The biomethane route to cutting emissions

Published Wed 05 Jun 2024

Australian Financial Review

There’s considerable enthusiasm about renewable energy such as wind or solar, or the alluring prospect of affordable green hydrogen, on the long road to a decarbonised economy.

There’s far less talk – and policy attention – focused on “renewable” gases or low-carbon fuels such as the biomethane created by crops, food and other organic, animal and yes, human, waste. Perhaps it’s because the processing of such waste sounds less sexy – certainly messier and murkier – than the image of clean, green renewable power.

Yet many of these low-carbon products are available now and are being used – or at least trialled – by Australian businesses, because they allow investment in existing networks and technology at often more feasible prices.

By contrast, the usual view of Australia’s energy transition dominated by solar and wind supported by batteries or pumped hydro has a constantly moving finish line. In practice, that path to net zero has been dogged by constant delays, technical problems, high costs and often strong community opposition.

None of this has stopped the practical shift underway in many Australian businesses, looking for the most efficient, lowest-cost way to a lower-carbon future.

Cleanaway chief executive Mark Schubert, for example, extols both the environmental benefits and the profits to be made in the company’s massive recycling and waste management business.

Many involved would like to see low-carbon fuels benefit from government incentives like production tax credits.

Cleanaway, he says, relies on setting up infrastructure to treat waste as a resource and create the most circular outcome – which is also the lowest-carbon outcome.

But, he says bluntly, the economics of hydrogen don’t work for the 3500 diesel-powered trucks his company has on the road – each with a lifespan of 10 years.

“We’re not waiting,” he told The Australian Financial Review ESG summit.

Instead, Cleanaway is developing a new business based on used cooking oil as a viable, affordable drop-in alternative to diesel for its trucks. With Cleanaway already the biggest collector of restaurant grease traps nationally, that sounds an extremely pragmatic interpretation of a circular economy.

There’s more to oil and gas than you might think

But while this sort of fuel – known as hydrogenated vegetable oil 100 (HVO 100) – is in common use in Europe, it’s not so here with no local manufacturing and no approval in federal fuel regulations. So Cleanaway is operating on a trial import basis rather than building economies of scale. It wants the results to persuade the federal government this should be recognised as a low-carbon fuel.

Ampol chief executive Matthew Halliday is also committed to a version of renewable gases from the range of biomass products available to boost decarbonisation efforts, particularly for industry uses and heavy transport.

“We can’t wait for 10, 15, 20 years to start making progress,” he said “This is a pragmatic solution. It can work. Now, we can start scaling and building that capability. I think the opportunity for Australia – when you think about the trade-offs that are involved from an energy security point of view – is this is something that leverages Australia’s own strength in agriculture.”

Nor is this just about transport. Rio Tinto announced a $250 million investment on Tuesday in a bioIron pilot plant and research facility incorporating biomass and microwave energy rather than coal to convert Pilbara iron ore.

But of course, there’s a catch to all these ambitions for new low-carbon industries and power sources based on biomass. Australia needs the “right policy support” – usually corporate code for greater federal funding.

Many of those involved would clearly like to see low-carbon fuels benefit from government incentives like the production tax credits on offer for critical minerals processing and hydrogen.

The federal budget did promise further consultation on low-carbon fuels – encouraging optimists to believe similar incentives could be included under the government’s Future Made in Australia strategy as well the $1.7 billion low-carbon innovation fund.

Despite the urgency of demand, this will take time – at best.

That leaves business also arguing for regulations needing to be changed ASAP. This includes the prospect – common elsewhere – of mandating a blend of initially only a small percentage of such gases into traditional fuel sources.

Another is allowing businesses that adopt lower-carbon gases or fuels to include them as part of emissions reduction reporting requirements. They are not currently counted.

Biomethane is happening now

David Gillespie is managing director of Jemena, a company that owns and operates energy infrastructure assets in several states including gas pipelines and gas and electricity networks. He is dubious about the cost trajectory of hydrogen in a particular time frame, backing instead renewable gas targets – just as renewable electricity targets were set.

“We are strongly of the view that other low-carbon gases can potentially be a bridge to hydrogen, particularly for those hard-to-abate sectors,” he told the Summit.

“Biomethane is something we are trialling with Sydney Water today that is small-scale but points to the reality that it has two benefits that hydrogen doesn’t have right now. It’s commercially in line with the market in terms of cost. The second is that it doesn’t require a wholesale change of household appliances.

“But if there was an industrial customer to buy that biomethane from us today, they would not be able to get the benefit in their national greenhouse gas reporting for reduced emissions intensity of their own business.”

That may all sound more complicated than a shiny new solar or wind farm – or buying an EV. But as Australia grapples with practical difficulties in moving to lower-carbon emissions, progress will come in many forms. It must. And Canberra needs to pay more attention to what’s going on in business.