In a recent interview, Peter Staude, Chief Executive Officer of Tongaat Hulett, highlighted the potential revenue benefits for sugar cane growers of investing in electricity co-generation. He pointed out how in Zimbabwe cane farmers were being paid US$65/tonne, compared to US$45/tonne paid to South African cane farmers. In response to questioning, Mr Staude attributed the difference to the use of the sugar cane fibre in co-generation, saying that ‘once you get the proper value for the fibre in the cane …, and you put in high-pressure boilers and turbo alternators, a typical sugar mill …will take the same fibre and generate four times as much electricity as we do at the moment …, and that gives everybody the possibility to pay more … for the cane.’
The sale of co-generated electricity by Tongaat Hulett reflects a wider regional trend, with both Swaziland and Malawi now supplying electricity to their national grids. South Africa, however, is held to be lagging behind because of the absence of an appropriate regulatory framework for electricity co-generation. According to a press report, Mr Staude took the view that ‘the slow pace of consolidating the policy framework for electricity co-generation as well as the biofuels sector was frustrating the industry’ and was ‘stunting a potentially huge new market that could see farmers, both commercial and emerging ones, planting more crops for the production of biofuels’.
While a number of sugar companies in Southern Africa are now generating electricity not only for their own needs, but for sale to national grids, this practice is by no means universal. It requires considerable investment in new equipment and may even require investment in off-season feedstock procurement to ensure year-round co-generated electricity production, thereby gaining a better price, since supplies contribute to meeting base-load requirements of the grid. Given these investment needs, it is not surprising that millers have focused on securing adequate remuneration for these investments and have continued to treat cane-based feedstocks as ‘waste’, with no commercial value attributed to them.
While recent comments by the CEO of Tongaat Hulett suggest that this may be changing, to date this practice has only been in Mauritius, where the diversification of revenue streams and the common pooling have been built into sugar sector adjustment strategies from the outset.
For such practice to become generalised, it will be essential to allocate a commercial value to the sugar cane residues that are used as a feedstock for electricity co-generation and to integrate this in pricing formulas agreed with public authorities. The pricing policy set within evolving public policy frameworks for electricity co-generation across the Southern African region are likely to have a strong influence on whether sugar cane farmers can gain commercial benefits from electricity co-generation.