Posted 1:50 PM by Luigi
Biofuels in the Pacific

By Jan Cloin and Shane Fairlie, SOPAC, Suva, Fiji. In Island Business.

The steadily increasing world market price for fossil fuels has aroused significant interest in the development of local sources of energy in the Pacific Islands.

Key experiences in Vanuatu, Samoa, Papua New Guinea, Solomon Islands and Fiji indicate there is a special case for the economic viability of biofuel in the Pacific. Over the last 20 years, the price of coconut oil on the world market has consistently decreased, and after a period of relatively low diesel prices, the last five years have seen diesel prices progressively increase.

Only recently, imported diesel in the Pacific has become more expensive than the net value of exported coconut oil, suddenly making coconut oil a serious commodity option for internal use as biofuel.

At the global level, ambitious targets set by countries to achieve a significant reduction in fossil fuel usage has caused an increase in world market prices for vegetable oil and sugar, as well as a tempering effect on crude oil prices. At the same time, environmental concerns that are driving the biofuel industry in the European Union are causing environmental problems through wide scale deforestation of palm plantations in Malaysia and Indonesia.

In the Pacific, the call for the use of locally produced biofuels has been based mainly on the desire to reduce dependency on imported fossil fuels. However, research conducted by the Pacific Islands Applied Geoscience Commission (SOPAC) about the impact of biofuel on government finances, found that as coconut oil and sugar are important export products, using them to replace imports will also cause a decrease in total export revenue. In addition, if duties and excises are waived so as to promote the use of biofuels, the total impact on government finances might be negative.

In Fiji, the relatively small size of the sugar industry makes it difficult for Fiji to be competitive with ethanol on the world market. However, the cost levels appear to be close to serving Fiji’s domestic market with a petrol substitute. The World Bank will investigate this further in 2007 in partnership with the Fiji Sugar Corporation.

Although costs to produce biodiesel based on coconut oil are still quite high, another cheaper option is the use of waste vegetable oil as raw material, which can make it competitive with regular diesel. In other Pacific countries, Tobolar copra mill in the Marshall Islands is retailing a 50/50 filtered coconut oil and diesel blend below the price of regular diesel. Recently, a SOPAC inspection into a local car run for three years on various coconut oil blends, found no long-term engine deterioration and one can now even smell coconut fumes along the main road in Majuro.

In Vanuatu, there are two retailers refining coconut oil to either a mix with 20 percent kerosene or with 50 percent diesel. Despite the reduced prices supported by government, the uptake is still limited, but nonetheless growing. In September, a similar blend was launched by Solomon Tropical Products in Honiara at the 2006 National Trade Show after testing their product in local vehicles.

In Samoa, SOPAC has assisted with the use of coconut oil as a fuel in power generation, with EPC, the power utility in Samoa. In Vanuatu, the power utility UNELCO, has embarked on ‘industrialising’ the production of fuel-grade coconut oil and using it in its generators in a blend of 10 percent that is supporting the local industry and decreasing emissions.

In PNG, many local suppliers of fuel have started to blend filtered coconut oil with diesel, including Unitech in Lae, which has been successfully trialling biofuel blends in engines as part of their mechanical engineering research. Another supplier, PNG SD, is using mining proceeds to attempt to make power generation in remote communities commercially viable.

Many technical options exist to utilise biofuels. The big question however, is where we will get the raw materials to produce biofuels. At the global level, International Energy Agency scenarios suggest that biofuels can only contribute about 20 percent of transport fuel consumption in 2030 due to problems with arable land availability and food market competition.

However, in the Pacific, assuming significant government support for major replanting and industry restructuring, SOPAC estimates the current regional potential in 2010 for biofuels (ethanol and biodiesel) is about 30 percent of all transport fuels. As there is no country in the world that has a biofuel industry without the backing of government policies and incentives, there is a very important role for national legislators in the region to ensure the adoption of standards and provide tangible support.

The Pacific biofuel advantage is in no small part due to our natural resources. Our colonial heritage of dedicated coconut tree plantations gives us the edge to make biofuel a real economic and environmental alternative. Although we will not be able to replace all fossil fuels in the near future, biofuels provide part of the solution and should therefore be pursued vigorously by governments in partnership with the private sector. Biofuels will then decrease our dependency on fossil fuels and build greater confidence in our own Pacific assets.