A US$6.5 million investment in a distillery for ethanol production using molasses could result in a net earning of US$800,000 and annual savings of US$5.4 million on the local energy import bill, at 2005 prices, a UN agency has said.
The report by the UN's Economic Commission for Latin America and the Caribbean (ECLAC) envisages using one third of the molasses not under current long-term contract
In a telephone interview on Wednesday, Prime Minister Sam Hinds told this newspaper that ECLAC has recommended that Guyana invest in a distillery in the short term for the production of ethanol and that the country should consider using 10% of ethanol in fossil fuel for motor vehicles.
The country depends on imported fuel to meet the needs of the transport sector. In 2005 alone, fuel accounted for 29% or US$220 million of the value of imports of the country.
Meanwhile, Hinds said that some four foreign companies are interested in investing in the industry including BioCapital from Brazil and the US firm Global Energy Ventures.
According to the ECLAC report, "imports of gasoline which could potentially be replaced by ethanol fuel were equivalent to 8.6% of the country's GDP in 2005." The increasing number of vehicles in the country is an indication of its growing motorisation and the increasing demand for fuel with obvious implications for the economy in terms of a larger fuel bill.
Asked whether the recommendations were being considered, Hinds said the government was looking at all the proposals related to ethanol production at this stage and though policy decisions have been taken decisions on the implementation are being considered.
Hinds said the current thinking is that planting of crops for biofuels should be on lands currently available for sugar cane or soya bean or abandoned cattle-grazing grounds; natural forests should not be felled to accommodate cultivation of crops for biofuels; and arable lands should not be made available for biofuels to the detriment of food security.
In Guyana, he said, consideration is being given for cane cultivation in the intermediate savannahs, which would be environmentally friendly and economically feasible.
The ECLAC report titled 'Biofuels Potential in Guyana' and dated February 2007 was prepared by Luiz Augusto Horta Noguira in collaboration with the Government of Guyana, it also considers other sources of bio-fuels including rice waste and wood waste but sugar cane stands out.
According to the report, the technology of using ethanol mixed with gasoline in four-stroke cycle engines is well known and does not require any changes in vehicles for levels of ethanol in the mixture up to 10%. It is used in many countries with vehicle fleets similar to those here.
The report said that if Guyana were to utilize a mixture of gasoline with 10% ethanol, a distillery producing 65,000 litres of ethanol daily would be required to satisfy national demands.
The potential demand for ethanol for fuel purposes a year may be estimated at 11.6 million litres. This would require an investment of about US$6.5 million resulting "in a net earning of US$800,000 and annual savings of US$5.4 million on the energy import bill, at 2005 prices.
"It is certainly an interesting opportunity, with a payback period of less than 18 months, an encouraging indicator for energy investment."
The report noted that in the most conservative scenario, that is, the use of final molasses, producing 8.8 litres of ethanol per ton of processed sugar cane, it is estimated that 30.8 million litres of ethanol may be obtained annually from the sugar cane industry locally. "This would be nearly three times the anticipated demand of 11.5 million litres, if a mixture of gasoline with 10% ethanol were to be used in Guyana's vehicles."
The report said that if other materials with higher productivity such as sugar cane juice or primary molasses, are considered, the available potential of ethanol would increase proportionally.
"In 2005, the export price of molasses was US$83 per ton. Each ton of molasses can produce 260 litres of ethanol" implying an estimated opportunity cost of US$0.392 per litre of ethanol, which is lower than the US$0.463 per litre that Guyana paid for its imported gasoline in 2005. This indicates the competitiveness of the biofuel.
Ethanol production costs depend mainly on the cost of raw materials, which make up 65% of the final cost of the biofuel. A Guysuco study on the modernisation of its sugar factories put the production cost at US$0.246 per litre of ethanol on the assumption that molasses cost US$45 a tonne. If the export value is US$83 as in 2005 the cost per litre would be estimated at US$0.392.
With surplus sugar and the fact that it has been cultivated in the country for centuries with one of the highest production/demand ratio and with the use of bagasse, the report said that the industrial processes could be self-sufficient and even generate a surplus.
At present, some 50,000 hectares of lands are under sugarcane cultivation, providing some 3.5 million tonnes. Based on this, the report said, "It must be understood that the production of ethanol fuel should not be restricted to an initial, tentative approach, since the potential already exists in the country."
The sugarcane industry of Guyana is one of the most important economic activities of the country and a main source of foreign exchange exporting 60% of its sugar to Europe. It is, however, subject to significant market risks, associated with changes in the Sugar Protocol and the reduction of preferential prices on the European market, which it enjoyed in the past. To deal with the price reduction, the Guyana Sugar Corporation proposes to expand sugar production by 50%, increase the production of refined sugar, introduce the production of ethanol fuel and increase electricity generation from bagasse.
Apart from the economic benefits, the report noted that ethanol production in the sugarcane industry would cater for job creation, mechanisation and electric power cogeneration.
The promotion of ethanol as a source of fuel in Guyana requires the collaboration of all institutions and stakeholders arriving at an operational mechanism for the introduction of ethanol within the energy sector. This requires clear timelines and commitments. It should also include a component for building public awareness as well as involvement of the local science and technology community.
In terms of greenhouse gases it has been determined that for conventional technologies, every litre of anhydrous ethanol in the gasoline blend results in an average reduction in emissions of 0.42 kg of CO2 (Carbon Dioxide) equivalent.
Depending on how the reductions are calculated, a relatively positive annual contribution could be obtained for the productive sector under the Clean Development Mechanism of the Kyoto Protocol.
Since the 1980s Brazil has been using 25% ethanol in all gasoline sold, with demand currently standing at 16 billion litres of ethanol and this is projected to increase to over 22 billion litres by 2013 based on current growth rates.