What is under review?
IPART has completed its review of the ethanol markets for 2020-21. The review is related to each of IPART’s functions under the Biofuels Act. These are:
- determining and periodically reviewing a reasonable price for wholesale ethanol for use in the production of petrol-ethanol blend
- monitoring the retail market (including prices) for petrol-ethanol blend, including reporting on the effect of our determined price on the retail market.
Who does this review affect?
This review mainly affects fuel sellers and ethanol producers.
Under the NSW Biofuels Act 2007 (Biofuels Act), fuel sellers must ensure that 6% of fuel sold is ethanol. This means that 60% of fuel sales are required to be E10 (which is made up of 10% ethanol, and 90% unleaded fuel).
What did we decide?
Since we commenced our price determinations in 2017, we have set the reasonable wholesale price for ethanol in line with what it would cost retailers if they had to buy it from overseas (the “import parity price” or “IPP”).
We have reviewed the conditions in the ethanol markets as part of this review. We have decided that:
- IPART will continue to determine wholesale ethanol prices based on the price of importing ethanol from overseas (the “import parity price”).
- We will simplify the import parity price model by reducing the number of cost components that require updating at each review:
- We will to hold cost items that represent 10% or less of the import parity price constant for the next 3 years using their 5-year average.
- We will continue to include the excise rates for imported fuel in our import parity price calculation.
- Additional price constraints are not required because a high degree of choice between fuels for consumers continues to protect them from excessive wholesale ethanol prices.