Biomass Energy Generation
Business Model Description
Set up and operate biomass plants for bagasse cogeneration and fuel-grade ethanol production from residues generated by the sugar and forestry industries, to meet own energy demand of industries and sell excess power to the national energy grid through a power purchasing agreement with the Eswatini Electricity Company (EEC).
Expected Impact
Utilise biomass waste from sugar and forestry industries to enhance energy security and reduce import dependency.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Eswatini: Lubombo
- Eswatini: Manzini
- Eswatini: Hhohho
Sector Classification
Renewable Resources and Alternative Energy
Development need
Eswatini imports 80% of its energy from South Africa and Mozambique (22). The high dependency on energy imports contributes to the government’s fiscal deficit and increases Eswatini’s exposure to energy supply risks, namely supply security and price shocks, highlighting the need for increased domestic energy production capacity (1).
Policy priority
The Kingdom of Eswatini Energy Masterplan 2034 aims to reduce dependency on energy imports by advancing domestic energy production through the utilization of available renewable energy resources, such as biomass and solar, and to ensure sustainability, efficiency, accessibility and affordability of all energy sources (1).
Gender inequalities and marginalization issues
Although national electricity coverage in Eswatini is 87%, several rural inhabitants, especially smallholder farmers and small business owners, do not have access to electricity or cannot afford high tariffs (2, 3, 4).
Investment opportunities introduction
Eswatini is well endowed with renewable energy resources, which incentivizes investments in renewable resources and alternative energy, including scaling-up renewable energy power plants, especially solar PV and biomass, that will provide low-cost energy (1, 4).
Key bottlenecks introduction
Limited private participation in energy generation, lack of regulatory and fiscal incentives for investors, high infrastructure costs and lack of adequate institutional and private sector capacity to plan, prepare and implement viable renewable energy projects prevent uptake of renewable energy (2, 6).
Alternative Energy
Development need
Eswatini's domestic energy supply is mostly derived from hydropower and sugar cane-based cogeneration, making the supply vulnerable to external factors such as droughts. Energy demand is expecting an 18.76% increase by 2034, placing further pressure to pursue alternative energy sources such as renewables (1).
Policy priority
Eswatini's National Energy Policy (5) and Nationally Determined Contributions (NDC) (9) commit to increase the share of renewables to 50% of the national energy mix and to increase household access to clean and affordable energy to 100% by 2030.
Gender inequalities and marginalization issues
Although the access rate to electricity is relatively high at 87%, rural electrification rate stands at 83% compared to urban regions with above 95% (4). 90% of the total rural energy for cooking and heating in Eswatini is primarily collected and used by women (5, 9).
Investment opportunities introduction
Substantial investment opportunities exist for solar PV and bagasse generation as seen in electricity authority's intention to roll out three more 15 MW solar projects and a 40 MW biomass plant (10).
Key bottlenecks introduction
Limited financial resources of the primary utility company to implement solutions constrains alternative energy production. Additionally, the current tariff system is not based on cost of service delivery and electricity access is constrained by high tariffs (7).
Biofuels
Pipeline Opportunity
Biomass Energy Generation
Set up and operate biomass plants for bagasse cogeneration and fuel-grade ethanol production from residues generated by the sugar and forestry industries, to meet own energy demand of industries and sell excess power to the national energy grid through a power purchasing agreement with the Eswatini Electricity Company (EEC).
Business Case
Market Size and Environment
185 MW biomass generation potential; timber and sugar industries with co-generation capacity potential of 168 MW
Potential for biogas cogeneration in Eswatini can be as high as 185 MW (15), with the timber and sugar industries potentially providing surplus power of 78 MW and 90 MW to the national grid (14).
The sugar industry owns and operates significant co-generation facilities with a capacity of 107 MW that provides electricity to its factories and associated communities using bagasse (18).
Eswatini's per annum demand for fuel grade ethanol (10% blend) stands at 12 million liters (25).
Indicative Return
10% - 15%
According to the Sustainability for All report, biomass power plants in Eswatini can generate an IRR of 12% (14).
Production of fuel grade ethanol can produce an IRR of between 20-22% (25).
Investment Timeframe
Medium Term (5–10 years)
A global analysis covering biomass plants of 150 kW to 1,0000 kW revealed a payback period of 8 years (27).
Ticket Size
> USD 10 million
Market Risks & Scale Obstacles
Business - Supply Chain Constraints
Market - Highly Regulated
Impact Case
Sustainable Development Need
The majority of Eswatini's energy is imported from South Africa that relies on fossil fuels for its energy production, which contributes to the country's indirect carbon footprint (9) and highlights the need for increased domestic production capacity.
Eswatini's energy sector is vulnerable to external shocks as a result of its heavy reliance on energy imports and energy sources such as hydro and biomass that are impacted by drought and other climatic factors, highlighting the need for more reliable sources of energy (17).
Eswatini's growing population size, coupled with the rising demand for fuelwood and poor management of indigenous forests, has resulted in biodiversity loss, deforestation and fuel wood resources being depleted in certain areas (9).
Gender & Marginalisation
Around 90% of Eswatini's rural population relies on fuel from wood for heating and cooking, which contributes significantly to GHG emissions and is detrimental to human health, solidifying the need for clean and affordable energy for low-income households (5, 9).
For the rural poor, grid connection costs exceed present consumption needs. These costs are an often insurmountable barrier for those who are energy poor (9); domestic energy generation from renewable resources is expected to drive down electrification costs currently reliant on fossil fuel imports.
Expected Development Outcome
Biomass energy generation reduces Eswatini's dependency on energy imports and contributes to the overall reduction of Eswatini's GHG emissions (9).
Biomass energy generation leads to increased access to clean energy sources, which reduces reliance on wood fuel and charcoal for cooking and heating, and enables restoration of indigenous forests, ecosystems and land in Eswatini (9).
Biomass energy generation leads to improved waste management and power reliability for producers in the sugar and forestry industries, capitalizing on the country's renewable biomass potential reaching around 170 MW between the sugar and timber industries (14).
Gender & Marginalisation
Increased access to clean and affordable energy through biomass energy generation reduces the use of traditional household fuels, especially wood, charcoal and dung, by rural and vulnerable households, reducing health risks and emissions (15).
Ethanol production through biomass plants can create jobs and opportunities for smallholder farmers in rural areas where poverty is concentrated and employment opportunities are most needed (9).
Primary SDGs addressed
7.1.1 Proportion of population with access to electricity
7.2.1 Renewable energy share in the total final energy consumption
Eswatini has 76% national electricity coverage (84% in urban and 55% in rural areas) (3).
68% of domestic energy production is from renewables, but when including energy imports / total energy consumption, only 7,7% is derived from renewable resources (7, 16, 28).
Achieve 100% access to clean energy at household level by 2030 (3).
Achieve 50% share of renewables in total energy consumption by 2030 (1, 5, 9).
13.2.2 Total greenhouse gas emissions per year
Eswatini’s net GHG emissions in 2018 were estimated at 3,240.10 Gg CO2e (9).
Achieve a 9.08% (665,800 tons) reduction in total GHG emissions in 2030 compared to a baseline scenario (9).
3.9.1 Mortality rate attributed to household and ambient air pollution
Approximately 161,913 households are affected by household air pollution and possible respiratory-related health issues (9).
N/A
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Outcome Risks
Despite its renewable energy character, burning of biomass for energy generation releases carbon dioxide, contributing greenhouse gas emissions in the energy sector (20).
The expansion of monocrops such as sugarcane and forestry plantations, required as inputs for biomass energy generation, may worsen soil degradation and negatively impact fragile ecosystems (9).
Forestry and sugarcane traditionally require large areas of land for cultivation; increased production thereof could restrict access to land by smallholder farmers (9).
Impact Risks
Co-production of energy from agricultural bi-products relies on success of farms and is therefore vulnerable to external factors, such as climatic conditions and market conditions, which may limit the expected impact.
If biomass energy production does not lead to reduced energy costs and increased connectivity, the rural energy crisis will not be adequately addressed and the expected impact may be limited (9).
If the sugar and forestry industry support imported energy rather than cogenerated power from bagasse boilers, due to historically cheaper prices, the expected impact may be limited (20).
Impact Classification
What
Biomass energy generation utilises biomass waste from sugar and forestry industries to reduce energy import dependency.
Who
Businesses benefit from reduced energy costs, the environment enjoys sustainable energy generation, and the sugar and forestry industries utilise their waste through biomass energy generation.
Risk
While the biomass energy generation model is proven, external input and climatic factors, tariff levels and connectivity, and the uptake by sugar and forestry industries require consideration.
How Much
Biomass energy generation realizes the biomass potential of the forestry and sugar industry, which is able to provide 78 MW and 90 MW (14), and contributes to increasing the share of renewables by 50% in energy consumption by 2030 (9).
Impact Thesis
Utilise biomass waste from sugar and forestry industries to enhance energy security and reduce import dependency.
Enabling Environment
Policy Environment
National Energy Policy, 2018: this Seeks to create a framework for the energy sector that is robust and aligned to global trends. It highlights the potential of liquid and solid biomass to contribute to the resilience of Eswatini's energy sector (5).
Kingdom of Eswatini Energy Masterplan 2034: Seeks to provide national decision makers with the necessary information for planning future energy sector development and includes plans for expanding the overall biomass energy production capacity of Eswatini (1).
Independent Power Producers (IPP) Policy, 2015 : Aims to increase the utilization of local renewable energy resources, including biomass besides solar, by establishing an enabling environment to promote the establishment of sustainable renewable energy and IPP generation sources (21).
Energy Efficiency and Conservation Policy of 2019: Seeks to secure energy supply through locally available resources. It is a high-level roadmap for implementation, covering regulations, financing, institutional responsibilities and monitoring evaluation (22).
Financial Environment
Financial incentives: The Post COVID-19 Economic Recovery Plan seeks to establish a 15 MW biomass energy plant valued at E 800 million (USD 52 Million) as part of its planned energy projects (19).
Fiscal incentives: As part of the Special Economic Zone Act (2018), investors benefit from a 20-year exemption from all corporate taxation (followed by taxation at 5%); full refunds of customs, value-added tax, and other taxes payable on goods purchased and unrestricted repatriation of profits (22).
Other incentives: The S10 Lifeline Tariff cushions lower usage customers against high prices; it is an attempt to increase energy security and advance poverty alleviation (33).
Regulatory Environment
Eswatini Electricity Act, 2007: Reforms and consolidates the laws regulating the generation, transmission, distribution and supply of electricity in Eswatini and sets obligations to hold licenses (1).
Eswatini Energy Regulatory Authority Act, 2007: Allows the establishment of Swaziland Energy Regulatory Authority with the mandate to administer the Electricity Act (1).
Swaziland Electricity Company Act, 2007: Provides for the establishment of the Eswatini Electricity Company (EEC) under the Companies Act and performance by that Company of the powers and functions presently performed by the EEC relating to the generation, transmission, distribution and supply of energy (23).
The Grid Connection Code for Renewable Power Plants Connected to the Electricity Transmission System or the Distribution System, 2014: Specifies minimum technical requirements for renewable energy plants wishing to connect to the grid (24).
Eswatini Petroleum Act, 2020: Inserts that the Eswatini Energy Regulatory Authority (ESERA) will provide licensing application forms for downstream petroleum activities; the National Petroleum company is mandated to blend and distribute fuel (31, 32).
Legal Notice No. 324 the Public Procurement Act, 2020: Regulates the procurement of goods, works and services by procuring entities, including for biomass energy generation, to ensure transparency, accountability and promote diverse private sector participation in public procurements (36).
Marketplace Participants
Private Sector
ILOVO Sugar, UBOMBO Sugar Ltd, Royal Eswatini Sugar Corporation, Montigny, Peak Timbers, Mhlante Group, Tibiyo Taka Ngwane, Symbion Power, Electricite de France South Africa, ABF Energy Limited, BNM Technology Group, Eswatini Europe Energy Resource Consortium.
Government
Eswatini National Petroleum Company, Ministry of Natural Resources and Energy, Eswatini Energy Regulatory Authority (ESERA), Eswatini Electricity Company (EEC).
Multilaterals
European Union (EU), African Development Bank (AfDB), International Renewable Energy Agency (IRENA), World Bank Group (WBG).
Non-Profit
Eswatini Cane Growers Association.
Target Locations
Eswatini: Lubombo
Eswatini: Manzini
Eswatini: Hhohho
References
- (1) Ministry of Natural Resources and Energy. 2018. Kingdom Of Eswatini Energy Masterplan 2034. http://www.gov.sz/images/Media/WEB_KINGDOM_OF_ESWATINI_ENERGY_MASTERPLAN_2034-1.pdf
- (2) Ministry of Economic Planning and Development. 2019. National Development Plan (NDP) 2019/20-2021/22. http://www.gov.sz/images/CabinetMinisters/NDP-2019-20-to-2021-22-final.pdf
- (3) FinMark Trust. 2020. Financial Inclusion Refresh. https://finmark.org.za/system/documents/files/000/000/391/original/Eswatini_Financial_Inclusion_Refresh.pdf?1614849476
- (4) USAID. 2021. Eswatini Power Africa Sheet. https://www.usaid.gov/powerafrica/eswatini
- (5) Ministry of Natural Resources and Energy. 2018. National Energy Policy. https://www.gov.sz/images/natural-resources/energy/NATIONAL_ENERGY_POLICY_PRINT.pdf
- (6) Ministry of Economic Planning and Development. 2017. Strategy for Sustainable Development and Inclusive Growth (SSDIG) (Offline)
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- (9) Ministry of Tourism and Environmental Affairs & Ministry of Economic Planning and Development. 2021. Kingdom of Eswatini’s Revised Nationally Determined Contributions (Offline)
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- (13) MONTIGNY. 2022. Company website: Renewable Energy. https://montigny.co.sz/renergy.html
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- (25) UNDP Stakeholder Consultation with Royal Eswatini Sugar Corporation. February, 2022
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- (27) USAID. December, 2016. An Analysis of the Profitability of Investments in Biomass Power Plants within the Current System of Incentives in the Federation of BiH. https://pdf.usaid.gov/pdf_docs/PA00W4WP.pdf
- (28) United Nations Department of Economic and Social Affairs. 2022. Statistics, SDG Indicators Database. https://unstats.un.org/sdgs/UNSDG/IndDatabasePage
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- (36) Eswatini Public Procurement Regulatory Agency. Public Procurement Regulations 2020. https://sppra.co.sz/sppra/documents/regulations/Pages%20from%20Eswatini%20Government%20Gazette%20-%2018th%20Dec%202020.pdf