South Africa: Renewable Energy Key to Sugar's Viability

Johannesburg — THE sugar industry views expansion into renewable energy, such as through power co-generation and the production of ethanol, as essential for the long-term viability of its growers and millers.

Given SA's increasing power requirements, the National Energy Regulator of SA's recent price determination for three years is aimed at sparking co-generation projects. Eskom will have R2,3bn to buy private power this year, R4,3bn next year and R5,8bn in 2012.

The white paper on renewable energy sets a target for 2013 of about 4% of the projected electricity demand for that year.

Energy generation accounts for about 60% of global carbon dioxide emissions from human activity, and many states are trying to diminish its effect on the environment by trying to reduce emissions and limit their effect on climate.

Other big sugar producers such as Brazil and India have made big investments to produce more ethanol, which can be made from sugar cane and is deemed more environmentally friendly than petroleum fuels.

All fuel for cars in Brazil requires a minimum 20%-25% blend of ethanol, while the Indian government has given loans to sugar mills over the past three years to increase ethanol production.

A South African Sugar Association spokesman says the domestic sugar industry has done most of the research required into biofuel production from sugar but no new developments are taking place, principally because the policy environment is still being developed. SA's biofuels industrial strategy aims for an average liquid fuels penetration of 2% by 2013, a reduction from an earlier target of 4,5% as food security concerns led to the banning of maize for biofuels. Crops under consideration include sugar cane, sorghum, sunflowers and soybeans.

Tongaat Hulett CEO Peter Staude says in the sugar, starch and property development group's annual report, SA has limited agricultural potential to supply a significant portion of its petrol from ethanol. Many other Southern African Development Community countries have good agricultural potential but limited markets. The full community has the market and agricultural potential to emulate the proven business model of supplying ethanol to the fuel market.

Mr Staude says every 10% of the South African fuel market supplied by ethanol would be equivalent to a new sugar industry requiring 2,2- million tons of sugar a year, creating 110000 additional jobs and producing sufficient electricity to replace the supply from a third of a big coal-fired power station.

Tongaat Hulett Sugar co- generates electricity to supply the national grid at the Felixton, Amatikulu and Maidstone mills.

The group's sugar mills in southern Africa, operating at full capacity, have the potential to generate 660MW of electricity if they were to utilise all the bagasse - the crushed residue of sugar cane, after juice extraction - and two-thirds of the tops and trash from cane supplied to the mills.

This would have the benefit of saving 2-million tons of coal a year and reducing carbon dioxide emissions by 4,25-million tons in a season, says Mr Staude.

A focus of ethanol production at Tongaat's expanded Moamba operations in southern Mozambique will be on its sale in Southern African Development Community states as part of an emerging biofuels strategy.

And an expansion at Tongaat's Felixton mill, about 160km north of Durban, is dependent on a decision by the energy regulator to determine tariffs for electricity generation from bagasse.

Illovo spokesman Chris Fitz- Gerald says the group, SA's biggest sugar producer, has been an interested applicant in Eskom's independent power producer schemes, but the terms fall short of the group's investment parameters.

Illovo chairman Robbie Williams said at the annual meeting last week it planned to commission its Ubombo factory expansion and co- generation project in Swaziland at the start of the 2011-12 season. The project increases sugar production and power generation capacity.

It would enable the factory and estates to become self-sufficient in electricity. There is an agreement with the Swaziland Electricity Company to supply power into the national grid for 48 weeks a year.

Pre-project activities are at an advanced stage in Mali for Illovo to produce sugar, ethanol and generate electricity for its own operations, with additional capacity to export power into the national grid. Co-generation is also being assessed in Malawi and Tanzania.