A plan for E20 and ethanol-to-power in Malawi
The Republic of Malawi has an energy problem. With a population of 19 million, the small, landlocked country is one of the most densely populated in Sub-Saharan Africa. Only 8% of Malawians have access to electricity from the grid, of which a disproportionate number live in urban areas.
Grid coverage is growing, but not as quickly as might be hoped. The World Economic Council’s target of achieving full electrification in Sub-Saharan Africa by the year 2030 would require an 8.4% growth in electricity access year-on-year. Current growth rates are lagging.
A big part of the problem is that even on current trajectories for grid roll-out, the gap between electricity demand and power supply is widening. In 2018, Malawi’s installed power generation capacity totalled 429 MW, 85% of which came in the form of hydroelectric plants sited along a single river. Peak demand, on the other hand, was 720 MW. The situation was exacerbated by low water levels in Lake Malawi, the large body of water that acts as the country’s de facto energy reserve.
To make up for the shortfall, the state-owned utility company ESCOM resorted to additional power purchases from polluting diesel generators, as well as frequent load shedding. The World Bank estimates that electricity rationing of this kind costs Malawi as much as 7% of its GDP annually. If alternative solutions are not pursued, such practices are likely to become more prevalent in the future, with peak demand forecast to rise to 1300 MW by 2022.
Added to Malawi’s power sector woes are the difficulties of meeting the demand for clean cooking fuel and transport fuel. 97.5% of Malawi’s population rely on biomass or charcoal for cooking, both of which are known to release carbon monoxide and cause respiratory problems when burned in confined spaces. This is unlikely to change without affordable and readily available alternatives.
As with the power sector, transport sector demand is also rising. The growth in newly registered vehicles has averaged 10.9% per year over the last seven years, most of them second hand. Because Malawi is a landlocked country, the prices of petrol and diesel are inflated by the cost of hauling the fuels from ports in neighbouring Mozambique and Tanzania.
Ethanol is a potential solution that cuts across each of these domains – power, transport and cooking – and one that as an early adopter, Malawi has already had some success in implementing. Christopher Guta, the Director General of the Malawi Industrial Research and Technology Development Centre, recently presented a paper on the subject at the 6th Sugar & Ethanol Africa Conference in Nairobi.
Guta applies a “technological systems” approach of the kind used by academics studying the transition from fossil fuels to renewables in Northern Europe to the unique set of challenges facing Malawi. His paper explains the steps Malawi is taking to improve ethanol feedstock availability, the need to reform ethanol pricing to provide greater certainty to investors, and the advantages of implementing ethanol-to-power to reduce load shedding.
Here’s a brief summary of how ethanol’s role in Malawi can be expanded, as outlined in Guta’s paper.
Ethanol economics in Malawi
Ethanol production in Malawi dates back to 1982, when the country’s first distillery was commissioned in response to the oil price shocks of the previous decade. This makes it roughly contemporaneous with the growth of ethanol in Brazil, a country on which Malawi has closely modelled its policy objectives. Both countries are net sugar exporters and net fuel importers, for whom access to an alternative transport fuel source would decrease the level of economic exposure to rising oil prices.
As of 2018, Malawi has two functioning ethanol distilleries: EthCo in the centre of the country, and PressCane in the far south. Each is located close to one of the country’s two sugar mills.
Malawi also has an E20 blend mandate in place, although the “effective blending ratio” – i.e. the blend rate enforced in practice – is only 10%. Achieving a higher blend rate has so far been prevented by a shortage of the necessary feedstock, molasses.
As a result of this shortage, the price of molasses in Malawi has been climbing steadily over the past six years. Price convergence between feedstock and end-product has cut away at the distilleries’ profits, with margins on earnings before interest actually sinking into the negative in 2017, before rebounding slightly in 2018. Restricted access to molasses has also meant that the newer of the two facilities, PressCane, is currently operating at half capacity.
Part of the problem with rising feedstock prices is that distilleries are unable to pass the price of inputs on to buyers, as would normally be the case in a freely functioning market. Fuel ethanol pricing is controlled by the Malawi Energy Regulatory Authority (MERA), which links the price of ethanol to the price of imported petrol. Guta points out that this breeds uncertainty among investors, as the profit margins for ethanol production are thus very much determined by fluctuations in the global supply and demand balance of oil. MERA has undertaken an ethanol pricing study intended to reform the existing policy, but its results have yet to be implemented.
In order to remedy the shortage of feedstock, Press Corp (which owns a controlling share in both distilleries) has launched the Raw Materials Development Project, or RAMA. Having observed that rising sugar production was crucial in the formative stages of the ethanol industry in Brazil, the project aims to facilitate more local production by building partnerships between Malawi’s ethanol producers and sugarcane farming cooperatives. It also aims to identify technologies capable of allowing sugarcane to be produced more efficiently, such as those used to generate usable energy or power from sugarcane bagasse.
To alleviate the pressure placed on a single feedstock source, PressCane are also searching for varieties of sweet sorghum suitable for cultivation in the vicinity of the distillery.
Another leaf borrowed from Brazil’s book is the promotion of flexible fuelled vehicles, as outlined under Malawi’s 2018 National Energy Policy. These vehicles are able to run off unblended hydrous ethanol as well as anhydrous ethanol blended with petrol. By encouraging their uptake, Malawi aims to grow the market size for biofuels, and also to create a healthy degree of inter-fuel competition. The strategy includes the installation of new pumps, and the importation of conversion kits to turn some of the existing vehicle fleet into flexi-fuel vehicles.
Such efforts have encountered political resistance from lobbyists representing the companies that profit from transporting oil products into Malawi from the coast. To safeguard against overpoliticisation, both Press Corp and the government have expressed their commitment to protecting ethanol’s perceived legitimacy. Ensuring that land use and food crop utilisation does not come into conflict with food security is one way to do this; another is adopting more effective technologies to minimise the environmental impact of the effluents produced by ethanol distilleries.
Ethanol-to-power
Press Corp also intends to use ethanol to meet Malawi’s power supply shortages. The company has put together a proposal in conjunction with APR Energy, a power plant operator, to build a 25 MW plant running off a combination of ethanol and diesel fuels.
The proposal is inspired by the success of Petrobas’s ethanol fired power plant near Juiz de Fora in Brazil, the world’s first ethanol-to-power project, which became operational in 2010. The Petrobas facility utilises two simple-cycle combustion turbines originally designed for use with natural gas, but converted by manufacturers General Electric to be compatible with ethanol.
Press Corp’s proposal would also make use of an adapted General Electric natural gas combustion turbine, the GE TM2500. If the power plant is built, it is expected to consume 45,000 litres of hydrous ethanol per day, to be supplied by the PressCane distillery.
Providing that it is supported by Government policy, Guta believes that the plant would allow Malawi to redirect ethanol consumption from to transport to power at times when the shortage in power supply is particularly acute.
