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The sky’s the limit for South Africa’s sugar indust...

Defend Truth

Opinionista

The sky’s the limit for South Africa’s sugar industry if it finds the aviation biofuels sweet spot

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Andrew Russell is the Chairperson of the South African Canegrowers’ Association.

The South African sugar industry, like the global aviation sector, was still recovering from years of crisis when it was dealt yet another blow. More than 500,000 tonnes of cane were torched during the riots in KwaZulu-Natal. The industry needs good news, and biofuels may fit the bill.

The aviation industry won’t shake off the economic impact of Covid-19 so easily. Virtually overnight, thriving global players found themselves in desperate need of financial aid from governments around the world. The attachment of environmentally friendly conditions to funding for the aviation industry powerfully illustrates that more environmentally friendly fuel types will become the norm in the future.

In the US, at the height of the pandemic, the draft Coronavirus Aid, Relief, and Economic Security Act (the Cares Act) included $200-million per year in grants over five years to “develop, transport and store sustainable aviation fuels”.

In Europe, France and Austria successfully conditioned airline bailouts on commitments to concrete increases in the use of sustainable aviation fuels. French Finance Minister Bruno le Maire detailed one condition, which not only required Air France to halve its carbon emissions by 2030 and renew its fleet with more efficient aircraft, but also committed the carrier to sourcing 2% of its fuel requirements from sustainable sources by 2025. Austria had similar conditions.

This growing interest in sustainable aviation fuels has spurred determined efforts to accelerate their production. In February 2021, a project development start-up called Synkero announced a project to build a commercial plant for sustainable aviation fuel production in the Port of Amsterdam in the Netherlands. It aims to produce 50,000 tonnes annually.

More recently, the Sustainable Aviation Fuel Bill was introduced in the House of Representatives in the US. The bill includes a commitment of $1-billion over five years for projects to produce, transport, blend, or store sustainable aviation fuels.

One of the difficulties with sustainable aviation fuels is the price uncertainty around the end product. The cost of these fuels is difficult to determine because they aren’t readily available, and the purchase contracts do not usually disclose the price. But in August 2020, S&P Global Platts, the leading independent provider of information and benchmark prices for the commodities and energy markets, launched Europe’s first independent price reference for sustainable aviation fuels, followed by a similar mechanism for the Americas in September.

All these moves show that the transition to sustainable aviation fuels is accelerating quickly. As the sector takes off, the only question is whether South Africa will ride the trend on the way up.

The South African sugar industry, like the global aviation sector, was still recovering from years of crisis due to falling world sugar prices, drought, cheap sugar imports and the sugar tax when the industry was dealt yet another blow in July. More than 500,000 tonnes of cane was torched during the riots and looting in KwaZulu-Natal. Together, these challenges threaten not only the industry’s sustainability, but also the one million livelihoods that depend on it. The industry needs good news, and biofuels may fit the bill.

In May, the South African Canegrowers’ Association and the Roundtable on Sustainable Biomaterials (RSB) released the findings of a joint study on the viability of using South African sugarcane to manufacture sustainable aviation fuels.

The Sugarcane Value Chain Masterplan, signed in November 2020, is designed to address the challenges facing the industry, and to implement forward-looking strategies to ensure the long-term viability of the industry. The diversification of the industry is a priority.

Diversification has two components. On one hand, canegrowers can diversify into other crops like cotton, nuts or bananas. They can also continue to grow cane, but diversify by directing it to uses other than sugar production. One of these options is the production of sustainable aviation fuels.

The research with RSB showed that, by diverting 50% of the 19 million tonnes of cane produced by growers each year towards ethanol production, the industry could produce about 700 million litres of low-carbon ethanol every year. This ethanol could be converted into more than 433 million litres of sustainable aviation fuel.

With a little investment, South Africa could become an ethanol exporter for conversion abroad. Or, with more investment into this project, the country could use its own local refineries adapted to produce jet fuel. This would not only give South Africa’s canegrowers an alternative revenue stream, shielding them from the most damaging effects of volatile world sugar prices, but it would also create new opportunities for young South Africans in a growing global industry.

The sustainable aviation fuel study suggests that local demand alone for fuel ethanol could be about 2.4 billion litres every year, taking both aviation and road transport into account. There are currently only six billion litres of sustainable aviation fuels offtake agreements in place worldwide. The aviation sector requires more than this to meet the decarbonisation target of carbon neutral growth and halving its 2005 emission levels by 2050.

Therefore, South Africa has a window of opportunity to become a significant producer in the sustainable aviation fuel industry. The steps we need to take are set out in the South African Canegrowers’ Association study with RSB. These include creating an enabling regulatory framework, implementing preferential procurement processes and labour laws to promote local labour, and incentivising private sector initiatives much like the Sustainable Aviation Fuel Bill in the US seeks to do.

Encouragingly, on 27 July 2021, the Department of Mineral Resources and Energy held virtual public consultations on the Draft Amendment Regulations Regarding Mandatory Blending of Biofuels With Petrol and Diesel. The South African Canegrowers’ Association made submissions on the regulations and participated in the consultations. We hope this process will be a foundational step towards South Africa’s expansion into an industry of the future.

If the past years have taught the sugar industry anything, it is the urgency of exploring all our diversification options in good times, so we are not battered so badly by future shocks to the industry. If South Africa is going to take advantage of this opportunity, we do not have a moment to waste. With Europe and America making significant moves to incentivise sustainable aviation fuel production, we are at risk of falling behind if we do not act quickly. Now is the time to ensure that we are strapped in and ready to go as the sustainable aviation fuel industry takes off. DM

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