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July 05, 2010

European demand seen powering Africa biofuels growth

by Laura MacInnis

European targets and demand from airlines should support the development of biofuels crops in Africa, renewables experts said July first.

At an African energy conference, biofuel company executives and government officials said it was nearly inevitable that much of budding jatropha and ethanol production on the continent would be exported in the near term.

Geoffrey Manley, principal investment officer at the African Development Bank, said it would be essential to encourage more domestic biofuel consumption in Africa -- to power cars or for home and business use -- once the sector gains traction.

"If you look at the medium term that is going to be key," he told the meeting in Basel, Switzerland. "But to jump-start this you need a pull from export markets."

UK-based Sun Biofuels, which covers biofuels from cultivation, to oil extraction and marketing, estimates the EU would need to import tens of billion litres of biofuels as a result of its renewables targets and demand growth.

"It is going to come from various areas, I believe South America, possibly Canada, and Africa. Mozambique and Tanzania in particular," Sun Biofuels Chief Executive Richard Morgan said.

The European Union aims to get 10 percent of its road fuels from renewable sources by 2010, of which 6 to 9 percentage points are expected to come from land crops. Within the next decade, that could create a global market worth $17 billion a year.

Airlines keen on renewables would also propel demand for fuel crops such as jatropha, which in Africa is typically grown on lands that were previously used for tobacco, said Morgan. "The aviation sector is very interested in a renewable fuel."

China is planning to launch its first flight with jatropha-based fuel feedstock -- this year under a deal with Boeing. Four Boeing test biofuel flights have already been conducted in the United States and Airbus also is planning to test biofuels with JetBlue Airways.

International demand for biofuel crops has prompted calls for more incentives to draw more investors to Africa, which is already struggling to maintain consistent electricity at home in the face of fast-growing domestic power demand.

Morgan of Sun Biofuels, which operates in Mozambique and Tanzania, said there could be domestic electricity-generating opportunities from combining biofuel generators with solar power.

Such hybrid models could be useful in rural areas where electricity is not spotty or impossible to access, leaving farmers with few options to produce their goods.

"If you are in an area with no power, you have no choice. If you have power you have choice and you can add value," he said, using as an example the potential to mill and store maize, instead of simply selling the raw product.

Last year, Rwanda signed on two foreign companies to start producing 20 million litres of biofuels annually from jatropha plants in 2012. The country relies on fuel imports through Kenyan or Tanzanian ports, and buys 160 million litres of fuel from abroad annually.

The International Energy Agency said in June that overcapacity in the global biofuels industry could hurt margins and boost feedstock prices in future, also warning that weather patterns added an element of risk to the sector.


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