A Molecule-Fuel Future
Australia’s Quiet Biofuels Pivot
This article is for general information only and is not personal financial advice.
There’s a lot of noise about gigawatts, turbines and high-voltage lines. But the sleeper move in Canberra’s latest energy package is in liquid fuels.
Last week the government earmarked $1.1 billion over the next decade to seed a domestic biofuels industry, including sustainable aviation fuel. It’s not flashy like offshore wind, but it could matter more in the near term.
Electricity can decarbonise quickly.
That’s why there’s a grassroots movement called ‘Electrify Everything’. Once things are powered by electricity, the switch to renewable energy sources is a simple as switching the grid inputs to solar and wind.
But alas, it’s not so simple.
Aviation and heavy transport can’t plug into the grid at scale. Jet engines are designed to combust dense liquid fuels like kerosene because they deliver huge amounts of energy per kilogram and can be stored safely in wings.
Batteries are far too heavy for long-haul aviation, so planes need molecules not electrons. Trucks hauling ore across the Pilbara face the same reality. Stopping for multi-hour charges kills productivity.
That’s where biofuels step in. By directing funding and policy certainty, Albanese has signalled that Australia’s energy transition will be built on liquids as well as electrons.
It’s a smart move.
Most people are unaware of just how big this industry already is.
Bagasse, the leftover fibre from sugarcane, already makes up about 15% of renewable energy use in Australia.
Add in other inputs like canola crush, waste oils, forestry residues etc. That’s scale right there.
Inputs aren’t the problem.
Australia produces roughly a million tonnes of canola crush alone every year. That’s enough energy for tens of thousands of short haul flights.
It's not just growing crops.
It’s about building the refining capacity, blending mandates, and logistics networks to turn that raw stuff into jet fuel and diesel replacements.
That’s why the government’s timeline matters.
Funding kicks in from 2028, which sounds slow, but it locks direction for industry to start its pivot. It forces airlines, refiners, and growers to put skin in the game now. Qantas has already cheered the move, airports are lobbying for hydrant upgrades, and fuel majors are crunching the retrofit math on old refineries.
The Real Story Beneath the Headlines
The grid debate dominates headlines, but molecules is another, less visible battle.
The government could soon mandate sustainable aviation fuel in domestic jet blends. Feedstock scarcity then becomes the bottleneck. Farmers, crushers, and refiners will suddenly sit at the heart of the transition. That creates a new agri-energy complex linking paddocks to runways.
To be clear, we know how to make this work already. This isn’t speculative technology. It's industrial age stuff.
The pathways are proven, and governments from the US to EU are already shovelling subsidies into sustainable aviation fuel (SAF).
Australia is late to the party. But now the cash is committed, we’ve got real strategic clarity. That gives investors a clear signal to position early.
Investment Angles
The obvious plays are companies like GrainCorp (ASX:GNC), which typically produces between half a million and one million tonnes of canola crush annually, depending on the season and has the infrastructure to scale throughput.
Sugar growers and processors contribute via bagasse and ethanol. But Australia's biggest players are listed offshore like Wilmar International (SG:WLIL).
There are also second-order effects.
When canola is diverted into aviation fuel, animal feed demand doesn’t disappear. It shifts.
Soybean meal is a direct competitor in animal feed markets, and higher canola demand for fuel could buoy soybean growers. Almond producers like Select Harvests (ASX:SHV) might also benefit as land-use competition for oilseed crops reshuffles acreage and global buyers diversify into alternative plant oils.
Suppliers to the agri industry should also see upside. Elders (ASX:ELD) and GrainCorp both benefit from handling, logistics, and farm service revenue as demand for oilseed crops rises.
Rural Funds Group (ASX:RFF), with exposure across orchards, cropping land, and diversified agribusiness assets, fits in as a landlord capitalising on rising demand for productive farmland and higher commodity throughput.
This is where the ripple effects of biofuels expansion stretch far wider than just the growers themselves.
Beyond feedstock farming, watch for technology disruptors. Companies experimenting with new refining methods that can cut costs or boost yields. Neste (HEL:NESTE) in Finland has pioneered large-scale renewable diesel refining.
The Big Catalysts to Watch For
The design of Australia’s first sustainable aviation fuel mandate will be a defining moment. The rules will set out blending targets, compliance obligations and the structure of credits or penalties. Once those details land, they will dictate which producers scale and which airlines bear the heaviest cost.
Refinery retrofits and the build-out of port and rail infrastructure are equally important. Old refineries must be retooled to process biofuels, and supply chains need to move feedstock efficiently from paddocks to plants. Delays here choke the entire industry.
Global feedstock prices are another swing factor. Europe and the US are already soaking up waste oils and canola for their own mandates. If overseas buyers outbid Australian refiners, margins at home get crushed. That creates volatility and opportunity for traders and growers who can pivot markets quickly.
Finally, airline procurement strategies matter. Carriers like Qantas, Virgin and international players must decide who locks in long-term sustainable aviation fuel contracts first. Early movers could secure cheaper supply and a reputational edge. Late adopters risk higher costs and policy penalties.
Together, these moving parts will shape the economics of Australia’s biofuels transition.
The edge
The Great Energy Transition is here.
Australia’s energy transition story is still sold as electrons, wires and batteries.
Liquid fuels are the sleeping dragon. It's also an area that Australia has real capability in. All that space and sunshine is great for growing biofuel.
Big structural shifts like this can bring multi-decade tailwinds. Smart investors are positioning early. Once it's obvious, it’s gone.
Spotting these multi-decade tailwinds is what we're all about at The Markets IQ. Make sure you subscribe to our newsletter and follow us on LinkedIn to stay up to date.
We'll be honing in on our top picks to play The Great Energy Transition over the coming months.
This publication has been prepared by The Markets IQ, a division of Vitti Capital Pty Ltd (ABN 13 670 030 145), which is a Corporate Authorised Representative (001306367) of Point Capital Group Pty Ltd (ABN 41 625 931 900), the holder of Australian Financial Services Licence 518031. This report is for general information only and does not take into account your objectives, financial situation, or needs. It is not personal financial advice or a recommendation to buy, hold, or sell any security. You should consider whether the information is appropriate in light of your circumstances and obtain professional advice before making any investment decision. This report is intended solely for wholesale, sophisticated, or professional investors within the meaning of the Corporations Act 2001 (Cth).
Any views, probabilities, valuations, technical levels, or forecasts expressed are strictly the opinions of the authors as at the date of publication, based on publicly available information and assumptions which may change without notice. They are illustrative only and not predictive of future outcomes. Past performance is not a reliable indicator of future performance.
