Green fuels are not the future – they’re just about here

Australian Financial Review

The sprawling Surrey Hills plantation, south of Burnie, Tasmania, was once at the heart of the Gunns forestry empire, the target of much environmental angst. If HIF Global gets its way, it could be ground zero for clean and green fuel.

Texas-headquartered Highly Innovative Fuels Global is backed by Porsche and wants to build a $1 billion synthetic fuels plant in the area. It’s betting on huge demand from Japanese customers, willing to pay a premium for environmentally friendly fuel.

The plant is one of several Australian proposals – using a range of technologies – that have the same goal: making a green version of diesel, methanol or aviation fuel that can be used in existing planes, ships and trucks without waiting for costly infrastructure needed to support hydrogen or battery-powered transportation.

Proponents of the plants say the ability to immediately substitute up to 100 per cent – in the case of renewable diesel, for example – of fossil-based fuels with clean alternatives provides an opportunity for immediate action on emissions reduction. The problem in Australia, however, has been a lack of mandates requiring their use, leaving projects here dependent on export markets or awaiting a major policy shift.
 
HIF Global’s president Cesar Norton, chief executive for Asia Pacific Ignacio Hernandez and chief operations officer Clara Bowman in Sydney last month. Oscar Colman

“Anything that is done today with petroleum, tomorrow can be done through this process of e-fuels,” says Clara Bowman, HIF Global’s chief operations officer, which has a demonstration plant operating in Chile, fuelled by Patagonia’s legendary winds.

“The beauty of it is that the market is already there, we don’t have to wait for any other infrastructure to be built out, really we just can substitute fossil fuels completely.”

At the world’s biggest plant making renewable diesel, the Singapore refinery of Finland’s Neste, converts used cooking oils, animal fats and tallow into a clean substitute for diesel.

Some of that is used in cranes at Mirvac, Lendlease and Multiplex construction sites in Australia where Simon Marr, managing director of Marr Contracting, which holds the licence to import Neste’s HVO100 renewable diesel in to Australia, says some customers are willing to pay about double the price of conventional diesel to make a dent in emissions.

Again, it’s the ability to immediately and flexibly swap the low-carbon fuel with conventional diesel that Neste’s Steven Bartholomeusz highlights as the big benefit.

It’s a drop-in solution,” Bartholomeusz, the group’s head of public affairs in Asia-Pacific says, rejecting the sometimes-cited criticism of such fuels that they prolong the use of conventional engines and delay the switch to battery or hydrogen vehicles.

“To get to the ultimate goal of net-zero, we’ve got to start working on the solutions that are available now while we then look at future technologies. That’s really the priority.”

Existing and former oil refiners in Australia are also eyeing the opportunity. BP is considering converting an oil import terminal at Kwinana into a renewable fuel production hub, including for sustainable aviation fuel. Both BP’s H2Kwinana project and HIF Global’s Tasmanian venture are among six applicants for the federal government’s $2 billion Hydrogen Headstart program.

Viva Energy chief executive Scott Wyatt says the company could consider a renewable fuels plant at its Geelong oil refinery site, one that could supply lower-carbon fuels for customers where electrification is not feasible.

“Aircraft, heavy vehicles, trucks, mining equipment are good examples where electrification is such a long way off, if we can replace fuels that are made with hydrocarbons that can also be made from renewable feedstocks, clearly that can play a meaningful role in reducing emissions,” Wyatt says.

“But for now, at least, they are more expensive to make ... and that is an impediment we need to overcome,” he adds.

Push for mandates

BP has also been pushing for the government to impose green fuel mandates on domestic airlines to kick-start the sustainable aviation fuels industry here amid ambitions to make Australia a hub for the southern Pacific region.

Ampol has an accord with Japan’s Eneos to examine producing advanced biofuels at its Lytton refinery in Brisbane. It would use agricultural, animal or other waste feedstocks.

HIF Global’s Tasmanian project differs from those other projects in that it involves electrofuels, or synthetic e-fuels, which are based on hydrogen rather than from biofuel feedstocks. The hydrogen will be powered by renewable energy – from wind farms – and combined with captured carbon to make methanol.

Methanol can be used as it stands as a shipping fuel, for example, or as a building block to make aviation fuels, green diesel or petrochemical feedstocks. Because the carbon used is captured from the atmosphere, from biomass or from other processes, the use of the fuels does not release more CO₂ and is climate neutral.

At full capacity, the plant could produce up to 100 million litres of carbon-neutral e-fuels a year, equivalent to about 260,000 tonnes of avoided CO₂ emissions a year, according to CSIRO’s HyResource database on Australian hydrogen projects.

E-fuels have also been criticised because of the huge energy losses during manufacturing. On some estimates, over 80 per cent of the energy finally used to propel a car using e-fuels forward is wasted.

HIF Global’s Bowman admits the conversion processes make e-fuels inefficient, but says that does not mean they have to be expensive – it all depends on having cheap renewable energy.

‘Enormous capabilities’

Porsche, which owns more than 10 per cent of HIF Global and is a “huge believer” in e-fuels, is in discussions to buy fuels from the Chile project – but not necessarily from the Tasmanian venture.

While companies working on sustainable aviation fuel and renewable diesel typically say e-fuels based on hydrogen are something for the future, HIF Global disagrees. The technologies involved are not new, Bowman says, while the production of methanol allows for processing into multiple different fuels.

“These are technologies that have existed for a long time, there’s just been no real need to put them all together like this,” she adds. “Obviously, you need to have that long-term contract – otherwise you can’t move forward – but you have less complexity in negotiating that because it’s a drop-in fuel.”

Without a mandate on green fuel usage in Australia, however, HIF Global believes the Tasmanian project will rely on overseas markets such as Japan, which recently brought forward its official goal to introduce e-fuels to 2030 from 2040.

Bowman says that in HIF Global’s discussions with potential customers in Australia, the same issue always arises. They want to decarbonise, but won’t put their competitiveness at risk.

“They actually would like for standards to be brought in because there are people who would like to be first movers, but they can’t be uncompetitive as compared to their peers,” she says. “You need regulation to really be driving the demand. The willingness is certainly there – everyone wants to get the carbon off their books and decarbonise – but they need to do that in a way that’s not going to adversely affect their business.”