South Africa is investigating two main sources of biofuel, maize and sugar, and already proponents are starting to square off.
The windfalls task team has recommended investment incentives for the manufacture of biofuels, or liquid fuels from indigenous raw materials, excluding crude oil and natural gas. It also says domestic biofuel production should be given precedence over new facilities from synfuels from coal or gas. This is because biofuels are expected to be more beneficial to the economy.
Tax credits would apply when the oil price falls below $45 a barrel, but investors would have to pay in tax at an oil price of more than $65 a barrel, although the exact figures still need to be debated. But, earlier this week, the South African Biofuels Association publicly criticised the plan, saying it needed between R2billion and R5billion a year in subsidies for at least 10 years.
Ethanol Africa, which plans to build eight bioethanol plants around the country to produce fuel from maize, said maize bioethanol was more profitable than other biofuels. “They have to make provision for all biofuels, [but] ethanol is more profitable and more sustainable,” says Joe Kruger, Ethanol Africa’s managing director.
Ethanol Africa’s break-even price depends on the price of maize and oil, the rand-dollar exchange rate and the basic fuel price, and would be between $40 and $45 a barrel. But, he says, the company supports a floor price of $50 a barrel.
The cost of Ethanol Africa’s first plant, in the Free State town of Bothaville, surged 20% to R1billion. This is because of higher steel prices. Kruger says it will be funded through a combination of equity and debt financing and that plans for this are on track.
James Blignaut, a professor of environmental economics at the University of Pretoria, outlines several concerns about biofuels. Crops grown for fuel purposes impact on biodiversity, on food security and on the water supply. Maize is largely rain-fed, he says.
“This initiative [bioethanol production from maize] started when we had a surplus, in a wettish year. Now we don’t have a surplus and it’s a dry, hot year,” says Blignaut, alluding to the present drought conditions. He is also concerned that dormant land, which has an environmental benefit, might be used for maize production.
The production of maize is also not a carbon neutral process as it results in a net energy cost.
Ethanol Africa’s Kruger disputes this, saying maize yields 1,65 times the input cost of energy.
Although maize is more widely cultivated, sugar may be a more appropriate crop, says Blignaut. Sugar cultivation would be concentrated in the Mpumalanga Lowveld and northern KwaZulu-Natal, in areas such as Paulpietersburg and Pongola.
Where maize yields three tons a hectare, sugar yields 130 tons a hectare and has a higher energy content, says Blignaut. While input costs are higher, the running costs are lower.
Maize needs to be replanted every year, but sugar regrows and only needs replanting after eight years or more, leading to lower carbon costs. Sugar also has less impact on food security, unlike grain, which is a staple food.
Kruger dismisses the food security concerns, saying his company would use yellow maize, which is used mostly for animal feed, and that South Africa already produces too much maize. There is a surplus of two- to three-million tons every year.
This, however, is white maize, which is used as a staple food. He also says the creation of a secondary market will encourage farmers to plant more maize. “Biofuels are highly risky, unless you have feedstock in surplus,” he cautions. A large percentage of the crop is irrigated and newer maize strains are “very” drought resistant, making crops less vulnerable.
On its website, Ethanol Africa says maize should be a preferred fuel source as the country already has an established maize industry with additional dormant land available for further production. Maize is also a well-traded liquid commodity and offers feedstock security over sugar.
The sugar industry, says the company, produces only a small surplus and sometimes experiences shortages, with limited land available for new sugar cane plantings. It summarises the argument against sugar as being a high opportunity cost, with a capital cost for production plants up to two and a half times higher than that of maize, higher relative transport costs and more complicated logistics.
It says sugar to ethanol plants will only be able to operate for eight months of the year, and there are significant pollution problems. Sugar proponents counter that sugar grown for ethanol has a much shorter cultivation cycle. And there are already worries about pollution from Ethanol Africa’s planned Bothaville plant.
Certainly, sugar to ethanol comes with a potential environmental cost. Increased production in the Pongola area of northern KwaZulu-Natal could, for example, place the already fragile St Lucia estuary under further threat, and pristine grassland could be turned over to farmland.
“We need all forms of support for renewable energy, but the subsidies must be well targeted and mustn’t conflict with other government priorities,” says Blignaut. “The other issue is to change the efficiency of fuel use with regard to fossil fuels. It’s not enough to change the fuel source, we need to use less fuel.”