The Clean Energy Finance Corporation has stepped up its lobbying of senior Coalition and Labor politicians for Australia to use wood waste to "co-fire" coal power stations and reduce carbon emissions.
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The corporation was established by the Gillard government to help drive investment into renewable energy sources.
Biomass products, such as wood pellets, are widely used overseas to help reduce emissions and are permissible under Australia's current renewable energy target, but not yet financially competitive.
The pellets are already produced in Australia by such companies as the Queensland-based Altus but are sold and shipped overseas to Europe, Britain, Japan and South Korea for use in power stations that have been converted to burn both wood and coal, rather than being used in Australia.
For carbon accounting purposes, wood pellets from forestry residues are considered close to emissions neutral because the wood waste turned into pellets and burnt is replaced by the planting of trees, while there is carbon abatement because it displaces the burning of coal.
Last week – following the release of the Finkel review and as debate began in the Turnbull government about a potential post-2020 clean energy target – officials from the Clean Energy Finance Corporation (CEFC) and the US-based Hancock Natural Resource Group met staff in the offices of Environment Minister Josh Frydenberg and shadow climate change minister Mark Butler to discuss prospective projects.
Both offices declined to comment but confirmed the meetings had happened.
The emphasis in the Finkel review on the need for more base load power that is dispatchable – that is, available on demand – has been followed by the Turnbull government signalling it could help fund or provide incentives for a new coal-fired power plant to be built.
But it could also open the door to the use of wood pellets and other biomass products in Australia to reduce emissions.
Paul McCartney, a member of the CEFC's executive, confirmed to Fairfax Media the organisation was talking to companies including Hancock about supporting projects that would lead to biomass fuels being used in existing coal-fired power stations that had been converted to work with wood pellets.
"The CEFC believes biomass and bio-energy have a place in a renewable future," he said. "We think that it needs to be more part of the debate than it has been. We reflect on that on the basis of what is happening around the globe, in Europe and Asia and the UK with renewable bio-energy.
"Given the intermittency issues we face [in Australia's national electricity market], bio-energy as a dispatchable base load power source is worth consideration.
The CEFC has estimated the cost per megawatt hour of using wood pellets in coal power stations could be as low as $100 per megawatt hour. Solar and wind power is cheaper than this but if, as the Finkel review suggested, a requirement for battery storage to improve reliability is added, the cost of solar rises to $107 per megawatt hour, and for wind it rises to $108 per megawatt hour.
Chief Scientist Alan Finkel said it was clear investors currently preferred wind and solar "because they are now cheaper to build than traditional generation, such as hydro and coal", and that it was a matter for government whether it wanted to back new coal plants.
He dismissed suggestions that, amid a backlash from government MPs, the clean energy target was now on "life support".
Australian Forest Products Association chief executive Ross Hampton pointed out the Finkel review had made clear coal would be part of Australia's energy mix "for decades to come", and with an ageing coal plants, "Australia is uniquely placed to embrace co-firing biomass in our energy mix" to reduce emissions.
"It makes no sense that Australia has all the ingredients to embrace the potential of renewable biomass energy, but instead we are currently exporting this potential to Europe and Asia," he said.
