The new blessings of climate change for the palm oil industry.
Climate change is bringing new opportunities and benefits to the palm oil industry – strengthening the bottom line and nudging it towards a more positive image.
More often than not, climate change news is depressing. But one news is bringing cheer to the palm oil industry and the world at large. Climate change supporters continue to highlight the shortcomings about the practices of the palm oil industry but this has not deterred the world demand for CPO from growing. Ironically today it is the same “climate change” call, that has (surprisingly) turned the industry into a beacon of hope. Among a barrage of measures climate change is driving is for traditional fuels to be replaced, at least partially, by biofuels as a source of clean energy to reduce carbon emissions. And it is this growing world demand for clean energy via the use of biofuels that has today made the world realize that the palm oil industry is not all bad news.
Climate change proponents have conferred a new dimension upon the palm oil industry, that is, as a source of clean energy based on the following four attributes, namely:
- Highest oil yield per hectare of land use among oil crops.
- Highest amount of residual biomass yield delivered to the mill doorstep for processing and as such it saves on the need for, cost and carbon footprint of separately collecting and transporting the biomass.
- Turns on the spotlight on the oft-neglected aspects of energy usage and energy efficiency at palm oil mills.
- Has a potential to attain near-zero carbon footprint in the produced oil for supply as feedstock for biofuels besides as edible product.
The palm oil industry is capable of making a valuable contribution to offset GHG emissions by being a source of alternative fuel to fossil fuels. Of all the food crops that can be sourced for biofuels, palm oil stands heads and shoulders above the rest, outdoing the competition, for the four main reasons:
- Sheer volume of CPO. With 54 million tons in 2011, palm oil is the most widely produced vegetable oil worldwide. Malaysia is the world’s second largest producer and recently reached an output of 20 million tonnes per annum. More palm oil translates into more opportunity to forray into biofuels supply.
- Oil palm crop efficiency. As mentioned above, oil palm has the highest yield of any oil crop and is the cheapest vegetable oil to produce and refine. It is an efficient crop, yielding up to ten times more oil per hectare than soyabeans, rapeseed or sunflowers. On 5% of the world’s vegetable-oil farmland, it produces 38% of output, more than any of these other crops. Any substitute would need more land and land use change having a large impact on carbon emissions incur higher carbon footprint and negative climate change impact.
- Volume of palm biomass. The oil palm fruit is unique compared with other edible oils crops in producing a vast amount of biomass residue at the mill from mesocarp fibre to palm kernel shell to empty fruit bunches and biogas. The high crop yield per hectare further augments the residual biomass yield. In Malaysia, it is estimated that the oil palm industry generates about 80% of the available biomass in the country.
- Energy usage efficiency at the mill. A potential high efficiency energy usage at the mill could produce for export significantly large amount of surplus clean energy and biomass for use elsewhere thereby off setting the carbon emisions of palm oil production. A highly efficient low-emission cogeneration (combined heat and power, CHP) system using residual biomass at the mill will effect this. This would culminate in a reduction of the carbon footprint of palm products to near-zero with conducive upstream agricultural practices.
Recognition of the above has created new opportunities for market expansion and increased revenue for palm oil companies.
With the above plus points, palm oil products should be enjoying greater economic success. But in Malaysia, it has not taken off as well as it could. A lot of potential remains untapped, especially qualifying as low carbon biofuel to meet the biofuel quota mandate in the EU and US, which could boost the demand for made-in-Malaysia biofuels besides local demand for the same.
Malaysia has not yet successfully qualified for these reserved biofuel quota primarily because it is unable to comply with the qualifying conditions. In order to qualify, among other conditions, palm oil producers need to show that the carbon footprint (lifecycle analysis) of palm biofuel / biodiesel is at least 20% to 35% lower than that of fossil fuels they are meant to replace.
Given the present unqualifying carbon footprint of palm oil production, we could only compete in the open market in the EU and US based on price differential with fossil fuel.
The good news is that these potentials CAN be put within reach quite easily – because we are not that far off in the first place. For example, any biofuel used in diesel mixtures in Europe must offer a 35 percent carbon reduction according to life-cycle analysis, and palm biodiesel offers only 19 percent. Because of this regulation, we are at present unable to penetrate the European mandated market. This is indeed achievable using available innovative technology which has the potential to actually bring about a further reduction to more than 35%. The technology even has the potential to give 2nd generation biofuels a run for their money.
In the case of the US, the U.S. Environmental Protection Agency EPA has ruled that Malaysian palm oil biodiesel does not qualify for renewable fuel substitution market because palm biodiesel that replaces diesel fuel only would reduce lifecycle greenhouse-gas emissions by 17%. EPA requires at least a 20% reduction to qualify for its renewable fuel mandatory quota. This means in the case of the US, we need to qualify for a further mere 3% reduction in lifecycle GHG emissions.
Here is where our technology comes in. Considering that the process technology used in palm oil mills has evolved little in the last 70 years, the proposed innovative technology may be a small step for the mill but a giant leap – transforming it for the industry.
The technology proposed is relatively new but its adoption is practical with minimum disruption to palm oil mill operations.
With an investment payback period of 2-4 years and an IRR of 20%, it would certainly be worth exploring based on these economic parameters alone. But this technology offers more than just good economics, it offers a potential to reduce the carbon footprint of palm oil to the extent required to qualify for the, till now elusive, reserved and subsidised biofuel markets.
The larger palm oil companies have been pursuing sustainable practices in the agricultural aspects to reduce the carbon footprint of palm oil for some time, such as, opting to plant in degraded land, staying away from forests and peat soil. The next step is improving energy efficiency at the mills to optimise the clean energy potential of biomass residue.
Large palm oil companies like other big businesses know that to stay on top and ahead of the game they need to rely on innovation and continously improve the quality of the ‘service’ aspects of their business.
Some openly acknowledge on their websites that sustainability is a long term process and offer a willingness to partner with others towards this end, especially in those areas where niche expertise is not available within the company.
We would like to take up this offer. Our technology re-looks at some of the engineering practices in palm oil mills. Our vision is that in future all palm oil mills will be designed this way – energy efficient and making money not just from production of CPO but equally from savings in fuel oil, sale of surplus biomass and sale of heat and power (clean energy) to utilities and/or general industries. Indeed the proposed technology has the potential to transform the palm oil industry to go green beyond its wildest imaginings.
We are the last generation that can fight climate change. We have a duty to act.
12 January 2015