Rural Victoria may convert straw to energy

Straw could be turned into bio-energy fuel instead of being mulched or burnt as waste as part of a rural Victorian study.

The state government will put $60,000 towards a feasibility and business case, which could result in a $3 million straw pellet plant being built in Victoria's Central Highlands.

Funding for the project will come from the government's $20 million Food Source Victoria Program, with support from local organisations.

If converting straw to energy is feasible, the project may lead to additional income for grain growers and new jobs, Labor MP Danielle Green said on Monday.

The investigation will focus on developing a new market for cereal stubble and straw, and finding out whether the conversion already occurring in Europe is possible under Australian conditions.

The Danish island Samso has been using biomass plants to burn hay and woodchips, which act like coal-fired power plants, to supply energy since 2007.