1 Ikuponisi, F. S., Status of Renewable Energy in Nigeria: An International Conference on making Renewable. Energy a Reality (November 21-27) at.
1
WHAT ARE THE PROSPECTS AND CHALLENGES OF BIOFUELS IN NIGERA? Kingsley Chigozie Onuoha
Centre for Energy, Petroleum and Mineral Law and PolicyUniversity of Dundee October 2010
ABSTRACT So much attention has been drawn to the development of biofuel in recent times. Biofuel is seen as a means to alleviate global energy concerns, foster rural development and mitigate climate change. Since biofuel is changing the face of the energy sector in the world, Africa is not left out. Africa is on the verge of stepping into the biofuels industry in a big way, with every sector being placed in the use of cleaner renewable energy. Nigeria, as the giant of Africa has mapped out comprehensive plans that will launch it into becoming one of the major players in the biofuels industry both at the continent and world levels. Despite strong indications of biofuels promotion, there are few countries currently participating in the production. However, production cost of biofuels is still relatively higher than those of fossil fuels and this poses a problem in the successful substitution of fossil fuels with biofuels. This work will focus on Nigeria’s biofuels industry by discussing the economic justification of promoting biofuels in terms of its costs and will
Electronic copy available at: http://ssrn.com/abstract=1959778
2
investigate the challenges and opportunities abounding in the promotion of biofuels. Based on available data and information, we found that extensive biofuel usage induces huge financial costs. Presently biofuel production is not economically viable, and the drive for its production is driven by the policies of some countries that perceive it as the only possible alternative to fossil fuels and a way out from the declining world crude reserves.
Electronic copy available at: http://ssrn.com/abstract=1959778
3
1.0
INTRODUCTION
Biofuels as a component of renewable energy (RE) has been talked about for more than thirty years while fossil fuels have increased in use and declined in supply.1 The world oil consumption stands at 86 million barrels per day2 and is expected to increase to 118 million barrels by 2030.3 This expectation could be surpassed following the current trend in energy usage mostly by developing countries. This has left many countries to intensify efforts in their search for alternative sources of energy to meet daily consumption. Nigeria, with a population of over 150 million people as recorded in the census of 2006 relies heavily on fossil fuels both as a means of meeting its energy demand and also for revenue generation. This has led the country to join the rest of the world in search for an alternative to its energy usage. The support for biofuels is increasing as they have been viewed by many as the only feasible option for the substitution of fossil fuels in the transport sector. The global demand for climate-friendly transport fuels is driving vast commercial biofuels projects in developing countries.4 Since the transport sector is the major emitter of green house gases (GHG), biofuels
1
Ikuponisi, F. S., Status of Renewable Energy in Nigeria: An International Conference on making Renewable Energy a Reality (November 21-27) at http://www.renewablenigeria.org/Status_of_Renewable_Energy_in_Nigeria[1].pdf (Last Visited on July 7, 2010) 2 BP, Statistical Review of World Energy 2008, at http://www.bp.com/productlanding.do?categoryId=6929&contentId=7044622 (Last Visited on July 7, 2010) 3 US Energy Information Administration, International Energy Outlook 2007, at http://www.eia.doe.gov/oiaf/ieo/oil.html (Last Visited on July 7, 2010) 4 Vermeulen, S. et al, (iied, 2009), Biofuels in Africa: growing small-scale opportunities, at http://www.iied.org/sustainable-markets/key-issues/energy/biofuels-africa-focus (Last Visited on July 7, 2010) 4 Vermeulen, S. et al (iied, 2009): Biofuels in Africa: growing small-scale opportunities, at http://www.iied.org/sustainable-markets/key-issues/energy/biofuels-africa-focus (Last Visited on July 7, 2010)
4
are projected to contribute 43 million ton oil equivalent (Mtoe) which is about 14% of the market for transport fuels in 2007. Bioenergy production also offers a way for the poor to meet their energy needs and diversify their livelihoods but it also poses serious threat to food security and environment integrity based on the fact that some biofuels are said to emit more GHG than fossil fuels. In Africa, most countries are bent on attracting foreign direct investment (FDI) and they see big business as a strategic means of scaling up rural development. Therefore, many countries are incorporating biofuels policies into government development plans to expand biofuel markets and increase private and public funding. The government of these countries hope to combine both large and small scale production of biofuels to guarantee energy security and Gross Domestic Products (GDP) at the national level, while opening up local opportunities.5 Interestingly, Nigeria is richly endowed with renewable energy resources ranging from large and small hydroelectric power sources, biomass, wind, solar and potentials for hydrogen utilization as shown in table 1. Table 1: Renewable Energy Resources in Nigeria Energy Source
Capacity
Hydropower, large scale Hydropower, small scale Fuel wood Animal waste Crop residue Solar radiation Wind
10,000MW 734MW 13,071,464 hectares (forest land) 61 million tones/yr 83 million tones/yr 3.5 – 7.0 kW/m2-day 2-4m/s (annual average)
Source: ECN (2005)
5
Ibid
5
To unlock the benefits of renewable energy, the Nigerian government has drawn up plans that will launch it into being a major player in the biofuel industry. To attain this, the government has intensified efforts to regain its once lost glory in the agriculture sector where the country was a major exported of cash crops. With the following projections made by the government, the question now is whether the drive can be sustained over time. 1.1
Project Structure
The unique value of this work is that it lays out analytical facts of the current state of biofuel production both in Nigeria, Africa and the World at large. This paper is divided into six chapters where chapter one is the introductory part of the work, chapter two discuss the overview of the biofuel industry, chapter three looks at the Nigerian biofuel industry, chapter four focus on the cost of biofuels, chapter five discuss the bending challenges and benefits of biofuel production while chapter six concludes the work by making recommendation where necessary.
6
2.0
BIOFUELS – AN OVERVIEW OF THE INDUSTRY
The liquid biofuels industry is increasing rapidly as global demand for biofuels increases. Biofuel policies and high oil prices (US$75.35/bbl)6 make fuels from energy crops a viable alternative to fossil fuels. Bioethanol and Biodiesel are mostly produced domestically for the consumer markets as international trade in biofuels is limited7 but this could change in the future when biofuel is commercially produced. So far there are few players in the biofuel industry and the current trend shows that Africa’s biofuels are not likely to compete with those from Brazil, European Union (EU) or United States of America (US). In any case Africa may become strong exporters of biofuels feedstock to the EU and US consumer markets,8 thereby attracting FDI to the region. This can be possible following the global perspective of biofuel industry and the vehement drive by the US and EU to be self sufficient in the production of biofuels. 2.1
The Term Biofuel
Biofuel is also known as agrofuel and are mainly derived from biomass or bio waste and as such are considered renewable and sustainable in contrast to the majority of liquid and gas fuels we use today, which are fossil based with limited world crude oil reserves.9 Bioenergy is energy derived from materials such as wood, animal wastes, or straw, which were 6
Wall street journal publication: Monthly crude oil spot prices (June 2010), at http://www.cn.ca/en/shippingprices-tariffs-fuel-surcharge-monthly-oil-price.htm (Last Visited on July 7, 2010) 7 Siehorst, S., et al, Biofuels in Africa: An assessment of risks and benefits for African wetlands, at http://www.unido.org/fileadmin/user_media/UNIDO_Header_Site/Subsites/Green_Industry_Asia_Conference __Maanila_/GC13/Wetlands.pdf (Last Visited on July 7, 2010) 8 Ibid 9 What is Biofuels? at http://www.energynortheast.net/page/whatisbiofuel.cfm (Last Visited on July 11, 2010)
7
living matters but in contrast to the fossil fuels. These materials can be burned directly to produce heat or power, but can also be converted into biofuels.10 Charcoal and biodiesel are examples of biofuels made from wood and plant seeds respectively. Most of the biofuels derived from living or recently dead biomass contain significant amounts of oxygen which enables the materials to burn.11 2.2
Global Trend of Biofuels
The current status of the biofuel industry and markets indicates a relative change in the production of biofuel since it was first applied 30 years ago. Most countries have been reluctant in the development of biofuels due to relatively low oil prices. This reduces governments’ motivation and the attention paid by stakeholders in the biofuel industry. But following the dramatic oil shock of 197312 when international price of oil rose, most countries reconsidered their positions and increased their participation in biofuel production. While advancement in technology and the drivers of biofuels have boosted the economies of the biofuel industry, the price of their petroleum equivalents and the existence of incentives also influenced the uptake of biofuels. Most countries have begun programs to develop the domestic biofuels industry, with United States leading in the production of ethanol. And for the first time countries of Organisation for Economic Cooperation and
10
nd
Boyle, D., (ed) Renewable Energy: Power for a Sustainable Future (2 ed) (Oxford, New York: Oxford University Press Inc, 2004) p.106 11 Ibid: p.110 12 Global Data: Global Biodiesel Market Analysis and Forecasts to 2020 on reports – research.com, at http://www.prlog.org/10618666-globaldata-global-biodiesel-market-analysis-and-forecasts-to-2020-onreports-researchcom.html (Lasted Visited on July 9, 2010)
8
development (OECD) have started regarding biofuels as a possible alternative to petroleum fuels and have even created a portfolio of new incentives therefore, increasing the production of biofuels in OECD countries.13 2.3
Energy Crops and Wastes
The two main sources of bioenergy are the purpose-grown energy crops and wastes.14 Energy crops have attracted attention in recent years, for several reasons;
The need for alternatives to fossil fuels, in order to reduce toxic
materials in the atmosphere.
The search for indigenous alternatives to imported oil
The problem of surplus agricultural land
The relative importance of the points mentioned above has been a major factor in determining the preferred crops in different regions or countries which is also subject to the constraints imposed by the local climate, soil, etc. Wastes from non-energy uses of biomass are potential fuels but is less evident for industrial and urban wastes. These wastes include; forestry, agriculture and animal husbandry. Currently biofuel has four generations but the first and second generations are receiving greater attention, with the fourth generation on the pipeline.
13
Steenblik, R., Biofuels – At what costs?), at http://www.iisd.org/media/press.aspx?id=7 (Last Visited on July 9, 2010) 14 Energy Crops – These are crops grown specifically for use as fuel or for conversion into other biofuels. They include for instance, wood for burning, plants for fermenting to ethanol and crops whose seeds are particularly rich in oils (but not of course those that are grown primarily for food).
9
2.4
First Generation Biofuels
They refer to fuels produced from organic materials using standard technology.15 As nations and corporations look for alternatives to fossil fuels, the utilization of biofuels has increased. Unlike fossil fuels, biofuels are renewable and potentially less polluting. Although they are not green renewable as mentioned above the most widely used ones require fertile agriculture land to be turned over from food crops. The processes and transportation involve are polluting even though less when compared to fossil fuels, but they still add to air pollution. Some may argue that first generation biofuels are not a very good alternative to fossil fuels but they hold some valuable potentials as they are renewable and as techniques and technology improve, costs reduce, the world may experience commercial production of biofuels that are more environment friendly. Bioethanol and Biodiesel are the most common first generation biofuels. These types of biofuels can be used both in neat and blended forms. 2.4.1 Bioethanol Bioethanol is a distilled liquid which is derived from cereal based crops such as wheat, sorghum, beet, cassava, maize (corn) sugarcane etc. It is an alcohol fuel that is made from other reclaimed greases. It can be used as a pure fuel or blended with gasoline. As of 2008, United States of America had the most developed bioethanol industry, consuming about 30 percent of all corn produced within the country.16 It is the world’s leading producer
15
Willson, J., What are the first generation biofuels? at http://www.helium.com/items/1923731-firstgeneration-biofuels (Last Visited on July 15, 2010 ) 16 Bioethanol: 2010 review, at http://www.biofuels.ru/bioethanol/news/bioethanol_2010_reniew/ (Last Visited on July 16, 2010)
10
of corn and bioethanol, with a bioethanol output of 9,000 million gallons in 2008. Another major producer is Brazil which produces bioethanol from sugarcane and is relatively cheap due to low labour costs, producing about 6,472.2 million gallons in 2008 as shown in table 2 below. Table 2: Production of Ethanol in Different Countries COUNTRY USA BRAZIL EUROPEAN UNION CHINA CANADA THAILAND COLUMBIA INDIA AUSTRALIA
MILLION GALLONS 9000.0 6472.2 733.6 501.9 237.7 89.8 79.3 66.0 26.4
Source: RFA, Litch, F.O. 2008 estimates
In 2009, over 20,000 million gallons of ethanol were produced in the world as shown in figure 1 below and it is assumed that the overall production will increase by 16.2% in 2010 which will result to 23,240 million gallons being produced. The increase in production will replace 553 million barrels of conventional hydrocarbon and diesel fuels in 2010 as forecast by Global Future Alliance (GRFA).17
17
Bioenergy news: Total ethanol production to increase, at http://www.biofuelsnews.com/industry_news.php?item_id=1900 (Last Visited on July 17, 2010)
11 Figure 1: Annual Ethanol Production
25000
Annual Production of Ethanol
Million Gallons
20000 Annual Productio n Million Gallons
15000 10000 5000 0
Year
Source: www.earth-policy.org
2.4.2 Biodiesel Biodiesel is made from organic oil which includes animal fat and vegetable oil. It is the equivalent of diesel and can be added to standard diesel to reduce the emissions caused.18 It is produced from oil based crops such as sunflower, palm oil, coconut, rapeseed etc. Biodiesel is produced majorly in the OECD countries with EU countries been the world leading producers. In 2009, the total biodiesel production was over 10 million litres with Germany, France, Spain and Italy having the largest of the production. Germany’s production capacity was over 2.8 million litres in 2009,19 making it the leading producer of biodiesel both in the EU and the world. The production of biodiesel in the EU countries has grown so fast which can be attributed to the use of diesel powered automobiles in its transportation sector and incentives provided by EU member states. As at
18
Supra: note 14 Biofuels Platform: Production of biodiesel in the EU, at http://www.plateformebiocarburants.ch/en/infos/eu-biodiesel.php (Last Visited on August 20, 2010) 19
12
2009, productions of biodiesel was over 4,000 million gallons as shown in figure 2 below. The EU had a share of 2,547 million barrels, while the remaining amount was produced by other countries.20 In 2008, biodiesel provided 1.8% of the world’s transport fuel. Figure 2: Annual Biodiesel Production
Million Gallons
Annual Production of Biodiesel 4500 4000 3500 3000 2500 2000 1500 1000 500 0
Annual Production Million Gallons
Year
Source: www.earth-policy.org
Other types of biofuels that are less commonly used are:
biobutonal and biopropanol which are also alcohols derived from
starch and sugar.
Biogas is gas produced from the rotting or fermentation of organic
material
Traditional fuels, such as wood and straw are also considered as
biofuels. Although they are renewable, they are extremely polluting.
20
Ibid
13
2.5
Second Generation Biofuels
Since first generation biofuels threaten food supplies and biodiversity, depend on subsidies, not cost competitive with existing fossil fuels and produce only limited GHG emissions savings, it is empirical that biofuels are developed to solve some of these problems and contribute a large proportion of our fuel supply by making them sustainable, affordable, and reliable with greater environment benefits. The second generation biofuels were developed to meet these challenges. The second generation biofuel are derived from lignocellulosic crops and are made from lignin and cellulose. It allows both components of a plant to be split after which the cellulose can be fermented into alcohol. It uses biomass consisting of residual non-food crops such as husks, leaves and stems that are removed from food crops as well as other crops that are not grown for food purposes such as jatropha, miscanthus, switchgrass, cereals bearing little grains and also industrial waste to address some of the problems of first generation biofuels. Some of the second generation biofuels that are being developed are;
Biomethanol - Produced from biomass and can be blended with
petrol up to 10% - 20% without any infrastructure changes.
Biohydrogen - Produced from biomass feedstock using gasification.
The methane produced through the process is reformed. Biohydrogen can be used in fuel cells to produce electricity.
14
Bio-synthetic - Produced by the Fischer-Tropsch process. This
process turns biomass to liquids.
Hydro Thermal Upgrading (HTU) diesel - Produced from wet biomass.
It can be blended with fossil diesel in any proportion without the necessity of engine or infrastructure modification.
Biodimethyl (BioDME) - Produced from coal and natural gas by
gasification. It can be produced also from biomethanol using catalytic dehydration or from syngas using DME synthesis.
Butanol and Isobutanol which can be produced by fermenting
glucose.
Mixed Alcohol - This is the mixture of ethanol, propanol and butanol
with some pentanol, hexanol, heptanol and octanol. It is produced from syngas with catalysts similar to those used for methanol. 2.6
Third Generation Biofuels
In search of more efficient ways of enhancing biofuel production studies have been focused on Algae fuel, also called oilgae or third generation biofuel. Algae are high yield feedstock and are believed to produce 30 times more energy per acre than land crops such as soybeans but these yields have yet to be produced commercially. Interest has been shown on algaculture (algae farming) due to its biodegradability. They can be produced using ocean and waste water and as such, they do not affect fresh water and are relatively harmless to the environment if spilled. In the US, it is estimated that replacing all petroleum fuel with algae fuel would require 15,000 square miles which is one seventh the land devoted to corn
15
production.21 This means that only small amount of land will be required. One difficulty facing algae fuel is that it must be mixed uniformly, and if not properly done will affect biomass growth. Examples of algae with great potentials are Botryococcus braunii and Chlorella vulgaris which are easy to grow but hard to extract algal oil. The production of biofuels from algae does not eliminate the introduction of new Carbon dioxide (CO2) to the atmosphere since any CO2 taken out of the atmosphere by the algae is returned when the biofuels are burned. Figure 3: Botryococcus Species with Oil Droplets
Source: http://www.biofuelstp.eu/algae.html
2.7 Fourth Generation Biofuels There is no established definition of fourth generation biofuels but some refer to it as biofuels created from processes other than first generation ethanol and biodiesel, second generation cellulosic ethanol and third generation algae biofuel. They are advanced bio-chemical and thermo-
21
Biofuels from Algae, at http://www.digtheheat.com/Biofuel/algaefuel.html (Last Visited on August 20, 2010)
16
chemical processes that produce green gasoline, green diesel and green aviation fuel which result in a negative carbon impact when combusted. Some fourth generation technology pathways include: pyrolysis, solar-tofuel, genetic manipulation of organisms to secrete hydrocarbons and gasification. 2.8
Feedstock Quality and Production
Biomass feedstock production is mainly from farms, the size and ownership structures which differ by crop and location. The sugarcane farms are larger than the starch-based crop farms, such as maize, wheat and oilseeds. Maize (for ethanol) and soybeans (for biodiesel), wheat, sugar beets and oilseeds are mostly grown in rotation on the same parcel of land while sugarcane is grown generally as a mono crop. Feedstock being the raw material for biofuel production is the most significant cost of biofuel production. In Brazil, feedstock for sugarcane-based ethanol costs 37% of the entire costs and over 45% for corn-based ethanol production in the EU.22 The feedstock cost shares are even higher now that commodity prices are rising. Another cost component that is higher is the cost of energy. This accounts for 20% of biofuel operating costs in contries like Thailand, Brazil Japan and Spain. All biodiesel is not of the same quality and the quality is related to the feedstock quality. Feedstock used to produce biodiesel can come from many sources and in many forms. Some of the feedstock come from virgin
22
Coyle, W., The future of Biofuels: A global perspective, at http://www.ers.usda.gov/AmberWaves/November07/Features/Biofuels.htm (Last Visited on July 20, 2010)
17
oils such as rapeseed, soybean, palm oil, coconut, mustard, jatropha and hemp. In addition, algae and waste vegetable oil (WVO) are biodiesel feedstock. Biodiesel from waste vegetable oil costs less to produce but due to suspended food particles in it, the oil requires pre-filtration to remove such impurities. In search for feedstocks with high quality that don’t compete with food crops, investigations have been conducted on some plants with good qualities that can be used to pursue the production of biofuels. One of the feedstocks is Camelina sativa also known as false flax and a member of the mustard family. It is an underdeveloped feedstock for biofuel which is being investigated. Camelina sativa is a non-food crop that is tolerant of low rainfall and can grow in areas unsuitable for food crops. It has a crop yield that doubles those of soybeans; its oil is more resistant than other oils and the by-product after producing oil from it can be used for livestock feed.23 Figure 4: Camelina Sativa Plant
Source: Treehugger (2008)
23
McDermott, M., Camelina: Another Biofuel Feedstock You May Not Have Considered, at http://www.treehugger.com/files/2008/08/camelina-another-biofuel-feedstock-to-consider.php (Last Visited on September 18, 2010)
18
Another good quality feedstock is Switchgrass (Panicum virgatum). It is a warm season grass and is one of the dominant species of the central North American tallgrass prairie. It can be found in remnant prairies, along roadsides, pastures and as an ornamental plant in gardens. Switchgrass is a non-food crop and is rich in cellulose which makes it attractive as a source for cellulosic ethanol. Switchgrass is one of the best crops used for carbon sequestration (the accumulation of carbon, especially below the ground) as the plant returns the CO2 obtained back to the atmosphere when it is harvested and burned for energy. Therefore, CO2 is recycled by the use of switchgrass for energy, making this process CO2-neutral compare to fossil fuels that add to the atmosphere. Also when compared to low grade coal, burning switchgrass for energy will probably result in less toxic emissions such as oxides of sulphur and nitrogen.24 Figure 5: Switchgrass Plant
Source: Webmaster (2008)
24
Bransby, D., Switchgrass Profile, at http://bioenergy.ornl.gov/papers/misc/switchgrass-profile.html (Last Visited on September 18, 2010)
19
Also, Jatropha Curcas is an oil bearing plant that is capable of thriving in arid regions. The establishment of Jatropha plantations can serve as a solution to the problem of desertification, as well as provision of feedstock for biodiesel production. It is a perennial plant that thrives on marginal soil and needs minimal inputs and management.25 Jatropha trees produce non edible oil seeds for up to fifty years and can be harvested within six months to a year after planted. The oil in the seed can be used to produce biodiesel and after extraction, the cakes can serve as fertiliser or animal fodder. The oil derived from the plant is commercially viable for fuel production since it has desirable physicochemical and performance characteristics comparable to normal diesel. Currently Eco Afrique, a subsidiary of Ensol has a 10,000 ha jatropha plantation in Lafiagi, Kwara State and when fully enhanced, it will add to Nigeria’s biodiesel production. Table 3 below shows feedstocks used by some countries and the blending targets they have set to achieve. Brazil is the only country promoting biofuel use beyond minimal blending levels by allowing consumers to choose it as a fuel substitute. The Brazilian government has promoted the availability of ethanol at almost every gasoline station and the manufacture of flexible fuel car (capable of using pure gasoline, E25, or pure hydrous alcohol). The US proposed legislation would also provide incentives for expanding E85 distribution and the manufacture of more E85-capable vehicles.26
25
Can Biofuels kick-start nigeria’s agri-economy? at http://www.tradeinvestnigeria.com/news/290612.htm (Last Visited on September 17, 2010) 26 Supra: note 19
20 Table 3: Biofuel Feedstocks and Blending Targets Biofuel blending targets, selected countries Country
Feedstocks Ethanol
2007 production forecast (million gals.)
Biodiesel Ethanol Biodiesel
64.1
25 percent blending ratio of ethanol with gasoline (E25) in 2007; 2 percent blend of biodiesel with diesel (B2) in early 2008, 5 percent by 2013.
25.4
5 percent ethanol content in gasoline by 2010; 2 percent biodiesel in diesel by 2012.
29.9
Five provinces use 10 percent ethanol blend with gasoline; five more provinces targeted for expanded use.
Brazil
Sugarcane, Soybeans, Palm Oil
Canada
Animal Corn, Wheat, Fat, Straw Vegetable Oils
China
used and Corn, Wheat, imported cassava, Vegetable Sweet Oils, Sorghum Jatropha
EU
Wheat, other grains, Rapeseed, Sugar beets, Sunflower, Wine, Soybeans Alcohol
India
Molasses, Sugarcane
Jatropha, imported Palm Oil
105.7
12.0
Indonesia
Sugarcane, Cassava
Palm Oil, Jatropha
--
107.7
Malaysia
Thailand
United States
None
Blending targets
Castor seed
Palm Oil
4,966.5
264.2
422.7
608.4
--
Molasses, Cassava, Sugarcane
Palm Oil, used Vegetable Oil
primarily Corn
Soybeans, other Oilseeds, 6,498.7 Animal Fats,
79.3
5.75 percent biofuel share of 1,731.9 transportation fuel by 2010, 10 percent by 2020. 10 percent blending of ethanol in gasoline by late 2008, 5 percent biodiesel blend by 2012. 10 percent biofuel by 2010.
86.8
5 percent biodiesel blend used in public vehicles; government plans to mandate B5 in dieselconsuming vehicles and in industry in the near future.
68.8
Plans call for E10 consumption to double by 2011 through use of price incentives; palm oil production will be increased to replace 10 percent of total diesel demand by 2012.
444.5
Use of 7.5 billion gallons of biofuels by 2012; proposals to raise renewable fuel standard to 36 billion gallons (mostly from corn and cellulose)
21
recycled Fats and Oil Source: William Coyle (2007)
2.8.1 Environmental impact of Biofuel The environmental impact of biofuel is one key interest in developing or expanding biofuel production. Biofuels are theoretically carbon neutral, releasing the amount of CO2 absorbed from the atmosphere by the crops used to produce them. Methane (CH4) is another type of greenhouse gas that has a significant impact on the climate even though its concentration in the atmosphere is small as shown in table 4. It is a powerful greenhouse gas which is a product of the anaerobic digestion of biomass. It retains more heat when compared to any other greenhouse gases and is eight times stronger than CO2. Table 4: Contribution of Greenhouse Gases (GHG) Gas
Formula Contribution (%)
Water Vapour
H2O
36 – 72 %
Carbon Dioxide
CO2
9 – 26 %
Methane
CH4
4–9%
Ozone
O3
3–7%
Source: IPCC Fourth Assessment Report (2007)
The environmental impacts caused by these GHGs include:
Health hazards
Ozone depletion due to the presence of Nitrogen oxide (N2O) in
fertilizer
Loss of biodiversity
22
Impact on ground source water
Acidification
Photo smog
Eutrophication
The environmental impacts as mentioned above are mostly associated with agriculture and production process of feedstock. Also the impacts of biofuel production, biomass transportation, distribution and consumption should be considered as well. Another important environmental concern is the land that will be required if biofuels become cost competitive with fossil fuels. A study in the US shows that if all corn and soybean acreage are to be used for ethanol and biodiesel production, it would offset only 12 percent and 6 percent of gasoline and diesel consumption for transportation fuel respectively.27 The use of much land to substitute a relatively small share of transportation fuel demand is ridiculous. Also an expansion of feedstock production encroach rainforest areas and wildlife habitats. To overcome these environmental concerns, further investment into biofuel production becomes inevitable. 2.8.2 Biofuel Technologies Reduction of economic costs of biofuel production has been a major concern and this can be achieved through technological advancement and efficiency gains-higher biomass yields per acre. The dead lock in second generation and third generation (algaculture) still lingers. For a meaningful 27
Ibid
23
achievement to be made in biofuel production there should be a significant shift from the use of food crops to non-food energy crops that don’t compete with food crops and have minimal or zero impact on the environment. This has become a course for concern for researchers as efforts are been intensified in the areas of Research and Development (R and D). The difficulty of converting cellulose via enzymatic hydrolysis to sugar for industrial-scale plants at competitive prices, as Fischer-Tropsch (F-T) synthesis requires a very clean syngas. This syngas needs to be cleaned and the cleaning process remains one of the big challenges for the commercialization of F-T biodiesel.28 For example, if cellulose materials that are widely available can be economically harnessed around the world, the biofuel yields per acre could be double. This will also reduce land requirements significantly. 2.8.3 Biofuel Investment Investment in biofuel industry has exceeded US$4 billion worldwide in 2007 and is still growing.29 Some European governments started investing in biodiesel research, but it was short lived when oil prices dropped in the mid 1980s from US$36.83 to US$14.43 in 1986 even after biodiesel was produced
commercially
thereby,
removing
the
heat
from
biofuel
development. Africa’s contribution to the production of biofuels is still marginal and large scale exports are non-existent.30 Investment in
28
Fischer, G., et al, Biofuels and Food Security, “Land use change and Agriculture program” Institute for Applied System Analysis. This study was commissioned by the OPEC Fund for International Development (OFID) and was prepared by the (IIASA) 29 Bringezu, S. et al, Towards sustainable production and use of resources: Assessing Biofuels (UNEP report), at http://www.unep.fr/scp/rpanel/pdf/Assessing_Biofuels_Full_Report.pdf (Last Visited on July 16, 2010) 30 Supra: note 15
24
infrastructure, processing facilities and crop production are mostly insignificant because African leaders are reluctant to invest due to high risk profile (both political and business). However, most foreign investors sought after investment opportunities because of the affordable labour, abundance of land for biofuel production and excellent natural conditions of the continental. Comparing the level of investment in Africa with investment elsewhere, a country like Canada has its biomass developers negotiating with their Austrian counterpart to explore technology and partnership opportunities potentially worth C$10 million.31 According to the President and Executive Director of Canadian Bioenergy Association, the Chinese investors have proposed the sum of US$20 billion to invest in RE overseas.32 In Nigeria, 10 biorefineries are been built which are valued at US$1.2 billion. According to the Managing Director of Global Biofuel Limited, Dr. Felix Obada, he said that the company has proposed building plants with 90,000 litres biofuel capacity per day with an ongoing construction of about 350,000 litres per day capacity in Ekiti State.33 Furthermore, he reiterated that a refinery producing 100,000 litres per day will cost between US$60 million and US$80 million and the farm that will feed the plant will cost about US$25 million.
31
Bioenergy: Policy, investment and markets, at http://www.renewableenergyfocus.com/view/11121/canadacould-see-c10m-biomass-projects (Last Visited on July 9, 2010) 32 Ibid 33 Orivri, H., Biofuel Production to resolve Nigeria’s economic meltdown, at http://www.compassnewspaper.com/NG/index.php?option=com_content&view=article&id=17874:biofuelproduction-to-resolve-nigerias-economic-meltdown&catid=50:business-news&Itemid=708 (Last Visited on September 22, 2010)
25
2.8.4 Biofuel Infrastructure Ray Hackett (2007) argues that there are better sources for biofuels, but the bigger question is lack of infrastructure to distribute it.34 In addition to the above, not just infrastructure alone but distribution also affects biofuel production. If biofuel production is expanded holding all other things constant, it will strain existing supply infrastructure and this will call for investment in entirely new infrastructure that would be necessary to handle a higher percentage of pure and blended biofuels.35 Notably, ethanol blended gasoline tends to separate in pipelines, and may damage existing pipelines because it is corrosive.
The current distribution system of
biofuels is dependent on rail cars, tankers trucks and barges. These modes of transportation deliver biofuels to terminals where they are blended with gasoline or diesel before they are shipped via tanker trucks to retailers. Conversely, these means of transportation lead to higher prices when compared to their petroleum equivalents that are transported via pipelines. To address the issue of distribution, some pipeline operators are looking for ways to modify the existing pipelines so that they become compatible with ethanol or ethanol blended gasoline. These could be by coating the interior of the pipelines with epoxy or some other corrosionresistant material. Another method could be to replace entirely all vulnerable pipeline components with newer, harder components.
34
Lovins, A. B., Biofuel infrastructure...what’s the problem? at http://ctenergy.blogspot.com/2007/04/biofuelinfrastructurewhats-problem.html (Last Visited on July 10, 2010) 35 Yacobucci, B. D. and Schnepf, R., Ethanol and Biofuels: Agriculture, Infrastructure and Market Constraints Related to Expanded Production (CRS Report for Congress) at http://collinpeterson.house.gov/PDF/ethanol.pdf (Last Visited on July 10, 2010)
26
3.0
BIOFUELS INDUSTRY IN NIGERIA
Nigeria is a country blessed with abundance of natural resources. These resources range from fossil such as crude oil, natural gas, coal and renewable energy resources like solar, wind, hydro, biomass, biogas etc. According to the International Energy Agency (IEA), in 2007, total energy consumption of Nigeria was 4 quadrillion Btu (107,000 kilotons of oil equivalent).36 Out of which combustibles renewable and waste accounted for 80 percent as shown in figure 6 below.
This high percent share
represents the use of biomass in cooking and to meet off-grid heating, mainly in rural areas. Figure 6: Total Energy Consumption in Nigeria (2007)
Nigeria Energy Mix Oil 9%
Natural Gas 10% Hydro 1%
Combustible Renewables and Waste 80%
Source: International Energy Agency (IEA, 2007)
Also, World Bank 2008 Development indicators show that Nigeria is also rich in human resource with a population of over 150million and annual growth rate of about 2.53%. NNPC puts crude oil daily production capacity
36
IEA: Nigeria Energy Data, Statistics and Analysis – Oil, Gas Electricity and Coal, at http://www.eia.doe.gov/emeu/cabs/Nigeria/pdf.pdf (Last Visited on September 2, 2010)
27
at 2.4 million barrels with estimated oil reserve of 35.9 billion barrels.37 Nigerian economy depends heavily on oil which accounts for 95 percent of export earnings and about 65 percent of government revenues presently. Notwithstanding the country’s abundance of natural resources, it is still plagued with resource curse also known as paradox of plenty.38 To move away from this, the federal government has been formulating policies that will launch the country to the enviable position that it once held after its independence in 1960. An alternative energy is one of the objectives which the government wants to achieve. Nigeria is one of the countries that have ratified the Kyoto Protocol,39 but is yet to implement it. The Kyoto Protocol was adopted in Kyoto, Japan, on December 11, 1997 but came into force on February 16, 2005 and has been ratified by 184 countries. The Kyoto Protocol made provision for a special climate change fund through the Clean Development Mechanism (CDM) window to finance climate change related projects.40 These CDM projects range from afforestation programmes to the conversion of gas flared and production of biofuels. This is one area Nigeria wants to take advantage on as it has multiple benefits to the country.
37
NNPC: Biofuels devlopemnt in Nigeria: A Presentation to International Renewable Conference (Abuja, 2007), at irec-nigeria.com/irecnet/downloads/nnpc_biofuels.ppt (Last Visited on July 22, 2010) 38 Resource curse or Paradox of plenty refers to countries and regions with an abundance of natural resources, specifically point-source non-renewable resources like minerals and fuels tend to have less economic growth and worse development outcomes than countries with fewer natural resources. 39 Kyoto Protocol is an international agreement that sets binding targets for 37 industrialised countries and the European community for the reduction of Greenhouse Gas (GHG) emissions said to be responsible for climate change. 40 Daily Independent: Nigeria, Country Yet to Domesticate Kyoto Protocol, at http://allafrica.com/stories/200906120427.html (Last Visited on September 2, 2010)
28
3.1
Nigerian Biofuel Program
Following the Presidential directive in August 2005 on an Automotive Biomass Programme for Nigeria to the Nigerian National Petroleum Corporation (NNPC) to coordinate a National Biofuels Programme, NNPC created a Renewable Energy Division (RED). This RED is to drive for the creation of wealth for Nigerians through RE. In order to achieve this, RED is to link the agricultural sector with the oil and gas industry by the domestic production of biofuels; while promoting the use of other renewable energy sources. The NNPC RED visions clearly envisage the following:
Maximize carbon credit opportunities
Rural wealth and job creation
Sustainable development of biofuels
Environment friendly energies
Increase home-grown energy industry
Energy self-sufficiency
Integrate oil and gas with agriculture
NNPC Renewable Energy Division articulated a three-split strategy to realise the vision of a thriving Nigerian biofuel industry. The first is known as the Domestic Industry Programme. This details out a vision for Nigeria’s biofuel industry, establishes an industry foundation by identifying suitable feedstock in the various states in Nigeria, designs operating and growth model for domestic biofuel industry and launches a number of initial projects of medium to large scale sizes.
29
Second, is the biofuels policy which involves developing policies, incentives and regulatory environment necessary for the emergence of a strong biofuel industry in Nigeria and incorporating the lessons learnt from other countries into Nigeria’s domestic framework. Third, is the Seeding Programme which introduces the use of fuel ethanol, creation of a biofuel market in Nigeria and facilitate development of infrastructure needed to market fuel ethanol. For RED to achieve its biofuel quality policy of providing steady supply of alternative fuel to the utmost satisfaction of customers and continuous improvement of quality management system, it developed a three-stage approach for the biofuel industry creation. The year 2005 was the planning stage which is the first stage. RED carried out economic, social, environment and regulatory assessment. It also developed financial approach,
partnership
strategy,
ethanol
import
program
and
implementation plans which includes medium scale farms, plantation development and distillery development. The second stage is the building foundation stage that started in 2007. A growth model was developed to do the following:
Convert existing acreage
Build new infrastructure
Develop skills
Develop industry capacity
Adapt regulatory environment
30
Expand infrastructure ability to supply ethanol
Run ethanol import test programme
Develop customer acceptance for E10 fuels
The third stage which is the growing stage kicked off in 2009. The target is to replicate the model and improve on it continuously. 3.2
Domestic Biofuel Production in Nigeria
Every state in Nigeria has the potential for biofuel projects, but few states have been selected for the test running of the biofuel program as shown in figure 7 below. So far, production has been carried out on small scale with plants scattered across the country. Policy has been put in place to support the emergence of an industry in which reasonable amount of feedstock used by biofuel plants will be produced by large scale producers and out growers. Nigeria is bestowed with a lot of biofuel opportunities owing to large feedstock at her disposal. These feedstocks include Cassava, Sugarcane, Sweet Sorghum, Soya, oil Palm, Coconut, etc. In Africa, Nigeria has the largest capacity for oil plantation which serves as a feedstock for biodiesel production and also it is the largest producer of Cassava in the world. The enrichment of good soil has made Nigeria to possess a great source for Jatropha Curcas which is a non-food crop.
31 Figure 7: Potential Biofuel Areas in Nigeria
Source: Nigerian National Petroleum Corporation (2007)
At the completion of the feasibility studies of the viability of biofuel in Nigeria, three sugar cane sites were established in Benue, Gombe and Jigawa states, two sites for cassava in Ondo and Anambra states and studies are on the way for three oil palm sites. These palm oil sites will provide diesel that will power heavy machinery in the country. In 2007, primary solid biomass accounted for 3,582,726 TeraJoule (TJ) of total energy consumption with industrial and residential sectors consuming 352,820 TJ and 3,103,049 TJ respectively.41 But not withstanding Nigeria’s biofuel potentials, land tenure and agricultural systems have posed as serious problems over the years.
41
Statistical data: Renewable and waste in Nigeria in 2007, at http://www.iea.org/stats/renewdata.asp?COUNTRY_CODE=NG (Last Visited on July 25, 2010)
32
3.3
Agriculture and Land Use Tenure in Nigeria
The dominance of agriculture in the Nigeria’s economy dates back to 1960’s when it played a major role in the mainstay of the country’s GDP. It was a period when Nigeria dominated the world in the production and exportation of cocoa, groundnut, cotton and rubber. The advent of oil saw the level of agriculture dropping in both inputs and outputs. Agriculture provided 70% of the country’s employment and accounted for 83% of export earnings between 1960 and 1970. Land is an important factor of production in the agriculture sector. It is used for the production of food, shelter and provides income in form of rent. The traditional land tenure system in the past was based on communal ownership where the right of disposal belonged to the community only. The community exercises traditional authorities in accordance with customary law. In this system, an individual does not have rights over a piece of land but can possess the land so long as the community benefited. Britain introduced a new concept to land ownership in Nigeria. The British introduced individual ownership of property thereby authorising the legal conveyance of land that could be registered with the federal government. With the legal backing, government has the power to expropriate statutory landholdings in return for compensation. In March 1978, the Federal Military Government of Nigeria promulgated the Land Use Decree with the goal of opening land to individuals for development.42
42
ALLOT, A.N., Nigeria: Land Use Decree, 1978, Journal of African Law, Vol.22 No.2
33
The land Use decree nationalised all land and certificate of occupancy from the government was required for land held under customary and statutory rights. This opened another source of revenue for the government in form of rents paid for the use of economic land. The decree pointed out that anyone who occupies and develops a piece of land in an urban or rural area continues to enjoy the right of occupancy and could transfer or sell his interest in the development of the land. This gives the local government the authority to reassign undeveloped land thereby, restricting the possession of undeveloped land by individuals.43 Despite the Land Use Decree, the customary land tenure practice continues as it regulates land in rural areas. The migration of people in search of green collar jobs from rural to urban areas has made the cities to be over populated. This makes the rural areas to be the target for large-scale capital intensive mechanised farming. This means that biofuel projects are likely to be driven by rural communities as the major suppliers of biofuel feedstock because of the availability of massive arable land. Most especially is the utilization of the rural land in the out growers schemes, where farmers and biofuel plant owners arrive at an agreement for the provision of feedstock used in biofuel plants.
43
Nigeria Index: Nigeria-Land Use, Soils and Land Tenure, at http://www.mongabay.com/history/nigeria/nigeria-land_use,_soils,_and_land_tenure.html (Last Visited on July 31, 2010)
34
3.3.1 Impact of Land Use Change Land is a limiting factor for biomass production and as such land use change has been a major issue in biofuel production. Land use change can be a factor in CO2 atmospheric concentration. Conversion of forest into agricultural land use may lead to increase GHG emissions and a loss of biodiversity.44 Intergovernmental Panel on Climate Change (IPCC) estimates that land use change contributes a net 1.6 Giga ton carbon per year to the atmosphere. In 1990, it was estimated that 82 million hectares (Mha) out of Nigeria’s total land area of about 91 Mha were arable. Cultivation was carried out on 42 percent (about 34 Mha) of this arable land much of the land was farmed under bush fallowing, a system of farming that allows for an area of land much larger than that under cultivation to be idle for varying periods to allow regeneration of soil fertility.45 Another 18 Mha were classified as permanent pasture while 20 Mha were covered by forests and woodlands. The remaining 19 Mha were used to build houses or roads, or were considered as wasteland. 3.4
Current Biofuel Production Capacity
The production of biofuel is a good opportunity for Nigeria to grow agriculture again and diversify her economy. Agriculture has been the major source of revenue to the government before the discovery of oil in commercial quantity. The short payback time of crude oil also known as black gold gradually moved Nigeria away from agriculture and made it a mono-economy that depends mainly on oil for its export earnings. Biofuel
44 45
Supra: note 28 Supra: note 31
35
production in Africa as a whole will see the continent increasing its energy supply security thereby, providing a strong boost to rural economy development. In considering the biofuel program designed by NNPC, emphasis will be on bioethanol production using sugarcane and cassava because most cars are petrol powered. These sugarcane and cassava ethanol projects will depend on market size, availability of land, size of cassava and sugarcane output and climate condition. 3.4.1 Market Demand for Biofuel The National Policy on Biofuel targets a fuel ethanol industry that will utilize agricultural products as means of substituting or improving the quality of fossil-based fuels in Nigeria. The implementation plan includes an initial blend of 10 percent (E-10) with gasoline (petrol) and to achieve 100 percent domestic production by 2020. Distribution of ethanol utility will comprise the Gasoline E-10 which represents 24% of the ethanol utilization, replacement of paraffin by 74% and raw material for portable ethanol by 2% as shown in figure 8 below.
36 Figure 8: Ethanol Market Size in Nigeria Raw Material for Portable Ethanol 2%
DISTRIBUTION OF ETHANOL UTILITY Gasoline E-10 24%
Paraffin Replacement 74%
Source: Innocent Azih (2007)
Nigeria’s domestic energy market is very large ranging from the automotive industry, power generation and agricultural mechanization from the rural development window. The current market survey puts ethanol market size at 1.3 billion litres per year and projects it to reach 2 billion litres by 2020 based on the current demand for gasoline at 10 percent blend ratio with fuel ethanol. Replacing paraffin with ethanol based cooking gel fuel will require 3.75 billion litres and the raw material for portable ethanol will be 90 million litres. This brings the total ethanol market to 5.95 billion litres per year as shown in table 5 below. It is also estimated that the current market demand for biodiesel based on demand for diesel at 20 percent blend ratio will be about 480 million litres. With a projected average growth rate of 53.3 percent, the demand is said to be 900 million litres by 2020.46
46
Azih, I., Biofuels Demand: Opportunities for Rural Development in Africa (Nigerian case-study), at http://www.ruralforum.info/documents/presentations/wg-2.3_azih.pdf (Last Visited on September 25, 2010)
37 Table 5: Ethanol Market Demand in Nigeria S/N
Market Demand Per Year (litre)
1
Current Gasoline (E-10 Blend)
1.3 billion
2
Estimated bioethanol demand by 2020
2 billion
3
Paraffin (Replacement with Ethanol Based cooking Gel Fuel) Raw Material for Portable Ethanol
3.75 billion
Total Market Size
5.95 billion
5
Current Diesel (E-20 Blend)
480 million
6
Estimated biodiesel demand by 2020
900 million
4
Source: Innocent Azih (2007)
90 million
38
4.0
BIOFUEL PRODUCTION PROCESS IN NIGERIA
The tons of biomass produced per hectare per year are obviously as important for energy crops. Crop yields depend on so many factors; the location, climate and weather, the nature of the soil, supplies of water, nutrients and the choice of plant. Since Nigeria’s biofuel industry focuses more on bioethanol production, our discussion will be based on the available information on bioethanol. The production cost structure for ethanol is such that feedstock accounts for up to 40 percent of the entire costs, operating costs account for 40 percent while 20 percent covers the capital costs. In sugarcane production, feedstock accounts for 50 percent of the entire costs and even more in the case of other first generation bioethanol production.47 4.1
Proposed Ethanol Projects
The most current viable feedstocks for ethanol production are sugarcane and cassava. The off take of these projects by NNPC shows that an integrated operation of sugarcane would require a minimum farm size of 15,000 - 20,000 ha of arable land producing 18 million tons per year. The ethanol plant characteristics include; an ethanol output of 75 million litres per year, refined sugar output of 110,000 tons per year and plant self powered by bagasse. The Out-grower scheme will comprise of 1,000 ha initially with an investment requirement of $250 - $300 million. This investment will be the cost of the farm which is valued at $100 - $125
47
Laan, T. et.al, IISG GSI report finds biofuels are an inefficient policy for combating climate change, at http://www.iisd.org/media/press.aspx?id=7 (Last Visited on September 6, 2010)
39
million (including land and irrigation) and cost of plant which is also valued at $150 - $175 million. The integrated operation of cassava will involve a minimum farm size of 15,000ha with output of 3-4 million tons per year. The ethanol plant characteristics will be an ethanol plant producing 40 - 60 million litres per year, Out-grower scheme of 10,000 ha initially and an investment requirement of $39 - $45 million. The investment will be the cost of farm which is valued at $4 - $5 million (excluding land and irrigation) and cost of plant valued at $35 - $40 million.48 With this anticipated project models, the government is now set to execution them. 4.2
Sugarcane Based Ethanol Production in Nigeria
In a bid to link the oil sector with the nation’s economy and in particular the agricultural sector, development of large scale sugarcane plantation amongst others is receiving attention. Sugarcane industry in Nigeria is still growing as most production is done for immediate domestic consumption. Sugarcane is the main feedstock used in Brazil’s ethanol production and almost half of ethanol produced in the world is made from sugarcane. Intensive studies reveal that the conversion of sugar to ethanol is simpler than converting corn or cassava and requires about half the energy needed in the conversion process that would have be used in corn or cassava.49 Sugarcane is grown on flat or sloping land, mostly in tropical and subtropical regions. It is grown best in hot humid climate condition and is
48
Supra: note 30 Jacobs, J., Ethanol from Sugar: What are the prospects for US sugar co-ops? at http://www.rurdev.usda.gov/rbs/pub/sep06/ethanol.htm (Last Visited on September 5, 2010) 49
40
harvested after one year to 18 months of growing, normally starting in April each year. Feasibility studies have shown that the Northern part of Nigeria favours the growth of sugarcane as the climatic condition meets its growth requirement. The harvest season tends to be more prolonged which makes the production period to be longer. The cane is harvested by hand but mechanized harvesting is being introduced.50 Once the harvest period is completed the canes are transported to mills which are close to the fields as possible, thereby, reducing the cost of transportation. The canes are further washed to remove soil dirt before it is sent to the biorefinery. The extraction chamber of the biorefinery separates the juice from the bagasse and the juice is taken to the treatment system while the bagasse is used as fuel. The juice is treated and passed on to the evaporation chamber, then to the fermentation chamber and lastly to the distillation chamber. At the completion of these processes, the sugarcane is fully converted to ethanol and is ready to be distributed to outlets to be used in automobiles as shown in the figure below.
50
Ethanol Production from sugarcane in Brazil: Review of potential social and environmental labelling of ethanol production from sugarcane, at http://www.gronabilister.se/file.php?REF=39461a19e9eddfb385ea76b26521ea48&art=376&FILE_ID=2006051 1084611.pdf (Last Visited on September 6, 2010)
41 Figure 9: Flow Diagram of Biofuel Life Cycle
Source: Ecolake.org
4.2.1 Cost of Producing Sugarcane The average sugarcane yield of a hectare of land is about 60 tons per ha. It is of importance that the cost of producing sugarcane on a hectare of land is taking into consideration because it will determine the commercial viability for feedstock purposes by local farmers to meet the anticipated demand. To determine the cost of sugarcane production on a hectare of land, we will take the following costs into consideration; cost of land preparation, planting, pre-emergence herbicides, fertilizer, cultivation, postemergence herbicide, cane setting and harvesting.
42 Table 6: Sugarcane Cultivation Cost per Hectare S/N
Cost/ha (US$)
Naira equivalent (N)
19.99
3,039.48
2
Land Preparation (pre-discing, ripping, ploughing, post-discing, land levelling and ridging) Planting
94.47
14,364.16
3
Pre-emergence herbicides
45.36
6,896.99
4
72.09
10,961.28
5
Fertilizer application ( 270 kg/ha of Urea at $220/ton and 100 kg/ha of Potassium at $200/ton) Cultivation
78.85
11,989.14
6
Post-emergence herbicide
40.94
6,224.93
7
Cane Setting
244.75
37,214.24
8
Plant Harvesting
358.46
54,503.84
TOTAL
954.91
145,194.06
1
Source: RED NNPC (2007)
The table above shows that it will require US$954.91 an equivalent of N145, 194.06 at an exchange rate of N152.05/US$51 to produce sugarcane on a hectare of land. Therefore, a ton of sugarcane is estimated to be US$15.92/ton (equivalent of N2, 420.64/ton) 4.3
Cassava Based Ethanol Production in Nigeria
Cassava production in Nigeria is by far the largest in the world; a third more than the production in Brazil and almost double the production of Indonesia and Thailand.52 In comparison to other African countries, Nigeria has a substantial output as shown in the figure below.
51
Exchange rate of US$ =N 152.05, Rate valid as of September 27, 2010 FAO Corporate Document Repository: A cassava industrial revolution in Nigeria, at http://www.fao.org/docrep/007/y5548e/y5548e07.htm (Last Visited on September 9, 2010) 52
43 Figure 10: Top Cassava Producing Countries
Source: Food and Agriculture Organisation (2004)
Government has intensified efforts to deepen cassava development since 1999. The initiative is to boost its production and export in order to actualize the dream of diversifying the country’s sources of revenue. Cassava which is a staple food in Nigeria can be processed into flour, garri (local Nigerian meal) and cassava flakes. The current cassava production in Nigeria is about 38 million tons annually.53 The government of Netherlands has proposed to invest about six million Euros (N3 billion) for massive cassava production in three states of Nigeria namely; Taraba, Benue and Osun. With the project 2015 cassava Objectives on the pipeline, it will strengthen the capacities of 162,000 farmers and support small cassava farmers through adequate provision of modern technology on sustainable basis. The project would increase yearly net income of famers to US$250 per hectare about (N38, 012.50).54
53
Iortim, H., Netherlands Funds Cassava Farming in Nigeria with Euro 6m, at http://businessworldng.com/web/articles/1056/1/Netherlands-Funds-Cassava-Farming-in-Nigeria-with-Euro6m/Page1.html (Last Visited on September 11, 2010) 54 Ibid
44
Several interviews have shown a strong desire by farmers to increase their cassava crop size because of the market demand. There are new strains of cassava that are mainly designed for ethanol production and this will increase crop yield. Cassava is grown on land in humid and drought conditions with low nutrient. In Nigeria, cassava is grown in the SouthSouth states of Cross River, Akwa Ibom, Rivers and Delta; South-West states of Ogun, Ondo and Oyo; South-East states of Imo and Enugu; Kaduna state in the North-West and little production in North-East states. Cassava starch has many properties that make it an excellent material to be used in many industries. A basic ethanol plant that produces ethanol from cassava will wash, peel, cut into chips, grate and cook the cassava in a jet cooker. The cooked cassava will move to the fermentation chamber, then to the distillation chamber and lastly the ethanol produced will be bottled. There are other equipment used in the conversion process and they are steam boiler, generating set, effluent treatment plant and an electrical system.55 Once the processing and conversion is carried out, it is ready to be used by the End-Users. 4.3.1 Cassava Production Cost The average cassava yield of a hectare of land is 40 tons per ha and takes about 18 to 20 months to harvest. To determine the costs of cassava production per hectare, we take the following costs into consideration; land preparation, cassava cutting, planting and application of pre-emergence
55
Cassava Ethanol Production, at http://www.onlinegardenertips.com/vegetable-gardening/cassava/CassavaEthanol-Production.html (Last Visited on September 6, 2010)
45
herbicides, application of post emergence herbicide, fertilizer application, weeding, pre and post emergence herbicide application and harvesting. Table 7: Cassava Cultivation Cost per Hectare S/N
Cost/ha (US$)
Naira equivalent (N)
60.5
9,199.03
154.69
23,520.61
31.02
4,716.59
7.63
1,160.14
143
21,743.15
6
Planting and application of preemergence herbicides Application of post-emergence herbicides Fertilizer application (500 kg/ha of NPK at $260/ton) Weeding
38.40
5,838.72
7
Cost of pre-emergence herbicide
30.03
4,566.06
8
Cost of Post emergence herbicide
30.36
4,616.24
9
Harvesting
106.81
16,240.46
TOTAL
602.44
91,601
1 2 3 4 5
Land Preparation (ploughing, heavy and level harrowing) Cassava Cutting
Source: RED NNPC (2007)
From the table above, it is seen that US$602.44 an equivalent of N91, 601 will be required to grow cassava on a hectare of land. Therefore, the cost per ton of cassava will be US$15.06/ton (equivalent of N2, 289.87/ton). The costs of producing sugarcane and cassava were assumed to have appreciated by 10 percent since 2007 to date and as such the costs were estimated based on the appreciation. It is of note that the costs of growing both sugarcane and cassava per ha of land do not include the costs of farm machineries used in the planting and harvesting processes as they form part of the capital expenditure of the company. Also, the cost of farm land is not included as the cost of land varies with location and as such a definite monetary value cannot be attached to it. After considering the cost
46
of the major feedstock of bioethanol production, we will take a look at the total cost of making this biofuel available to meet the market demand of 10 percent ethanol blend with gasoline (E-10). 4.4
Ethanol Conversion Cost
Biofuel plants in Nigeria are small and scattered all over the country. A small plant for a low quality ethanol production would cost about US$476,816.84 (N72.5 million) and would produce around 3,000 litres of ethanol per day. This plant will require around 300 hectares of feedstock crop to feed it on an annual basis.56 Also, a bigger plant with an output of 4,000 high quality litres of ethanol would cost US$1,019,401.51 (N155 million) or more and would require 400 hectares of feedstock on an annual basis to feed it. To evaluate the different cost components of bioethanol production, we will consider the two major feedstocks in Nigeria which are sugarcane and cassava. The various categories in the cost assessment will be obtained from available data sources and where information is missing, precise and realistic assumptions will be made.
Feedstock costs for cassava and
sugarcane have earlier been calculated. The result will be inputted in the detailed cost assessment.
56
Ethanol Production: The Ikululand Initiative, at http://www.nfiafrica.org/id29.html (Last Visited on September 15, 2010)
47 Table 8: Bioethanol Detailed Cost Analysis Bioethanol Detailed Cost Analysis
Sugarcane
Cassava
Unit Specific Yield Value
Ton/Ha
60
40
Feedstock Costs per Hectare
US$/Ha
955
602
63
128
3780
5120
Bioethanol Processing Bioethanol Conversion Rate
Litre/Ton
Bioethanol Yield
Litre/Ha
Additives Enzymes and Other Chemicals
US$/Ha
359.74
395.64
Subtotal Costs of Additives
US$/Ha
359.74
395.64
Electric Power
US$/Ha
215.55
431.1
Steam Costs
US$/Ha
416.98
833.96
Labour Cost
US$/Ha
216.73
433.46
Depreciation
US$/Ha
114.68267 114.6827
Subtotal Other Costs
US$/Ha
963.94267 1813.203
Bioethanol Total Costs
US$/Ha
2278.6827 2810.843
Bioethanol Cost per Litre
US$/Litre
0.6028261 0.548993
Other Costs
Source: Felipe Andres Toro Chacon (2004)
The table above shows a detailed cost assessment of bioethanol using sugarcane and cassava in Nigeria. The costs include capital cost and operating cost. The capital cost is the cost of the ethanol plant which covers feedstock handling, saccharification, fermentation, distillation, solid/syrup separation/drying, storage/load out, waste water treatment and air compressor. It is obtained from vendor quotations (an Ikulu land initiative) in Nigeria. While the operating cost includes cost of feedstock, cost of additives, electric power cost, steam cost and labour cost (often referred to as operating fixed cost). The bioethanol conversion rate for sugarcane is 63 litres per ton given that 60 tons of sugarcane is produced on a hectare of land while that of cassava is 128 litres per ton given that 40 tons is produced per hectare. For feedstock costs US$955/ha and US$602/ha
48
were adopted for the calculations from tables 6 and 7 respectively. The cost of fuel additives for ethanol was assumed to be US$359.74/ha and US$395.64/ha for sugarcane and cassava. The enzymes and other chemicals are required in the ethanol process to convert the starch to glucose, ferment the glucose and assist the process at various stages. US$215.55/ha and US$431.10/ha was assumed for electric power, US$416.98/ha and US$833.96/ha for steam costs and US$216.73/ha and US$433.46/ha for labour cost. Since the energy for producing sugarcane is half the energy used in producing corn or cassava, it was assumed that the costs of electric power and steam will double for cassava ethanol production, and this will double the cost for labour. To determine the depreciation which is the decrease in the economic value of the capital stock of a firm either through physical depreciation, obsolescence or change in the demand for the services of the capital stock, we use the straight-line depreciation method.57 The residual value which is the future value of a good in terms of percentage of depreciation of its initial value, assuming a 10 percent recovery of the cost of acquisition was targeted. The plant depreciation time/equipment life is valued for 20 years and is assumed to produce over 4,000 litres per day, requiring over 400 hectares of cassava or sugarcane on an annual basis to feed it. Using the annual depreciation expense formula, we arrive at US$114.68/ha as shown in table 9 below.
57
The Straight-line depreciation is the simplest and most often used technique in which the company estimates the salvage value of the asset at the end of the period during which it will be used to generate revenues (useful life) and will expense a portion of original cost in equal increments over that period.
49
Table 9: Capital Cost Depreciation per Hectare
Annual Depreciation Expense
(US$)
Cost of Fixed Asset
1019402
Residual Value (10%) of Fixed Asset
101940.2
Useful Life of Asset (yrs)
20 yrs 45873.07
Depreciation per Hectare
114.6827
Source: Vendor Quotation of Ikulu Land Initiative
As a result of these cost assessments, total bioethanol costs from sugarcane
and
cassava
are
US$0.60/Litre
(N91.23/Litre)
and
US$0.55/Litre (N83.63/Litre). Although, the cost of bioethanol production using cassava is higher when compared to sugarcane, its unit price per litre is lesser. This is due to low cost of cultivating cassava and high conversion rate per ton. To meet the E-10 requirement of the Kyoto Protocol, Nigeria has to produce at least 3 million litres of biofuel per day. Nigeria consumes about 35 million litres of gasoline per day and this amount to 13 billion litres per year at N65/litre (current pump price). This shows that 1.3 billion litres of bioethanol must be produced annually to satisfy the E-10 requirement. At US$0.60/Litre and US$0.55/Litre for sugarcane and cassava bioethanol, it will cost the country US$780 million or US$715 million (N119 billion) annually.
50
In order to determine the degree of competitiveness for the bioethanol industry, it is important to compare ethanol cost figures with gasoline prices. Bioethanol has less energy content (21.2 MJ/Litre) than gasoline (31.2 MJ/Litre) meaning that 1 litre of bioethanol replaces approximately 0.68 gasoline litres. Table 10: Gasoline and Ethanol Cost Difference
Product Fuel
US$/Litre
Gasoline
0.43
Sugarcane Ethanol
Cassava Ethanol
0.60
0.55
N/Litre
Difference (N)
65
91.23
83.63
26.23
18.63
Source: Generated from figures obtained
The table shows that gasoline is relatively cheap compared to sugarcane and cassava ethanol. Many may argue that gasoline is affordable because it is subsidized by the government and once the subsidy is removed it may become expensive to afford. Notwithstanding, the cost per litre of ethanol is exclusive of tax. Once tax is included, it will force the price per litre to increase. To make bioethanol more competitive in comparison to gasoline, the cost of ethanol has to be reduced to the same or lower levels of gasoline. Cost reductions for bioethanol can be achieved through the use of cheaper raw materials or by creating larger scale production plants resulting in higher production volumes and economies of scale. Low cost
51
options for raw materials include the use of non-food crops like switchgrass and miscanthus will help reduce cost. In any case, bioethanol costs especially from sugarcane remain high when compared to gasoline; therefore fiscal incentives are needed to promote its commercial expansion. Due to high yields, cassava used in the production of bioethanol seems to be an attractive option and it is expected that in the long run, feedstock cost will reduce. However, cassava is a very demanding and energy intensive crop and as a consequence it is expected that the land dedicated for growing it will not increase significantly. Being a major source of food in Nigeria, it will raise the issue of food security. This takes us to the point where we have to evaluate the impact of biofuel development on Nigeria’s rural economy by understanding the challenges and benefits associated with biofuel production.
52
5.0
IMPACT OF BIOFUEL DEVELOPMENT ON NIGERIA’S RURAL ECONOMY
The rapid expansion of ethanol and biodiesel production from agricultural crops has been affecting virtually all aspects of food markets, ranging from land allocation to produce biofuels to the adoption of crop exports bans and import restrictions to protect domestic food markets. With more food crops being used in the production of biofuels, world food stocks were affected and world food prices increased. Notwithstanding, scientific evidence indicates that the climate change is for real and further delay of mitigation will not only result in higher costs but may put the life supporting capacity of the earth at risk. To overcome these warnings, a number of developed and developing countries have embraced the apparent win-win approach to foster the development of biofuels in order to address the threats of climate change. 5.1 Opportunities of Biofuel Development The drivers of biofuel development emanates from the search for an alternative to fossil fuels, mounting evidence of global warming, research and development activities. They were not only based on reducing the oil dependency but stimulated by-product improvement and environmental issues, global declining national crude oil reserves and the associated increase in the cost of crude oil exploration. These drivers increase the attractiveness of renewable energy and environmental goals of GHG emissions that were set by national governments and international agreements such as Kyoto Protocol (1997) and the Copenhagen Summit
53
(2009) further supported the promotion of biofuel. Outlining all the aforementioned, we will consider the direct benefit to Nigeria. 5.1.1 Trade, Investment and Industrial Development The concentration of biofuel plants in the rural areas will attract huge capital investments and FDI into rural-sited feedstock chain that will stretch from agricultural through agro-industrial and petroleum based enterprises. This will also lead to the introduction of modern technology in these sectors. Nigeria and other African countries will attract the benefit of CDM under the Kyoto Protocol meant to mitigate the adverse effects of climate change, poverty reduction and increase rural development. The activities of biofuel development will lead to economic empowerment that will boost the terms of trade from downstream agriculture and rural operators to attain capacity for best practice. Also, increase in the demand of biofuel will lead to structural development of rural markets from domestic markets to sub-regional, continental and global market access. Nigeria will be US$150 million (about N23bn) annually richer when the development and applications of biofuel as an alternative energy source to fossil fuels is fully adopted.58 5.1.2 Automotive Industry Utility The emergence of biofuel energy sources could lead to the complete redesigning of the automotive plants for a 100 percent biofuel (E-100)
58
ETHANOL IN AFRICA: Nigeria will use Brazilian Blueprint to found its new Biofuels Industry, at http://www.ecoworld.com/energy-fuels/ethanol-in-africa.html (Last Visited on September 16, 2010)
54
utilization vehicles. This will re-awaken the industry as government has privatised its owned motor assembly plants. 5.1.3 Rural Infrastructure and Transportation Biofuel development cannot exist if there is no proper infrastructural network. Since they exist alongside each other, an increase in the demand of biofuel products will attract huge private investment for rural infrastructure development in transportation sector (water, rail and roads), rural electrification and basic social amenities. A good transport system will reduce the cost of transporting feedstock to the biorefinery. 5.1.4 Job Creation and Poverty Reduction Biofuel development will open new job opportunities as it will expand and modernize rural agriculture. Agriculture which was once the highest employer of labour will regain its glory as it will employ over 98 million of the Nigerian working population which is approximately 75 percent of the population.
This will further reduce the poverty level in the country as
graduates will be employed to provide logistics in the implementation and expansion of biofuel production. 5.2
Biofuel Development Challenges
Addressing the challenges of biofuel development has been a major issue. Although biofuels are made from plants materials and are a renewable source, they may not be as green as they seem. The production of biofuels require large amount of land for feedstock cultivation. The activities of irrigation,
fertilizer
usage,
transportation,
conversion
and
refinery
processes all require energy input and emit carbon dioxide. A large number
55
of lifecycle analysis studies suggest that current biofuels save little greenhouse gas and that production may pose a threat to biodiversity and food security. The challenges lie in improving farming practices to enhance quality and yield, enabling infrastructure to boost production (power, roads and water), fiscal and regulatory issues, research and development issues, product quality, water tolerance, distribution and retail facilities. 5.2.1 Food Security Concerns The development of crops for biofuels could threaten food security, in cases where food crops are the feedstocks required to produce biofuels (first generation biofuels). The rise in price of maize in recent time was cited as an evidence of the threat of biofuel to food security. Also, there is evidence that land is being taken away from food for biofuel production in some developing countries. A recent United Nations study urges government to beware of the human and environmental impacts of switching to energy derived from crops. The study shows the consequences of switching to biofuels need to be thought out properly and debated before turning food crops or animal feed into fuel. The study further stated that the focus of biofuel production needs to be on sources like waste oil and grease, animal fats and non-edible sources. Investigation into Nigeria’s 10 percent (E-10) ethanol blend shows that the production of bioethanol using sugarcane and cassava as feedstocks will raise the issue of food security. To meet the 10 percent target, Nigeria requires either 345,000 ha of sugarcane or 254,000 ha of cassava
56
depending on the feedstock it chooses to utilise. The total land area for growing cassava is 950,000 ha while that of sugarcane is 400,000 ha. This shows a difference of 55,000 ha for sugarcane and 696,000 for cassavas as shown in table 11. Evaluating the difference in percentage, it can be seen that about 86 percent of sugarcane will be needed from the current production to feed sugarcane ethanol plants, leaving 14 percent to other uses. Also, about 27 percent of total cassava production will be required to feed cassava ethanol plants, thereby, reducing the total quantity that will be needed to meet food demand. Since the cost of cassava cultivation is cheaper and has more ethanol yield when compared to sugarcane, the focus maybe more on cassava ethanol. If this happens, cassava which happens to be a staple food source in the country will be under threat. Some part of the land that was initially meant for food production will be converted to feedstock production thereby, endangering food security in Nigeria. Table 11: Land Requirement for E-10 Blend
Land Requirement
Sugarcane (Ha)
Area used for Cultivation
400000
950000
10% Bioethanol Blend
345000
254000
55000
696000
Difference
Source: Ethanol in Africa (2006)
Cassava (Ha)
57
Current research has focused on algae based biofuels which has a technical
challenge
of
developing
better
and
cheaper
catalysts;
improvements in current technology for producing high biodiesel; use of solvents that are non-fossil based; conversion of the by-products such as glycerol to useful products such as methanol and ethanol and development of low cost photo bioreactors.59 Even if a well thought out plan that will expand the production of food is developed it may lead to food price increase. The push in the West to use biofuels derived from grain, especially maize in US to reduce oil consumption was pointed out as one factor leading to increase in food price. Farmers may switch production of food crops to energy crops due to the excess gain that will accrue from it. This will result in an increase in the overall food prices. 5.2.2 Infrastructure Limitation The absence of infrastructure to support the development of biofuel in the agriculture sector inhibits the initial benefits of its effective production. For example, the poorly developed post harvest processing of agricultural raw materials first damps prices and cause farm migration, then forcing the price of staple food to increase and developing countries to import the energy source. To address this issue there should be a sustainable chain development; this will make the bioenergy products to be affordable for developing countries.
59
Singh, O., and Harvey, S., (ed) Sustainable Biotechnology: Sources of Renewable Energy (London, New York: Springer Dordrecht Heidelberg, 2010) p. 51
58
5.2.3 Incentives to Farmers To encourage sustainability in the production of biofuel feedstock, the Nigerian government is faced with the challenge of providing incentives to farmers. The federal government through its agricultural scheme provided a tractor for each local government so that farmers can hire it since they cannot afford a tractor costing N4.5 million. Also, provisions have been made for farmers to have access to soft loans, seedling varieties and fertilizer. Government support for biofuel will reduce long term risk for biofuel investment. 5.2.4 Electricity and Water supply shortage Electricity supply shortage is one challenge that is not only affecting the biofuel industry but is plaguing the entire country and economy. Nigeria is currently facing a crippling energy crisis with an output that is below 3,000 megawatts (MW). For Nigeria to be industrialised, it has to generate 30,000MW,60 this will guarantee the development of biofuel. Water supply in Nigeria is also a challenge as a sizeable percentage of the population does not have access to portable water to meet their daily needs. This will require the construction of dams and retention pumps to provide millions of litres of water for the production of feedstock on annual basis. 5.2.5 Land Competition A major concern is the growing competition for land use. In the absence of comprehensive analysis and policies, commercial production may target high quality land leaving cereals and subsistence crops to the low quality 60
Oparaku, N., Alcohol fuel from Biomass: Challenges of implementation in Nigeria, at http://www.wiloludjournal.com/pdf/biosci/2010/1-7.pdf (Last Visited on September 16, 2010)
59
land. This raises the issue of food security as land that would have been used for agricultural purposes will be converted to growing feedstock to feed biofuel plants. It therefore makes no economic sense for the country if it experiences food shortage in its pursuit for alternative fuel. Therefore, the utilisation of land for growing feedstock should not displace or make subsistence farmers landless and framers who aimed to supply biofuel feedstock should not mono-crop. 5.2.6 Environmental Concerns One of the arguments for the promotion of biofuel is that it has a positive impact on the environment. Since the production of biofuels does not completely eliminate CO2 and greenhouse gases, they still pose a threat to the environment. The environment in some parts of the world is already been compromised in a bid to meet biofuels demand which is contrary to the aims of finding alternative sources of energy. As deforestation occurs, the environment is less able to absorb the carbon dioxide leaving it in the atmosphere thereby compromising biodiversity. 5.2.6.1
Greenhouse Gases
The conversion of non-agricultural lands such as grasslands to production of maize for bioethanol would first require removing the plants/grasses and converting it to agricultural land. This process leads to an overall increase in CO2 emissions. The effect of fertilizer usage in the cultivation of these crops cannot be ignored. Here the greenhouse gas N2O is generated. When converting biomass to fuel, smart strategies to obtain biomass that does not negatively interfere with food production, cause unfavourable land
60
changes
and
imbalance
in
greenhouse
gas
formation
should
be
considered.61 It is essential that countries invest in sustainable bioenergy and
programmes
that
mitigate
further
environmental
damage
like
reforestation. 5.2.7 Higher Costs than Conventional Fuels One of the biggest barriers to large-scale development of biofuels remains their higher economic costs compared to conventional fuels. Some estimates show biofuels to be twice as costly as conventional fuels. Economic costs however, tend to differ depending on the type of biofuel, country of provenance and the technology used. 5.2.8 Research and Development Issues Biofuel production in Nigeria utilizes food crops and cultivation is done on high
value
land
and
cleared
forest
which
impact
negatively
on
environmental quality. Despite the afforestation programmes in Nigeria, it is yet to achieve the 25 percent forest cover stipulated by international standards. In view of this, we cannot afford to lose our fragile forests and other high value land to biofuels at expense of food crops production.62 The bioethanol production is said to have high level of pollution. This means transferring pollution to rural areas at this time when environmental regulatory bodies have lost control over urban pollution problem. To address the numerous problems associated with biofuel production, the government encouraged the synergy of both private and public sectors in 61
Supra: note 51 Tayo, A.K., Biofuels in Nigeria: Ensuring a Cautionary Approach, at http://www.jgsee.kmutt.ac.th/see1/cd/file/C-024.pdf (Last Visited on September 17, 2010) 62
61
Research and Development (R and D) by setting up a research and development fund where biofuels companies contribute 0.25 percent of their revenue for the purpose of funding research into feedstock production, improved farming practices and local technology development. The government undertakes a 100 percent contribution to the fund which is more than the total contribution by the biofuel companies. Also the Petroleum Technology Development Fund (PTDF) which was established under the Petroleum Training and Development Fund Act was mandated to fund research and development in biofuels.63 Furthermore, there is need to look at the sustainability of biofuel as this will address the life cycle impacts of biofuel pathway on our environment – land, water and air. The end-to-end carbon footprint of each pathway must be understood. The physical and chemical properties of biofuels need to be examined in terms of their impacts on the nations fuelling infrastructure. Research into aquatic species needs to be initiated as they do not require arable land or fresh water. These aquatic species tend to have high yields of lipids that could someday supply the feedstock for the needed quantities of biodiesel, bio-jet-fuel and other high energy density biofuel.64
63
Global Biofuels: Federal Republic of Nigeria Official Gazette on Nigeria Bio-Fuel Policy and Incentives, at http://www.globalbiofuelsltd.com/news/govtpolicy.html (Last Visited on September 17, 2010) 64 Dr. Arvizu, D., Biofuels Research and Development to Reduce Reliance on Imported Petroleum, at http://www.nrel.gov/biomass/pdfs/arvizu_testimony.pdf (Last Visited on September 18, 2010)
62
6.0
CONCLUSION AND RECOMMENDATION
Having properly analysed the biofuel program in Nigeria and thorough investigation carried out on both the benefits and challenges of biofuel production, we conclude that the promotion of biofuel will unlock new opportunities in virtually all the sectors of the economy. The increase in the global demand for liquid biofuels, high oil prices and biofuel policies make fuels from energy crops a viable alternative to fossil fuels. Ethanol and biodiesel are mostly produced in the consumer markets and international trade in biofuels is limited. Nigeria can take advantage in exporting feedstocks to other countries that cannot cultivate enough energy crops to feed their biorefineries. This can be possible considering the ambitions of the EU and US regarding energy self-reliance. The major challenge facing biofuel production has been its promotion. This promotion is in terms of subsidies. Since the production involves huge investment, the private sector may not be able to finance the entire project. Due to the huge capital involvement, Nigerian government has shunned away from the biofuel program in the past years until recently when efforts in mitigating climate change geared up. Government participation has been felt in recent times from provision of massive hectares of land to provision of incentives to farmers that want to go into feedstock production. Notwithstanding, achieving the 10 percent blend target of ethanol will require sustained efforts on all sides.
The government, organisations,
companies and households as stakeholders need to pursue a common goal so that they can checkmate the issue of food security. From the analysis, it
63
was seen that promoting E-10 ethanol blend will endanger food security by converting land meant for food production to feedstock production. To actualise the vision of using biofuel as an alternative to fossil fuel, its development must follow the sustainable paths which are: ensuring security of supply, economic feasibility, social desirability and ecological viability. These will help to direct the benefit of biofuels to the local people. The government in its national fuel policies should not prohibit the free movement of other forms of energy that meet environmental standards as laid down by legislation. Also, the government should create research centres in areas with great feedstock potentials. These centres should not be short funded as adequate funding will mean true commitment in the quest of discovering new varieties of feedstock species that will not compete with food crops as well as developing new technologies that will unlock the benefits of the third and fourth generations of biofuels. Presently, the cost of producing biofuel is expensive in Nigeria and as such may not get the needed attention. This means that if Nigeria is to subsidize the cost of biofuel production, it will deprive the citizenry from benefitting from other aspects of the economy. The deadweight loss will be a burden to the country and should be considered. Equilibrium should be reached before aggressive drive is carried out on biofuel production.
64
BIBLIOGRAPHY 1.0
SECONDARY SOURCES
1.1
BOOKS AND REPORTS
ALLOT, A.N., Nigeria: Land Use Decree, 1978, Journal of African Law, Vol.22 No.2 Boyle, D., (ed) Renewable Energy: Power for a Sustainable Future (2nd ed) (Oxford, New York: Oxford University Press Inc, 2004) p.106
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Singh, O., and Harvey, S., (ed) Sustainable Biotechnology: Sources of Renewable Energy (London, New York: Springer Dordrecht Heidelberg, 2010) p.51
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