IT'S a potential win-win situation: use a greenhouse gas to create an environmentally friendly biofuel and make money at the same time. That's the vision and Hazelwood power station in the Latrobe Valley and Smorgon Fuels are working together to achieve it.

Smorgon, through a partnership with US company Greenfield, is developing a technology to produce biodiesel from Hazelwood's carbon dioxide emissions. The CO2 is siphoned from the power station and pumped into waste water channels where, through photosynthesis, micro-algae transforms the CO2 emissions into vegetal matter.

About 30% of the organic matter extracted is expected to create the oil feedstock for biodiesel. "We have made biodiesel from this process, but not in great quantities, and we are very satisfied with the quality," Smorgon Fuels managing director Mile Soda said.

"We're now looking at the economics of it. Does it (the algae) stand up as a competitive second-generation feedstock that will allow us commercially to turn it into a fuel and sell it in the marketplace?"

The Federal Government's proposed emissions trading scheme may also change the economics of the algae-sourced fuel. "It's unclear how the ETS will work. We would potentially help Hazelwood reduce the amount of emissions and the biofuel itself will have a further recycling value," Mr Soda said.

"Who ends up getting the (carbon) credits is yet to be determined. But clearly there will be a benefit at the power station and the CO2 will be turned into biodiesel."

Hazelwood power station produces 16-17 million tonnes of carbon dioxide annually from burning brown coal. "We will make a dent in that if or when we commercialise," Mr Soda said. It's possible the technology could be used at other Latrobe Valley stations.

Smorgon has been holding trials at Hazelwood for 18 months, but the program aims to extend the size of the micro-algae ponds to 1000 hectares and beyond, potentially taking millions of tonnes of CO2 out of the atmosphere. Smorgon calculates this area would reduce CO2 emissions by about 555,000 tonnes.

The company became interested in algae because of the limited amount of feedstock available for biodiesel. At its Laverton North plant, Smorgon uses recycled cooking oil collected from restaurants, outlets such as McDonald's and fish and chip shops as its base biodiesel ingredient to blend with canola oil and animal tallow.

Canola, the best oil, is too expensive and competes with food. "Tallow is good and does not compete in the food market, but it has problems in winter when it can go solid," Mr Soda said. A blend of the two is also still vulnerable in winter if the ratios are not correct.

The Laverton North operation has the capacity to produce 100 million litres of biodiesel a year. "We're not running to full capacity," Mr Soda said. "We are a drop in the ocean in terms of petroleum diesel used." The pure B100, which can be blended with petroleum-diesel, is sold under the brand name BioMax to trucking companies, local councils and through Liberty service stations around Melbourne and Riordan Fuels' locations in rural Victoria.

(The Age, 10/11/2008)