Z Energy to keep biodiesel plant closed despite mandate

Z Energy has confirmed the company’s decision to permanently close its biofuels plant, Te Kora Hou, and exit production of biodiesel at the site. The plant has been in hibernation since May 2020 after rising global tallow prices combined with escalating construction costs to bring the plant to an acceptable scale. 

As part of a range of measures to reduce carbon emissions from transport in order to hit New Zealand’s 2050 carbon neutral target, in January 2021, the government agreed in principle to implement a biofuels mandate. The Sustainable Biofuels Obligation will come into force from April 1, 2023 and will apply to all transport fuels used in New Zealand. New Zealand’s current use of biofuels is low by international standards. Liquid biofuels make up less than 0.1% of total liquid fuel sales, compared with about 4% globally.

In coming to its decision, an initial Front-end Engineering Design (FEED) study, as well as detailed analysis on the economics and risks associated with restarting the plant, was completed. Located in the Auckland suburb of Manukau, the biodiesel plant started commercial production in late 2018. When it was closed down in mid-2020, the plant was producing less than half of its 20 million litre-per-annum capacity. It had not yet made a profit. 

“One of the key questions we asked ourselves was whether further investment in the plant was the best way for Z to meet the upcoming obligation, and whether it would have resulted in a more cost-effective solution for our customers by producing biofuels domestically than an import alternative such as drop-in renewable diesel,” said Mike Bennetts, Z Energy’s chief executive.

“Analysis confirmed that the case to stand up the plant for domestic production is uneconomic when compared to the cost of imported products. In the context of a highly competitive global market, the ongoing challenges associated with securing the necessary tallow feedstock are intensifying.”

“While we understand that there will be disappointment in this decision being confirmed, Z’s commitment to investing in biofuels, including leading the introduction of biofuels into the market to help the New Zealand transport sector decarbonise remains strong,” Bennetts said.

“At this point in time, Z believes importing renewable diesel from the international market will be the most efficient and climate friendly way to meet the obligation’s emissions intensity reduction targets for the first two to three years of the obligation and make biofuel products available to the New Zealand market.

“We look forward to continuing to engage with the government over the coming months as the Obligation Bill makes its way through Parliament,” he said.