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Saturday, May 06, 2006

High oil prices fuel bioenergy and biofuels push

High oil prices and growing concerns over climate change are driving investment and innovation in the biofuels sector as countries and industry increasingly look towards renewable bioenergy to replace fossil fuels. Bill Gates, the world’s richest man, has recently invested $84 million in an American ethanol company, while global energy gluttons ranging from the United States to China are setting long-term targets for the switch to such fuels potentially offering a secure domestic source of renewable energy and fewer environmental headaches.

Biofuels are fuels that are derived from biomass, including recently living organisms like plants or their metabolic byproducts like cow manure. Unlike fossil fuels—such as coal, petroleum, and natural gas, which are finite resources—biofuels are a renewable source of energy that can be replenished on an ongoing basis. In general, biofuels are biodegradable and, when burned, have fewer emissions than traditional hydrocarbon-based fuels. Typically, biofuels are blended with traditional petroleum-based fuels, though it is possible to run existing diesel engines purely on biodiesel, something which holds a great deal of promise as an alternative energy source to replace fossil fuels. Further, because biofuels are generally derived from plants, which absorb carbon from the atmosphere as they grow, biofuel production offers the potential to help offset carbon dioxide emissions and mitigate climate change.

Biofuels have been around as long as the internal combustion engine, and much longer if you count the biomass used to power horses and other beasts of burden. And with petroleum prices hovering around $70 a barrel, they are increasingly cost competitive with fossil fuels, arousing interest and excitement from the investment community and policymakers alike. Biofuels, which currently are the source for less than 1 percent of electricity in OECD nations, have the potential to provide a quarter of the world’s energy needs within a generation, according to analysts with the United Nations Food and Agriculture Organization (FAO).

While other alternative energies—like solar, wind, geothermal, hydroelectric, and tidal—offer viable options for electricity generation, around 40 percent of total energy consumption requires liquid fuels like gasoline or diesel fuel. This is where biofuels are especially attractive, where they can serve as a practical alternative to oil.

Currently most biofuel comes in the form of ethanol, an alcohol typically produced from grains or fruit. Ethanol production is booming around the world. For example, in the United States ethanol is growing at 30 percent per year and currently consumes nearly 12 percent of the country's corn harvest. In Germany, biodiesel output is rising by 40-50 percent a year while France aims to triple output of ethanol and biodiesel by 2007, according to The Economist. Nevertheless, America and Europe lag far behind Brazil, the world’s leading user and producer of such fuels.

Brazil: biofuels leader

While in 2004, ethanol blended into gasoline made up only 2 percent of all fuel sold in the United States, the South American country of Brazil relies heavily on such alcohol-based fuels. The fuel—hydrated alcohol derived from sugar cane—powers more than two million of Brazil’s cars and produces no benzene or sulfur emissions, and very little carbon dioxide and carbon monoxide. Today ethanol accounts for as much as 20 percent of Brazil’s transport fuel market, and at a production cost of about $1 a gallon—or half the price of conventional oil—offers an economical alternative to drivers throughout the country. The Wall Street Journal estimates that seven out of every 10 new cars sold in Brazil are flex-fuel—capable of running on either traditional gasoline or bioethanol. In Europe, biofuels will play an increasingly important role in transportation. In its "Biomass Action Plan," the EU has set a target of increasing the share of biofuels used in transport to 8 percent by 2015. Already Europe is the world's largest producer of biodiesel—mostly made from rapeseed, soybeans, or sunflower seeds—and output is growing at more than 30 percent per year. Back in the United States, great hopes have been pinned on biofuels, which currently make up 3 percent of total energy consumption in the United States. The Biomass R&D Technical Advisory Committee, a panel established by the U.S. Congress to guide future development of federally funded bioenergy research and development, envisions 30 percent replacement of current U.S. petroleum consumption with biofuels by 2030 under a plan that would require about a billion tons of dry biomass feedstock per year. The strategy, spelled out in a report issued by the Department of Agriculture (USDA) and Oak Ridge National Laboratory of the Department of Energy, suggests that a portfolio consisting of 30 percent agricultural waste, 35 percent forest, 5 percent grains to biofuel, and 30 percent "specialized crops" could meet this objective within a generation, reducing demand for imported oil, curbing missions of greenhouse gases, and strengthening the country's farm economy.

Of specialized crops, none is more promising than switchgrass, which is a better source for cellulosic ethanol production, a more efficient and less polluting process than traditional corn-based ethanol production. Cellulosic ethanol is a blend of normal ethanol that is derived from cellulose, the main structural component of plants, and can be produced from virtually any plant matter including agricultural waste. Since such wastes are typically burned or discarded—adding to agricultural production costs as well as carbon emissions to the atmosphere—their utilization as fuel is specially efficient. According to DOE studies, cellulosic ethanol may reduce greenhouse gas missions by 85 percent over reformulated gasoline, while offering significantly higher energy yields and low emissions than sugar and corn-derived ethanol. Further, since cellulose cannot be digested by humans, its production does not directly compete with food production and produces considerably higher yields than traditional grain crops. Plants like switchgrass are excellent feedstock for cellulosic ethanol production and can be planted on marginal agricultural lands.

Switchgrass, a perennial grass that once blanketed the central prairies and eastern parts of the United States from the Gulf Coast to Canada, offers perhaps the best potential as a source of biofuel in America. Studies conducted at Auburn University found the plant yielded an average of 11.5 tons per acres over a five-year period, enough to make 1,150 gallons of ethanol per acre per year (1,750 liters per hectare per year), or more than three times the yield of traditional corn-based ethanol. Further, once you factor in the energy required for tractors, transport, and fertilizers, the net energy output of switchgrass is 15 to 20 times better than corn’s. In other words, it requires far less land and energy to produce a gallon of fuel derived from switchgrass than it does from corn, sugar, or soy.

Beyond efficiency, switchgrass offers advantages over gasoline and standard ethanol. Hardy and adaptable, as a perennial, switchgrass can be harvested as a cash crop on an annual or semi-annual basis without replanting for 10 years. The species has multiple uses—ethanol feedstock, forage, ground cover—giving a farmer several options depending on market conditions. It can be also utilized for chemical products useful for making fertilizers, solvents, and plastics. The plant can be harvested with standard farming equipment, requiring minimal additional capital investment for farmers. From an ecological standpoint, unlike annuals which deplete soil of nutrients, switchgrass restores organic nutrients to over-farmed and otherwise degraded lands. Further, the plant's deep roots anchor soil, reducing erosion and filtering runoff before it enters waterways.

While switchgrass looks promising in its natural form, through selective breeding researchers at leading universities are working to boost yields and increase the adaptability of the plant for growing under a variety of conditions while reducing the need for chemical fertilizers. A study released recently by Carnegie Mellon found that ethanol derived from switchgrass could be made in sufficient quantities to deliver 16 percent ethanol fuel to all consumers in the U.S. by 2020.

Global benefits

Globally, there are benefits from biofuels that extend beyond resource security and the environment. The FAO highlights the poverty alleviation potential for energy crops by bolstering crop diversification, allowing farmers to offer their crops at the best price for food markets or energy markets.

"Farmers, particularly in tropical areas, are seeing new opportunities for increasing production and raising their incomes," said Gustavo Best, senior energy coordinator at the FAO, in a statement on bioenergy. "The beauty of bioenergy is that production can be tailored to local environments and energy needs. Where there’s land, where there’s farmers, where there’s interest, bioenergy may be the best option. And if we add some sound analysis and good business models, we will get that option right."

While bioenergy appears to offer hope for a bright future, it also presents concerns and faces significant challenges. Beyond supply logistics issues, including how to efficiently harvest, transport, store, and process biomass feedstock, there are potential environmental conflicts that arise with energy crop production. Land-use competition (food versus fuel conflict), the use of nitrogen fertilizers and pesticides, and the conversion of natural vegetation for biomass plantations are the foremost concerns for environmentalists. For example, in Malaysia and Indonesia, vast swatches of biodiverse rainforest have been replaced with oil palm plantations, while in the Amazon agricultural expansion has put ecosystems at risk. For these reasons, many green groups actively oppose bioenergy development projects in the tropics. Some have called for certification schemes that would ensure biofuels are derived from sustainable sources.

Also of concern is the volatile nature of energy markets. While market forces—high energy prices—are rapidly improving the environment for the adoption of biofuels, a significant drop in oil prices could cause efforts to stumble. Under such a scenario governments could take steps to encourage the nascent bioenergy market including reducing subsidies for fossil fuels which distort the true costs of hydrocarbon use; levying an environmental tax on fossil fuels to bear the full cost of fossil fuels; and redirecting existing subsidies, which currently top $20 billion dollars a year in the United States alone, toward promising bioenergy crops.

It is now clear that as oil becomes increasingly scarce, economics will continue to drive bioenergy development. As Alexander Müller, assistant director-general for the Sustainable Development Department of FAO, says, "The gradual move away from oil has begun . . . . Oil at more than $70 a barrel makes bioenergy potentially more competitive [while] in the last decade global environmental concerns and energy consumption patterns have built up pressure to introduce more renewable energy into national energy plans and to reduce reliance on fossil fuels.

"Over the next 15 to 20 years we may see biofuels providing a full 25 percent of the world’s energy needs," he adds.


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Tuesday, May 02, 2006

Africa enjoys record economic growth

This year, Africa enjoyed record economic growth. This is a good sign as it will ease Africa's transition towards becoming a global biofuel and bioenergy powerhouse.

Despite all the commonplaces out there, Africa is definitely capable of 'growing', in the narrow economic sense of the word. We must begin to wonder what the role of the Worldbank and the IMF is in all this. Because isn't it significant to note that during the 1980s and 1990s, when African states were forced to swallow the Worldbank's and the IMF's neoliberal 'structural adjustment' policies, they all went in decline and stopped growing, whereas today, when these states no longer obey Worldbank/IMF discipline, they all suddenly start showing the magic?

Obviously, the case is more complex. High oil prices have a clear impact, but this doesn't explain the economic boom witnessed in non-oil exporting African countries. So what is going on? And, after the Asian Tigers, are we now witnessing the rise of the African Leopards?

Sub-Saharan Africa's economic growth is projected at 5.3 percent in 2006, the same rate as in 2005, according to the IMF's African Regional Economic Outlook. As last year, Angola is Africa's fastest growing economy, leading the trend of oil exporters growing faster than oil importers. Only in Equatorial Guinea, Seychelles and Zimbabwe, the IMF expects negative growth rates in 2006.

Africa is in a state of record economic growth "thanks in part to prudent policies," according to the latest data released by the International Monetary Found (IMF) in its World Economic Outlook. Last year's strong growth is to be repeated this year, the forecast shows. The very high oil prices however are resulting in higher growth rates for oil producing nations and a somewhat lower growth for oil importing nations.

The IMF report attributes the projected maintenance of relatively strong growth despite higher oil import prices, to "many countries' continued pursuit of prudent macroeconomic policies" and to strong global demand growth. "Higher growth in oil-exporting countries should offset slower growth in oil-importing countries," the Fund noted.

In 2005, economic growth in sub-Saharan African oil exporting countries was measured at 6.8 percent of GDP, while it is expected to be at 8.0 percent this year. Simultaneously, African oil importers saw their economy growing by 4.8 percent last year, going back to a still comfortable 4.5 percent this year. Even when corrected by population growth, per capita growth in oil importing nations stands at 2.9 percent this year in Africa.

As last year, the most impressing growth is to be measured in Angola this year. With a real GDP growth of 15.7 percent in 2005, Angola is set to speed up growth to an impressive 26.0 percent this year, according to the IMF. Also other oil exporters, including Nigeria, Congo Brazzaville, Cameroon, Chad and Gabon, are experiencing considerable growth this year. Equatorial Guinea is the only oil exporting country seeing detraction and can expect a negative growth of 1.1 percent.

Among non-oil exporters, the picture is more differentiated. Strongest growth is expected in Malawi (8.3 percent), mostly connected to the poor country's bumper harvest this year, Mozambique (7.9 percent), Sierra Leone (7.4 percent), Congo Kinshasa and Cape Verde (both 7.0 percent). All these five countries will experience a much higher GDP growth that population growth, producing per capita growth between 3.9 (Congo) and 6.2 percent (Malawi).

While the majority of African countries are performing well, a few are not able to connect to the current positive trend. Negative GDP growth is even foreseen in Zimbabwe (-4.7 percent, improved from -6.5 percent last year) and Seychelles (-1.4 percent, improved from -2.3 percent last year). Zimbabwe continues to struggle with its failed economic and agricultural reforms and an international boycott, while Seychelles struggles with too late reforms and a setback in the tourism sector.

Several other countries however experience a negative trend when population growth is added to the IMF calculations, as there are more people to share economic goods among each year. As such, Guinea-Bissau experiences a positive development in GDP growth (2.6 percent), but per capita, the economy is still shrinking (-0.4 percent). Also the poor countries of Comoros, Lesotho and Niger see almost their entire economic growth eaten up by population growth.

Despite the large overall growth, the IMF was not satisfied with the registered numbers. For poverty in the region to be halved by 2015 - the UN's millennium aim - a real GDP growth rate of 7 percent is required for Africa at large. Only five countries were close to that aim in 2006, the Fund noted.

Especially the slow growth (4.5 percent) in oil importing countries disappointed the Fund. In presenting the report to the press last week, the IMF's Abdoulaye Bio-Tchane, said "it is really not acceptable to see oil revenues increasing while poverty is increasing. That is the equation we have to solve, and I think [African] authorities, ourselves, the World Bank, and other donors ... need to find the right balance."

Inflation in sub-Saharan Africa registered 10.7 percent in 2005, in part because of higher oil prices, and is expected to be largely stable in 2006 at 11 percent. It should decline in many countries but rise in others, including Zimbabwe, the only country with annual inflation in triple digits, according to the IMF. Stabilisation efforts in oil exporters Angola, Chad, and Nigeria should reduce inflation to less than 8 percent" in these countries.

Fiscal deficits, including grants, are projected to worsen in more than half the oil-importing countries, notably Cape Verde, Ethiopia, Guinea-Bissau, and Kenya. According to the report, the reserve cover for oil importers should, on average, remain unchanged, but it is expected to fall in Burkina Faso, Comoros, Ethiopia, Guinea-Bissau, Rwanda, and Tanzania. Continuing high oil prices are expected to raise the fiscal and current account surpluses of oil-exporting countries.

"However, this outlook is subject to risks," the IMF notes. "In oil-importing countries, fiscal and current account balances may come under pressure from higher-than-expected oil prices or lower-than expected prices for Africa's other commodities."

"In several parts of the region, political uncertainties and fragile security threaten growth prospects, as does the possible spread of the avian flu. Moreover, millions of people in eastern and southern Africa are experiencing food shortages and urgently need humanitarian assistance," the Fund adds.

Afrol News.

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Monday, May 01, 2006

Tropical grass to power 83,000 homes in Florida

Earlier we reported about the Biomass Investment Group which has started a plantation of the tropical C-4 grass known as Miscanthus x giganteus (aka Elephant grass or "e-grass")in the Philippines.
The same company has now announced that it has formed an alliance with a utility to produce green electricity using the same biofuel crop, to power 83,000 homes in Florida.

The power plant is expected to avoid the need to burn nearly 9 million tons of coal over the 25-year life of the contract.

Once constructed, it will be the world's first commercial-scale, biomass power plant using crops grown on site. As a "closed-loop" plant, it will contribute no additional carbon dioxide to the atmosphere, and is estimated to reduce carbon emissions by more than 20 million tons over the life of the contract when compared to coal.

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