South Africa is going Brazilian, joining a worldwide scramble to catch up with the South American country’s successful use of the green fuel ethanol as its primary source of liquid energy.
Ethanol, which has benefited in recent years from dramatic technological advances, is now seen internationally as a key renewable energy source. It is price competitive and not susceptible to volatile Middle Eastern politics.
Brazil’s home-grown fuels programme has reportedly kept $69-billion in the country.
The United States, China, the European Union and Australia are implementing biofuel policies to reduce oil dependency and improve the environment.
Cars running on ethanol eliminate sulphur dioxide and reduce carbon emissions by 80%.
In South Africa, the Cabinet has adopted a biofuels policy to reduce oil imports, diversify energy supplies and boost agriculture and the rural economy.
Fuel using ethanol as a 10% additive is expected to be available at petrol stations next year.
President Thabo Mbeki and Deputy President Phumzile Mlambo-Ngcuka this week identified biofuels as a key building block in the government’s growth strategy.
It is estimated that biofuels could add one percentage point to economic growth and create 100 000 jobs for every 100 000 hectares of new area of cultivation to provide ethanol.
“My job is to de-oil the economy,” says Manny Singh, who heads the Energy Development Corporation, a division of the Central Energy Fund.
Singh, who recently returned from a study trip to Brazil, says it produces ethanol at between $28 and $32 a barrel, compared with current oil prices of $60.
Brazil’s ethanol programme is so advanced that 95% of new car sales this year are projected to be flex-fuel cars that can run either on petrol or ethanol, the latter being 45% cheaper.
Leading manufacturers supplying flex-fuel cars in Brazil include Ford, BMW, Volkswagen and Toyota. These cars run on E85, referring to the amount of ethanol (85%) in the fuel, but require a relatively inexpensive $200 adaptation to conventional petrol engines.
In the US, more than five million cars supplied by leading manufacturers can run on ethanol fuel. Ethanol is generally unavailable at fuel stations but manufacturers are nonetheless including this option to meet new green-friendly standards.
South Africa and Brazil are in the process of signing a memorandum of understanding where Brazil will provide technical assistance.
The country is keen for South Africa to help develop a world market for ethanol. In poor rainfall years ethanol users will be able to source supplies on the world market.
South Africa’s ethanol programme is focusing on the relatively unambitious E10, where petrol is mixed with 10% ethanol. Petrol engines can run on E10 without any modification.
Annual petrol consumption is about 11-billion litres a year, meaning that E10 could save R3-billion a year at current prices and benefit the rural economy by this amount.
“Oil imports are the biggest cost item on the balance of payments, while 53% of our sugar production is exported at huge losses,” says Singh, saying that domestic ethanol production can redress this imbalance.
Sugar cane is the best source for ethanol, which takes just four months to grow compared with eight months for sugar production, but it can also be made from sugar beet, maize, sorghum and waste agricultural products.
In Brazil, sugar cane waste, known as bagasse, is used to make electricity to power the ethanol plant. In South Africa, the bagasse is used to make manure.
Ethanol is an excellent source of octane, another reason increasing its acceptance now that lead as a octane source has been outlawed.
South Africa’s green fuel revolution forms part of the country’s commitment to the Kyoto Protocol.
Singh says it costs more to grow sugar cane in South Africa than Brazil, one difference being the former’s relative water scarcity. The government’s ethanol plans envisage ethanol coming from new agricultural production. Existing food production is not being targeted.
Ethanol in Brazil is produced in a free market without subsidy, but alternative fuels suppliers in South Africa qualify for 40c a litre tax rebate from the R1,20 fuel tax.
South Africa’s relative water scarcity could limit the country’s ethanol potential, but neighbouring countries, such as Mozambique, in particular, with vast amounts of land, sun and water, could become primary producers of ethanol for the world market.
While conventional oil refineries have capital costs in the billions, substantial ethanol plants have costs in the tens of millions, raising the prospect of many rather than few market players.
Biofuels are a hot investment destination at present, a high-profile US venture capitalist having established a fund for these investments, and the United Kingdom’s Richard Branson describing ethanol as the win-win fuel of the future and setting up a new subsidiary, Virgin Fuels.
Support for the E10 programme has come from the Automobile Association, says Singh, who adds that building and maintaining consumer confidence will be key to the success of greening fuel.
He plays a video on his laptop of an Australian consumer television show that compared four identical cars filled with a tank of petrol. The car running on E10 travelled 400km further than that of the premium unleaded car even though it cost Aus$7 less to fill.
Discussions are scheduled with the oil and motor industries. South African Petroleum Industry Association director Colin McClelland says biofuels are an individual member matter. “That said, I believe the industry would be willing to buy the output at commercial prices and blend it into their products provided all necessary specifications are met and the motor industry accepts the resultant blends.”
The world price for sugar is at a 25-year high, in part because Brazil has cut supplies as it switches to ethanol and also because rich countries have cut subsidies to sugar farmers.
At one time, owners of ethanol-powered cars in Brazil could not get supplies as farmers had switched from ethanol to sugar. Hence the current hybrid approach using flex-fuel cars allowing motorists to use petrol or ethanol, depending on which is cheaper.
E10 is enough to keep the government busy and focused for now. Successful implementation of E10 though, is likely to see motorists clamouring for E85 as well.