REPORT ON THE OUTPUTS OF THE PARTNERS FOR AFRICA

STAKEHOLDERS WORKSHOP

“Recomendation of the Policy Framework for the Introduction of

Ethanol-Petrol Blending and Biodiesel on the Zambian Market”

By Centre for Energy, Environment and Engineering Zambia Ltd (CEEEZ) Private Bag E721, Lusaka, ZAMBIA Tel/Fax: +260 - 1 - 240267 Email: yamba@eng.unza.zm / ematsika@yahoo.com / ceeez@coppernet.zm

June 2004

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1.0 BACKGROUND The Partners for Africa (PFA) project started in January 2004, under the support of the European Union. Its sole objective is to demonstrate the role of renewable energy in poverty eradication and to offer support to policy making activities in the following areas:

• Sustainable resource management

• Health and public health

• Enterprise development

The proposed action will support and stimulate the activities of the European Energy Initiative for Poverty Eradication and Sustainable Development.

These goals are achieved by mobilising international and local partnerships to create an innovative forum for developing new programmes, project platforms, and in particulart support policy making. The mobilisation of partners in Africa involves:

1. Identifying partners

2. Bringing them together in partnership structures

3. Supporting and contributing to their financial efforts

4. Facilitating their set-up and operation

Tools for mobilisation of partnerships include organising meetings, financing travel expenses, newsletters and other information networking services. Notably, three workshops were scheduled to be organised in three African countries (South Africa, Senegal and Zambia), to support this activity. Results of the action’s partnership activities are expected to provide policy makers with the essential tools, results and information to allow them to develop targeted and effective policy.

It is against this back ground that a workshop was held in Zambia at Fringilla Guest House, 50km North of the capital city, Lusaka, from 10th - 11th May 2004. The workshop dubbed “Reccomendation of the Policy Framework for the Introduction of Ethanol-Petrol Blending and Biodiesel on the Zambian Market” attracted participants from the following sectors:

• Government Organs (ministries, departments, agencies) • Non-governmental Organizations • Academic and Research Institutions • Companies (Public and Private) • The media

2

The objectives of the workshop was to

• Make awareness of the existing prospects and challenges on harnessing energy towards a sustainable development path with particular reference to transport fuels

• Make policy recommendations to promote production and use of biofuels

2.0 WORKSHOP PROGRAMME The programme that was adopted is shown in Appendix A. 3.0 ATTENDENCE A total of 21 people were in attendance. The details of the attendees are presented in Appendix B. Mrs. Edith Chilembo was chosen to be the chairperson of the sessions for the duration of the workshop. 4.0 WORKSHOP PROCEEDINGS 4.1 Official Opening The introductory speech was made by Prof. F. D. Yamba, the Director, CEEEZ, which was the host institution. He explained the purpose of the workshop, with reference to the objectives of the umbrella project “Partnets for Africa”. He paid special thanks for the PFA project for financing the holding of the workshop. Mrs. Chilembo, the Chairperson of the Energy and Environmental Concerns of Zambia (EECZ) officially opened the workshop. She thanked the PFA project for facilitating the hosting of the workshop, and encouraged the participants to apply themeselves in the discussions so that implementable policy recommendations arise from the workshop. 4.2 Presentations Three presentations were made. They are summarised in this section. 4.2.1 Prospects, Challenges and Opportunities in Harnessing Energy Towards a

Sustainable Development Path in Zambia With Particular Reference To Transport Fuels

By Prof. F. D. Yamba, Director, CEEEZ

Summary The presenter focused on the fact that Africa need energy source alternatives that are sustainable and would also bring sustainable development to Zambia. Since the workshop emphasised transport fuels, the presentation was limited to production and use of bio-ethanol and biodiesel. The presentation (Appendix C) addressed the following issues:

3

• Sustainable alternatives to replace or partially replace fossil fuels (transport fuels are gasoline (petrol) and diesel, which are described as “Fossil Fuels” and as is well known these are finite in nature and have corresponding environmental effects)

• Challenges for continued use of fossil fuels (gasoline and diesel) • Prospects and opportunities for alternatives (to included technology considerations) • Sustainable development indicators and economics of alternatives • Policy issues

Issues Arising

• Land and water availability (Zambia has both) • Need to decide at what point in the petroleum production chain blending should be

done • Need for Zambia to take advantage of locally produced biofuels • When shall this be implemeted? (depends on policy makers and implementers) • While the main drivers (farmers) are ready, issue of where to get financing arises • Need for energy policy to promote energy crops for ethanol and biodiesel • Need for sensitising politicians/policy makers and general public on availability and

benefits of production and use of biofuels (using appropriate and targeted means) • Implementing agencies (Department of Energy and Energy Regulation Board) • Convincing financials required to attract participation of oil companies • Pricing issues to be considered (a presentation was made by Mr. Kangende, from

Energy Regulation Board, and is shown in Appendix D) Advantages of biodiesel(elaborated)

• Can be produced from renewable sources • Safe to use since it has a high flash point • Can be used either as a blend with fossil diesel or as 100% in engine • Cleaner to burn than fossil diesel as there are low emissions of solid particulates,

sulphur dioxide and carbon monoxide • Degragable (80% of spilled biodiesel biodegrades within two weeks) • Has positive performance attributes such as increased cetane number, high fuel

lubricity, and high oxgen content • Production and use of biodiesel in Zambia would result in significant micro-economic

benefits to both urban and rural sectors, and the balance of payment 4.2.2 Research in the Production and Use of Ethanol as a Renewable Source of

Energy

By Dr. C. K. Wamukwamba, Head, Department of Mechanical Engineering, University of Zambia (UNZA)

Summary Due to the wide possibility of producing ethanol from bio-based raw materials which in themselves are renewable and in abundant supply, work is currently going on to produce ethanol whose main application is for blending with petrol for use as a fuel in internal

4

combustion engines. The presentation (Appendix E) focussed on work being carried out at the University of Zambia, School of Engineering. It covered the following aspects:

• The science behind ethanol production • Raw materials for production of ethanol (e.g corn, molasses, etc) • Plant design • Dehydration of ethanol (preparation for blending with gasoline)

Issues Arising • Ensuring that less energy is produced to produce ethanol with respect to ethanol

produced (ideal place is a sugar factory which has other core business) • Important aspects to consider (Heating process, de-hydration, condensation) • Control of ethanol produced so that it does not end up being taken as an alcohol • Quality control

4.2.3 ‘The Recommendations of the Policy Framework for the Introduction of Ethanol

- Petrol Blending and Bio-diesel On The Zambian Market.’ By Mr. Michael M. Mulasikwanda, Department of Energy, Ministry of Energy and

Water Development Summary Representing the Government of the Republic of Zambia, the presenter reiterated that the Government is ready to support initiative that are aimed at poverty reduction through sustainable means of development. The presentation (Appendix F) covered the following:

• Overview of the 1994 national energy policy • Detailed focus of the petroleum policy • Implementation models • Government’s role • Regulator’s role • Lessons from other countries

Issues Arising

• Need to formulate a rational implementation model • Appropriate fiscal incentives to promote production and use of biofuels • Consideration of main ministries involved (Ministry of Lands, Ministry of

Agriculture and Cooperatives, Ministry of Commerce, Trade and and Industry, Ministry of Energy and Water Development, Ministry of Tourism, Environment and Natural Resources)

• Due to so many cross cutting issues at national level, there may be need to recommend re-introduction of a ministry to oversee work cross-cutting ministries

• Capacity building needs to include all stakeholders, not just Department of Energy • Need to put targets in the National Energy Policy (NEP)

5

5.0 GROUP DISCUSSIONS Two groups of almost equal numbers were formed to carry out an in-depth discussion of the subject matter of biofuels. The groups were supposed to come up with policy recommendations and evaluate the two projects for sustianability using the crireria developed by CEEEZ. The sustainable development criteria is summarised in the presentation by Prof. F. D. Yamba under Section 4.2.1, and is shown in Appendix C. 5.1 Ethanol Group Details of the outcomes of the group discussions on ethanol production and use are shown in Appendix G. The overall group discussions yielded the following policy recommendations:

1. Governement to develop a policy on use of clean fuels such as ethanol blended petrol to replace lead blended petrol

2. Private sector to be allowed to participate in the blending of petrol with ethanol 3. Government to provide fiscal incentives to locally produced ethanol 4. Government to provide specification and quality monitoring for ethanol 5. Government to encourage Public/ Local private sector partnerships to set up ethanol

plants For the sustainable development evaluation, the group gave the ethanol alternative 72.3%, which is greater than the 55% threshold (Table 5.1). Table 5.1: Sustainable Development Evaluation for the Ethanol Alternative

INDICATOR MARKS OBTAINED

REPRESENTATIVE WEIGHTING (%) TOTAL (%)

Economic 72.2% 38 27.4 Environmental 73.3% 33 24.2

Social 71.4% 29 20.7 Total 100 72.3

Therefore, the ethanol alternative meets the sustainable development criteria which takes account of economic, environmental and social indicators. The details of the marks scored under each category are shown in Appendix H. 5.2 Biodiesel Group The details of the group discussions on biodiesel production and use are shown in Appendix I. The following were the overall policy recommendations:

1. Governement to develop a policy on use of clean fuels such as biodiesel 2. Promotion of production of feed stock (like Jatopha) 3. End use ( Distribution and Marketing) 4. Investment in Bio-diesel 5. Appropriate legal framework

For the sustainable development evaluation, the group gave the biodiesel alternative 79.3%, which is greater than the 55% threshold.

6

Table 5.2: Sustainable Development Evaluation for the Biodiesel Alternative

INDICATOR MARKS OBTAINED

REPRESENTATIVE WEIGHTING (%) TOTAL (%)

Economic 78% 38 29.6 Environmental 72% 33 27.1

Social 78% 29 22.6 Total 100 79.3

Therefore, the biodiesel alternative meets the sustainable development criteria which takes account of economic, environmental and social indicators. The details of the marks scored under each category are shown in Appendix J.

7

APPENDIX A WORKSHOP PROGRAMME

PARTNERS FOR AFRICA

Workshop on Reccomendation of the Policy Framework for the Introduction of Ethanol-Petrol Blending and Biodiesel on the Zambian Market

Fringilla Guest House, Chisamba

10 - 11 May 2004

Workshop Programme Day 1 Time Activity By

08:00 – 08:45 Registration CEEEZ Secretariat 08:45 – 09:00 Self – introduction All

09:00 – 09:30 Official Opening

Mrs. Edith Chilembo (Chairperson - EECZ) Prof. F. D. Yamba (Director – CEEEZ)

09:30 – 11:00

Prospects, Challenges and Opportunities in Harnessing Energy Towards a Sustainable Development Path in Zambia With Particular Reference to Transport Fuels

Prof. F. D. Yamba (CEEEZ)

11:00 – 11:30 Break (Refreshments) All

11:30 – 12:15 Case Study on Pilot Ethanol Production Dr. C. K. Wamukwamba (UNZA)

12:15 – 13:00 Policy Options For the Framework for Introduction of Ethanol - Petrol Blending and Bio-Diesel on the Zambian Economy

Mr. M. M. Mulasikwanda (Dept. of Energy, MEWD))

13:00 – 14:30 Lunch All

14:30 – 17:00 Group Discussions: Group A: Ethanol Production and Use Group B: Biodiesel Production and Use

All

Day 2 Time Activity By

08:30 – 10:30 Group discussions (Continued) All 10:30 – 11:00 Break (refreshments) All

11:00 – 13:00 Planery: Presentations from groups Resolutions and policy recommendations

All

13:00 – 13:15 Closing Mrs. Edith Chilembo Prof. F. D. Yamba

13:15 – 14:30 Lunch All 15:30 Departure All

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12

APPENDIX C PROSPECTS, CHALLENGES AND OPPORTUNITIES IN

HARNESSING ENERGY TOWARDS A SUSTAINABLE DEVELOPMENT PATH IN ZAMBIA WITH PARTICULAR REFERENCE TO TRANSPORT FUELS

By Prof. F. D. Yamba, Director, CEEEZ

SEE ENCLOSED 1

13

APPENDIX D PETROLEUM CHAIN AND PRICING

By Mr. Kenneth Kangende (Energy Regulation Board)

PROCUREMENT The landed cost of feedstock (CIF value) at Dar includes cost of feedstock, ocean loss, freight, insurance, inspection charges, financing cost, (bank charges), (demurrage charges), harbour charges and importer’s margin. PIPELINE TRANSPORTATION Pumping fee Pumping losses Storages fees REFINING Processing fee Processing losses Import duty @ 5%

TERMINAL STORAGE Terminal fees Excise duty @ 45 for petrol Road levy at 15% for petrol Vat @17.5% ROAD TRANSPORTATION Transportation fees about 2.6 cents per litre DEPOT STORAGE Oil Marketing Company Margin (about 6 cents per litre) VAT @ 17.5% RETAILING Dealer margin (about 4 cents per litre) VAT @ 17.5% PUMP PRICE The summation of the cost inputs given above is what constitutes the pricing formula for petroleum products in Zambia.

14

REFINING PROCESS AT INDENI In the initial stages of processing of feedstock, two grades of petrol are produced. These are light gasoline with a high octane number but no market value and heavy gasoline with a low octane number. Therefore, when the two grades are blended, the octane rating drops below the specification of 91RON. In order to attain the required octane raring, 0.2g/litre of the lead compound is deliberately added. In program for transition towards unleaded petrol, lead in petrol should be phased out in Zambia by December 31, 2005. Since ethanol has a high octane rating, it can be used as a substitute for the lead compound TEL. Therefore, in order for the proposed blending of ethanol and petrol to be competitive, the possibility of using heavy gasoline as feedstock should be considered-instead of the finished product. The current Zambian specification for unleaded petrol gives a maxim of 10% v/v ethanol in petrol. High ratios of ethanol were not recommended during the development of the standard because of corrosion and stability problems of ethanol.

15

APPENDIX E RESEARCH IN THE PRODUCTION AND USE OF ETHANOL AS A RENEWABLE SOURCE OF ENERGY

By Dr. C. K. Wamukwamba, Head, Department of Mechanical Engineering, University of Zambia (UNZA)

SEE ENCLOSED 2

16

APPENDIX F ‘THE RECOMMENDATIONS OF THE POLICY FRAMEWORK FOR THE INTRODUCTION OF ETHANOL - PETROL BLENDING AND BIO-DIESEL ON THE ZAMBIAN MARKET.’

By Mr. Michael M. Mulasikwanda, Department of Energy, Ministry of Energy and Water Development

SEE ENCLOSED 3

17

APPENDIX G GROUP DISCUSSIONS ON ETHANOL PRODUCTION

AND USE

SEE ENCLOSED 4

18

APPENDIX H SUSTAINABLE DEVELOPMENT EVALUATION FOR

ETHANOL ALTERNATIVE ECONOMIC

• Reducing the burden on the imports of energy and enhancing the balance of payment (7)

• Increased investment in priority sectors of the economy (7) • Contributing to competitiveness at a micro-level, like industry (5) • Positive effects on the balance of payment (5) • Improved sectoral productivity, growth and linkages leading to higher contribution to

GDP (9) • Reduction of energy intensity (energy used per unit product) at a micro level (5) • Increasing share in the contribution of renewable energy to the energy supply mix at a

macro-level (5) • Job creation (9)

ENVIRONMENT

• Reduction of GHG emissions (CO2, CH4, N2O) aimed at enhancing global environmental integrity (7)

• Reduction of local emissions (SO2, NOx, CO, NMVOC) impacting on air (7) • Reduction of local emissions (SO2, NOx, CO, NMVOC) impacting on water

resources (5) • Reduction of local emissions (SO2, NOx, CO, NMVOC) impacting on land (7) • Reduction of local emissions (SO2, NOx, CO, NMVOC) impacting on bio-diversity

(7) SOCIAL

• Contribution to poverty reduction through local employment (9) • Contribution to more equitable distribution of resources (reduction of wealth

disparities) (7) • Increase in percentage of rural and peri-urban population with access to energy supply

(5) • Affordability of the project product (s) (5) • Capacity building (e.g. transfer of technical skills) (7) • Reduction of health hazards (7) • Contribution to access to social amenities (5)

19

APPENDIX I GROUP DISCUSSIONS ON BIODIESEL PRODUCTION AND USE

SEE ENCLOSED 5

20

APPENDIX J SUSTAINABLE DEVELOPMENT EVALUATION FOR BIODIESEL ALTERNATIVE

ECONOMIC

• Reducing the burden on the imports of energy and enhancing the balance of payment (7)

• Increased investment in priority sectors of the economy (9) • Contributing to competitiveness at a micro-level, like industry (7) • Positive effects on the balance of payment (5) • Improved sectoral productivity, growth and linkages leading to higher contribution to

GDP (9) • Reduction of energy intensity (energy used per unit product) at a micro level (3) • Increasing share in the contribution of renewable energy to the energy supply mix at a

macro-level (7) • Job creation (9)

ENVIRONMENT

• Reduction of GHG emissions (CO2, CH4, N2O) aimed at enhancing global environmental integrity (9)

• Reduction of local emissions (SO2, NOx, CO, NMVOC) impacting on air (5) • Reduction of local emissions (SO2, NOx, CO, NMVOC) impacting on water

resources (7) • Reduction of local emissions (SO2, NOx, CO, NMVOC) impacting on land (9) • Reduction of local emissions (SO2, NOx, CO, NMVOC) impacting on bio-diversity

(7) SOCIAL

• Contribution to poverty reduction through local employment (9) • Contribution to more equitable distribution of resources (reduction of wealth

disparities) (7) • Increase in percentage of rural and peri-urban population with access to energy supply

(7) • Affordability of the project product (s) (5) • Capacity building (e.g. transfer of technical skills) (7) • Reduction of health hazards (9) • Contribution to access to social amenities (5)