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Sep 20, 2012

SA biofuels industry awaits implementation of regulations

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The lack of regulation of mandatory blending of mineral fuels with bio- fuels, the pricing structures for the sale of biofuels and the incentives for licensed producers have led to challenges in establishing the industry in South Africa, says future producer of fuel-grade bioethanol Mabele Fuels GM Asogan Moodaly.

The Department of Energy (DoE) last month published regulations regarding the mandatory blending of biofuels with petrol and diesel in the Government Gazette.

The regulations, once implemented, constituted another step towards the establishment of a biofuels industry in South Africa. Establishing the industry will also be in line with the country’s aim of moving towards using cleaner fuels that have a lower sulphur content and produce less greenhouse-gas emissions by 2017.

The regulations state that a licensed petroleum manufacturer must buy all bio- ethanol and biodiesel offered for sale by a licensed biofuels manufacturer, provided the volumes can be blended with the petro- leum manufacturer’s petrol and diesel within the minimum concentration of 5% volume per volume (v/v) biodiesel blending with diesel, and between 2% v/v and 10% v/v of bioethanol to petrol.

Besides the mandatory blending regulations, legislation on a pricing structure that will determine the delivered cost of biofuels and a government-agreed incentive for biofuels producers must also still be announced before an industry can be fully established.

“This action is a major milestone in the development of the domestic biofuels industry; however, the pricing regulations and incentives, as guided by the 2007 Biofuels Industrial Strategy compiled by the former Department of Minerals and Energy, need to be finalised and approved,” says Moodaly.

“It is our understanding that government will pronounce on the regulated price and the financial support mechanism for licensed biofuels producers shortly, as the National Treasury’s commitment to the approval and confirmation of the financial support mechanism is crucial.

“We eagerly await pronouncement on these two outstanding items, as it will complete the suite of regulations and incentives that will unlock funding for a sector that is capable of creating jobs, contributing to economic growth, improving air quality, as well as enhancing fuel security in South Africa,” he adds.

Once all the regulations have been implemented, a fully functioning biofuels industry can be established and regulated in a transparent manner, asserts Moodaly.

Biofuels Beginning
The biofuels industry was started through government’s Accelerated and Shared Growth Initiative for South Africa (AsgiSA), which was implemented in 2006.

At the time, biofuels investment was seen as a catalyst for the transformation of South Africa’s underdeveloped rural economies, a contributor to the country’s renewable energy goals and its energy security, as well as a method of reducing greenhouse-gas emissions.

Under AsgiSA, a feasibility study into the development of a biofuels industry in South Africa was undertaken, which indicated that the industry represented a great opportunity for rural development.

The feasibility study culminated in the release of a draft strategy, followed by the release of the Biofuels Industrial Strategy.

As a result of the strategy not favouring mandatory blending at a regulated price and delays in the implementation of the incentive, four of the six bioethanol plants that were in the process of being developed at the time, have been put on hold, says Moodaly.

Only two of the plants remained going concerns, namely the Industrial Develop- ment Corporation’s plant, in Cradock, in the Eastern Cape, and Mabele Fuels, in Bothaville, in the Free State.

Mabele Fuels Plant
The Bothaville-based producer has, to date, acquired 30 ha of land from the Nala Municipality that has been rezoned for the construction of the bioethanol plant and an environmental-impact assessment has been completed with a record of decision granted. However, construction cannot start until the regulatory framework is finalised, says Moodaly.

He says Mabele Fuels hopes the pricing and incentive regulations will be imple- mented before the end of the year.

Once complete, the plant will produce 150 000 m3 of bioethanol each year from a blend of different grain sorghum cultivars, which are dependent on the different price points and production efficiencies of each cultivar.


The grain sorghum market, which produced about 511 000 t of grain sorghum in the 1988/89 financial year and about 280 000 t in the 2009/10 financial year, currently produces about 137 000 t/y, as shrinking demand has resulted in reduced sorghum production, says Moodaly.

The traditional sorghum beer market has diminished to such an extent that farmers have resorted to producing other crops instead, he says.

The biofuels market, however, does not need a high-specification sorghum and may, once again, promote the production of sorghum, says Moodaly.

What makes grain sorghum to bioethanol production advantageous in South Africa is that grain sorghum is a less water-intensive feedstock crop than sugar cane, is the least capital-intensive feedstock to process and will, as a result, require the smallest incentive from government for greenfield production.

Further, Dried Distillers Grains with Solubles (DDGS), which is a medium-protein animal-feed component, is produced as a by-product of grain sorghum-to-ethanol production.

The DDGS will, to some extent, add to South Africa’s food security and lessen the country’s prevailing need for imported soya meal, states Moodaly.

The DDGS will further incentivise the production of grain sorghum for farmers, as the by-product can also be sold to the local feed market.

Depending on the type of grain sorghum used, a typical bioethanol plant will produce 1 m3 or 1 000 of bioethanol, 0.7 t to 0.8 t of DDGS and about 0.7 t to 0.8 t of carbon dioxide (CO2) from about 2.4 t of grain sorghum.

Moodaly notes that only one-third of a bioethanol plant’s product is used as fuel, while the CO2 can be sold to the speciality chemicals and gases industries for use in the beverage market and the DDGS can be used in animal feed.

Based on this, it is Mabele Fuel’s view that the use of underused land to produce raw materials for a bioethanol plant will improve food security, as about two-thirds of the processed grain enters the food and beverage market.

Mabele Fuels commends the DoE on the work it has done in terms of the regu- lations to date and looks forward to a South African biofuels industry finally being realised, says Moodaly.

Edited by: Chanel de Bruyn
Creamer Media Senior Deputy Editor Online
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