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“ Biofuels in Africa : Opportunities and Risks in the International context”

Presented to Glopolis o.p.s By: Francis Njoka - Kenya njokanaam@yahoo.com Venue: Institute of International Relations, Nerudova 3, Prague 1. “ Biofuels in Africa : Opportunities and Risks in the International context”. Prague - 13 th Mar, 2012. Contents. Country - snapshot

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“ Biofuels in Africa : Opportunities and Risks in the International context”

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  1. Presented to Glopolis o.p.s By: Francis Njoka - Kenya njokanaam@yahoo.com Venue: Institute of International Relations, Nerudova 3, Prague 1 “Biofuels in Africa: Opportunities and Risks in the International context” Prague - 13thMar, 2012

  2. Contents • Country - snapshot • Types of Liquid biofuels • Biofuels policies and development in Kenya • Biofuels - Risks and Opportunities • Foreign Direct Investment (FDI) incentives • East Africa briefs • Conclusions

  3. Kenya - Country snapshot Latitude - 4o35’ N – 4o42’ S Longitude – 34o E – 41o51’ E Time zone - +3Hrs GMT Population – 40 million (2011 est.) Language – English/Kiswahili Local languages – 42 Religion – Christians (83%), Muslims (11.2%) Literacy - 85.1% (2010) Life expectancy – 59.5yrs (2011) Growth rate – 2.9% GDP (ppp) - $1,689 = €1.279 (2010) Inflation – 18.9% (2011) Poverty levels – 46.6% (2007) Energy per capita – 121kWh/yr. (2008)

  4. Kenya’s land resource

  5. Economic summary

  6. The Energy sector

  7. Key Stakeholders in Energy sector • Ministry of Energy (MoE) – In charge of the entire energy sector • Energy Regulatory Commission (ERC) – Body under the MoE responsible for energy regulation, licensing, permits, protection of investors and customers • Kenya Electricity Generating Company (KENGEN) – Responsible for electricity generation together with IPPs. • Geothermal Development Company (GDC) – Responsible for the development of the geothermal energy sector. • Kenya Electricity Transmission Company (KETRACO) – Responsible for the development of the grid electricity distribution system • Kenya Electricity and Lighting Company (KPLC) – Responsible for electricity connection to customers throughout the country. • Rural Electrification Authority (REA) – Responsible for the improvement of access to electricity in rural areas.

  8. Renewable energy • Commercial level • Hydro Power – 757MW • Geothermal – 165MW • Wind – 5.1MW • Biomass (sugar bagasse) – 26MW • Domestic level • Small hydro – Mini-grid installations • Solar PV – over 40 companies, over 220,000 SHS installed • -REA installing off-grid units in schools and other centres • Solar Thermal – over 140,000m2 - common in upmarket residentials • Biogas – over 3,000 domestic size units installed • Improved cook-stoves – Numerous Institutional and domestic • Bio-ethanol/-diesel - stoves, lanterns, stationary engines

  9. Biomass energy resource - overview • Waste-based • Exploited – animal manures (household biogas), molasses (ethanol), sugar bagasse* (cogeneration) • Un-used – Sisal*, coffee, tea, municipal wastes, rice husks, sugar bagasse*, horticultural wastes, wheat straws, molasses*, market wastes, saw dust, abattoir wastes. • Plant-based • Exploited - fuelwood and charcoal extensively used • Un-used* - Prosopis Juliflora (ironwood/mesquite), water hyacinths, sweet sorghum, cassava and other biofuels. * = marginally used currently

  10. Biogas • Small domestic biogas units ranging from 3-15m3 have been promoted since 1957. • Favourable substitute to fuelwood and charcoal • Over 3000 units exist, mainly running on animal manures • Key players are MoE, GIZ, KENFAB, ABC-K, Universities and private companies • UNIDO (abattoir wastes) and MoE (human wastes) promoting medium scale systems (15-50kW) • Kilifi plantations runs a 150kW biogas plant on sisal & cow wastes • Cogeneration • Annual sugar bagasse production is over 1.8million tonnes • Mumias, one of the 9 sugar companies has a 32MW capacity bagasse cogeneration unit • 26MW of the generated electricity is fed to the grid

  11. Bio-ethanol • Bioethanol is produced from sugar molasses and used in beverage, biochemical, pharmaceutical, chemical industries and hospitals. • Spectra International (SIL) and Agro-Chemical & Food Company Ltd (ACFC) are the key players producing 22million and 18million litres respectively per year (2008) • An E1O pilot is to start in Kisumu, Eldoret and Nakuru • Plans are underway to produce bioethanol from sweet sorghum and cassava. • PAC (ITDG) is conducting field trials on bioethanol stoves

  12. Biodiesel • It is mainly produced from Jatropha, castor, croton and yellow oreander. • Most of the main plants existed before consideration as fuel crops and several pilot projects have been established in different areas in the country with over 4.2 million Jatropha seedlings distributed to small/large scale farmers. • Key players in jatropha include; Vanilla Development Foundation (1.19 million), Green Africa Foundation (3 million), Magadi Soda Company (10ha), GEF etc. • Biomass power • A company by the name Tower power is almost through with feasibility studies for 2No., 11.5MW thermal power plants to run on Prosopis Juliflora (mesquite / ironwood) • Vast plantations of this invasive plant, about 200,000ha are found in Baringo, Garissa and Tana river basin.

  13. Main types of Liquid biofuels

  14. Biofuels policies and development in Kenya National Energy Policy (Sessional Paper No. 4 of 2004) -Ministry of Energy, 2004 • Encourage wider adoption of renewable energy technologies, thereby enhancing their role in the country‘s energy supply matrix especially in isolated applications. • Recognizes the potential for production of biodiesel from locally grown crops • Need to set aside land for the production of energy crops • Formulate strategies to optimize land use and to harmonize the existing land use policy with the energy policy • Mobilization of resources for research and development to facilitate biofuels introduction as a motor blend in the medium term

  15. Energy Act, 2006 - Government of Kenya, 2006. • Most relevant legislation operationalized in July 2007 • It encourages enhancement of incentives to the private sector • It allows duty free importation of energy. • It empowers the Minister to promote the development and use of RE technologies including biodiesel and bioethanol. • Established the Energy Regulatory Commission (ERC) responsible for regulating the production, distribution, supply and use of renewable and other forms of energy by; • Protecting the interests of consumers, investors and other stakeholder interests. • Monitoring and ensuring fair competition. • Issue licenses and permits for all undertakings and activities in the energy sector • Formulates, enforces and reviews environmental, health, safety and quality standards for the energy sector. • Enforces and reviews regulations, codes and standards.

  16. Feed-in-Tariffs (FiTs) for REs (2008) 2008 1 Mini-hydro (Tea factory) project already cleared Other proposals under review - Biomass (Tower power)

  17. Draft policy on strategy for the development of Bio-diesel industry in Kenya (2008-2012) This has the objectives of; Increasing security of energy supply by reducing vulnerability from dependence on imported fossil fuels (a 5% reduction in imported diesel by year 2012 through substitutions with biodiesel) To diversify rural energy sources by promoting substitution of kerosene with biodiesel - (reduce dependence on kerosene from 76.4% in 2005/06 to 50% by 2012) To contribute to the efforts of addressing global warming through substitution of petroleum fuels. The biodiesel industry is expected to contribute to a 6% reduction of poverty incidence by 2012.

  18. To contribute to poverty alleviation through diversification of income sources. (through rural agricultural mobilization, especially in the marginal semi-arid areas, bio-diesel industry can increase household income levels by 30% by 2012. Kenya Biodiesel Association (KBDA) is established to bring together all major players in the supply chain, namely producers of planting materials, feedstock producers, processors, marketers and distributors, and large consumers Blending – B5 by 2012 and B10 by 2020 NB: Foreign Investors recommended to come in as strategic partners to existing local Groups. Key is the establishment of markets

  19. Draft Bioethanol Strategy 2009-2012 • It has the following objectives; • To fast track development of the bioethanol energy resource • To reduce the import bill for petroleum products. (a 10% reduction in the importation of gasoline can be realised by 2010) • To achieve blending ratio of E-10 by December 31st 2010 • To diversify the sugar industry base and strengthen the economic base of sugar factories • To enhance clean energy application in rural households in order to reduce pollution levels • To contribute to poverty alleviation and food security • To contribute to the reduction of global warming through substitution of petroleum fuels with bioethanol.

  20. Biofuels opportunities and RisksThe Risks Large scale commercial projects • These are ideally huge untested experiments • Poised to introduce intensive farming methods • Cause unplanned industrial developments • Use of fertilizer, insecticides, pesticides will lead to environmental pollution • Mechanisation leads to displacement of people and cause loss of livelihood • The net terrestrial CO2 storage is lost with the introduction of biofuels • Biodiversity and environmental sustainability is lost with monocultures

  21. Climate change market driven systems & FDI • The EU’s or US policies have seen foreign companies acquire huge trucks of land for biofuels impacting on land in EA and Africa in General • Majority of EU countries are in short of biofuels land yet they must fulfil their policy obligations • Africa is perceived as a continent with available land, cheap labour and highly suitable climate. • This land grabbing has little regard for the rural poor, food production, family cohesion, and traditional land values. • Local people’s way of life; forestry, pastoralism, bee keeping, tourism is being compromised • Cases of Foreign companies structuring their project financing or tax breaks to evade local taxes

  22. Leigh Phillips & Mat McDermott

  23. A case of Tana Delta – Dakatcha woodland The delta during a rainy season - aerial view Key concerns Loss of biodiversity Over 234 bird species 20,000 people to be displaced Loss of pasture, subsistence Habitat to Clarke’s Weaver

  24. Land tenure systems & laws • Land ownership (Government trust land, privately owned land and communal land) • Land is one of the most scarce and valuable asset • Ownership and access is to-date, a thorny issue and is profoundly political. • Communal land is governed by Trust land Act – entrusts county councils to hold in trust on behalf of groups of communities or Land (group representative) Act – 3-10 people are elected to represent and be custodians of communal land • The present public land tenure management system in Kenya is fragmented, uncoordinated and non-transparent. • Land transactions are vulnerable to corrupt deals and can result to unending lawsuits, political influence or civil rights group objections.

  25. Risk of failure • Most of biofuels such as jatropha, castor, oleander, croton have not been tested especially on marginal lands • Sugar, palm oil may also fail as soils get denuded and water shortages continue to persist • Bankruptcy - Most of investors have pulled out due to lack of funds e.g. In Tanzania, of the 20 companies licensed, only 6-7 are active Knowledge gaps and climate change • Most of biofuels have not been thoroughly researched especially on viable varieties, production rates under given conditions • East Africa continues to experience frequent droughts and sudden floods exacerbated by climate change problem

  26. Increased vulnerability of women and children • In East Africa, land tenure is predominantly owned by men • Men are also in charge of land transactions and associated with cash crops which biofuels are. • With most farmers being small scale, there is a possibility of losing subsistence where food crops/staple foods may be grown. • This will render women and children to suffer more

  27. Competition with other resources • Less than 3% of Kenya’s land is under forest cover – below the recommended 10% minimum • Kenya also aims at increasing her agricultural productivity by irrigating more of arid and semi-arid regions for food • Kenya is also considered a chronically water scarce country (per capita - 548m3 against recommended 1,000m3) • Biofuels production will of course bring in conflicts with food production, reduce forest cover or encroach on wetlands. • Its production will definitely affect the water resource as rain-fed production is not feasible • It will also use land and may lead to soil degradation eventually • Commercial production will reduce/eliminate crop and indigenous biodiversity and fragment ecosystems

  28. The Opportunities • Diversification of rural energy supply mix • Improvement of agricultural returns and rural economies • Value addition of agricultural produce (farm-gate quality) • Improvement of local infrastructure • Reduction on oil imports • Reduction of GHGs from fossil oil emissions • Improvement of the health of women and children (in-door-air) • Child education improvements • Conservation of soils susceptible to erosion • Conservation of the forests and environment

  29. Biofuels investments or commercial production will; • Improve production quality • Improve transfer of technology • Additional investment finance or capital flows • Economic and social development

  30. FDI opportunities in Biofuels Doing business report of June 2011 (World bank)

  31. Government incentives – in general In general, Kenyan policies on foreign investment have been favourable since independence • An investment allowance is offered on buildings, equipment and plant machinery • Loss carried forward option whereby a company is allowed to carry forward their loses to future taxable profits • VAT waiver for all plants set up and machinery • Depreciation of assets based on book value • Removal of exchange controls • Laws in place against expropriation • Rationalized trade licences regime which requires less licences than before • Decontrolled prices

  32. Membership to MIGA (1988 ) • Kenya is signatory to World bank’s Multilateral Investment Guarantee Agency (MIGA) of 1988 • Promotes the flow of private foreign investment to developing member countries. • MIGA offers political risk insurance coverage to eligible investors • MIGA also offers technical assistance programs (through dissemination of information on investment opportunities and business operating conditions, capacity building and investment facilitation activities. supporting the efforts of developing countries to identify and attract investment

  33. Export processing zones (EPZs) Established in the 1990, there currently are about 42 EPZs in Kenya Due to attractive tax incentives, operating environment, good physical infrastructure and support by EPZA staff - over 80 firms worldwide make the Kenya EPZs their home. Incentives to private investors on RE

  34. New Constitution (2010) Vision 2030 (2007) • Country’s development blueprint covering the period 2008 - 2030. • Aims at making Kenya an industrialized middle-income country • Opens up new investment opportunities including energy • Pillars are; • Economic (prosperity – 10% GDP growth) • Political (issue-based politics – rule of law, rights & freedom for all) • Social (just & cohesive society, social equity, clean & secure environment) Presumes a new political dispensation, devolved governance, streamlining judicial system, rule of law and improvement of human dignity

  35. Other Investment Incentives • Exploring CDM possibilities • Strategic location of Kenya - The gateway to E. Africa • East Africa’s largest economy • Stable currency - Kenya shilling (KES) • High returns on trade and investment • Aggressive economic development Incentives • Free enterprise economic policies • Highly educated local workforce • Expansive regional infrastructure (e.g. LAPSSET) • Commitment to public-private partnerships • Intellectual property protections • Sophisticated fibre optic voice/data infrastructure • Diversified economy - Real estate, Mfg, IT, Agri-Biz • English is the official business language • Access 500 million people in East & Central Africa

  36. Broader Investment opportunities in the Energy sector • Key => Installed capacity – 1,860MW (2013), 2,600MW (2018)- 18% growth • Transformer manufacturing • Geothermal development – 165MW (installed) 7000MW (potential) • 300MW coal power plant – power generation or exploration • Hydro power – Tana river (Mutonga - 60MW, Grand falls – 140MW) • Solar PV – 15% annual growth, 3,000 remote institutions to be connected • Wind energy – Marsabit, Turkana, Ngong, Kinangop and Coast regions • Biodiesel – 2.7mlts of gasoline & 6.5mlts of diesel per day by 2030 • => 148mlts for E10 and 50mlts for B2 annually by 2030. • 300-1000MW nuclear power – Private sector (BOOT), 30yrs PPA

  37. East Africa Scenario Case of Tanzania Land area – 945,089km2 Latitude – 1o – 12o South Longitude - 29o – 41o East Time zone - +3hrs GMT Admin capital – Dodoma Commercial capital – Dar-Es-Salaam Language – Kiswahili, English Population – 41million (2010 est) GDP – 58.4 billion (2010) GDP growth – 6.5% GDP per capita – $1,400 (€1.060) Energy per capita – 76kWh/yr. (‘07est) Poverty levels – 36% Inflation – 7.2

  38. Economic summary

  39. The energy sector

  40. Case of Uganda Land area – 241,039km2 Latitude – 4o N, 1o S Longitude - 29o E, 35o E Time zone - +3hrs GMT Capital – Kampala Language – English, Kiswahili* Population – 33.4million (2010est) GDP - $42.15 billion (2010) GDP growth – 5.2% GDP per capita – $1,300 (€984,4) Energy per capita – 62kWh/yr (‘07) Poverty levels – 31%

  41. Economic summary

  42. The Energy Sector

  43. Food insecurity map *Famine Early Warning Systems Network - USAID

  44. Conclusion • There exists a great potential for biomass energy and some for biofuels production too in Africa • Biofuels offer an avenue that could help improve agricultural productivity, provide clean rural energy and improve local economies • Policies still wanting - need for synergetic intersectoral redress and actualization/implementation • The failure by Governments to fast-track biofuels policy implementation for local consumption exacerbates the risk of land grabbing by foreign investors.

  45. Unlike the other two East African countries, Kenya exhibits a complex case for biofuels implementation due to the limited potential land area available for both food and biofuels • Sustainable solutions for commercial production must NOT; • Displace indigenous people or prohibit them from access to other valuable resources • Greatly affect local people’s way of life and lifestyles i.e. limit resource use options in big margins • Encroach on wetlands, forests and other high biodiversity or gazetted areas • Lead to loss of biodiversity or fragmentation of natural ecosystems • Block wildlife migratory routes etc. • Focus on foreign markets but the local markets

  46. Thank you for your Attention!!

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