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A System dynamics study of sugar industry for the production of bioethano fuel (2010)

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Thesis Archive

A System dynamics study of sugar industry for the production of bioethano fuel (2010)

Chua, Encarnacion Karell A.
Sze, Spencer N.

Abstract:

-The bio-ethanol industry in the Philippines started from four (4) years ago upon the implementation of R. a. 9367 or known as the Biofuels Act of 2006. The goal of R. R. 9367 was to encourage people to use renewable energy sources from natural resources, and to increase rural employment and income by focusing on the development of agricultural sector for the feedstock required to produce bio-ethanol fuel.

Currently, there are issues concerning the capacity production of local bio-ethanol plants not being able to supply the appropriate amount of bio-ethanol fuel domestically. However, based from interviews with the decision makers and the stakeholders, the issue of the bio-ethanol industry in the country is not just about capacity problem, but the implementation of the Biofuels Act itself.

According to Department of Energy (DOE) from their planning of the bio-ethanol industry last 2007, in four (4) years time, many investors will come to the Philippines and put-up bio-ethanol plants. Unfortunately, there are still no investors willing to invest in the country since the industry is collapsing. According to Sugar Regulatory Administration (SRA), the main culprit for the inefficiencies and unattractiveness of the bio-ethanol industry is the tax incentives given by DOE to importing bio-ethanol fuel. Also, another problem foreseen by SRA that is affecting the bio-ethanol industry is the sugarcane industry. On the side of DOE, the tax incentive on importing was done on order to achieve the required number of bio-ethanol fuel with respect to the 5% mandated blend to crude oil. Plus according to DOE, the importing of bio-ethanol fuel will only be resorted if the local bio-ethanol plants are not able to meet the demand.

Based from the interview with Shell Pilipinas, oil companies stopped ordering locally produced bio-ethanol fuel two (2) years ago since the price of local bio-ethanol fuel s too much expensive. In short, 100% of the bio-ethanol fuel consumed in the country is imported.

Upon simulating the model behavior of the sugar and bio-ethanol industry, it shows that the bio-ethanol industry is dying, because milled sugar is prioritized over bio-ethanol in selling sugar cane. The market in the Philippines shifted to importing due to the expensiveness of bio-ethanol produced locally. The government should implement stricter execution of the Biofuels Act. As such, it limits or prevents the oil companies to import bio-ethanol from other major ethanol producing countries and strictly consume the locally produced bio-ethanol first despite the expensiveness of the local bio-ethanol. The lack of support from the government generates opportunity loss for the country. The government should have guided bio-ethanol producers on their start-up/pilot operation by giving incentive such as subsidy in electricity or subsidy in raw materials just to make sure that operating costs will be lessen to reduce the price of locally produced bio-ethanol. In that way, the price of bio-ethanol will be accepted by its consumers.

Adviser:

Mr. Edgar Mutuc

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