Decarbonising the agriculture sector is a complex and multifaceted challenge. Agriculture is heavily reliant on fossil fuels for energy, from fuelling farm machinery to providing heat and electricity. Decarbonising the sector will require a range of solutions that address both the direct and indirect emissions associated with agriculture. It will also require a coordinated effort from farmers, policymakers, and industry stakeholders to transition to low-carbon farming practices, develop and implement new technologies, and build more sustainable supply chains. This article discusses the potential for biodiesel and renewable diesel as alternative fuels for the transition.

The Australian agriculture, fisheries, and forestry sector consumes approximately 2.6 billion liters of petroleum diesel fuel each year, representing just below 10% of the sector’s greenhouse gas (GHG) emissions. Diesel is used to fuel stationary pumps, generators, heaters, as well as mobile machinery, while marine diesel fuels fishing trawlers. The transition from petroleum diesel fuel is driven by more than a demand for sustainability, the economic and fuel security drivers are also important. However, the transition away from diesel fuel use is a significant challenge that requires a coordinated effort to replace diesel equipment and transition the on-farm energy infrastructure, as well as energy systems and skills in communities and across regions.

Our recent report on the diesel transition identified several technology pathways that the sector may adopt. Agricultural equipment manufacturers identify battery electric and hydrogen fuel cells as the dominant technologies by 2040, although combustion technology is expected to remain in product lines for some time to come. Manufacturers such as Volvo have identified that, in the transition, internal combustion will likely involve direct diesel substitution with synthetic renewable diesel, or using blended biofuels, as well as blending natural gas or hydrogen to increase energy density. There are some agricultural applications that will require further innovation, for example, cotton crops are one of the highest consumers of diesel fuel, due to the high volumes of water lifting required, and an alternative energy solution for high-volume floodplain harvesting has yet to emerge.

During Australia’s 2023 evokeAg conference, a panel discussion on the ‘risks and rewards of renewables’ explored the potential for renewable diesel and biodiesel fuels to be used as a transition option for the agriculture sector. Moderated by Oli Madgett, our Managing Partner Cassian Drew was joined on the panel by Steven Hobbs, an innovative farmer with a 30-year history of experimentation and production of biodiesel on Yarrock Farms, and Jennifer Patterson from the Frontier Impact Group, which has invested in one of Australia’s few renewable diesel projects. The panel explored the potential of both fuels in the context of the sector’s energy transition.

Renewable diesel offers a more efficient, cleaner-burning, and more convenient direct substitution alternative than biodiesel for powering diesel engines. Renewable diesel has a higher cetane rating than biodiesel, which means it burns more efficiently and cleanly in diesel engines, resulting in fewer emissions (noting this is the subject of ongoing research). Renewable diesel is a direct substitute and does not require blending with petroleum diesel, like many biodiesel products do. Renewable diesel has a lower cloud point than biodiesel, which means it remains liquid at lower temperatures, making it more suitable for use in cold climates, and the fuel can be used in existing diesel engines, pipelines, and storage facilities without the need for modifications or special handling procedures – which biodiesel users have discovered. Renewable diesel also has a longer shelf life than biodiesel, which can degrade over time.

The verdict is still out on the emissions benefits of renewable diesel, and the source of feedstock is a critical factor. A lifecycle assessment of any fuel considers the contributions of raw materials and their transportation, fuel refining, fuel transportation, and fuel use. Today renewable diesel uses a range of waste products as feedstock, including animal fats from food industry waste, vegetable oil processing waste and residues (e.g., palm fatty acid distillate, spent bleaching earth oil, palm effluent sludge, fish fats, tall oil-based raw materials, and technical corn oil (a residue from ethanol production).

Supply and local availability of renewable diesel is the issue for the agriculture sector. Early projects aside, Australia does not yet have significant commercial-scale production. Commercial renewable diesel producer Neste has plants in Singapore and the Netherlands and has established an office in Australia to coordinate the sourcing of feedstocks. Domestic producers will need to establish a stable supply of feedstocks, as well as establish consistent demand to establish the scale needed for cost efficiency.

There are several reasons why people are still producing biodiesel despite the advantages of renewable diesel. One reason is that biodiesel can be produced from a variety of local feedstocks such as soybean oil, animal fats, and used cooking oil, which are widely available and cost-effective. Biodiesel is also a well-established industry with a proven track record, whereas renewable diesel is a relatively new technology with limited production capacity and market penetration. However, we don’t produce nearly enough biodiesel to support a transition. Today, Australia produces around 100ML of biodiesel per year, representing only 3% of the agricultural sector’s annual demand. Despite its super-premium price over petroleum diesel, Australian Biodiesel is in demand from other sectors and is also exported abroad.

Whether renewable diesel or biodiesel, investment in local production capacity will need a dramatic boost if the fuels are to be a viable alternative to petroleum diesel for Australia’s diesel engine stock. Regulation over the fuel production industry will also need attention.

Steven Hobbs, like many farmers, owns older model tractors that are today out of warranty. His “homemade” B100 biodiesel is used as a direct diesel substitute, without blending. As a small-scale on-farm producer of biofuels, the Yarrock Farm experience highlights some of the policy barriers that exist today. Under current regulations, the farm is required to conform to the same standards as a multinational petroleum manufacturer, including requirements to meet fuel standards and testing requirements that represent an unviable cost to the business. Despite producing for on-farm consumption; homemade fuels are subject to excise, which then need to be claimed back by the farm through the diesel rebate.

The Australian federal government committed $1.9 billion to low-emissions technologies in 2020, signalling support for research and development of alternative fuels. However, it is likely that more needs to be done to incentivise farmers to invest in renewable energy systems. The cost of renewable energy systems can be a significant barrier for farmers, particularly for smaller operators. There is an opportunity for government and industry to work together in the transition to renewable energy systems in communities across regional Australia. This could include providing grants or other forms of financial support to encourage investment in renewable energy infrastructure. There is also an opportunity to stimulate investment in supply through aggregated fuel offtake agreements between communities and local suppliers.

In conclusion, the agriculture sector in Australia is facing significant challenges in transitioning away from diesel fuel use. The sector’s transition to alternative fuels requires a coordinated effort that encompasses the ultimate replacement of diesel equipment, as well as the energy systems in communities and across regions. Biodiesel and synthetic renewable diesel are substitute fuels that can be used in existing diesel equipment, and they will have a role while new technologies such as battery-electric and hydrogen fuel cell machinery are adopted, and their supporting energy systems developed. The government and industry need to work together to provide support and certainty for farmers to make significant changes to their energy systems in the transition.

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