African biofuel industry

Announcing the date of commencement on Monday, Energy Minister Ben Martins noted that the government had approved South Africa's biofuels industrial strategy in December 2007, envisaging a five-year pilot phase aimed at achieving a 2% biofuels penetration into the national liquid fuels pool.
However, incentives such as a 50% rebate on the general fuel levy for biodiesel manufacturers and a fuel tax exemption for bioethanol producers had been insufficient to lure investments in the biofuels sector, "hence the need for establishing a more enabling and supportive regulatory framework", Martins said in a statement.
A Biofuels Pricing Framework would be finalised by the end of 2013, the minister said, and a Biofuels Implementation Committee had been set up to resolve all "practical or operational aspects pertaining to the blending of biofuels with mineral petrol and diesel".
Biofuels include bioethanol, which is produced from sugar and starch crops such as sugarcane and sugar beet, and biodiesel, which is produced from vegetable oils such as canola, sunflower and soya.
The government has excluded maize, South Africa's staple food, from use in biofuels production.
The Department of Energy's chief director for clean energy, Mokgadi Modise, told Members of Parliament in January that eight companies had been granted licences, or provisional licences, to produce bioethanol or biodiesel in South Africa.South Africa's biofuels strategy aims to stimulate the production of suitable crops in areas of the country that have been under-used for agriculture.Modise told MPs that a feasibility study conducted by her department in 2006 had indicated that the production of 400-million litres of biofuels a year in the country could create up to 25 000 new jobs.

Read more: http://www.southafrica.info/busines...iofuels-011013.htm#.U1d-k_ldVf0#ixzz2zhJTFcf5

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From October next year all oil refineries will be required to blend 2% of locally produced bioethanol into their petrol.The government has decided that sorghum and soybeans should be used as the biofuels and biodiesel feedstock respectively, in order to alleviate concerns around food security.

In doing so it also hopes to revive the flagging sorghum farming industry which has seen production volumes collapse from roughly 900,000 tonnes a year to 150,000 tonnes as sorghum beer’s popularity as a drink has declined. Maize has been banned as a biofuels feedstock.

But time is running out to start construction of the plants needed to produce the biofuel, warned joint CEO of Mabele Fuels Zahir Williams. He said the government needed to move speedily in processing the draft regulations and signing them off in order to meet the October deadline.The government subsidy will provide licensed domestic bioethanol producers, such as Mabele Fuels, with a minimum return on assets. It is funded through a biofuels levy to be added to the petrol price, estimated to be at 4.5c-6c a litre.

So far four bioethanol and four biodiesel manufacturing licence applications have been issued or granted by the department. The government has identified the biofuels industry as a potentially major source of employment and economic development.

In 2005 the Cabinet directed the Department of Energy to come up with a strategy for the industry, which led to the Biofuels Industrial Strategy. The Cabinet endorsed it in 2007.Mr Williams leads a consortium of investors and black empowerment partners who plan to build a R2.4bn sorghum-to-bioethanol plant in Bothaville in the Free State.

"We need to commence construction now. Our build plan will take 22 months," said Mr Williams. It was possible to have everything finalised by the middle of next month."Literally a week thereafter we can begin construction as we have all our approvals in place, our construction teams are on standby and we can turn the soil. That is how close we are," he said.Mabele Fuels has already secured all the various environmental and legal plans it needs for the plant. The bioethanol plant will be the first of its kind in South Africa and will mark the establishment of a new biofuels industry.

Funding is also in place from, among others, local mezzanine fund mangers Vantage Capital and Standard Bank.Luc Albinski, managing partner at Vantage Capital, confirmed that the mezzanine financing company will be providing R175m of mezzanine funding to Mabele Fuels from its R1.9bn fund. In addition, Vantage has arranged a further R160m of mezzanine funding from Standard Bank and the Eskom Pension and Provident Fund. The total mezzanine funding component amounted to R335m of the R2.4bn project.

The balance has been raised from players such as Standard Bank, the Government Employees Pension Fund and the National Empowerment Fund.

Mr Williams said while all the necessary capital was in place to fund the project, investors needed certainty over the various pricing mechanisms before they would release the money to build the plant. He was worried that further delays in processing the regulations might lead to these commitments being withdrawn. "If you hear a bit of anxiety in my voice it’s because it has taken so long to get to this point. The clock is ticking."

Emma Dempster, a senior associate lawyer for projects and infrastructure at Cliffe Dekker Hofmeyr, said the position paper had a lot of positives to give some comfort to the industry.

"It provides a little bit more certainty as to the tax and pricing mechanisms going forward." She described its publication as an important junct ure.

In order to achieve a 2% blend, an estimated 250-million litres of bioethanol will need to be produced annually. The Mabele Fuel’s plant will produce two-thirds of this required volume, with the remainder to be supplied by a plant backed by the Industrial Development Corporation, which is to be located at Cradock in the Eastern Cape.

Mabele Fuels will require about 380,000 tonnes of grain sorghum annually, which will be sourced domestically over time from commercial and emerging black farmers. An estimated 150,000ha of farmland will be required to grow these volumes, half of which will come from previously unused land being cultivated and the other half from maize crops being switched to grain sorghum.

David Kornik, associate partner at Vantage Capital, says grain sorghum is the ideal crop for bioethanol production as it is drought and disease resistant and is capable of generating reliable yields on marginal land.

"The crop grows well in drier areas, especially on marginal soils that are shallow and have heavier clays. Conditions in the Free State are particularly well suited to grain sorghum cultivation, a key reason for the Mabele Fuels plant being located in Bothaville at the heart of the country’s so-called ‘grain triangle’," he said.

The location of the plant in the Nala municipality is expected to give the region a major economic boost.

Mr Williams said studies have shown that based on a 2% level, the biofuels industry will produce between 15,000 and 18,000 jobs in the agricultural supply chain alone.

The plant itself will only require around 100 employees to operate it. During the construction phase between 500 and 600 direct and indirect jobs would be created.But the biggest effect will be on the balance of payments as the country will not need to import the crude oil that the biofuels would replace.
"That is where we as a country stand to see monetary savings. That will make a significant impact," Mr Williams said.There are plans to eventually raise the biofuels target to 10% over time, which will require an additional R25bn in capital investments.
http://www.bdlive.co.za/business/energy/2014/01/17/milestone-for-biofuels-as-pricing-rules-issued

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THE Government has signed a Memorandum of Understanding (MoU) with Zambia Sugar to facilitate the negotiations for an off-take contract for ethanol production, aimed at mitigating the high cost of fuel.
Mines, Energy and Water Development Permanent Secretary Charity Mwansa said the agreement would facilitate the negotiations on ethanol production.
“Yes! I would like to confirm to you that we have signed a Memorandum of Understanding with Zambia Sugar for the establishment of an ethanol plant,” Ms Mwansa said in an interview in Lusaka.
Last year, the Government announced that it would engage Zambia Sugar to set up an ethanol plant in an effort to reduce the escalating prices of fuel.
In a separate interview, Zambia Sugar managing director Aubrey Chibumba said the MoU established the basis for the negotiation with the Government on how much ethanol the company was required to produce and at what price it would be sold.
“The MoU establishes the framework which allows us to negotiate for an off-take contract with the Government in terms of how much ethanol we can produce and what sort of pricing we can expect before the construction of the plant begins,” Dr Chibumba said.
This will guarantee a market for future production of ethanol and improve chances of getting the necessary financing for the construction of the plant and installation concerned.
He was confident that the signing of an agreement with the Government would allow the firm to negotiate the details of the off-take contract.
“And the Government may be interested that we produce this ethanol as cheaply as possible. We have to understand certain things we are doing and allow all those discussions to take place and be concluded,”
Dr Chibumba said currently, it was difficult for the company to set up ethanol plant until the policy issues were resolved, saying the MoU had set the tone for the discussions.
“We are in the early days; we still have policy issues that need to be resolved. We are doing the technical issues right now. We will have all our numbers in terms of the total cost, what the value addition to the economy is going to be and the numbers will be ready by June next year.
“The board will be expected to make a decision by November this year, at that point we will be in a position to begin ordering the necessary equipment with the view to start erecting the plant sometime in 2016. We hope to start full production by 2017, assuming everything goes right,” Dr Chibumba said.

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Times Online /Business Reporter

And the government will soon sign a Memorandum of Understanding (MoU) with Zimbabwe-based firm Green Fuel in its continued efforts to find cheaper sources of fuel for Zambia.

Mines, Energy and Water Development deputy minister Charles Zulu said shortly after a conducted tour of the Chisumbanje Energy plant operated by Green Fuel in Harare that the government was happy to find a cheaper source of ethanol in Zimbabwe.

He said the government would, in the short-term, import ethanol from Zimbabwe .

Zulu said finding a cheaper source of fuel was an alternative for Zambia and not subsidies, as the government was in a hurry to develop the country.

“We are about to sign an MoU with Nakambala, although the sugar company wants to start producing power and exporting ethanol. So we want to encourage them to just use ethanol produced at the plant,” Zulu said.

Zulu noted that Zimbabwe had progressed in the energy sector in terms of renewable energies, but Zambia still had a lot more to learn.“We are happy that as the government, we have found a source of energy which, in the short-term will assist us as a country to bring down the prices of fuel in Zambia,” he said.

He noted that the Zambian people were bemoaning the removal of fuel subsidies, but that the government felt the solution was not throwing stones and criticising, but working together to find cheaper sources.

Zulu said the government had realised that ethanol was environmentally clean, and it was expected that fuel prices in Zambia would go down once the country switched to that source of energy. He said motor vehicles would last long and that there would be job creation, adding that the economy would grow. Zulu said it was possible for Zambia to do what Zimbabwe was doing currently.

“As you may be aware fuel in Zimbabwe is cheaper than in Zambia as the country is using ethanol.Green Fuel said the company was ready to start exporting the commodity to Zambia.The company said it was possible to export directly from the plant as it had a customs officer stationed within the plant, hence it would not be difficult for it to do so.

He said the company had been focusing on the local market, but that it was considering to start exporting to countries including Malawi and South Africa which he said had a huge market in the region.Green Fuel general manager Graeme Smith said the the $600 million project, which currently employs 15000 workers, could further create 22 000 direct and indirect jobs.“So a total of close to 50 000 of direct and indirect jobs together would be created by the end of the project,” Smith said.

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According to a press statement released on Wednesday by the Zimbabwe Energy Regulatory Authority (Zera), fuel importers, wholesalers and retailers are expected to comply with the new statutory instrument on blending.

Wholesalers and retailers have been given up to 10 days to clear their current stock, after which all licensees in the petroleum sector will be expected to comply with legal provisions.

The price of ethanol is currently set at US$0.95 per litre. Zera said the price of ethanol will be reviewed in due course, adding that ethanol blending contributes towards the country's security.“It also reduces the fuel import bill, creates employment and has potential for power generation,” said Zera, adding that the country is set to save about $4m every month in imports through mandatory blending.

Zera’s position on ethanol comes at a time when ethanol from Zimbabwe’s Green Fuel is in huge demand from other countries, including South Africa.
At the weekend The Herald reported that some Southern African Development Community countries are scrambling for the product and have approached Green Fuel with a view to sealing deals.

Green Fuel general manager Graham Smith reportedly said the company had been approached by Zambia, Malawi, Mozambique, Botswana and South Africa.Smith said South Africa, which introduced mandatory blending, was "a key market hungry for energy".Green Fuel is running with capacity to produce 120 million litres of ethanol a year. “In the next seven years we would be producing 500 million litres of ethanol per year,” said Smith.

- Fin24

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The plant is a cornerstone of a multi-tiered venture, CleanStar Mozambique, which will buy cassava from local farmers and refine it into ethanol. That ethanol will then be distributed as cooking fuel in Maputo, the nation's burgeoning . The hope is that the new market for cassava will boost the incomes of 1,500 local farmers, while creating a supply of clean cooking fuel that can be used as a mass market alternative to charcoal.

"We're estimating an average of a tripling of income in the first three or four years," said Stefan Maard, a sustainability manager for CleanStar Mozambique. That income is coming from an incredibly low baseline, he adds. But it will be enough for families to save some surplus, to pay for school—beyond covering basic necessities.

The unusual business model pioneered by CleanStar Mozambique—a partnership between CleanStar Ventures and Novozymes, a Danish industrial enzymes producer—stretches all the way across this fully developed supply chain. There's been much tinkering here: CSM employs a sustainable farming model in which cassava will account for one-sixth of the yield. To keep the soil fertile, farmers must also harvest other edible crops. Project leaders say that they're sensitive to the "food vs. fuel" issue, and that they've steered clear of monoculture farming methods.

After the cassava is sold to CSM, it's refined at the Dondo plant—which will eventually produce 2 million liters of cooking fuel a year. According to Novozyme's CEO Steen Riisgaard, the plant was donated and built by the American ethanol company, ICM, which refused to take a share in any profits.

The refined ethanol is then distributed to stores and marketing outlets in Maputo. Thelma Venichand, CleanStar’s Director of Sales and Marketing, a Maputo native, developed a new brand, Ndzilo, with a local staff to hawk the biofuel. Ndzilo is also selling clean cookstoves Mozambicans will need to use the new fuel.

The net result, as you can see, is a tightly orchestrated, start-to-finish venture. The entire supply chain is accounted for, and there's little room for error. The project attracted the attention of Bank of America, whose carbon desk invested seven figures (representatives wouldn't give a more concrete number) in CleanStar Mozambique.

On its face, it's a win-win-win-win. But the project is still new, and the market is still unproven. There are high hopes that the biofuel plant will be running at its top capacity, and that 120,000 households will own the cassava-powered cooking fuel within three years.

Which would mark significant progress: As I've noted previously, the indoor air pollution generated by charcoal cookstoves kills two million people every year. And they're ubiquitous in Mozambique—read all about the damage they do, and how the charcoal is bought and sold in my previous posts in the series. Solving this crisis should indeed be an urgent priority, and this venture is remarkably promisin

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About US$560 million would be spent on the construction of additional two plants with a combined capacity of 40 million litres of ethanol per month and US$400 million on developing farm land measuring 40 000 hectares.

Mr Smith said some money would also be invested in upgrading the current plant which would double capacity to 20 million litres.

"At the moment, we have 9 500ha and the potential total is around 50 000ha," said Mr Smith. "To develop that, we had a 10 year plan . . . but in the next seven years, we intend to fully develop the entire project to the full potential of 50 000ha.

"Once developed, we will be producing on an annual basis, figures of around 500 million litres and generate 120 megawatts."

Mr Smith said once the project is completed, Zimbabwe could stop petrol imports. Zimbabwe uses around 400 million litres of fuel per month.

"In other words, we will be in a position to sufficiently produce enough ethanol to fully substitute petrol imports," said Mr Smith.

The expansion project is expected to create around 16-17 000 jobs bringing the total workforce at the company to 31 000, making it one of the country's largest employer.

Green Fuel has so far invested US$320 million into the project since its inception in 2009. The plant started running in 2012 and is currently producing 10 million litres of ethanol per month. It currently employs about 14 500 permanent workers, 2 500 of which are casual. The company also produces its own electricity for the plant and the farms.

The plant can produce 18MW, but is only consuming about 4MW. Mr Smith said the company would install electricity transmission facilities with a capacity of transmitting 14MW on the national grid and for export. Greenfuel's operations have been boosted by the introduction of mandatory blending by Government which started at 5 percent in August last year and was increased to 10 percent and 15 percent two months later.

During the first three months of mandatory blending Government realised savings of about US$20 million on it fuel bill while further savings were expected as the policy gains traction.

Government has, however, revised the blending thresholds to 10 percent as Green Fuel is not presently able to produce ethanol required to produce E20

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