Three recent publications relevant to the alternative fuels industry

Part 2 Strategic framework for alternative transport fuels

The Commonwealth Department of Resources, Energy and Tourism has just released a document that outlines directions for alternative fuels in Australia. Some observations made in the report include:

Strategic overview

• A principals-based approach will guide the development of alternative transport fuels.
• There will be a greater focus on replacing diesel and jet fuel (possibly due to freight and aviation growth).
• The Australian Government does not support mandates for alternative transport fuels.
• In the period to 2015 the government wants to lay the foundations for a market-led diversification of Australia’s transport fuel mix in the medium to longer term.

Assistance

• An Implementation Advisory Group will be set up to advise the Australian Government on the implementation of measures, particularly those with an immediate or short-term start date.
• Government incentives could reduce the capital cost of alternative transport fuel distribution infrastructure and vehicles. These incentives could be based on the amount of petrol or diesel displaced, and/or the level of alternative transport fuels used to power the vehicles.
• The government might work in partnership to identify freight corridors or regions as test cases for demonstrating alternative transport fuels (e.g. LNG).
• Potential assistance from government could be sought if eligibility criteria for relevant government initiatives are expanded or if assistance is provided through the Clean Energy Legislative Package (e.g. $200 million Clean Technology Innovation Program).
• An investment mandate from the Clean Energy Finance Corporation could provide the opportunity for alternative transport fuel technologies and production facilities to seek some of the $10 billion in investment funding. Submissions were received in early December regarding the investment mandate, and it is now important that the alternative fuels industry pursue eligibility prior to the release of a final report in March 2012.
• There may also be scope to develop alternatives to the current Australian Design Rules test procedures to help evaluate the performance of particular alternative fuel engine conversions at lower cost.

Taxation

• An excise on gaseous fuels is expected to add $518.5 million in tax revenue to 30 June 2015.
• Maintaining the current taxation and production grant arrangements for biofuels until 30 June 2021 may provide a benefit of approximately $1.2 billion in the 10-year period.
• Fuel taxation measures are expected to be reviewed regularly in the next 10 years, starting with a review of arrangements for LNG and CNG after 12 months.

Industry insights

• Expectations for biofuels have not been realised because prices have trended upwards at the same time as fuel, fertiliser and farm chemical input costs have risen sharply.
• CTL faces competition from the coal export market but STL is not constrained in the same way, as oil shale is best suited to liquid fuel production.

This paper may not provide all the answers that the alternative fuels industry wants, but it asks all the right questions. It will set the foundation for considered policy and program development through to 2015 and beyond through the Implementation Advisory Group. The industry should therefore benefit from serious government leadership rather than from ad hoc targets and fixes that may be pursued but do little to support long-term confidence when targets are difficult to achieve, or realise limited value to the community.