An investigation into the current state and future of bioethanol and biodiesel as renewable energy sources in South Africa
Thesis (MBA)--Stellenbosch University, 2012.
Bioethanol and biodiesel are currently the main biofuels. The United States of America and Brazil are the major bioethanol producers from maize and sugar cane respectively. European and Asian countries produce and consume biodiesel as transportation fuel. Generally, governments want to avoid importing biofuels, since this erodes the advantage of fuel security from growing fuel locally. There are however opportunities for many African countries to export to Europe and the United States of America, since they have preferential import tax exemption agreements with African countries. Sub-Saharan Africa has large potential to produce biomass. Inherently, South Africa has poor potential to produce biomass, due to the climatic conditions and water scarcity. However, South Africa has infrastructure, skills, commercial farmers and, importantly, government policy on biofuels. These advantages should be leveraged to optimise gains from a biofuel industry. A biofuels industry holds potential in terms of job creation and rural development gains, apart from the advantages of fuel security, greenhouse gas (GHG) emission reductions, stimulation of the agricultural sector, and reduced fuel imports with the balance of payment advantages. The South African government aims to develop rural communities in former homeland areas. If degraded land in these areas is recovered and used for production of biofuels, the environmental benefits are immediate and substantial. Fuel crop production in these areas does not compromise food security nor does it result in further deforestation. Creating jobs in rural areas can contribute to reduction of poverty. The Department of Minerals and Energy (DME) published its strategy in 2007. This excluded maize as permitted bioethanol feedstock, it sets a two per cent liquid fuels penetration target, and gave fuel tax exemptions for biodiesel and bioethanol. The biofuels would be distributed through voluntary low concentration blending into petroleum products by oil companies. The industry would be regulated and producers require licensing through the South African Revenue Service (SARS). The license conditions were mainly related to the type of feedstock, where it was produced, volumes produced, local consumption, environmentally friendliness, compliance with broad based black economic empowerment requirements and it should not compete with food sources. The strategy is up for review after the initial five years phase. Currently there are no commercial bioethanol fuel production plants in South Africa and only some small scale biodiesel production plants with very limited outlets to consumers. With all the apparent advantages, why is nothing happening in the industry? Business is not showing interest, proving that the economic conditions are not favourable. The government wants to control the production side to maximise the gains from it, but instead of assisting the industry, it has practically inhibited it from getting started. The consumers must also be prepared to accept the new fuels. Awareness, education and a culture of sustainable use are vital to create the required market. This is an exciting industry with potential benefits to South Africa and its society as a whole, but the fundamental elements of business must be in place in order for it to become self-sustainable.