Sewage sludge could become a source of fuel for the Queenstown Lakes district, according to a Queenstown Lakes District Council report.
The report, to be presented to the council's utilities committee today, investigates alternative uses for sewage sludge.
Sludge is at present removed from Wanaka's Project Pure wastewater treatment facility and disposed of in the Victoria Flats landfill, at a cost of $284 a tonne.
Project Pure and the future Shotover wastewater treatment facility could produce up to 240 tonnes a month.
The report estimates 3840 tonnes of sludge would be put in the landfill at a cost of $1.3 million a year.
Under its waste management strategy, the council must maximise waste diversion from landfill.
The report by council strategic project manager Martin O'Malley and solid waste manager Stefan Borowy said the collection and processing of green and food waste had been deferred to October 2013 because it was "unaffordable".
Organic waste, including sludge, would make up 10% of the district's waste in 2014.
The council commissioned Connell Wagner, now Aurecon, to investigate alternative uses for sludge.
Aurecon presented two options: using sludge as fertiliser or for energy generation.
The report says reusing sludge as fertiliser and compost would be a practical option, because the council at present buys and transports compost from Southland for its parks and reserves.
Electricity produced from burning sludge could be put into the national grid or used as power for wastewater treatment plant facilities.
The report recommends the council discuss beneficial uses of sludge with the community and business organisations.
It is estimated the cost of the investigation would be $50,000.
