ADELAIDE – The Australian wine industry is evaluating the conversion of a 263-million-litre red wine surplus into biofuel to mitigate a severe market oversupply and crashing grape prices.
The move represents a strategic attempt to find industrial utility for a product that has lost consumer demand, as global consumption patterns shift and historical export dependencies have failed to provide the expected recovery. It would also align the sector more closely with Australia’s national fuel standards and emissions-reduction settings, which already allow for bioethanol blending in petrol.
The initiative targets the vast majority of the current oversupply, which consists primarily of red wine. Australian Grape and Wine chief executive Lee McLean stated that the volume of stored red wine makes it necessary to examine alternative applications.
“With the current fuel situation, it seems sensible to at least explore the economics, barriers and opportunities related to converting some of this into biofuel,” McLean said, adding that any large-scale scheme would need to work within existing government fuel quality and excise regimes.
Lee McLean is looking to turn Australia’s wine oversupply into an opportunity.
Distillation and Ethanol Yields
The proposed process involves extracting ethanol through distillation, a method identical to the production of spirits. University of Adelaide plant science professor Rachel Burton noted that the ethanol present in wine is not fundamentally different from the ethanol used in E10 petrol, which is regulated under Australia’s Fuel Quality Standards Act.
“The difference is in purification,” Professor Burton said. “If you wanted to isolate the bioethanol, you would do that through distillation, which is the same process used to make spirits.”
The projected conversion rates are as follows:
- Raw Wine Surplus: 263 million litres
- Projected Fuel-Grade Ethanol Output: 30 million litres
- Primary Method: Thermal distillation for alcohol separation
Professor Burton highlighted that since the wine is already fermented, the ethanol is already present in the product, reducing processing steps compared with starting from raw grape juice or other feedstocks. However, additional refinement would be required to meet transport-fuel specifications and to ensure the product can be safely blended into existing fuel infrastructure.
Rachel Burton says the ethanol in wine is not fundamentally different to what is used in biofuel.
“The difference is that for spirits sold to consumers, flavour matters. For biofuels, it doesn’t – the aeroplane doesn’t care what [the fuel] tastes like.”
Structural Decline in Global Demand
The pivot to fuel follows a precipitous drop in global wine consumption. McLean reported that 2025 global consumption levels have fallen to levels seen in 1961, despite the world population being 60 per cent larger.
This demand collapse has created a “perfect storm” for producers, with grape prices in several regions falling to approximately 50 per cent of the cost of production. The industry is currently facing an oversupply of both finished product and vineyard capacity, particularly in inland growing regions geared toward bulk red wine.
Wine consultant Leon Deans noted that while distillation is a viable method for removing surplus, it may be economically unsustainable without government intervention or targeted transition support for growers.
“Broadly speaking, you’d probably need something in the order of about 15 cents per litre of wine to cover the gap,” Deans said.
The financial requirement assumes that value can still be recovered by converting the wine into fuel-grade ethanol or pharmaceutical-grade alcohol, and that offtake agreements from fuel blenders or industrial users can be secured at scale.
As less wine is consumed globally, the industry needs to recalibrate its production.
Market Volatility and Exit Barriers
The current crisis follows a period of failed expectations regarding the Chinese market. While China was previously viewed as a primary growth engine for Australian exports, Deans stated that the market has since stabilised at a volume much lower than anticipated, leaving producers exposed after years of planting for growth.
This imbalance between supply and demand over the last 25 years has forced many growers into precarious financial positions. Some have been forced to sell their water entitlements to maintain solvency, trading long-term production capacity for immediate cash flow.
Because these entitlements are essential for agricultural production, selling them effectively removes the possibility of a cash-positive exit for many operators, locking families out of future horticultural use of their land even if prices eventually recover.
Industry bodies are now pressing federal and state governments to clarify what, if any, temporary assistance or structural adjustment programs could underpin a conversion-to-biofuel pathway, alongside other measures such as managed vineyard removal and regional diversification. For now, the sector is modelling whether turning wine into fuel can be more than a stopgap – and whether it can become a regulated, commercially viable arm of Australia’s wine economy rather than a one-off disposal exercise.