Internationally, the sugar industry has undergone permanent structural change. More and more companies are co-producing sugar, ethanol and electricity, and sugar-only industries are becoming uncompetitive. In South Africa, there is an urgent need for additional power- generation capacity. Renewable energy is included in the sugar industry’s development plan and is part of the Department of Trade and Industry’s sugar industry strategy.
The SA sugar industry’s agricultural cane-growing and milling sectors are firmly established in KwaZulu-Natal and Mpumalanga, with 12 sugar mills in the former province and two in the latter. All are virtually energy self-sufficient and use the bagasse produced during the processing of sugarcane to generate steam and electricity for their own use for 35 to 40 weeks of the year.
But more is in store. Through increased sugar mill energy efficiency, better technology and higher agricultural yield, these mills can be modified to produce two to seven times more power for export to the national grid. The SA sugar industry has proposed 14 renewable energy projects to make this a reality. The size of the power plants will complement the distribution of preferred bidders from the Renewable Independent Power Producers’ Procurement Programme (REIPPPP), of which none exist in KZN and Mpumalanga.
The value chain
The sugar industry advocates optimising the sugarcane value chain to include a diversification into renewable energy products. A cumulative investment of R18 billion is expected in sugarcane agriculture, sugar mills and co-generating power stations in KZN and Mpumalanga. In turn, a total capacity of 780,5MW is envisaged. The industry believes there is strong potential for economic development from the construction, operations and supporting agricultural activity of the co-generating power plants.
The agricultural primary fuel phase distinguishes the industry from other renewable energy initiatives in that it accounts for substantial economic development benefits. The estimated total job creation for the renewable sugarcane fibre technology is about 34 000 jobs. Of this, nearly 13 000 will be created during construction, more than 400 during operation, and about 20 700 during the primary fuel phase.
Clearly, the development and operation of the plants generating power from sugarcane fibre technology hold substantial benefits for the development of South Africa’s rural economies. Consequently, the SA sugar industry was delighted with the announcement by government regarding the Determination by the minister of energy in December last year that makes provision for 800MW for industrial co-generated electricity under the Medium Term Risk Mitigation Project (MTRMP).
Meeting with government
The industry has had numerous meetings with the Department of Energy (DoE) dealing with the commercial production of electricity for the national grid. In June 2013, the DoE published the Request For Registration and Information (RFRI) for potential developers of new generation capacity, which includes co-generation under the MTRMP. The DoE will use the responses to the RFRI to develop a range of procurement processes relevant to the projects and needs of the national grid.
Biofuels from sugarcane
The former Minister of Energy Dipuo Peters’ recent tour of the SA sugar industry highlighted the opportunities for the co-generation of electricity from sugarcane fibre for export to the national grid, as well as the associated socio-economic development opportunities across the sugar value chain. The SA sugar industry believes that through government support, a procurement process for the industry’s renewable energy projects is imminent.
Internationally, the growth of the biofuels industry has been driven by several factors. Chief of these are the need to improve energy security, the support for renewable energy, and cleaner, more environmentally-friendly energy sources that help to exert downward pressure on crude oil prices.
Worldwide, markets for ethanol are developed through government-established mandates or quotas that oblige fuel distributors to blend a set percentage of ethanol into their national fuel supplies. The world’s two largest sugarcane producers, Brazil and India, enjoy access to sugar, electricity and ethanol markets. The simultaneous production of sugar, ethanol and electricity enables the extraction of the full value of the sugarcane stalk and creates synergies between the products, as well as between sugarcane supply options and the agro-processing plant.
In Brazil, ethanol is the dominant energy product; about 60% of sugars in this country are converted to ethanol. Released in December 2007, South Africa’s National Biofuels Industrial Strategy (BIS) recognises that government support is essential to establish a biofuels industry in the country, and that a biofuels industry, particularly in its infancy, is at the mercy of volatile oil prices, crop prices and exchange rates.
The DoE is supporting the development of a biofuels sector through mandatory blending regulations and an ethanol subsidy mechanism. The regulations for the mandatory blending of biofuels with petrol and diesel were gazetted in August 2012. These support a minimum 5% biodiesel blend and a 2% to 10% range for bio-ethanol blending. The DoE and the National Treasury have also moved forward with the development of an ethanol subsidy mechanism. A viable government subsidy mechanism will support the production of fuel-grade ethanol sugarcane in South Africa.
Dr Marilyn Govender is the natural resources manager in the SA Sugar Association’s (SASA’s) External Affairs department. Contact her on 031 508 7026, or at [email protected]. Visit the SASA website at www.sasa.org.za.
The views expressed in our weekly opinion piece do not necessarily reflect those of Farmer’s Weekly.