14/2/07 (Checkbiotech.org)  Switzerland  -  New Government requirements for fuel to contain a component of biofuel may kickstart a new energy sector, a lobbyist for sustainable business says.

The Government yesterday set a target of 3.4 per cent for the biofuel component of petrol and diesel in 2012.

Biofuel is any fuel derived from biomass, recently living organisms or their metabolic byproducts, such as cow manure. It is a renewable energy source.

"This is really about keeping our options open," said Peter Neilson, chief executive of the Business Council for Sustainable Development.

"It provides a signal for the people working on biofuels that in 2012 there will be sufficient demand to get serious about it."

The scaling-up of biofuel additives to petrol and diesel from April 1 next year would allow would-be manufacturers to work out whether they could produce enough fuel at the right price.

"If the price of oil stays at US$50-60 a barrel over the next three or four years, and some of the experimental technologies for biofuel come through, I think there will be people who will take a commercial punt that they can make biofuels pay."

In most other countries where biofuels were being used at high level, it was because there was a glut of a crop such as sugar cane, corn or palm oil and governments provided "protection" to prevent import of competing biofuels.

"You don't have to be very smart to create a biofuels industry -- creating a biofuels industry that has benefits and is competitive: that's the challenge," Mr Neilson said.

Prime Minister Helen Clark told Parliament yesterday New Zealand has the potential to lead the world in renewable energy, and locally-produced biofuels could help the economy, while reducing greenhouse gas emissions.

"This initial target is considered sufficient to encourage the uptake of biodiesel and the development of infrastructure for ethanol distribution," she said.

Energy Minister David Parker said manufacturers were initially expected to obtain tallow from the meat industry to make biodiesel.

"Quite a few contracts have already been signed to tie up tallow sources so that they can turn that into biodiesel," he said.

New Zealand slaughterhouses produce sufficient tallow to produce around 5 per cent of its diesel fuel needs. Mr Parker said ethanol for adding to petrol was expected to initially come from milk sugars in whey -- the "waste" from casein manufacture.

Dairying already produces sufficient whey ethanol to meet around 0.3 per cent of the nation's petrol needs.

Fonterra's Edgecumbe dairy factory in the Bay of Plenty has been distilling ethanol from waste whey to blend in petrol.

Fonterra successfully tested petrol mixed with 10 per cent ethanol in a 1.8-litre car, in a blend approved by the Environmental Risk Management Authority (Erma).

The Edgecumbe plant produces 30,000 litres of ethanol a day and five million litres in a dairy season. Fonterra also produces ethanol at Reporoa and at Tirau.

First generation biofuels -- bio-ethanol from whey and biodiesel from tallow -- are produced from sugars, starches, vegetable oils or animal fats from proven technology.

New Zealand researchers are also working on second generation biofuels -- the conversion of plant lignin and cellulose into fuels by enzymes, and the gasification of biomass material followed by a "gas-to-liquid" process that can be used on trees, grasses, agricultural plant wastes, straw and algae.

A deal between two Crown Research Institutes (CRIs) and a United States company may open up the possibility of the entire vehicle fleet ultimately running on biofuels grown and manufactured in this country.

The three parties are CRIs Scion and AgResearch, and San Diego-based Diversa Corporation, which has pioneered the development of high-performance speciality enzymes.

They have agreed to co-ordinate technology development to investigate the feasibility of a transportation biofuel industry in this country using bio-based feedstocks, such as trees and grasses.

State science company Scion, at Rotorua, and Diversa are studying how to use enzymes to convert wood into sugars that can be fermented and refined into ethanol.

With Agresearch they are carrying out a feasibility study for producing biofuels from forests, identifying potential risks or barriers to commercialisation, as well as specific technical steps.

The three companies have said they believed the forestry sector could provide ethanol for all 3 billion litres of petrol the nation uses each year.

They are also assessing other potential feedstocks, such as special crops of fast-growing grass.

A biofuel company, Biojoule -- an offshoot of Genesis Research -- plans to later this year have a trial plant turning shrubby willows into ethanol for transport fuels.

Genesis founder Jim Watson has said it needs $5 million to build a pilot plant to process willows already growing on trial plots near Taupo.

The 50 per cent of the cane willow which is cellulose will be used to produce ethanol.

The rest of the wood was expected to be processed to extract lignin that could be turned into plastics -- replacing some of the reliance on oil-based plastics -- and xylose, a natural sweetener which can be used by diabetics and does not cause tooth decay.

Other biofuel proposals are processing the "slash" waste from forestry to extract ethanol: breaking down the timber waste by heating it in the absence of oxygen to produce carbon monoxide and hydrogen that can be further refined to give large volumes of methanol.

In Marlborough, one biotech company has been turning the scum from sewage ponds into biodiesel, which it said could one day power much of the vehicle fleet.

Aquaflow Bionomic Corporation has begun commercial production on a small scale, with an eye on the start of minimum biofuel requirements from 2008.

It expected to eventually produce at least one million litres of biodiesel per year.

While some biofuels required crops to be specially grown -- using scarce resources of land, chemicals and fertilisers -- sufficient sewage already existed to grow algae that could be pulped and its oils turned into biodiesel.

Energy experts say maize is also a possible feedstock for bioethanol production in New Zealand.

On top of that, Auckland company LanzaTech is investigating ethanol production from carbon monoxide waste streams.