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Biodiesel: The great crash of Australia's 'fish and chip cooking oil' renewable fuel industry

By Emilia Terzon

Updated Dec. 27 2016 at 6:12pm

Former chef-cum-Darwin's "biodiesel warrior" Greg Henderson was elbow-deep in an industry of second-hand grease when the global price of crude oil started to tumble in 2014.

Within weeks the humble entrepreneur was contemplating a price war with one of the world's biggest oil conglomerates.

"We lost two clients in one week," Mr Henderson said.

It is a common story in an Australian industry that, in the last few years, has faced business conditions described as "catastrophic" by one of the last remaining players.

This is a change of fortunes from a decade ago, when a small yet vibrant biodiesel industry was in its infancy, offering 4WD owners and transport companies a cheap and low-emission alternative to diesel fuel.

Mr Henderson stumbled into the biodiesel industry in 2006, after he bought a tiny deep-fryer cleaning business on a "strange whim" to help maintain his restaurant's kitchen.

He was soon spending his mornings driving around to fish and chip shops, kebab stores and restaurants to remove their unwanted 20L tins of old cooking oil.

Mr Henderson initially sold the waste cooking oil to an Adelaide-based company, however after making a paltry $57.20 profit on a sale of 35,000L, started researching the process of refining vegetable oil into biodiesel.

"You're recycling something to the nth degree by burning it as a fuel," he said.

By 2013 Mr Henderson was collecting and refining tens of thousands of litres of biodiesel a week, had contracts with trucking companies, and was selling direct to car owners dismayed by a decade of high diesel prices.

His sales point — a vintage pump salvaged from a petrol station.

"All different kinds of people would come in. A lot of rural guys. Just Joe Blows. We had quite a few musicians. I couldn't say all of them were hippy types," Mr Henderson said.

"A lot of them did it for price. When mineral diesel was running at $1.60 to $1.70, we were still around $1.25."

Then in 2014, the crude oil price tanked amid a sudden drop in global demand, reducing biodiesel's hip-pocket allure and sending the broader oil market into a tailspin.

Mr Henderson started receiving phone calls from local clients who said they were being made offers they could not refuse.

"So that's 40,000 litres of biodiesel sales we lost in one week. We just went, nope."
ASX-listed company goes into receivership

At the bigger end of the market, there have also been tough times.

Early this year, one of the country's biggest biodiesel companies, Australian Renewable Fuels, collapsed into voluntary administration, halting production at three processing plants across the country.

As well as competitive oil prices, the ASX-listed company blamed its issues on a change in government support, citing "highly damaging" changes to the taxation of renewable fuels announced in the 2014 federal budget.

Until July 2016, domestically produced biodiesel paid no excise due to the Cleaner Fuels Grant Scheme, but that scheme has been axed and the country's few remaining biodiesel plants face rising overheads.

Ethanol, another renewable fuel produced from alcohol, was also hit in the 2014 budget.

Doug Stuart, technical development manager of Queensland-based biodiesel plant EcoTech, said the industry was currently only paying a few cents a litre in excise but that was set to ramp up "significantly" by 2021.

Mr Stuart said EcoTech had already been seriously struggling since late 2015, when oil prices dropped again.

"Goodness, we would have seen a 90 per cent decline in our volume over that time. It's catastrophic. I don't want to play that down," he said.

"We've lost a lot of investment in this sector because the Government will have a position now and then will change that position.

"[That] hurts us and I think you'll see that right across the renewables sector."

Yet Mr Stuart said there was no single issue to blame for the downturn, with other factors including a hike in the price of tallow, the waste animal fat also refined into biodiesel by major processing facilities.

"The government backing of biofuels in Europe and United States has also put an upwards pressure on the tallow and raw materials," Mr Stuart said.

"Because those markets are being supportive, we're seeing Australia be a net exporter of those raw materials, rather than Australia value adding to the raw materials."
Glimmer of hope for Queensland biodiesel market

For EcoTech, there is a glimmer of hope.

From January 1 2017, the Queensland Government is introducing a mandate which means biodiesel has to make up half a per cent of the diesel available for sale, with ethanol receiving a 3 per cent mandate for regular unleaded petrol sales.

Mr Stuart said the mandate will have a "huge benefit", but only if it is strictly enforced.

Meanwhile, AFR's receiver told ABC this week that it was "hopeful" about a recent upwards trend in the price of oil.

Back in Darwin, Mr Henderson has gotten out of biodiesel entirely, and has switched to selling his old fryer oil to a less volatile industry that pays the bills — the animal feed market.

He said it is unrealistic to believe old cooking oil or animal fats will ever solve the world's looming energy crisis, and that the Australian renewable fuels industry needs to broaden its imagination.

In recent years, some have been looking towards old tyres or seaweed crops, and in Canberra there are plans for a facility that converts non-recyclable plastics into diesel and petrol.

Yet Mr Henderson still has a lingering passion for the environmental ethos behind biodiesel, and urged the Federal Government to set a 5 per cent national mandate to save the remaining industry.

"Will it ever be the solution to everything? No. Will it be part of the solution? I think it will be," he said.
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