As has lately been so vividly illustrated in South Africa, energy is a worldwide concern that requires far more than a glancing attention. Energy is an essential part of life, and this reality means that alternative energy sources are being examined and scrutinised with greater urgency than ever before.

One subject at the forefront of the current alternative-energy debate is biofuels, with emerging consensus that its production has become increasingly viable, given surging oil prices and should, therefore, be high on the South African government's agenda, as well as that of the South African public at large.

Indeed, this is a view shared and advocated by Ernst & Young's director for oil, chemicals and utilities, Norman B Ndaba: "We are facing an energy crunch, not only in terms of electricity, but also in terms of potential availability of refined products, such as petrol and diesel. The energy scene needs an alternative. In the medium term, biofuels will probably not be able to meet those needs, but in the longer-term, as a top-up strategy, biofuels should really be pushed."

Southern African Biofuels Association (Saba) CEO Erhard Seiler adds that it would be a ‘disaster' if Southern Africa did not commit to properly developing a biofuels sector, considering the benefits it could potentially generate, ranging from job creation and rural development on the social end of the spectrum to energy security and agricultural-sector growth on the economic front.

A key advocate, Saba president Andrew Makenete, argues that biofuels development will increase broader agricultural development, with multiple benefits emerging.

However, there are also strong opposing arguments that have to be considered as South Africa moves to create the policy environment for the development of a biofuels sector. The potentially competing agendas of food and energy are a key concern, as is the worry that the resources directed towards biofuels might well have a greater social and economic impact if spent elsewhere. Then there is the issue of blending ratios to traditional crude-oil-based products, as well as the financial implications of the creation of sufficient blending, refining and logistics capacity. Moreover, there are those that question the whole ‘energy-in-energy-out' equation, which suggests that it is sometimes less energy efficient to pursue biofuels than might be imagined.

WHERE DOES SA STAND?

What is the current state of play?

In December, the South African government published its long-awaited draft industrial strategy for the development of the local biofuels sector.

The key points of debate to emerge following the release centre, firstly, on a seeming lack of ambitions in the plan and, secondly, on the exclusion of maize from the equation. On the latter point, food security was cited as the main reason.

This exclusion led to something of an outcry, but Ndaba stresses that its publication should still be welcomed "as a step in the right direction", noting that it is "still early days" in the finalisation of the actual strategy.

"Given the energy crunch we are facing, it is gratifying to see some movement on the issue. Over the long term, government will, hopefully, together with industry and the agencies involved in the energy sector, have a common view as to how to shape the industry going forward."

Ndaba believes the ultimate strategy still needs to be refined to take into account not only local conditions, but to also mimic aspects that have worked in countries in the developed world, where biofuels is a viable industry, such as Brazil, Spain, the UK and the US. Therefore, he says, it is crucial to have integrated planning, and to properly set up the correct mechanisms that will drive the industry.

All the drivers of biofuels have to be looked at in South Africa's biofuels strategy going forward, says Ndaba. He maintains that the "devil is in the detail", such as market regulation, supporting infrastructure, access to finance, the tax climate, offtake incentives, grants and soft loans, export potential and feedstock. These factors, which drive the international biofuels market, have been included in the strategy, he notes.

The biofuels strategy, he comments, must be an integrated plan with involvement from government, the oil industry, and the South African public. Through this integrated approach, he says, particular areas of biofuels should not supersede other areas. Seiler says that he is hoping for a more extended and developed approach to biofuels from the South African government in future.

THE FOOD SECURITY WORRY
There is little question that food security is the main reason for maize being excluded from the South African government's biofuels draft strategy.

Ndaba agrees that food security should not be substituted for energy security, and that displacing rural communities so that maize can be produced in large enough quantities to make biofuels viable would be "foolhardy".

Even Makenete, who is of the view that the decision "flies in the face of logic", in sofar that it impedes food production, agrees that food security is the most important issue in the maize debate. However, he believes that countries across the whole Southern African Deveopment Community (SADC) region have not properly examined the full potential of agricultural production, before "raising the flag" on the food security issue.

"The greatest inhibitor of food security is not biofuels, but market development, and reasonable price returns for farmers. Your bottleneck is not biofuels, but not producing enough food. The argument says that the more food you produce, the better the food security.

"If one looks at biofuels in isolation from a proper strategy to increase food production, it will have a negative effect on food security. However, biofuels development must not happen in isolation, but in conjunction with a concerted effort to improve production, whereby each is compatable and not exclusive," he says.

Ndaba does not believe that the South African government will include maize as part of its strategy in future, commenting that "a lot of water has to go under the bridge" for government to take maize into consideration.

Generation 1 of liquid bio fuels technologies produce ,on average 70 % byproducts, which are perfectly suited to be used as animal feed, says Seiler. Therefore, he says, the more these biofuels are produced, the more that animal feed comes onto the market. At this stage, he notes, biofuels production is a byproduct of animal feed production, and biofuels will, therefore, support food production, and not reduce it.

CANE VS CORN (MAIZE)
In some quarters, including within government, it has been argued that sugar cane offers better long-term biofuels prospects than does maize.

For instance, Ndaba says that maize is not viable in the longterm as an energy substitute product on its own, but will be effective as a blended ‘top-up' product, in which it is a subordinate part of an ethanol and diesel mixture, rather than the main ingredient.

Whether sugar cane or maize has greater biofuels potential (simply from the point of view of the opportunity) is entirely dependent on the nuances of a particular country, says Makenete. He admits that sugar cane conversion to ethanol is the most efficient process for biofuels, and has significant potential in countries with high rainfall and good soil. However, he notes, in relation to energy balance, maize efficiency is net positive, rather than negative.

In the South African context, Makenete firmly believes that converting maize to ethanol should be given higher priority, as with well over two- to three-million hectares of unused agricultural land, the country is highly suited to mass production of maize, sorghum or other grain crops. Jatropha, oil seeds and grasses should also come into the equation when considering biofuels production, he adds.

Energy efficiency depends on the total energy of the produced biofuels in comparison to the amount of energy used in the production. If, for example, one litre of fuel is used in the production of less than one litre of biofuel, the production is energy negative.

The question of efficiency should thus not refer to the sources, but to all the processes, argues physics professor at the University of the Western Cape Dirk Knoesen.

Some biomass sources (crops) have a higher energy content, which means they will produce more biofuel for every raw mass than other sources. The advantage that sugar cane has, he says, is the amount of biomass it has available for converting into biofuels, compared with maize, where only the seeds are used. He adds, however, that sugar cane also requires more water in the biofuels process.

A SADC VIEW EMERGING
Last month, a SADC biofuels policy workshop was held, with involvement of governments from the region and the private sector. Seiler says that the need for coordination of biofuels activities, particularly on the part of the private sector, was the main theme that emerged from the workshop.

"We need integrated rules and regulations in the region, so the private sector can have a long-term business environment in which to operate. It is important to find common ground between the different SADC countries and different private-sector members, not only from industry's point of view, but also from an agricultural, financial, technical services and challenges point of view," he notes.

Makenete emphasises the important role that both the private sector and government have to play in biofuels development.

"If we really want to see improved efficiencies and committed players, we are more likely to get that response from the private sector than from the State. Government, however, is an enabler in terms of legislation, policy, supporting infrastructure such as tax regimes and tariff policies, and that is the role people want to see. A partnership with government is, therefore, important."

Other key discussions in the workshop focused on the need for biofuels standards to interlink with technical standards, and for SADC countries to employ the same standards that are used in Europe. The same problem, he says, applies to investment incentives, tax regimes, and pricing regimes for fuels. Makente says that incentives in South Africa do not have to be consistent with those in Europe, but there must at least be a workable framework, so one can "compare apples with apples".

Makenete and Seiler also note many positives that emerged from the biofuels workshop, including an agreement that there should be an apex structure, within which SADC policymakers, business and civil society can participate in the development of the biofuels sector. Such coordination is also important in ensuring that civil society gains a better understanding of biofuels developments.

There was also a realisation, he notes, that the Southern African Biofuels industry is fundamentally different from industries in Europe, and North and South America.

"You cannot treat Southern Africa with the same brush as the US and Europe. The South African context is different, with different environmental concerns. Comparisons are, therefore, "unrealistic and uncritical". Concerns about the Southern African biofuels industry are based on ignorance about the conditions in the region from people who do not understand Africa and or Southern Africa specifically There is also a paternalistic view outside Africa, from donors and overseas agencies, about what is good for the continent, " says Makenete.

Makenete maintains that South Africa can play a massive enabling role in the SADC region, in the sense that it can create markets, become the base at which investments are directed, and can provide much of the technical expertise that is required in the development of the biofuels industry.

A MATTER OF URGENCY

Makenete says that, given that many of the SADC countries have small markets, and that some are landlocked, such as Malawi and Zambia, their cost of fuels is significantly higher than South Africa's, and the urgency to foster and develop biofuels is therefore more striking than it is in South Africa. Malawi has already reached the ethanol20 (E20) threshold, with a 20 % ethanol and 80% oil mix in its fuel, meaning that it cannot develop its biofuels market further, and has to, therefore search for external markets.

Makenete says that it is difficult for countries such as Malawi to gain an external market, owing to transport and logistics costs. He says that in the development of a regional strategy, all these countervailing issues have to be taken into consideration, with each individual SADC country strategy being looked at in the context of a broader strategy for the region. A key example in the South African context, he says, is that any opportunity for production with the country's neighbours would allow it to look at higher standards or levies. An important issue would then be how South Africa could compensate the other SADC countries for the ethanol or diesel, and correct protocols would come into play.

Seiler says that biofuels continuity with other SADC countries could result in ancillary benefits for those countires.

"The biofuels potential in neighbouring countries is higher than in South Africa. If they use that potential properly, they have the potential to equalise their balance of payments with South Africa."

CAN BIOFUELS BE SUSTAINABLE?
The long-term viability of biofuels is often doubted when the topic comes up for discussion. Ndaba maintains that the most important criteria in the long-term sustainability of biofuels is not whether they produce enough reward, but whether the biofuels industry is able to sustain a market. If a market cannot be sustained, he says, supply cannot satisfy demand, and viability will then become questionable.

For biofuels to have successful staying power, oil companies will have to come to the fore "big time", as they have the infrastructure and resources to make the industry viable, not only in relation to logistics, but also in terms of product blending, notes Ndaba.

He says that the oil industry would have a role to play from three points of view: firstly, with regard to infrastructure, logistics and access to capital; secondly, with regard to job creation, and sustaining farming; and, thirdly, with regard to the development of small-scale farmers.

However, offsetting this notion is that, by bringing the oil industry on board, one runs the risk of the same problem as now, with high crude oil prices dictating the market, he adds. Therefore, regulation in this regard will be important, he notes.

Ndaba says that biofuels must also take into account social issues: accessibility, affordability and acceptability Another important factor to consider, he says, is that across the world, two-billion people do not have access to clean, affordable energy, and people with access to energy will therefore have to drive the issue.

In order for biofuels to be a profitable industry, consumers will also have to change their mindset, asserts Ndaba, with a willingness to buy environment-friendly cars. He says that this change of mindset will represent one of the largest transformations ever in society. Major motor manufacturers, he adds, will also have to flood the market with hybrid cars.

For his part, Knoesen says that biofuels could reduce South Africa's dependence on imported fuels. However, the decisions on the type of crops, the land to be used, water requirements, competition with food production, balance of carbon dioxide (CO2), and the energy efficiency of the processes will have to be very carefully explored, he says, adding that the long-term answer for energy requirement lies in using renewable energy sources, such as generating hydrogen as a portable fuel. He adds, however, that this still requires much more research and concludes that biofuels can only be regarded as a renewable energy source if it is sustainable into the future.

Knoesen maintains that, in the long term, biofuels could become a major energy source once there is efficient conversion of cellulose fibre into biofuels. This, he notes, refers to the raw organic fibre in plants and not just seeds, fruits, juices or oils. There has been extensive research in several laboratories around the world in this area, he says. The development of special algae to produce methane for conversion into a liquid fuel is another intensively studied field, the advantage being that it becomes an industrial process under one's control, and not dependent on natural weather circumstances.

OTHER IMPORTANT FACTORS TO CONSIDER
Knoesen says that, primarily, biofuels allows for an energy source that reduces the negative enevironmental effects of fossil fuels. He says that there are at least four major aspects that play a role in the manufacturing of biofuels: the energy-efficiency equation of the total process; the CO2 balance of the total process; the type of land use; and the competition with food production. The economic costs, he says, are also important, once the other aspects can be satisfactorily answered. He argues, therefore, that biofuels can only be considered an energy-efficient solution if all the requirements are met.

He maintains that one needs a relatively fertile, flat land surface in an area of sufficient rainfall, a short winter season, easy harvesting, and short transport routes to the biofuels plan, for it to be an energy efficient process. The conversion process in the plant, he notes will depend on the type of crop, and the less fibre it contains, the less costly the conversion process in the plant will be.

Knoesen states that there are studies reporting that increased use of land for biofuels production will lead to more CO2 being released. He argues that, in South Africa, the regular occurrence of droughts could mean an unacceptable variation in the annual production of biofuels, adding that it does not help if one has a very efficient process, but nothing to harvest.

FUTURE PROSPECTS
While positive about biofuels' potential, Ndaba admits that uncertainty still surrounds the issue.

"Whether biofuel crops grow properly in South African context is the ‘$ 64 000 question'. Climate change, energy shortages, and sustainability all have to be taken into consideration. To the extent that biofuels will mitigate these shortcomings, we need to take it very seriously. "

He concludes, however, that, all things considered, it appears that biofuels should indeed be high on South Africa's agenda.

"The energy scene needs alternatives. In the medium-term, biofuels will probably not be able to meet our needs, but in the long-term, as a top-up strategy, biofuels should really be pushed."