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An Independent View
Monday, March 4, 2013
LAST week's announcement that Seaoil is considering a joint venture with sugar cane planters to set up a facility in the Murcia/Bago area to produce sugar, ethanol and electric power is very welcome.
It has been disclosed that Seaoil executives will be coming to Bacolod to continue discussions. As with all potential joint venture projects, careful evaluations of the costs and benefits need to be undertaken. A possible sticking-point with a cogeneration plant is what has become a vexed question as to benefits accruing from electricity generation.
The issue has become vexed because the government is being dilatory. For years, it has been dangling the “Feed-in Tariffs” (FIT) carrot for electricity generated from renewable energy (RE) sources. The idea is that this will encourage investment in cogeneration plants such as the one being considered by Seaoil. Unfortunately, no-one has yet received any funding associated with the FIT scheme.
Recently, the Energy Regulatory Commission (ERC) announced that a plant seeking FIT support will have to be up and running before it will be considered. There are no guarantees that electricity generated from a bioethanol plant will receive FIT benefits. This uncertainly makes it difficult for Seaoil and its potential joint venture partners to properly evaluate the potential project.
Then, there is the question of sale and purchase of electricity produced by a cogeneration plant. It is not a question of putting the electricity into the grid and, hey presto, funds are remitted to the plant by a grateful electricity co-operative. A buyer needs to be found. At present, the Negros electricity co-operatives have negotiated bilateral contracts with electricity generators. These contracts specify much more than 10-15 MW mentioned by the Seaoil possibility. It is not clear that there will be a ready market for the electricity produced by a cogeneration plant, particularly when the electricity co-operatives are quite prepared to inflict their consumers with rotating brownouts at peak periods. Perhaps we consumers should register our displeasure at frequent unplanned brownouts with greater vehemence than we do at present.
The plant envisaged by Seaoil is large. 8-10,000 ton canes per day during the season is envisaged. This corresponds to approximately 2 million tonnes of cane during a crop year which is approaching 10% of the Nation's sugarcane harvest. If the Seaoil project comes to fruition, then existing sugar mills will be challenged.
The existing cogeneration plant of San Carlos Bioenergy Inc. (SCBI) has been in operation since 2007. The ethanol it produces is being purchased by Petron. The Seaoil project suggests that the pricing of ethanol will follow the index designed by the Sugar Regulatory Administration and the Department of Energy under a mechanism that integrates prevailing oil prices in the computation. This is fine in theory but there could be problems if imported ethanol is less expensive than ethanol produced by the cogeneration plant. SCBI experienced this problem in 2010.
Running a cogeneration plant is no easy matter. Fairly recently, SCBI experienced some production problems which, unfortunately, resulted in a malodorous atmosphere throughout San Carlos City. Rumor has it that a petition was drawn up by local residents for delivery to the Department of Tourism requesting that San Carlos be designated “The City of Smells.”
The Seaoil evaluations are very welcome and we hope that it leads to a substantial investment and associated job creation in Negros. It would, in principle, enable the sugar industry to flourish.
What is required now is for someone to 'roll the numbers' and hopefully demonstrate a viable project.
“Let him that hath understanding count the number of the beast for it is the number of a man: and his number is Six hundred threescore and six.” --Revelation ch. 13 v. 18
Published in the Sun.Star Bacolod newspaper on March 04, 2013.