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Presented at the
ECONOMICS ASSOCIATION OF ZAMBIATaj Pamodzi Hotel – Baobab Lodoge, Lusaka
September 30th, 2008
ByProf. Thomson Sinkala
CHAIRMAN, Biofuels Association of Zambia
www.biofuelszambia.org
LIQUID BIOFUELS AS A VIABLE ENERGY MIX IN ZAMBIA
Prof. Thomson Sinkala, CHAIRMAN of Biofuels Association of Zambia
2
CONTENT
1. Zambia’s compelling environment for engagement in biofuels
2. What have we done so far?
(a) Organizational(b) Research and development(c) Operational
3. Zambia’s preferred feedstocks
4. Opportunity for poverty alleviation
5. Brazilian Experience
4. Conclusions
COMPELLING ENVIRONMENT FOR ZAMBIA’s ENGAGEMENT IN
BIOFUELS
• Peak Oil “Fever”;
• Energy security;
• Increasing fuel expense
• Energy deficiency for industry and domestic needs (the ever increasing load shedding); and
• Poverty reduction opportunities.
Prof. Thomson Sinkala, CHAIRMAN of Biofuels Association of Zambia 3
Prof. Thomson Sinkala, CHAIRMAN of Biofuels Association of Zambia
4
http://www.energyandcapital.com/
Average replacement rate
of oil reserves
www.energyandcapital.com/
As of 3rd March 2008
Prof. Thomson Sinkala, CHAIRMAN of Biofuels Association of Zambia 5
New GAO Peak Oil Report Provides Urgent Call to Action: U.S. Vulnerable and the
Government Unprepared for Unacceptably High Risks of Oil Supply Shock
March 29, 2007
Congressman Roscoe Bartlett said,
“This GAO peak oil report is a clarion call for leadership at the highest level of our
country to avert an energy crisis unlike any the world has ever before experienced and
one that we know could happen at any time.
Only the President can rally the country to take the urgent steps necessary. Potential alternatives to oil are extremely limited.
Technology won’t save us without time and
money to develop and scale them up.”
Prof. Thomson Sinkala, CHAIRMAN of Biofuels Association of Zambia
6
A Chatham House (of UK) Report titled: “The Coming Oil Supply Crunch”
published in August 2008 warns that
“… unless there is a collapse in oil demand within the next 5 to 10 years,
there will be a serious oil ‘supply crunch’”.
The Accenture Report of September 2008 states that:
The global biofuels industry has a 10-year window of opportunity to evolve into a
global and efficient industry before new technologies competed with first- and
second-generation biofuels.
Developing countries like Zambia that do not own their biofuels industry NOW will
only be production grounds, and Zambians to remain only as workers.
Prof. Thomson Sinkala, CHAIRMAN of Biofuels Association of Zambia 7
USAShell Oil Co., BP America Inc., Chevron Corp. and ConocoPhillips together have invested
$3.5 billion in:solar, wind, biofuels projects
ISRAELLabor Party fixture Binyamin (Fouad) Ben-Eliezer the
National Infrastructures Minister says……………… with worldwide oil supplies squeezed to the point where
even friendly suppliers won't have much left to send to Israel.
Therefore,……… southern desert known as the Negev, where the world's most highly concentrated solar
radiation levels could turn sparsely inhabited areas into a renewable energy gold mine.
Year BiodieselNr of family
farmers2007 B2 205.0002008 244.6682009 292.0112010 B5 348.515
1.5472.100
Million liters of biodiesel
8401.140
BRAZIL
MOZAMBIQUE
Prof. Thomson Sinkala, CHAIRMAN of Biofuels Association of Zambia 9
Maputo, June 21, 2006
In all his visits to provinces, this year, President Guebuza asks the population to cultivate jatropha and other oil producing
plants.
He had a branch of a jatropha with some fruits and showed the population how the
plant and its fruits look like.
He also showed them a jatropha oil-lamp and told them how easily it can replace
the current fossil-fuel lamps used in many households, in urban areas as well as in
the rural areas.
7 million hectares earmarked for biofuels
Prof. Thomson Sinkala, CHAIRMAN of Biofuels Association of Zambia 10
ZAMBIA
Workshops ? Meetings ?
Planning how to beg ?Sharpening begging skils ?
CHINA13 million hectares to
be under Jatropha
INDIA39 million hectares (13.5% of
landmass) to be under Jatropha
What have we done so far?
(i) Organizational
17th – 18th August 2006: National stakeholder‘s consultative workshop for biofuels in Zambia held at Mulungushi International Conference Centre, Lusaka.
25th September 2006: Biofuels Association of Zambia (BAZ) registered to promote biofuels industry in the country.
25th January 2007: 1st Release of Information to the Public (JATROPHA CURCAS – What we know).
29th January 2007: Minister of Energy challenges BAZ to develop a quantitative understanding of the biofuels industry to be the basis for decision making.
20th April 2007: Draft Biofuels Development Framework formulated jointly by Government and BAZ.
What have we done so far?
(i) Organizational (continued)
29th April 2007: TEN (10) Action Points from the Draft Biofuels Development Framework developed by the National Technical Committee (composed of Govt and BAZ).
June 2007: BAZ communicates to the President of Zambia on issues affecting development of biofuels industry.
22nd – 24th July 2007: The President elevates the biofuels agenda by inviting BAZ to the Business Advisory Council.
5th September 2007: The Ministry of Commerce, Trade and Industry begins facilitating dialogue on financing of the energy sector.
November 2007: Government approves the Energy Policy (comprising biofuels).
What have we done so far?
(i) Organizational (continued)
Since December 2007: Development of the DRAFT National Energy Strategy for the 2008 – 2030 period by Government jointly with stakeholders.
16th April 2007: Government issued a Statutory Instrument (SI 42) which legalizes
biofuels.
May 2008: The Energy Regulations Board issued liquid biofuels standards.
• Government is considering a statutory instrument to make biofuels a priority sector;
and
• Government is working on National Energy Strategy 2008 – 2030. The strategy comprises
biofuels.
What have we done so far?
(ii) Research and Development
•Research is being carried out on sweet sorghum by University of Zambia;
•Significant research was carried out on Jatropha by the then National Council for Scientific Research (now National Institute of Scientific and Industrial Research).
•The private sector is carrying out various tests and developments on feedstocks and vegetable oils.
•Since April 2008: Ministry of Science and Technology formulating R & D programme for Jatropha.
In October 2007 we completed a study on Jatropha Value Chain
Supported by Sida of Sweden through the International Labor Organization
3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00%
Seed Producion -23% 3% 29% 55% 80% 106% 132% 158%
Biodiesel Production 170% 107% 67% 41% 21% 6% -5% -14%
-50%
0%
50%
100%
150%
200%
Re
turn
on
In
ve
stm
en
t
Price of Seed as Percentage of Diesel Pump Price
Seed Price Impact on Returns on Investments of Two Value Chain Components
3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00%
Seed Producion -23% 3% 29% 55% 80% 106% 132% 158%
Biodiesel Production 170% 107% 67% 41% 21% 6% -5% -14%
-50%
0%
50%
100%
150%
200%
Re
turn
on
In
ve
stm
en
t
Price of Seed as Percentage of Diesel Pump Price
Seed Price Impact on Returns on Investments of Two Value Chain Components
Prof. Thomson Sinkala, CHAIRMAN of Biofuels Association of Zambia 17
•March – May 2008: Country wide survey of biofuels related activity. MEWD / UNDP Funded
Report of the
Tour of Liquid Biofuels Industry in BrazilWith proposal for a trilateral cooperation
involving Zambia, Brazil and UNIDO
May 2008
Prof. Thomson Sinkala, CHAIRMAN of Biofuels Association of Zambia 19
The opportunity for Zambia’s participation and ownership
of the biofuels industry is now less than 5 years!!
PARAMETERS USED FOR ANALYSIS OF FEEDSTOCKS
1. Scope of wealth ownership at all levels;
2. Production technology;
3. Job creation;
4. Resilience against external disturbances;
5. Diversity of products;
6. Size of investment;
7. Market scope;
8. Land requirements;
9. Water requirements;
10. Food security;
11. Geographical coverage of wealth ownership in the country; and
12. Environmental protection
FUELFeed C R I T E R I A
SCORE
stock Etc
Biodiesel Jatropha 3000 3 3 3 3 3 3 Etc 33
Oil palm 5000 3 2 3 2 2 2 Etc 24
Etc
Etc
B/ethanol S/cane 10000 3 3 2 1 1 2 Etc 21
S Sorghum 3000 3 3 3 2 2 3 Etc 27
Cassava 3800 3 3 3 2 3 3 Etc 27
Etc
Etc
21Prof. Thomson Sinkala, CHAIRMAN of Biofuels Association of Zambia
In general, the best feedstock should be one that NET empowers all players across the board, from small to large.
MONOPOLISTIC feedstocks are a possible breeding ground for UNSUSTAINABLE biofuels industry.
FEEDSTOCKS FAVOURABLE TO ZAMBIA’s SITUATION
OIL / BIODIESEL
1. Jatropha curcas (first choice and country-wide participation)
2. Palm (mainly viable on large scale and in selected parts of Zambia)
BIOETHANOL
1. Sweet sorghum (country-wide participation)
2. Sugarcane (already existing)
22Prof. Thomson Sinkala, CHAIRMAN of Biofuels Association of Zambia
Prof. Thomson Sinkala, CHAIRMAN of Biofuels Association of Zambia
23
YIELD ASSUMPTIONS:
Oil/Biodiesel•Jatropha (2000 liters/ha)•Palm (3000 liters/ha)
Bioethanol•Sweet sorghum (4200 liters/ha)•Sugarcane (7500 liters/ha)
Taking Jatropha and Sweet sorghum as lower ends for 100% substitution, the land requirements for local consumption would be: BIODIESEL & KEROSENE would require:420m l/yr would need 210,000 ha BIOETHANOL would require: 200m l/yr would need 48,000 ha.
Land RequirementsZambia currently consumes about
200 million litres/year petrol20 million litres /year kerosene400 million litres/year diesel
Prof. Thomson Sinkala, CHAIRMAN of Biofuels Association of Zambia 24
This land requirement of 260,000 ha is almost half that (about 450,000 ha) which Zambia looses as a forestry cover every year due to:
• Shifting cultivation;• Mining;• Charcoal burning;• Etc
Food Security
5 gmsD-compound
5 gms Jatropha cake
10 gms Jatropha cake
Jatropha organic fertilizer tests at Thomro Biofuels Farm, Zambia
25
Jatropha Nutrient Content (independent analyses)N 6.0%, P 2.75% and K 1.0% ( Chungu, in UNIDO paper on liquid biofuels).
N 3.2 – 4.44%, P 1.4 – 2.09%, and K 1.2 – 1.68% (Eijck, in UNIDO paper on liquid biofuels).
Own fuel by farmers will lead to mechanized
farming systems, and therefore increased
production
Reduced Deforestation
26
Biogas from Jatropha
Jatropha cake as charcoal
Use of Jatropha biogas and charcoal would significantly reduce deforestation due to wood charcoal fuel
Power Generation
27
SOURCE: Energiebaue of Germany
This opportunity will
(i) accelerate rural electrification and manufacturing.
(ii) improve services in areas such as Education (eLearning), Health, and eCommerce, Commerce.
Prof. Thomson Sinkala, CHAIRMAN of Biofuels Association of Zambia 28
WHAT IS BAZ NOW WORKING ON?
BAZ is now lobbying Government to:
(i)facilitate availability of funds to enable participation by citizens in the biofuels industry; and
(i)provide incentives to boost investment in the industry.
Prof. Thomson Sinkala, CHAIRMAN of Biofuels Association of Zambia
33
CURRENT MATRIX OF VEHICLE FUELS – 2007 IN BRAZIL
The anhydrous ethanol is mixed with gasoline A where the compulsory present use is 25% in the blend (gasoline C).
The hydrated ethanol is used pure in ethanol vehicles or voluntarily in flex fuel vehicles (any blend to gasoline C).
Prof. Thomson Sinkala, CHAIRMAN of Biofuels Association of Zambia
35
COMMODITIESYEARS
1990 1995 2000 2005
Sugarcane 262,674 303,700 32,7705 420,121
Soybeans 19,898 25,683 32,735 50,195
Beans 2,234 2,946 3,038 3,076
Rice 7,421 11,226 11,090 13,141
Corn 21,348 36,267 31,879 34,860
Cassava 24,322 25,423 23,336 26,645
Potatoes 2,234 2,692 2,561 2,951
Poultry 2,356 4,051 5,981 8,669
Hen eggs 1,230 1,415 1,509 1,560
Beef 4,098 5,628 6,566 7,779
Pig meat 1,050 2,799 2,600 3,110
Tomatoes 2,261 2,715 2,983 3,304
Increasing trend in the energetic and food crops production in Brazil (x1000t)
Prof. Thomson Sinkala, CHAIRMAN of Biofuels Association of Zambia 36
COMMODITYWORLD RANK
PRODUCTION (Million tons)
Sugarcane 1 420.1Oranges 1 17.8Coffee 1 2.2Papaya 1 1.7Soybean 2 50.2Cassava 2 26.6Beef 2 7.8Bananas 2 6.7Poultry 2 8.7Corn 3 34.9Pineapples 4 1.4Pork 4 3.1
Source: FAO Statistical Database, 2005
Overall production and world ranking of some Brazilian commodities
Prof. Thomson Sinkala, CHAIRMAN of Biofuels Association of Zambia 37
Free market prices of fuels in Brazil (June 2008)
Bioethanol: B$1.779 (about US$1.11)
Petrol costs B$2.599 (about US$1.62)
38
TYPE OF COMPANY STATUSINTEREST
RATE
Micro, small and medium sized companies
Social Fuel Stamp TJLP + 1%
Micro, small and medium sized companies
No Social Fuel Stamp TJLP + 2%
Enterprises Social Fuel Stamp TJLP + 1%Enterprises No Social Fuel Stamp TJLP + 3%
Other segments No Social Fuel Stamp 1 to 4.5%)
FUNDING THE BIOFUELS INDUSTRY
The financing agencies include: BNDES (National Bank for Economic and Social Development);
PRONAF (National Program for the Strengthening of Family Farming);
Banco do Brazil – “BB – Biodiesel line of credit”; and
Other official or private banks.
Long Term Interest Rates (TJLP)
39
Oil Crops Financing Programs (BNDES)
Program Loan Participation
Interest Rate
Term
MODERFROTA
No limits 80 to 100% 12.75% 5 to 6 years
MODERAGRO
R$200,000 100% 8.75% 5 years
MODERINFRA
R$400,000 100% 8.75% 8 years
FRODECOOP
R$20,000,000 70 to 90% 10.75% 12 years
40
Social Fuel Certificate (Seal or Stamp) and how it works
To participate in the production and distribution of biodiesel, one must obtain a Social Fuels Certificate from ANP (an equivalent of the Energy Regulation Board of Zambia), the authorized Government agency.
To obtain the Social Fuel Certificate, a company must:
1.Commit to buy regularly a minimum amount of raw material that comes from the household agriculture (small farmers);
2. Commit to provide the appropriate technical assistance including certified seeds, rural technicians and best practices; and
3. Sign a contract with each small farmer in terms that must be regarded as proper by a rural workers’ union.
Agricultural Chain
Crops Crusher/Extractor
Seeds Veget. oil or Seed
Supplier
Service
Station or
RetailerRefinery
Consumer
Consumer
B1
00
B100 ONLY FOR CASES WITH ANP
AUTHORIZATION
EthanolProducer
B100
B100
Sugar cane
E100
B2/E100GASOHOL
BiodieselProducer
Regulated by ANPRegulated by ANP
B2/E100GASOHOL
The Biofuels Industry Profile
Not Regulated by ANPNot Regulated by ANP
Chain of industry, supply and retailChain of industry, supply and retail
Where are we in Zambia?
Prof. Thomson Sinkala, CHAIRMAN of Biofuels Association of Zambia 42
INFRASTRUCTURECOMMENTS
Existing in Brazil Existing in Zambia
Biofuels policy and regulations
Energy policy & standards
Inter-Ministerial Biodiesel Programme (PNPB)
Urgent and necessary to minimize inter-ministerial tensions due to mandates.
Social Fuel StampRequired immediately to effectively empower small growers.
Biofuels Credit LineRequired immediately to effectively engage Zambians in the biofuels industry.
Mandatory blending ratios
DraftImportant and urgent to set the liquid biofuels business volumes.
General incentivesRequired immediately to effectively engage Zambians in the biofuels industry.
Preferred feedstocks
Oil (Jatro & palm), Bioethanol
(Sugar & sweet sorghum), as
preferred
Land identification/allocation required immediately.
Plantations (various)Jatropha, sugarcane
Ground verification of existing plantations urgently required.
Where are we in Zambia?
Prof. Thomson Sinkala, CHAIRMAN of Biofuels Association of Zambia 43
INFRASTRUCTURECOMMENTSExisting in Brazil Existing in
ZambiaBiodiesel processing plants
Small scale
Bioethanol processing plants
Incentives immediately required for existing sugar companies to start processing.
Filling stationsSpecifications/regulations required immediately.
Flexi fuel vehiclesIncentives to populate these vehicles required immediately.
Biofuels clusters (Piracicaba Regional Ethanol Cluster, Biodiesel feedstock small grower associations)
Biofuels Association of
Zambia
Immediate need to financially beef-up BAZ with resources to enable the association produce data/information and reach out to members.
Research and development fund
Urgent to start localizing experience and technology in biofuels industry.
Support to biofuels industry cluster organizations
Immediately required to beef up organizational capacity and awareness in the biofuels industry.
Where are we in Zambia?
Prof. Thomson Sinkala, CHAIRMAN of Biofuels Association of Zambia 44
INFRASTRUCTURECOMMENTSExisting in Brazil Existing in
Zambia
Brazilian Agricultural Research Corporation (EMBRAPA)
Urgent to start localizing experience and technology in biofuels energy-agroindustry.
National Agency for Petroleum, Natural Gas and Biofuels
Energy Regulations
Board
Development of capacity urgently required in readiness for its role in monitoring and evaluations.
The National Institute of Metrology, Standardization and Industrial Quality (INMETRO)
Zambia Bureau of Standards
Development of capacity urgently required in readiness for its role in setting references for monitoring and evaluations.
Research institutions
Universities, research
institutions, colleges, R&D
trusts
Urgently need to develop MAINSTREAM educational as well as R & D programmes.
Prof. Thomson Sinkala, CHAIRMAN of Biofuels Association of Zambia 45
EXAMPLE OF: Timely Action by Mozambique
From:"Generosa Cossa" <generosa@uem.mz> To: "Prof. Thomson Sinkala" <tsinkala_thomro@yahoo.com>, dimonekeneditutala@yahoo.com.br, tom.mukaiwa@bits.com.na, dlakudzala@bumas.com, andre.md@matrix.co.mz, mabila@uem.mz, izakvn@telecom.na, lp@lehlaka.co.za Subject:Re: About the Jatropha ProjectDate:Fri, 2 Jun 2006 00:37:42 +0300 Dear Prof Sinkala, I am writing to thank you for the information you gave us about Jatropha. We managed to influence our government and now the jatropha plantation is part of the national policy. All the best for you. I hope to see you in Maputo. Best regards, Generosa
1. The threat of energy insecurity is real and the Government must elevate the urgency to catch-up with the FAST GROWING GAP (e.g. Brazil & Malawi);
2. Government and LEGAL FRAMEWORKS on biofuels should be completed urgently to build confidence and energize players.
3. The biofuels industry has room for all at all levels in society, and therefore has potential to address economic problems country-wide.
4. Land requirements for biofuels industry, are way less than feared.
CONCLUSIONS
46Prof. Thomson Sinkala, CHAIRMAN of Biofuels Association of Zambia
6. Biofuels is a new industry and needs to be assisted through incentives and R & D because of its high potential to reduce poverty and address energy insecurity.
7. Research must run IN PARALLEL with production.
8. Government MUST facilitate availability of funds to enable participation by citizens in the biofuels industry.
CONCLUSIONS / RECOMMENDATIONS(continued)
47Prof. Thomson Sinkala, CHAIRMAN of Biofuels Association of Zambia
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