The Independent Pricing and Regulatory Tribunal (IPART) has determined a reasonable wholesale price for fuel ethanol from 1 January 2021 to 31 December 2021 of 114.2 cents per litre excluding GST.
Under the NSW ethanol mandate, volume fuel retailers are required to ensure that at least 6% of the total volume of fuel they sell is ethanol (sold in petrol-ethanol blend, such as E10). However, the Minister may exempt a volume fuel retailer from complying with the ethanol mandate on various grounds.
Since 2017, one of the grounds for exemption is that the wholesale price of ethanol for use in the production of petrol-ethanol blends exceeds the reasonable wholesale price determined by IPART. Therefore from January 2017, IPART has been required to determine a reasonable wholesale price for ethanol under s17A(1)(a) of the Biofuels Act 2007 (NSW) (Biofuels Act).
We determine a wholesale price for fuel ethanol in line with what it would cost retailers if they had to buy it from overseas (the import parity price or IPP). It is based on a nine-month average (to one month prior to the commencement of the pricing period) of weekly IPP estimates based on the lowest cost origin for ethanol from either the US or Brazil.
We adopted this approach in 2016 after extensive consultation with stakeholders, and taking into account the matters in the Biofuels Act. It is based on our findings that there is a high degree of consumer choice in retail fuels. There is also some competition in the supply of wholesale ethanol.
Our approach should minimise distortion in the market for fuel ethanol and provides scope for ethanol producers and fuel wholesalers to negotiate prices below our determined prices.
More information on our calculation and why we consider it is the most appropriate approach is available in our 2017-18 ethanol market monitoring report
Our spreadsheet model which calculates the reasonable price for ethanol can be found here