Information article #12
29 April 2019
What is the current price of diesel? Within the last two weeks I have seen prices ranging from $1.38 per litre – near
Hamilton - to $1.74 per litre – near Nelson. With GST taken off that makes the real price for businesses between $1.20
and $1.51 per litre. In the view of Miscanthus New Zealand Limited (MNZ), this is probably too much. This view is partly
influenced by the fact that commercial users of diesel almost certainly pay less than that, so they may be feeling smug.
But can they or anybody else tell us what their cost per litre for diesel will be in July 2020 and better still July
2021? When Renewable Diesel Fuel (RDF) production from Miscanthus commences in New Zealand, MNZ will be able to arrange
for fixed price contracts over that sort of time period.
Plans are well advanced for the establishment of the first RDF plant in New Zealand based on Miscanthus. The capital
funding is already conditionally approved. So when (not if) RDF starts to be made in New Zealand from Miscanthus the
fuel could be sold at a fixed price which in the current financial projections is $1.00 per litre plus GST. Once such a
production facility is in operation, the only price increase required will be for published New Zealand inflation.
Because RDF is a direct and complete substitute for fossil fuel diesel, meeting all of the current specifications other
than the physical density, there is no reason at all why RDF should not replace diesel for any use to which diesel is
put in New Zealand. With RDF having a higher energy density than fossil fuel diesel, it should not be difficult for the
Minister of Energy to amend the appropriate schedule in the diesel fuel regulations to cover the density issue.
So the three questions that major diesel users should now be answering are: How much is fuel price stability worth to
you? What value do you attach to having certainty of supply, rather than being completely dependent on international
shipping and peace in the Middle East? Would you value having a carbon negative fuel supply?
MNZ has access to RDF technology that is already being used for diesel production in the USA. Miscanthus is one of the
types of feedstock that have been evaluated. Through a partner company in the USA, MNZ has supplied the production
facility with Miscanthus to check that Miscanthus worked well in an operational scale plant. That plant is currently
producing RDF from chipped logs and another similar plant is using switchgrass.
The RDF process works well at what is regarded internationally as a small scale. With 50,000 tonnes per year of
feedstock dry matter, 18 million litres of RDF can be produced. The process can be made to work at an even smaller scale
- down to 4.5 million litres per annum - but because of some costs being fixed the unit cost of production of RDF from
such small plants will be somewhat higher. Because the system is modular, bigger plants can also easily be established.
When producing the RDF, there are two key co-products. One of them is very high quality biochar which has a significant
graphene content and the other is pyroligneous acid which is known internationally as “wood vinegar”. Both of those
co-products have excellent markets and they complement the production of the RDF.
Because most RDF plants will be at the 18 million litres output level, they can be sited regionally. This avoids many
transport issues. The feedstock supply can be produced close to the RDF production site and businesses in the vicinity
can use the RDF.
So you should picture a New Zealand diesel fuel supply based on Miscanthus that could have a fixed price for an agreed
term, indexed only to New Zealand inflation. Picture also a fuel price that is not affected by changes in the
international oil price. To round it off you should picture a fuel supply that is not affected by changes to the USD:NZD
conversion rate - meaning that comments in the Trump Twitter feed need not influence the cost of diesel fuel in New
Zealand.
All of this plus a lot more information has been sent to what should be very interested politicians. A complete silence
has been the response. Independent life cycle analysis has shown that growing Miscanthus is carbon negative to the farm
gate point. Then with the RDF production process being significantly carbon negative - because about 15% of the dry
matter that goes in, ends up as permanently sequestered carbon - the Climate Change Minister should be very interested
shouldn’t he? But he or one of his staff told MNZ that this was just an energy issue so they have supplied the
information to the Minister of Energy. In spite of other follow-ups by qualified people independent of MNZ, there has
been no reaction or interest shown. So a later article in the series will be on the political ramifications and
interest, or lack thereof.
Because of the breadth of this subject, the next articles will relate to use of Miscanthus for this purpose, focusing
firstly on the RDF itself, secondly on the high quality biochar and thirdly on the wood vinegar.
Forest industry participants should also take note because radiata pine samples from New Zealand have been successfully
evaluated through this RDF process in the USA. So everywhere in this article that Miscanthus has been mentioned as a
feedstock, forest industry residues could be substituted or could supplement the Miscanthus.
ENDS