South African company to produce biomass pellets for exports to Europe

The Coega Industrial Development Zone (IDZ) in Port Elizabeth, South Africa, has announced it has secured 70 million Rand (€7.5/US$9.75 million) to invest in a biomass pellet production project. Eastern Cape Biomass Fuel Pellets will create some 100 jobs during the construction of the plant, which is currently underway, and an additional 3000 jobs for poor rural communities who will help supply the biomass. The company's aim is to supply 10000MT per month of the biofuel pellets to European countries including Scandinavian countries who already have a large domestic forest and wood products industry.

A total of 285 plants globally produce a combined four million tons of biomass pellets per year that are burned either in large power stations in combination with coal, separately in often smaller but more efficient combined heat-and-power plants or in small stoves by individual consumers. The plant in South Africa will be the largest among 285 manufacturers of the renewable fuel product globally. The 120 000 tons per year it aims to produce, are equivalent to roughly 50,000 tons or 350,000 barrels of oil.

Global bioenergy trade
According to a recent EuroBarometer, the use of solid biofuels for power and heat generation is rising rapidly in the EU, with a total consumption of 58.7 million tons of oil equivalent in 2005, a marked increase over previous years (earlier post).

The fact that Eastern Cape Biomass Fuel Pellets will export the fuels over such a long distance, proves the viability of a scenario we have been describing here at the Biopact: that of a large-scale, global trade in bioenergy products, whereby the South profits from its competitive advantages to produce biofuels. Such large-scale bioenergy trade is feasible and can tap into a huge energy potential (earlier post), but most key players in this new industry agree that there is a need for clear sustainability criteria (earlier post). Europe is already building logistical infrastructures to accomodate this new market (earlier post):
biomass :: bioenergy :: biofuels :: energy :: sustainability :: pellets :: solid biofuels :: combined heat-and-power :: bioenergy trade :: EU :: South Africa ::

Jobs
CEO Willie Claassen said 60 direct jobs and about 3 000 indirect jobs “in backward linkages to the Eastern Cape rural areas will be created”. “We are dealing extensively with Amathole District Municipality to secure services for the conversion of raw material, Wild wattle for use in industrial operation,” said Claassen.

The plant will produce biofuel pellets from a diversity of biomass sources:

• forest residues, sawmill waste, and alien vegetation from the Eastern Cape and part of the Southern Cape
• scrap wood from the government Working For Water Programme
• an alien species of tree, called the 'wild wattle', which is usually found in waterways and used by the biofuel industry to make fuel pellets

Claasen said that about 3 000 rural dwellers will supply the industry with the wattle.

Enviro Freight Service, will employ 40 people to move the material between the sources of supply, the factory and the harbour. “Biomass Fuel Pellets has already secured off-take agreements with the Nordic countries to where the product will be transported,” said Claassen.

Production is scheduled to start in July this year with the first export expected in October. The Coega IDZ was chosen as the location for the plant because of the coastal position and the fact that the Eastern Cape is a source of the raw materials that are used to produce the pellets.

Shared ownership by the poor
‘The aspect of creating jobs where they are most needed and the opportunity to design and build a plant from scratch without the constraints of legacy also counted in favour of the Coega IDZ,” said Claassen.

The Eastern Cape Bio Fuel Pellets has set aside 5% of the ownership of its workers and another 5% for rural communities that will provide raw materials. The Industrial development Corporation (IDC) has 10% equity with 30% still under negotiation with black economic empowerment partnership.

Spokesperson for the Coega Development Corporation (CDC) Vuyelwa Qinga-Vika said it was on the right track and would achieve its target of signing 10 investors within the current financial year. She said the Biomass project was the fourth investor to be announced by the CDC after Cerebos, Dynamic Commodities, and Alcan in 2006.