New Zealand’s first commercial-scale biodiesel plant is now in its final stages of construction in Wiri, south Auckland, according to a report by Radio New Zealand.

The 20-million-litre-per-year Z Energy biodiesel plant will be completed in June. The biodiesel plant will use tallow as feedstock. Z Energy, which sells about 860 million litres of diesel fuel per year, plans to blend 5% biodiesel to petroleum diesel when the plant becomes operational.

“We’ve been well supported by Fonterra, Fulton Hogan, Downers and New Zealand Post, to pay us a small premium to actually take the product,” said Z Energy CEO Mike Bennetts.

Bennetts said that the marginal cost imposed for burning fossil fuels under New Zealand’s Emissions Trading Scheme discourages the use of clean alternatives such as biodiesel.

“One of the things that stops people from investing in biodiesel plants is not so much the running costs, it is the capital cost of getting it going in the first place,” Bennetts said. But he said the company was able to build the plant at half what it would have cost elsewhere.

“So we have effectively got a 20 million litre plant for NZD 20 million (USD 13 million), but elsewhere in the world it would have cost NZD 40 million (USD 26 million).”

Transport produces about 20% of New Zealand’s greenhouse gas emissions, less than agriculture. Z Energy views its biodiesel plant as a start towards reducing greenhouse gas emissions from transport.