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ARENA’s investment focus is on supporting biofuels activities that demonstrate:

  • pathways that meet demand (particularly aviation/marine fuel, niche or remote applications)
  • efficient aggregation, processing and development of renewable feedstock for biofuels
  • processing of bio-crude or other intermediate fuels into refined, drop-in fuels[1] suitable for end users.

ARENA is primarily interested in advanced biofuels[2], will require life cycle assessments for project applications, and will not exclude projects that are economically dependent on co-products[3].

How is ARENA involved with biofuels?


ARENA’s assessment of biofuels is informed by market analysis and an ARENA-hosted stakeholder workshop that was held in January 2014. ARENA also consulted with industry at the Biofuels Association of Australia annual conference in November 2014.

Biofuels should be considered as part of a broader analysis of the transport sector with key market segments being residential, industrial and aviation/marine fuel supply.

ARENA plans to undertake deeper analysis of the transport sector.

ARENA views biofuels as a critical technology for market sectors that are heavily reliant on liquid fuels with no reasonable alternatives (such as aviation and marine), and as a transitional fuel for markets that have other fully renewable long-term alternatives with better sustainability outcomes (for example, electric vehicle substitution in residential transport with a fully renewable power supply).

Through this investment focus area, ARENA aims to maximise its impact on the long-term cost-competitiveness of biofuels.

Likely scale and potential for growth by 2030-40

Australia has natural advantages in producing bioenergy including expertise in agricultural science, an established agricultural economy and an abundance of natural resources.

Projections indicate continuing or increasing biofuels demand, even in a scenario with significant electrification of transport and mining demand.

Aviation, marine and heavy vehicles have few or no alternatives to using liquid fuel. The largest increase in liquid fuel demand in Australia over the long term is expected to be in aviation fuel[1].

Source: ClimateWorks Australia, Office of Chief Economist, Biofuels Association of Australia[5]

Advanced/drop-in biofuels make up an increasing share of biofuels supply as they become more cost-competitive, since they face fewer barriers to entry such as the need for engine modifications at high biofuel blend rates.

ARENA anticipates that advanced/drop-in biofuels will have a substantially larger share in the longer term of the Australian biofuels market than ethanol and earlier generation biodiesel.

Investment influence

Biofuels development and commercial deployment faces a number of significant barriers including:

  • economics of feedstocks, including aggregation and feedstock with alternative, higher value uses
  • lack of fuel distribution infrastructure, and conflict with the business models of existing oil companies
  • inadequate or lack of bio-refining capacity in Australia to produce refined, drop-in biofuels suitable for end users
  • low levels of consumer/investor knowledge and acceptance
  • fragmented biofuels supply chain
  • immature second generation technology.

ARENA’s investment in biofuels demonstration projects, and in some cases research and development, has the potential to address these barriers and improve the competitiveness and supply of biofuels in the long term, as well as helping Australia capitalise on its natural advantages in producing biofuels.

Gap in ARENA portfolio

As at June 2015 ARENA had invested over $33 million across 14 studies, research and development activities and early-stage demonstration projects involving a range of biofuel pathways.


ARENA’s investment focus is on supporting biofuels activities that overcome market challenges, while focusing on pathways that meet demand for liquid fuels.

In particular, ARENA’s focus is on advanced/drop-in fuels that have the potential to cost-competitively displace non-renewable liquid fuel use in Australia over the long term.

ARENA will require biofuels project applications to include life cycle assessments of energy and carbon, and will allow projects that are economically dependent on co-products, while funding only the renewable component of projects.


[1] Renewable or drop-in biofuels are chemically equivalent substitutes for existing fossil based liquid fuels that do not require engine modifications for use.
[2] Advanced biofuels are bio-based and other synthetic fuels derived from renewable sources that do not use feedstocks that could be used for food production (eg sugar cane, wheat, corn).
[3] Funding support will only be given to aspects of projects that contribute to innovation in producing renewable energy.
[4] LEK Consulting, Advanced Biofuels Study (2011). Suggested 3.5% compound annual growth in jet fuel demand to 2030, higher than diesel, gasoline and other fuels.
[5] ClimateWorks: 2050 Decarbonising Pathways. Office of the Chief Economist: Australian Energy Projections, Australian Petroleum Statistics. Biofuels Australia: List of current biofuels + biodiesel projects.