There still remain many energy options, but biofuels are falling out of favour

The production of biofuels has “aggravated, rather than ameliorated, global warming”

The development of clean energy and sustainable technologies has received a substantial boost recently when the African Development Bank (AfDB) approved a R100-million equity investment in the Evolution One Fund (EOF).

The EOF, the first southern Africa-focused private equity fund specialising in the areas of clean energy and sustainable technologies, has already raised $54m in cornerstone capital commitments from four international investors, and the AfDB investment will augment that capital pool.

Only time will tell if the fund’s priorities in focus will change, but indications from other sources at this stage seem to indicate that the agri-industry maybe deserves more attention than it presently receives for its contribution to global warming, and that biofuels from agricultural crops are fast falling out of favour as an alternative energy source.

While the fund will be targeting eight specific sectors, two – clean energy and energy efficiency – will receive half of the fund’s investments.

Other sectors targeted are efficient and clean manufacturing processes and technologies, air quality and emissions control; water quality and management; waste management; agribusiness and forestry; natural products; organics and natural health; and environmental real estate.

South Africa will account for between 60% and 75% of the fund’s overall investments, while the balance will be earmarked for investment in the rest of the Southern African Development Community.

The International Council for Science has issued a report which declares that the production of biofuels has “aggravated, rather than ameliorated, global warming”.

Over the last decade or longer, considerable lobbying has gone into influencing decision-makers and legislators to create a biofuels-friendly political and economic environment.

The agricultural industry in marginal areas has seen huge new business opportunities in cultivating crops for the production of biofuels.

In some instances, subsidies have been put in place to promote the development of a biofules industry.

Some commentators have been expressing concerns that it would be very difficult to once again turn around this tide, which seems to be going in the wrong direction.

There are, however, signs that it is indeed starting to happen. Plans to turn potential food crops into fuel have already been scrapped in some areas.

Notably the Western Cape Climate Change Strategy, which was launched in January this year, stated that one of the options for alternative energy sources that did not make the grade was biofuels from crops like maize.

It was largely rejected as an option because the production process used large amounts of water and energy.



Status of biofuels

A status report on the biofuels industry, prepared by agricultural economist Dirk Troskie of the provincial Department of Agriculture, was released with the climate change report.

He stated that traditionally, biofuels were produced from crops such as sugar cane and maize to produce bioethanol, and sunflower oil to produce biodiesel.

Although none of these was commonly produced in the Western Cape, the department investigated the potential that a biofuels industry would have in the province because of the rocketing price of crude oil, the dropping price of wheat, and the need to find alternative markets for wheat produced in the province.

The report also looked at the role that a biofuels industry could play in supporting emerging farmers.

A preliminary investigation into using wheat as feedstock for a provincial biofuels industry found that such an industry may produce R69m a year. This would mean an added value of R243 for a ton of wheat.

A once-off benefit of R320m and 150 jobs would be added during the construction of a plant. Once the plant is established, 40 to 50 specialised jobs would be created.

Economic linkage would lead to another 560 to 750 jobs.

The task team, appointed to elaborate on establishing the industry, found that a biofuels industry could only succeed if appropriate policy instruments were created and put in place, and if the province put in a subsidy of about R100m per year.

This, together with the sharp increase in the price of all agricultural commodities and the global deficit in grains, led to the decision not to proceed with developing a biofuels industry based on food crops.

The next generation of biofuel technologies may be a viable option for the province. This included biofuel from algae, the report stated.

A United Nations Food and Agriculture Organization report, which was released in October last year, also stated that the West needs to rethink its rush to produce biofuels. This had done more harm – in pushing up food prices – than good, in reducing greenhouse gases.

The report further stated that biofuels would offset only a modest share of fossil energy use over the next 10 years, but would have a much greater impact on agriculture and food security.

Demand for biofuels would drive the price of sugar up by 26%, of maize by 11%, and of vegetable oil by 6%.

Experts have said that biofuels could provide energy security and mitigate against global warming, but the industry has not achieved either, the report stated.

The high hopes there were initially for the contribution that biofuels could make to counter the dangers of global warming, may also have been wrong on another count.

Dr Paul Crutzen of Germany’s Max Planck Institute calculated a few years ago that nitrogen dioxide (NO2), which is a toxic gas produced as a by-product of certain industrial processes, had an impact on global warming over a century of more than 300 times that of an equivalent mass of carbon dioxide.

Fertiliser used to grow crops in depleted soils contains nitrogen that soil bacteria fix in the ground to become food for plants, but not all plants can absorb nitrogen all that well. Two plants that are deficient in this regard are maize and canola, another favoured source of vegetable oil
for biofuel.

In a recently published book, associate professor of the University of Cape Town’s Energy Research Centre, Harald Winkler, argued that in developing countries such as South Africa, sustainable supply of energy should have development impact as the first priority, and the mitigation of climate change as a logical spin-off.

Climate change mitigation policy should start with local sustainability development rather than goals set in climate terms,
he argues.

If biofuels are not the solution, some serious thinking about alternatives still has to be done. As a top energy expert recently warned at an energy conference, the security of liquid fuels supply to South Africa’s economic heartland of Gauteng remains under threat in the short to medium term.

Recent serious supply disruptions have only been averted owing to a slowdown in demand.

Dr Rod Crompton of the National Energy Regulator of South Africa, however, also cautioned that competing supply and logistical solutions – ranging from a new costal refinery, through to the development of a series of new pipelines and another coal-to-liquids plant – could lead to a glut of inland capacity.

Considering the age of the country’s refining and transport infrastructure, the inland market would remain vulnerable, particularly once economic growth returned.

Electricity options

While South Africa’s options might seem rather limited when liquid fuels are at stake, there is apparently an abundance of possibilities as far as electricity generation is concerned.

The good news for South African electricity generation goes back to November last year when it became known that international investors had made R1.5 billion available for the development of clean renewable electricity sources.

Capital is available to particularly large electricity consumers that were threatened by rationing from Eskom.

Richard Worthington, WWF-SA Climate Change Programme manager, recently argued that investing in renewable energy could be a cost-effective solution for South Africa, which is presently 90% dependent on coal for power generation.

“We risk having to live with ever-increasing fuel prices and the possibility of international penalties or trade barriers for South African exports manufactured with dirty energy,” he said.

Abundant in sunlight and wind, solar thermal and wind energy would be the most promising technologies to bet on.

“We have so much potential, we just need to count the cost to see why and how we can mobilise investments,”
he said.

Worthington’s argument, however, relies heavily on subsidies of one form or another to make the use of renewable technologies for electricity generation viable.

He said that besides international funding and subsidies, South Africa can use a fee-in tariff and tradable renewable energy certificates to make it affordable.

Mindful of Prof. Winkler’s argument that local sustainability should come first, note should also be taken of the argument put forward by Oliver Baker, an independent consultant at Banzi Geotechnics – that South Africa needs to invest in gas infrastructure and exploration.

He argued at a coal conference in June that the country’s coal mining majors should get involved to develop a coal bed methane (CBM) industry.

He said CBM could be a quick way to ease the power shortages that led to shutdowns at mines and smelters early last year. “It can be brought on stream very quickly, it’s immediate, there is no beneficiation; the moment you bring it to the surface, you can use it.”

He did, however, point out that the lack of data was a problem and that estimates for the potential in the country range from between 15 and 40 trillion cubic feet.

Making CBM part of the government’s energy plan and establishing a model for state-owned utility Eskom to use gas to power its plants would be one way of moving the industry forward.

“The government needs to realise CBM’s potential for power production and for reducing our carbon footprint. We need to develop the infrastructure and develop a financial model to help people assess the potential of it,” said Baker.

KPMG’s public sector advisory director, Tony Vicente also recently highlighted at another conference the need for an energy database in South Africa with credible and transparent information, to ensure the country would be able to attract foreign direct investment in the energy sector.

It was his assessment that much of the information and data on South Africa’s energy sector, which is currently available, was outdated. This could lead to a delay in significant energy reforms and investment, as investors are sometimes not looking at current information.

Vicente is of the opinion that the database should be run by the National Energy Regulator of South Africa and that it should provide clear information on the energy output, shortages and surpluses – to not only assist in attracting investment and finance, but also facilitate co-operation agreements between the government, business and other organisations.

Hydroelectricity

There is still massive potential for the generation of hydroelectricity in South Africa which remains untapped.

Speaking at the same conference as Vicente, Dr Terry Moss, vice president of the International Hydropower Association, said South Africa had only about 1% of installed hydropower capacity if existing hydro reservoirs alone were taken into account; and only about 5% if pumped-storage projects were included. Globally, the percentage was just under 20%.

By comparison, China has developed about 65% of its clean-generation mechanisms for hydropower projects, while India has developed about 10% of its potential hydropower projects.