Just less than 5% of the country’s fuel needs will be supplied by renewable biofuels by 2013 if an ambitious government draft plan is implemented.
The draft biofuels industrial strategy sees the potential for a new biofuel industry to create 55Â 000 jobs, add 0,12% to GDP, save R3,7-billion annually on the balance of payments and achieve greenhouse gas savings of R100-million annually.
The strategy says a domestic biofuels industry could contribute 75% to the national renewable energy target. It says this can be achieved with limited impact on food security and prices as most feedstock for biofuels will come from crops that are currently exported. Increased agricultural production and efficiency gains are also envisaged to flow from the new policy.
The plan envisages support for a biofuel industry through an equalisation fund at less than $45 a barrel, with the industry being required to pay into the fund above $65. At $35 a barrel motorists would pay an additional 1,2 cents a litre to support this industry.
“To motorists this is relatively insignificant compared to fluctuations in world prices,” says the draft report.
“For world prices above $65 the biofuels industry could pay in and slightly reduce pump price increases.” Crude was trading at $55 this week.
The draft paper could also be seen as an indication of what government may apply to other local fuel industries such as the synthetic fuel industry. A task team has completed a report for Finance Minister Trevor Manuel on a new tax dispensation targeting Sasol and Mossgas.
The draft plan says average market penetration of biofuels of 4,5% of liquid road transport fuels (petrol and diesel) by 2013 “is achievable without excessive support by utilising surplus agricultural capacity”.
Producers will also get support through the fuel-levy exemption.
The strategy says that “internationally biofuels typically provide a significant portion of renewable energy and are recognised as the major contributor to the supply of renewable liquid transport fuels.
“In South Africa, transport fuels make up about 30% of energy consumption (by energy content) and 70% (by value) and hence renewable fuel supply should include a contribution from biofuels.”
The paper says the creation of a biofuels industry requires that investors see an attractive return on capital and demand certainty, as well as a margin between the fuel-based product price and the agricultural feedstock net input cost.”The support must not be excessive, such as that food markets are materially affected.”
The strategy says biofuels require a low-cost, high-yield and surplus agricultural production, most of which will not be food crops.
The biofuels strategy could lift usage of indigenous fuel production from about 35% of total at present to about 40%. Total investment in this new industry would be about R6-billion.
The draft plan was released for comment last month interested parties are invited to respond by March 10.