The initiative will receive the capital funding over three years from 2015, once the best and most suitable industry proposals have been identified.
It is hoped the funding will underpin private sector investment in demonstration-scale waste to fuel plants, using municipal waste and forestry residues to produce fuel. The project aims to discover a practical alternative and renewable replacement for fuels used in road transport and aviation.
Transport minister Norman Baker said: I am delighted that we are able to support these innovative technologies and believe that they will bring significant benefits to the UK. There are real opportunities for the UK to take a technological lead, driving growth, creating highly skilled jobs and seeing energy, security and environmental benefits.
Replacement
The initiative was largely welcomed by the Renewable Energy Association (REA) who argued any funding into biofuel technology was a step forward.
REA head of renewable transport Clare Wenner said: The REA welcomes this new funding for demonstration-scale advanced biofuels plants. Advanced biofuels, made using unconventional methods and feedstocks including wastes, can achieve exceptionally high environmental performance. The UK could certainly take a lead in developing advanced biofuels, spurring growth and creating jobs in a new industry.
However, Ms Wenner also questioned Mr Bakers comments in the press this morning, after he said there was a need to distinguish between good and bad biofuels.
The Minister is absolutely right to say that advanced biofuels are good. But it is misleading to imply that current biofuels are bad.
Current biofuels, which meet strict sustainability criteria, can make a major contribution to renewable energy and emissions reduction targets in the short term, and enable the investments for R&D into advanced biofuels, with even better environmental performance, over the medium term.
Signal
The key missing ingredient for both is a clear and supportive policy framework.
She added: We urge Government to give investors a signal that the regulatory framework for renewable transport fuels will be extended beyond 2020 to at least 2030, to give entrants to the competition assurance that their investments will be underpinned by legislation.
Dft will also commission a feasibility study to report on the detailed design of the competition including eligibility criteria and ensuring the project complies with EU State aid rules.
Further details on both the study and the competition are to be released in the autumn.
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