Bioenergy output markets

Declaring that bioenergy output markets constitute a policy and institutional challenge implies that Namibia can influence them. Here ‘output markets’

refer both to the national and international market for Jatropha (nuts, SVO/

biodiesel, seedcake and other by-products) and bush products (charcoal, briquettes and electricity). Three problem areas related to policy aspects of output markets are discussed below.

6.7.1 The domestic market

Although an explicit goal of Namibia’s energy strategy is to support renewable energies, there are no effective policies to promote it: No targets have been set for renewable energy production or feed-in quantities and there is little specific support for renewable energies, which hampers the development of a large domestic output market. There is also only minimal support from the government for bush-to-energy and Jatropha. While the private sector and donors seem to be interested in these markets, public measures are needed to address the multifaceted challenges of establishing such new value chains. The costs of producing such energy should be studied since it is clear that developing countries cannot afford to subsidize energy the way developed countries do, although some conventional energy options are subsidized – hampering the development of renewable energy.

Those subsidies could be revised in order to develop sustainable renewable energies. The question is whether Namibia wants cheap imported electricity or more expensive locally produced renewable energy, and which option better promotes the country’s rural development and food and energy security. Were Namibia to actively support bioenergy production and value chains catered to the domestic electricity market, price and tariff-related initiatives as well as (other) incentives and risk-reduction activities for investors, would all play important roles.

Similar considerations should be made for the local biodiesel market. While certain business models mainly target local off-market use (the Community Model or commercial farmers who only produce for use on their own farms), larger models could produce for local and national markets. Fuel standards, blending quotas and subsidies are the main instruments that have been used worldwide to promote biofuels. The National Bio-oil Energy Roadmap presented these and other important issues, but so far little has been done about them. Apparently the frustration of commercial farmers in the Maize Triangle (see Chapter 5.2.4) has caused the whole country to lose interest in Jatropha, although large-scale (mainly foreign) investors have continued and even accelerated their engagement. But even these large players require certain non-financial support and policy guidelines for their production.

A major drawback when liquid bio-energy (SVO and biodiesel) is introduced on the domestic market is likely to be the lack of standards regarding technical quality. Warranty schemes exist for conventional fuels, but there is no protective regulation for users and consumers if a machine, engine

or other device using SVO and bio-diesel breaks down. Specifications are needed regarding the technical standards and the maximum amount of fuel blending. There also is no answer yet about who is responsible for assuring and monitoring quality standards and how this can be practically carried out. Obviously, in some business models such standards are not an issue because the producers use their own fuel, but know-how that may exceed local actors’ capacities is needed for checking machinery quality.

Technical standards are also important for bush-to-electricity initiatives, for instance, to help manage fluctuations in the grids of independent power providers. The latter should be obligated to follow governmental standards.

6.7.2 The international market

Charcoal, briquette fines and briquettes are currently being exported from Namibia. Since the country is a net importer of electricity, exporting electricity is not a realistic option. On international markets, Jatropha is highly appreciated and is being widely tested for use in the aviation industry.

Even if Jatropha oil were available in Namibia to eager international buyers, attaining the necessary economies of scale to satisfy international market demand would be difficult (especially for smaller production units; see Chapter 6.3) and would require still other developments, especially if new port facilities e.g. for liquids had to be constructed. Jatropha oil degrades with time and cannot be stored indefinitely. Small farmers often do not find a direct market for their product because they cannot deliver large enough quantities to attract traders; as often happens in the charcoal industry, smaller Jatropha processors have extra costs when selling to traders, which lowers their profit margin. SVO, in contrast, is relatively easy to store.

The failure to deliver international quality and adhere to social and environmental standards can hamper market access, not only through official regulations but also because of consumer perceptions and private standards. One example of regulations is the European Union Renewable Energy Directive (see Chapter 1.1). The criteria set there might ensure that the biofuels do not cause more environmental harm than they reduce GHG emissions, but they pose problems for producers in developing countries, particularly with regard to measuring environmentally relevant data and obtaining certification. As for ‘private standards’, there is a noticeable trend in Western markets to opt for products with ‘a social and environmental conscience’. If an international campaign were to draw attention to the

harsh labour conditions in bioenergy production, it could adversely affect marketing opportunities, even if correct under local legislation. FSC certification for forest products is a case of considering both social and environmental standards, requiring for instance briquettes to fulfil high consumer expectations and higher than the legal requirements in order to succeed as an environmental niche product. EU standards and certification schemes aim at fulfilling RED standards for liquid biofuels, thus creating a close link between public regulation and private standards. The governments of many developing countries view these developments as new barriers to trade – beyond the WTO disciplines – but many civil society organizations applaud them for being more rigorous than private standards. Obviously, Namibia cannot change international norms on its own but must figure out how to deal with them at the level of trade policy and by facilitating local adoption.

6.7.3 Additional revenue possibilities

In the production processes of both Jatropha and bush, additional revenue could be generated by efficiently marketing by-products and carbon trading, by using CDM or voluntary carbon markets, for example. The benefits of bush-to-energy by-products have been discussed; meat is ready to market nationally; meat from commercial areas could even be sold internationally.

Beyond fulfilling national and international standards and regulations, the environmental effects can enhance the image of existing products or even create a new brand (Bushbloks). In addition, since some by-products such as water availability and biodiversity are public goods, they can attract government and public support.

Since only about one-third of the Jatropha fruit is oil, the rest could be processed for by-products. For investors and farmers in Namibia, however, this is still a theoretical issue. By-products that have been tested internationally include fertilizer for home-farm use or local markets, feed and ingredients for pharmaceuticals. All of them (except green manure) require large-scale industrial detoxification, chemical extraction and processing.

As for the carbon credit market, bioenergy projects in Namibia theoretically exhibit vast potential. However, interested investors reported that the potentials of the carbon market and the procedures that must be followed to reap the benefits appear to not be well known or understood. It is not

clear whether it is possible to seek carbon credits with bush since permanent debushing destroys carbon sinks. But in light of the revenues that can be reaped from carbon credit schemes, Namibia would be wise to develop this market.

Most likely Jatropha and bush-to-energy will only become competitive for market production (beyond on-farm or community use) by combining several uses, as in the case of soy. This will be particularly relevant if the expected high yields fail to materialize.