Ugandan local sugar companies are racing against time to
diversify into commercial ethanol production as they look to tap into the
country’s increasingly lucrative energy sector. Leading the pack is the
country’s largest producer, Madhavani Group’s Kakira Sugar Works, which is set
to start ethanol production at its $35 million (€31.6m) distillery plant
in September this year.
Once complete, the sugar firm hopes to produce 32 million
litres of ethanol fuel using the 74,000 tonnes of molasses that it produces
annually. Last year, Kakira contracted India-based Praj Pune Industries to
build the distillery. According to Madhavani Group publicist Angella Kintu,
the initiative will help the firm save 500,000 Ugandan shillings per tonne
that it loses in the sale of raw black treacle to local dealers.
“These molasses are usually sold off to local gin producers
and farmers at low prices,” says Kintu. “With our own distillery, we have
a double-edged sword.”
The plant is designed to switch between the
production of fuel-grade bio-ethanol and premium-grade extra neutral alcohol.
“It is expected to be complete by September this year. This
will pave way for ethanol either being blended with petrol to run vehicles or
being sold as neutral alcohol for making other products including sanitisers,”
Kintu continues.
The timing appears to be right, with Uganda preparing to
build a $4 billion oil refinery along its western border with Congo. The
refinery will start with 30,000 barrels-a-day of refined fuel products. With
refined petroleum consumption in the East African nation growing at 15%
annually, the potential is enormous. The petroleum refinery can then blend petrol
with ethanol, the Energy and Minerals Ministry says.
Sugar Corp. of Uganda (SCOUL) the third largest sugar
producer in the country. It is also installing a state-of-the-art
distillery with a production capacity of 35,000 litres per day of premium grade
extra neutral alcohol. Currently producing 60,000 million tonnes of sugar
annually, the company has embarked upon expanding its distillery and
alcohol production plant to an annual 9 million litres by 2017 with
products such as ethanol and extra neutral alcohol.
Governmental support
In the energy-hungry East African region, Uganda is the only
surplus sugar producer and the chances of tapping into the biofuel sector will
give the producers an added edge. The government of Uganda has expressed that
biofuels production can solve the energy needs of the country, reduce dependence
on imported fossil fuels, and encourage economic growth.
According to James Baanabe, Uganda’s commissioner of the Efficiency
and Conservation Department at the Ministry of Energy and Mineral Development, biofuels
provide cleaner and environmentally-friendly fuel for industrial purposes,
cooking, transport, and power generation.
“Biofuels, especially ethanol, are good for powering
vehicles. They do not produce toxic gasses when used,” he says.
The Ugandan government hopes to fast track biofuels
development to secure a stable energy supply and diversify the energy sector
for long-term economic development by 2040. It has demonstrated commitment to
biofuels production by putting in place legislation, the Biofuels Bill
2015, which is still awaiting parliamentary approval and enactment. The bill
will create incentives like tax rebates, which will encourage investors to
develop biofuels. It is also meant to help project developers acquire a secure
market in the sector.
The bill complements the Renewable Energy Policy for Uganda
2007, which provides for compulsory blending of biofuels with fossil fuels
in regulated proportions to 20% of the former component. Kintu says that the
bill could reduce the country’s cost of importing petroleum products and set
terms of producing ethanol for domestic use and for export. She adds that the
legislation will enable developers to access long-term finance for project
development in the biofuels industry.
The benefits of biofuels
Over the past decade, Madhvani has invested $75 million in
cane-crushing facilities and in a power plant using bagasse, a cane fibre. At
the moment, the sugar firm at the moment uses 20MW of the 52MW it produces,
selling the remainder to the national grid. With the discovery of abundant
fossil fuel reserves, coupled with the promotion of investments and research
in biofuels, Uganda is on its way to fuel self-reliance.
Uganda is set to begin pumping its first commercial oil in
2020 after substantial reserves were discovered near the country’s border with
the Democratic Republic of Congo in 2006. Only 40% of the country’s potential
has been explored so far and there is hope of further finds. A consortium of
companies, led by UK-based Tullow Oil, Total, and China National Offshore Oil
Corp. hope to produce up to 60,000 barrels per day, which could increase to
120,000. These oil companies will be obliged by law to blend fossil oil with
bioethanol, up to the E20 standard. Banaabe says that blending petroleum
products with biofuels will enhance the life of the Uganda’s oil fields through
partial substitution. This also provides lucrative market for bioethanol.
Uganda meets more than 93% of its energy demand with biomass
in the form of charcoal and firewood, 6% with fossil fuel combustion, and only
1% with electricity from hydropower, according to Ministry of Energy
statistics. Only about 15% of the population has access to electricity, and in
rural areas percentage sinks as low as 7%. This has resulted in the depletion
of the country’s forests and woodlands. The loss of these fragile ecosystems
not only has serious implications on Uganda’s biodiversity, but also
compromises the nation’s ability to cope with climate change.
According to the Ministry of Energy, it is hoped that
bioenergy will increase the renewable energy mix from 4% to 61% of total energy
consumption by 2017. Uganda also has a national strategy for bioenergy
development, including growing biofuel crops to contribute to the country’s energy
balance. Investors have already shown interest in developing biofuel projects
in Uganda. Last year an ethanol extraction factory was established in Lira
District in northern Uganda. The $1.8 million Kamtech Logistics plant is
located at Barlwala in Adekokwok sub-county. Farmers are no longer worried
about a market for their cassava, as they sell it to the plant for ethanol
production.
Opposing opinions
A few companies have also already established massive
biodiesel feedstock farms in different parts of the country. Among these
companies are Nexus Biodiesel, a US-based biodiesel company, and African Power
Initiative (API). Nexus has planted more than 400 hectares of jatropha in
Isimba, Masindi, which is three hours north of Kampala. API has planted about
4,000 acres of castor oil and jatropha in Namalu, Karamoja region. The
companies are already producing diesel.
Kakira's entry into biofuels comes at a time when the price
of crude oil is averaging at $50 a barrel, massively down from $100 barely a
year ago, which is hurting the global biofuels industry. However, even as crude
prices have been volatile, the biofuel industry remains lucrative as countries
seek cleaner energy in the face of global warming. Blending also reduces over-reliance
on the volatile global crude markets.
Biofuels production brings many benefits for Uganda by
providing access to clean energy services. Production of ethanol from sugarcane and
maize grain is likely to increase grain and cane prices, which in turn
will benefit small scale farmers that work as growers for larger companies.
This will also increase maize and cane grain output.
But environmentalists and food rights activists worry that
although curbing modern energy shortages is crucial for Uganda’s development,
the biofuel industry may have negative consequences especially on food
security. They thus continue to oppose to the development of biofuels, which
they say creates a shift from growing crops for food to growing crops for
profits. Another argument is that biofuel crops demand large chunks of land and
thus compete with food crops further.
“Biofuel production is not sustainable as it does not lead
to poverty alleviation or an improvement in livelihoods,” says Kabongo Isaac, the
director at Ecological Christian Foundation, a local Ugandan non-governmental
organisation. Farmers involved in growing feedstocks for
biodiesel projects are already facing food shortages because they have
neglected to grow food crops to sustain their families by committing all their
farm lands and labour to growing jatropha and other feed-stocks as their
mainstay, Isaac argues.
“The proceeds they earn from the sale of
biofuel feedstocks are spent on buying food and other necessities from the
markets. It will most likely worsen food shortages,” he adds.
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