Ethiopia: Private Sector Promise for Biofuel

The jatropha plant is used to make biodiesel.

Upon legislation, the proclamation will be the first for biofuel energy

A new bill is in the works to allow the involvement of the private sector in development, production, distribution and the sale of biofuel energy. The law will be the first to be enacted for the biofuel energy industry.

The Ministry of Petroleum & Natural Gas is drafting the proclamation, regulation and directives that will fully open the industry to the private sector, which was once exclusively allocated to public investments only. The Ministry has been drafting the legal framework for the past two years in collaboration with 22 institutions, including ministries, public enterprises and representatives from the private sector.

The biofuel industry has been regulated by the investment and trade laws of the country until now. The new law, which is in its final stages of review, will replace the current laws, according to Michael Gessese, director of biofuel at the Ministry.

"The sector is underdeveloped and facing multiple challenges," said Michael.

The main points of the legal framework include establishing authority and managing the industry. It also includes incentives that will be given to private investors who generate energy from by-products of industries and agricultural outputs.

Individual and small-scale investors can engage in biofuel energy generation and distribution by partnering with the largest industries, according to the new law.

The country has the potential of producing 30 million litres of ethanol. And as a success story, the country has launched a project of blending ethanol with gasoline. Nile Petroleum, National Oil Corporation, OiLibya and recent entrant Total Ethiopia all blend ethanol into their gasoline. Ethiopia annually consumes 3.5 million tonnes of petroleum procured for 2.5 billion dollars.

To maximise the value of the fuel and minimise the expenditure of forex, the oil companies blend five percent to 10pc ethanol with gasoline, as set by the Ministry. The blending projects enabled the country to save 50 million dollars annually.

The Ministry is also working on blending ethanol from biofuel at the Fincha and Metahara sugar factories. It has also harvested 20,000ha of land in Tigray, Amhara, Southern Nations, Nationalities & Peoples, Oromia and Afar regional states. The area supports approximately 24 million jatropha trees, a plant rich in oil and algae, cultivated over the past five years.

"We have prioritised nurturing non-edible plants for biofuel purposes," Michael said.

The Ministry has identified over 40 plants that can potentially be used to produce biofuel energy- including jatropha trees, algae and oil palm. There are over 38,000ha of infertile land that can be cultivated with biofuel plants in Ethiopia.

"The industry is at its infancy and needs huge finance," said Michael. "Thus investors need incentives to get engaged."

Two weeks ago, Prime Minister Abiy Ahmed (PhD) expressed his administration's desire to see private companies engaged in the energy sector. The country has set aside 40pc of this year's budget for the energy sector.

"A huge amount of energy investment cannot be covered by the government alone," Abiy said. "We have to engage private investors."

A lack of a proper legal framework has blocked the private sector from investing in biofuel energy production, according to experts.

"Therefore, the proclamation needs a thorough engagement from the private sector," said Tegabu Atalo, a power and energy consultant with over a decade of experience. "The regulation needs to see the sector with the eye of the private sector, not from the angle of the government itself."

The Ministry is nearly ready to send the draft to the Office of the Attorney General for review before it is sent to the Council of Ministers and the parliament for legislation, according to Michael.

"We expect the directive to be tabled for legislation," he said.

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