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Business Day (South Africa)
Business Day Edition
February 6, 2014 Thursday
Biofuel rules needed soon for production
Biofuel rules needed soon for production
Plants need to be built for mandatory blending project to happen next year, writes
HEATED debate abounds over how SA should go about developing and regulating its nascent biofuels industry, with some arguing that draft regulations published last month are restrictive, and others that restriction is prudent.
The Department of Energy has to get cracking on finalising the regulations if biofuels processing plants to be built in time to produce the fuels to meet demand that will kick in when the deadline for mandatory blending from October 1 next year.
A 2% biofuel blend is the target - and it takes about two years to build a biofuel plant, says Cliffe Dekker Hofmeyr projects and infrastructure senior associate Emma Dempster.
It is suggested a levy of between 4.5 cents per litre and 5.6 cents per litre is imposed for the first 20 years in order to provide a 15% return on investment guarantee for biofuels manufacturers.
The aim is to boost the chances of securing funding for biofuels projects.
The levy is aimed at giving the industry a solid foundation, and so boosting economic development and employment in a country with 25% joblessness.
While all recognise SA should take part in this growing industry, there is debate over the recommendation that, in the first implementation phase, only grain sorghum and soya beans be used as reference feedstocks - used to determine prices and other elements of the industry.
This has upset those who farm other potential feedstocks, such as maize and sugar cane.
But the Department of Energy says a prospective biofuel manufacturer & may still make an investment decision (to use feedstocks other than maize or soya) provided it is confident that its feedstock will be economically viable or profitable given the reference price& Those who want the subsidy, however, will have to meet certain criteria. In addition to the subsidy being based on actual litres of biofuels supplied for blending (as long as penetration remains below 2%), the criteria include licensing by the Office of the Controller of Petroleum Products; a mandatory 25% ownership by historically disadvantaged South Africans; a minimum of 10% of the feedstock sourced from smallholder, emerging and historically disadvantaged farmers; legal consent from landowners; where possible 70% of labour being South African citizens; and a prohibition on diverting commercial farmlands to biofuel stock production.
Black economic empowerment company Mabele Fuels is ready to start building a 158-million litre per year bio-ethanol refinery near Bothaville in the Free State, with sorghum its preferred feedstock. It is just waiting for the regulations to be finalised.
But Mabele Fuels' feedstock choice, says local agriculture and biofuels advisor Fanie Brink, is a mistake. He says sugar cane and maize are & the world's most important& feedstocks, with sorghum a late finisher and that & almost no sorghum is produced within a 50km radius of Bothaville& quot;The fact that the average yield of sorghum per hectare over the past 10 years was just about half the average yield of maize, means grain farmers will have to be offered a price (of) at least double the maize price in order to plant sorghum in the Bothaville area. The expectation that small, developing, black farmers will plant sorghum in this area will, for the same reason, not come to fruition.& But Biomass Renewables MD Louis le Roux, formerly a farmer, says there are vested interests in agriculture that have been able to perpetuate an archaic system, monoculture, that destroys the environment and upsets local people when promises made (such as jobs) are not met.
Mr le Roux says he is in favour of a & five-year window& in which SA & builds intelligence& on what is an infant industry here. Also, it is important to protect SA from monoculture biofuel feedstock developments that have stripped millions of hectares of nutrients in countries such as Brazil.
The Department of Energy is cognisant of this, and has stepped away from maize for food security issues, and other crops, such as sugar cane, because of the crops' need for irrigation, in a water-restricted country.
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