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Chapter 3: Rural Energy Supply

3.1 Demographic Trends

The world's population has now exceeded 6 billion people, and growth projections (FAO, 2000c) indicate that the total will be over 8 billion by 2030. More than half the world's population lives in rural areas, and the vast majority of these, some 2.8 billion people, live in rural areas in developing countries. There are 2 billion people without access to adequate, affordable and convenient sources of energy. At least two-thirds of them are dependent on the traditional fuels of woodfuel, dung and crop residues for cooking and space heating. These traditional fuels have low energy conversion efficiencies. Their use, especially in arid and semi-arid areas, can lead to environmental damage through excess stripping of forests and woodlands, and to adverse health effects due to smoke inhalation causing respiratory diseases. Time spent by rural people in gathering and cooking with these fuels involves hard work and drudgery, and is a diversion from other economically useful activities.

Most of the projected population growth is expected to occur in developing countries, and most of that in urban areas. Figure 3.1 shows demographic projections for developing countries up to 2030. The rural population remains almost stable, whilst there are major increases expected in the urban population. Observations suggest that it is the young people that migrate from rural areas to urban centres, whilst an increasingly aged population is left in the rural communities. These broad projections mask some important regional differences. Regional population projections indicate that a large proportion of Africa's population growth will take place in rural areas, contrary to the trends in Asia and Latin America where rural populations are expected to fall in absolute terms. Given the realities of urban growth and the political and administrative pressure to tackle urban problems, it may become more difficult to keep rural energy development on the agenda.

Figure 3.1: Urban and rural population projections in developing countries

3.2 The Challenge of Providing Rural Energy Services

A transition to modern energy systems, some of which may continue to use traditional energy sources, but in new ways, needs to be achieved if sustainable economic activity is to be realised in rural areas. This is a slow process in which traditional energy technologies are likely to co-exist with a gradual improvement and introduction of new technologies accompanying the rural development process. As noted in Chapter 2, energy policies and projects in developing countries have traditionally focused on large capital investments in the generation, transmission and supply of electricity, gas and petroleum products. Such investments have often been concerned with industrialization and urbanization. By increasing access in urban and peri-urban communities to these energy sources, governments have attempted to stimulate growth in productivity and output in response to the socio-political importance of these areas.

Nevertheless, rural energy programmes have been established in many countries. In keeping with the bias to extending the supply of modern energy forms, and because electricity is seen as a flexible and efficient means of accessing modern energy services, most of these programmes have focused on rural electrification. This often involves grid extension into rural areas, but some programmes promote decentralised electricity supply, for example with mini-grids supplied by diesel generators and sometimes with stand-alone renewable energy systems.

For many rural communities there is no immediate prospect of being connected to the central electricity grid, and other commercial energy sources are often too expensive for poor people. However, many rural areas do have local access to other sources of energy, such as solar energy, water streams, wind and biomass. There are opportunities for these resources to be tapped using existing technologies and thereby release a range of useful services.

Moreover, there is a need for urgent action, given the drift of rural populations to peri-urban and urban areas in developing countries. Economic benefits will accrue as a result of improved energy services for rural livelihoods. Agriculture can have a major role in supporting rural livelihoods and community development through provision of locally sourced biomass energy. Improved rural energy services contributes to international development goals, including poverty reduction, better access to water and sanitation and protection of the natural environment.

3.3 Experience of Rural Energy Programmes

The impact and benefits of rural electrification have been examined in many studies. It seems to be accepted that, since electrification is a catalyst for development and not a solution in itself, rural electrification should be part of a much broader development approach. Although priority might be placed on electricity for productive activities, such as food production, agro-industries and small scale rural industries, the reality is that the household and community needs for lighting, space and water heating and small appliance power have received rather more attention. This has occurred through the encouragement and implementation of novel energy supply options such as solar home systems (FAO, 2000a).

The broad experience of rural energy policies has shown that subsidies can distort markets and encourage the uptake of fuels, which are not necessarily least cost, or even best suited to the energy services needed (World Bank, 2000b). Furthermore, the cost of available appliances that use modern fuels can be too high for poor families, especially as the energy end-use technology is often imported. Another difficulty is that supplies of liquid fuels are often insufficient or unreliable, and there is reluctance by rural people to depend on modern fuels due to fluctuations in household income levels, arising from the seasonal nature of agricultural outputs and unstable markets.

Grid extension is not economic for low density energy demands. Low density demand arises from a combination of the dispersed nature of the rural population and the low initial electricity consumption in low income households. High connection and wiring costs can mitigate against households hooking-up to grid supplies even where the supply has reached their village, and despite subsidised tariffs. High first costs can be a barrier to the deployment of decentralized off-grid systems. Supplies are sometimes unreliable or of poor quality. Moreover, by itself, electrification does not guarantee economic development and its benefits tend to accrue to the wealthier groups in electrified areas. Indeed, any correlation between energy investments and poverty alleviation is less well understood. Although there is anecdotal evidence on the direction of links between energy and poverty alleviation, little direct evidence is yet available (World Bank, 2000b).

Simply providing electricity, which can often be the main policy objective, does not tackle the major uses of energy by poor rural households, namely cooking and space heating. Furthermore, it does not impact on economic development unless, as stated above, it is coupled with rural development efforts. In some cases central "top-down" energy programmes have been imposed without local community consultation, involvement or support, and insufficient institutional structures have led to disappointing results. Even in deregulated markets, few financial incentives exist for utilities to invest in rural electrification schemes, and central policy direction from the government can hinder rural energy development. For example, independent power generation is often not permitted, or is controlled very tightly. Legislative and institutional weaknesses can create barriers to the development of local resources, and act as a disincentive for private investors or entrepreneurs to invest in rural energy markets.

The ability of the rural poor to pay for their energy needs is now seen as being greater than previously assumed. Box 3 provides examples of approaches using micro-finance to provide credit for rural energy development involving the application of PV systems, which have been a major focus of off-grid rural energy interventions (UNDP/EC, 1999; and DFID, 1999). Building on such experiences, new directions for rural energy programmes aimed at improving energy services for poor people are being examined (World Bank, 2000b). These include policy actions in the following areas:

These approaches are attempts to improve energy service options available to rural households and communities. They also recognize the importance of a more efficient, financially sustainable energy supply sector operating in a market structure.

Box 3: Micro-finance for Rural Energy Using PV Systems

Community associations and cooperatives can bring together local people in planning, managing and financing rural energy projects. By scaling up energy demand they can reduce unit costs and offer greater creditworthiness than is possible for individuals. Examples are:


The Grameen Bank in Bangladesh has set up a non-profit company, called Grameen Shakti (GS). The company specialises in micro-credit for rural development. GS aims to supply renewable energy technology to rural households and create local employment. Starting with PV systems, GS is offering 24-month leasing financing to consumers to spread out the initial equipment cost. GS estimated that one million Bangladeshi households without electricity would be able to afford these terms. In parallel, GS is training a network of local retailer-technicians to provide on-going maintenance and customer support.


In Morocco, the NGO Migrations et Developpement has helped electrify nearly 100 villages in a remote mountainous area through diesel-based mini-grids. Local operators provide electricity to a village cooperative on a fee-for-service basis. The NGO helps the villagers form an association to own, manage and finance the electrical systems. The association raises some 40% of the capital cost and a further 10-20% as costs-in-kind (such as direct labour and supplies), the balance coming from an EU grant. To minimise costs and maximise benefits, bulk purchases are used, and all households must be connected. Least-cost and sustainable tariffs and service standards are negotiated.


In a Dutch-funded project in the Philippines, the Development Bank of the Philippines agreed to finance PV solar home systems, but only to village cooperatives in order to avoid the high costs of servicing many individual small loans. The Bank leases out the systems, and hence owns the PV panels as collateral. If a cooperative has to return a PV panel because of payment defaults, the dealer which supplied the system has to agree to buy it back. Another financial safety net is provided by the cooperative's own funds, which can usually carry for a time the payments of individuals who run into financial difficulties.

Sahel Region

Solar PV drinking water pumps and community systems were installed in remote areas of nine countries in the North African Sahel region. The village associations pay for the main project output - water. These payments cover the salary of the villager who manages the system, plus the day-to-day upkeep, the annual maintenance and a deposit fund that is collected for the eventual replacement of the system. All the installation and maintenance contracts are managed by a local company, which benefits from the financial stability of the operational and maintenance fund.

3.4 Sustainable Rural Livelihoods

An emerging theme in development policy is that of "sustainable rural livelihoods". FAO recognizes the concept of promoting sustainable livelihoods as a means to combat food insecurity and rural poverty17. The livelihoods concept denotes the means, activities, entitlements and assets by which people make a living (DFID, 1998). For poor rural people to escape from poverty, they must be able to improve their livelihoods in ways that can cope with, and recover, from stresses and shocks, while maintaining and enhancing their material and social assets and opportunities, both now and in the future, and while not undermining the natural resource base. Applying this approach, UNDP explicitly focuses on the importance of modern technology as a means to help people rise out of poverty whilst complementing indigenous technologies18.

One element of this sustainable rural livelihoods approach is to have better access to basic and facilitating infrastructure, and energy is a key component of this infrastructure. Improved energy services can assist more broadly in rural development as well as in food security. For example, the supply of wood-based fuels can be organized in a commercial way that provides income to a large number of people while still remaining sustainable. By appropriate investment in physical and human capital, the development of rural enterprises can be stimulated by improved electrical energy services, and this applies particularly for lighting, small power tools and appliances.

3.5 Modern Biomass19 and Rural Energy

Modern biomass systems offer an economically promising and environmentally sustainable means of increasing access to improved rural energy services in developing countries. Whilst traditional solid biomass fuels can deliver only poorly controllable heat, modern biomass can provide a variety of efficient and well-controlled energy services. Biomass is stored energy and is not subject to daily or seasonal intermittency. Biomass can produce all forms of energy, electricity, gas, liquid fuels and heat, and its exploitation can provide rural employment, encourage people to remain within their communities, increase profitability in the agriculture sector and help to restore degraded lands.

Biomass can be converted into modern energy carriers through both mature and novel conversion technologies, and has the potential to be a significant source of energy for rural applications. Technological developments in biomass utilization in modular plant have also created new opportunities for rural energy development. Advanced small-scale biomass energy technologies could generate base-load electricity and contribute much to improving living conditions in rural areas. Decentralised rural electrification can provide more jobs in rural areas than central generation. Woodfuel supply is labour intensive, and can involve a series of processes of cutting, collecting, splitting, bundling, charcoal making, packing, transport and trading. Biomass production could be a major source of both jobs and revenues for rural areas, where both energy crops from dedicated plantations and the by-products and residues of other agricultural production can be used as feed-stocks.

Biomass resources vary in type and content, depending on geographical location:

Wood energy supply

Woodfuels account for an estimated 7% of the world's total energy supply. They are often depicted as a primitive energy form, which is a major cause of deforestation. In practice woodfuel for cooking and space heating comes in large part from non-forest sources and from by-products and forest residues. Managed properly, wood energy supply can be sustainable, environmentally benign and economically sound. There is little real evidence that woodfuel use is a major contributor to deforestation and degradation. Often wood is not burned directly, but is processed into a more suitable form, such as chips and pellets. Wood can also be transformed into a secondary solid form (using pyrolysis, namely heating biomass in the partial absence of air and reducing wood to charcoal or liquids), or into a liquid (e.g. methanol) or gaseous form. Table 3.1 lists some woodfuel definitions and gives examples.

Table 3.1: Woodfuel definitions

Woodfuel type

Brief definition


Direct woodfuels

Wood produced for energy purposes and used directly as fuel

Woodfuel, charcoal

Indirect woodfuels

Mainly solid biofuels produced from wood processing activities

Bark and sawdust from wood mills

Recovered woodfuels

Wood used directly or indirectly as fuel, derived from socio-economic activity outside the forest sector

Used wooden containers

Wood-derived fuels

Liquid and gaseous products from forest activities and the wood industry

Black liquor from cellulose plants

Wood constitutes the major source of energy for most countries of sub-Saharan Africa, Central America and continental south-east Asia. In 1995 there were 34 countries where woodfuels provided more than 70% of energy needs, and in 13 countries woodfuel provided 90% or more. Table 3.2 lists woodfuel consumption by region for 1995 (WEC/FAO, 1999; and FAO, 1999).

The so-called woodfuel crisis emerged in the mid-1970s as the scale of deforestation in developing countries became apparent. Energy demand appeared to be out-stripping supply, and although the woodfuel resources were renewable, the rate of use appeared to be unsustainable. This analysis was based on the belief that most wood fuels originated from forests. However, more recent studies conducted by FAO have shown that non-forest areas supply considerable amounts of wood fuels. A major part of the supply is derived from non-forest areas such as village lands, agricultural land, crop plantations, field boundaries, homestead areas and roadside trees. These studies have helped create a clearer picture of the reality of woodfuel use.

Table 3.2: Woodfuel consumption and share of total energy use (1995)


Woodfuels Mm3 equivalent

Share total energy (%)




Black liquor







Asia (developing)





Oceania (developing)





Latin America and Caribbean





Europe, Israel, Turkey





Former USSR





Canada and United States





Australia, New Zealand, Japan





World Total





The overall trends in demand and potential supply of wood and other biomass fuels in 16 Asian countries are shown in Table 3.3 (FAO, 1997)20. The data show that the aggregated potential supply outweighs aggregated consumption. Deforestation due to conversion of forest land into agricultural land results in an increased supply of biomass fuels, because agricultural land generally has a higher biomass fuel productivity than forest land. The potential supply of biomass fuels from only half of crop process residues is substantial. Field residues, which are about four times the volume of processing residues, are not included in these estimates.

Table 3.3: Consumption and potential supply of biomass fuels in 16 Asian countries












1000 ha



1000 ha



Total woodfuel consumption







Potential woodfuel supply


Forest land







Agricultural areas







Other wooded lands







Deforestation waste







Total woodfuel potentially available







50% of crop process residues







Total potentially available






Despite the large size of the potentially available resource, fuel scarcity in localized areas and their unavailability to weaker consumer groups remain serious problems. In reality, woodfuel markets are extremely localised and fragmented, and consumers may not be able to use the available resources due to physical, financial and social constraints. As market mechanisms become stronger, and income distributions become wider, traditional woodfuel consumers may become marginalized. Where woodfuel is not yet a traded item, and its use is for the basic subsistence energy needs of poor people, participatory forest management is likely to remain important. Agricultural applications for traditional biomass include providing fuel for steam boilers to generate heat for tea drying and tobacco curing.

3.6 Biomass Conversion Technologies

Biomass for direct combustion utilizes agricultural and forestry sources, or specialist energy crops grown specifically for energy purposes. Many methods for the conversion of biomass into energy services have been developed, reflecting the diversity of final uses and the nature of the resource. The traditional domestic use of woodfuel, charcoal and agricultural residues is for household cooking, lighting and space heating. The efficiency of conversion of biomass to useful energy in these applications is generally between 5 and 15%. This compares with modern industrial processes using anaerobic fermentation to produce biogas or direct combustion in furnaces to produce either direct heat or steam to supply a turbine for electricity generation which have conversion efficiencies greater than 20% and up to 30%.

The following sections provide an overview of each of the main biomass conversion technologies and their use in rural energy supply applications.

Anaerobic fermentation

Wet wastes such as green agricultural crops, agro-residues, farm slurry, night soil and certain industrial effluent streams such as in beer, sugar and food production and processing can be processed via anaerobic digestion. This produces a methane-rich biogas that can be collected and combusted. Anaerobic reactors are generally used for the production of methane rich biogas from manure and crop residues. They use mixed methanogenic bacterial cultures that are characterized by defined optimum temperature ranges for growth. These mixed cultures allow digesters to be operated over a wide temperature range, e.g. from 0oC up to 60oC. When functioning well the bacteria convert up to 90% of the feedstock energy content into biogas, containing about 55% methane, which is a readily usable energy source for lighting and cooking. The sludge remaining is non-toxic and odourless and can make good fertilizer since it retains most of its nitrogen and other nutrients.

Anaerobic digesters of various designs have been widely used in China and India. Rural programmes have promoted biogas plant as ideal candidates for village use due to their advantages in energy and fertilizer production as well as the improved health benefits by substituting for inefficient woodfuel use. A further consideration is the need to meet increasingly severe environmental standards regarding liquid and solid effluents from farms and industry21.

At the household or community level biogas can be used for cooking and lighting. There are an estimated 5M small-scale digesters currently in use in China and India and perhaps 2000 large and medium sized plant, many of which are located on farms or at agro-industry plant. Subsidies, in either direct or indirect form, have contributed to this development, but there are prospects that a commercial market could emerge, particularly for the farm-based systems. In these larger sizes, biogas can also be burnt in modified natural gas boilers or used to run internal combustion engines for motive power applications. Box 4 describes an example of anaerobic digestion in rural energy supply on two large-scale farms in China (Martin, 1997).

Box 4: Anaerobic digestion on large-scale livestock farms in China

Two examples are given below where anaerobic digestion has delivered via an integrated approach a range of social, environmental and economic benefits. Whilst the main driver for the investments has been increasingly stringent environmental legislation regarding liquid effluents, the additional benefits have reinforced the attractiveness of these systems. However, the systems are likely to be best suited for large farm enterprises, since the majority of poor and small farms would be unable to afford the capital investment. Furthermore, the value of the extra produce is influenced by the close proximity of these farms to a city market that can afford to pay premium prices. Technical support, including training and advisory services, were required from the local rural energy association, and these facilities are not always available in more remote farming areas.

Fushan Collective Farm, Hangzhou

This farm comprises 280 families raising chickens, pigs and fish, as well as growing rice and tea. Two anaerobic digesters have been installed during the late 1990s - a 200m3 capacity digester receives waste from 30,000 chickens and a larger 500m3 capacity digester receives slurry from 8,500 pigs. The digesters produce biogas, a liquid effluent and a solid sludge. Biogas is used as a cooking fuel in the farm workers' houses, for leaf drying in the tea processing facility and for space heating in the chicken sheds. The liquid effluent is used as a feed supplement for the pigs (from the chicken digester only) and for the fish, and as a crop fertilizer for rice and tomato production. The sludge is also used as an intermittent fish feed and organic fertilizer. The capital costs were paid for by an initial investment from each family on the farm and a small bank loan. The biogas supply to each house and a cooking stove were included in the initial investment. The biogas replaced the use of straw and rice husks as the cooking fuel and this has improved the local air quality.

Xizi Pig Farm, Hangzhou

This farm contains 10,000 pigs. The farm is owned by a local manufacturing company which was able to raise the finance for the digester plant and associated engine/generator equipment. An anaerobic digester of 500m3 capacity has been built to process the farm wastes and improve the quality of the controlled liquid discharges from the farm. Pig slurry is collected daily and stored in the anaerobic tank, producing biogas, liquid effluent and sludge. The biogas is used as a heat source for hot water and also in winter for pre-heating waste for the digester, and as a fuel for a 50kW spark ignition engine. The engine drives an electrical generator, which supplies electricity for much of the farm equipment. The liquid effluent is used as a fertilizer and fish feed; the sludge is dried and mixed with potash and phosphate and then also used as fertilizer.

Electricity and heat production in modern biomass technology

Agricultural co-generation using biomass in an agro-industrial plant offers the prospect of producing process requirements for heat and power and the export of any surplus electricity to a local grid distribution system. Underlying this approach is the desire to capture the agricultural, industrial and energy benefits of biomass resources. However, the potential for co-generation varies according to site location and the nature and type of crop, on the capital costs and the economics of the operation. Biomass fuels are not always traded commodities, but are locally collected and transferred to the point of use, and fuel supply security then becomes an important issue.

A secure fuel supply chain, preferably with long-term contracts in place, is needed for co-generation, using sources such as:

Biomass gasification uses partial combustion of biomass to form carbon monoxide and hydrogen. The resulting gas mixture can be subsequently combusted in gas turbine plant to produce electricity. Gasification technology offers the prospect of making use of biomass plantations and agricultural residues to produce electricity. Large-scale gasifiers with direct coupling to gas turbines can give attractive gains in efficiency. Such systems take advantage of low grade and cheap feedstocks such as residues and wood produced in dedicated plantations using short rotation coppicing, and together with the high efficiencies of modern gas turbines can produce electricity at comparable cost to fossil fuel plant. Net atmospheric CO2 emissions are avoided if growth of the biomass feedstock is managed in such a way as to match consumption. The more recent developments of biomass integrated gasifier/steam injection gas turbine plant could operate at energy conversion efficiencies in excess of 40%.

Box 5 gives examples of several biomass combustion and gasification applications for rural energy supply, with electricity production being the main energy output (SEI, 1999; CDC, 1995; and UNDP, 1999). These show that the benefits of biomass can be exploited for the provision of energy services in rural areas.

Bagasse based co-generation has gained considerable momentum in the sugar industries in many developing (and industrialized) countries. For example in India, the technology has been catalysed by a national programme led by the central government and involving state governments and the state electricity boards22. The programme offers a favourable policy framework, adequate power buyback rates and attractive financial terms to stimulate investment including subsidies and tax concessions.

Box 5: Biomass combustion and gasification

Co-generation in the Indian Sugar Industry

India is the world's largest producer of sugar. The industry has made significant advances in recent years in developing and implementing sugar cane based biomass co-generation systems, mainly using bagasse as the fuel source. These systems offer an efficient and sustainable energy alternative that can provide process steam and electricity to local industries, while also exporting surplus power to the electricity grid. Around 180 MWe of co-generation plant is currently commissioned in India, with a potential to export to the local grid about 140 MWe. A further 200 MWe is under construction.

Wood-fired power station in Tanzania

Tanzania's first wood fired combined heat and power station was commissioned in 1995. It is owned by the Tanganyika Wattle Company, and has a capacity of 2.5 MWe. The station produces high pressure superheated steam for power generation and lower pressure steam to provide heat for a wattle extraction plant. The total capital cost of the project was US$6 M. The cost of power generated from the plant is significantly lower than diesel generation.

Biomass gasification in Brazil

Biomass has historically played an important role in Brazil's energy supply, contributing to about 30% of primary energy demand. It is also seen as an important energy source for the future with new technologies enabling the efficient conversion of biomass to electricity. Biomass gasification is one of these options. The first commercial power station in the world to use woodfuel in a combined gasification and gas turbine plant is in the State of Bahia, North-Eastern Brazil. It operates by gasifying pre-dried wood chips in an air-blown circulating fluidised bed gasifier. The hot fuel gas produced is then cooled and cleaned of contamination before it is compressed and fed to the combustion chamber of the gas turbine. Exhaust gas from the gas turbine is used to generate steam to drive the steam turbo-generator from which electrical power is produced.

The feedstock for the plant is eucalyptus wood from a dedicated plantation, at a cost of less than US$2/GJ. The net electrical output of the plant is 30 MWe and the capital costs for the gasifier and gas turbine module are around US$1,500/kWe. The system is expected to be competitive with future hydropower generation and with current fossil fuel plant. The project developers include local industry, the local electric utility and a major energy company. The Brazilian Government and UNDP support the project, and part of the investment is funded through the GEF. On a wider scale, demonstration of the commercial viability of Biomass Integrated Gasification-Gas Turbine technology will stimulate its replication in Brazil and elsewhere. The system could be applicable in plant sizes between 20 and 60 MWe, and is capable of offering enormous potential for future electricity generation in rural locations, if it proves economically and technically successful.

Liquid biofuels

Liquid biofuels, usually in the form of alcohol, can be produced from the plant components oil, sugar and starch, and ligno-cellulose containing plants can be converted to solid fuel, methanol, synthetic gas or ethanol. Higher levels of production are obtained using the C4 plant species, which have a more effective photosynthesis and water and nutrient utilization than the C3 plant species. The most important liquid biofuels produced from biomass are ethanol, methanol and rape methyl ester (biodiesel).

Ethanol is of particular importance, since it can readily be used as a fuel for spark ignition engines. It can be produced from a wide range of agricultural products: sacchariferous materials such as sugar cane, sugar beet and sweet sorghum; starchy materials including cereal grains, cassava and potatoes; and cellulosic materials such as miscanthus and short rotation coppice. Table 3.4 lists ethanol yields from a range of agricultural products (Stout, 1990). The basic production process is fermentation by conversion of sugar to alcohol and carbon dioxide through yeast activity. Starches must be broken down into simple sugars before fermentation. The energy content per litre of ethanol is about 65% of gasoline but it has a high octane rating and can be used in more efficient high compression engines. Its low cetane rating makes it inappropriate for direct fuelling of diesel engines.

Table 3.4: Ethanol yields from various products


Yield (litres/tonne)

Wheat, corn, grain sorghum


Cane and beet molasses


Sugar cane, sugar beet


It is important to calculate the energy balance for ethanol production. Although a major part of the energy input comes from solar energy, there are other inputs associated with crop production, raw material processing and post-fermentation separation and drying. Precise calculations are dependent on assumptions made regarding system boundaries, but in general energy from corn provides little or no energy gain whereas ethanol from sorghum or sugar cane can show a gain of 20-30%.

Methanol can be made from wood, crop residues and other biomass feedstock. The basic process comprises gasification followed by methanol synthesis in the presence of a catalyst, and distillation. However, its cost, toxicity and the need for substantial engine modifications mitigate against widespread use of this fuel.

Production of vegetable oil as a substitute for diesel fuel is a relatively simple process. It involves extracting the oil from the oilseed, filtering, degumming and possibly reducing its viscosity through trans-esterification. Raw materials include sunflower, coconut, rapeseed, palm and olive oils. Once processed, they can be used in existing diesel engines without modification, or can be blended with diesel in varying quantities. Over the last 15 years biodiesel has emerged as a viable alternative transport fuel to petroleum fuel. In Europe biodiesel produced from rapeseed has been stimulated by utilising agricultural set-aside land for energy production, and in the United States, a surplus in soybean oil has been a driving factor. Annual world-wide production of biodiesel is estimated to be over 0.5Mt (IEA, 1998).

A description of ethanol production from sugar in Brazil is presented in the next section:

Making Ethanol from Sugar Cane in Brazil23

The Brazilian alcohol fuel programme (PROALCOOL) is the world's largest biomass-to-energy programme, making use of sugarcane as the feedstock for ethanol production. It has been credited with significant environmental and social benefits but it has also been criticized on economic grounds due to the high costs of ethanol relative to the costs of imported petroleum. The rationale for this programme was to reduce Brazil's dependence on petroleum and to help stabilize sugar production in the context of cyclical international prices. The programme began in 1975 and has provided valuable information about the economics, management, agricultural productivity, rural employment and environmental impact of a major biomass-to-energy initiative.

Ethanol makes an excellent motor fuel and is used either as an octane enhancer (78% gasoline, 22% anhydrous ethanol) or as neat ethanol (94% hydrated ethanol, 6% water). As the programme got underway, vehicle manufacturers developed suitable engine technology including dedicated and modified engines for the ethanol-gasoline mixture and straight ethanol products. Ethanol is used as a substitute for gasoline in cars and light vans, and is not used as a diesel fuel replacement in commercial vehicles.

The decision to use sugarcane to produce ethanol in addition to sugar was a political and economic one that required substantial additional investment, and around US$12B (1995 values) has been invested in the programme over the period 1975-1989. Data on ethanol and sugar production from sugarcane in Brazil in 1996/97 are shown in Table 3.5.

Table 3.5: Ethanol and sugar production from sugar cane in Brazil





Area cultivated (Mha)




Total production (Mt)





65 t/ha

7.6 t/ha

5170 l/ha

Yield (per tonne of sugarcane)


0.14 t

80 l

The different stages involved in sugarcane and alcohol production are indicated below. They differ only in the steps following juice extraction, which is either fermented to produce alcohol or treated to produce sugar. If sugar production becomes less attractive due to reduced prices in the international market, it is possible to shift production to alcohol.

Increases in cane productivity and cost reductions due to improved varieties, better harvesting and crop management and lower transport costs have been made since the programme began. In 1996 there were about 200 combined ethanol and sugar production units, but with different output sizes and conversion efficiencies. Sugarcane grown for ethanol production occupies only 5% of the land area devoted to primary food crops, and uses less land than corn, soybeans, beans and rice. Competition between land for food, export crops and energy crops is not significant in Brazil.

At the outset of the programme, ethanol production costs were close to US$100 per barrel of oil equivalent in 1980, but costs fell rapidly to half that value by 1990, due to economies of scale and technological progress in sugar production and processing. The expectation that alcohol prices would continue to fall so that ethanol would be directly price competitive with gasoline did not materialize. The basic production costs of ethanol are around US$0.21 per litre. Retail ethanol prices were originally set at 64.5% of the gasoline price but ethanol currently sells for 80-85% of the price of gasoline at the pump. To preserve this ratio and to guarantee a remuneration of US$400/m3 of ethanol to producers, there is a cross-subsidy from the sales of conventional transport fuels. Since oil prices in the international market fluctuate while ethanol prices received by producers is subject to government control, mismatches have occurred and the national oil company has incurred losses with ethanol commercialization.

Until 1990, the use of alcohol as a fuel was very successful. By 1990, 4.5M pure ethanol fuelled vehicles had been sold, and ethanol was replacing 50% of the gasoline that would otherwise have been consumed. However, in 1990 the Government launched a programme of cheap popular cars that could not easily be adapted to use pure alcohol at low capital cost. Together with a lack of confidence in a steady supply of ethanol, sales of pure ethanol cars had fallen almost to zero by 1996. The segment of the car market using the 22% mixture of ethanol has not been so badly affected. Overall the share of the transport fuel market taken by ethanol products had fallen from its peak of 50% in 1990 to less than 30% by 1997.

Nevertheless, there have been some major benefits of the programme. These have included the creation of more than 700,000 rural jobs with a low investment cost of around US$ 20,000 each. This has helped to reverse the migration from rural to urban areas and to increase the overall quality of life in many small towns. Improved sugarcane production and sugar and ethanol processing technologies have been developed, and a major renewable fuel programme giving significant savings in hard currency has been implemented over the relatively short time-span of 10-15 years. Furthermore, ethanol fuelled vehicles have had a beneficial effect on local air quality in Brazilian cities. Ethanol from sugar cane also offers a carbon substitution route. The net contribution to atmospheric CO2 accumulation from the ethanol programme in Brazil in 1996 is shown in Table 3.6. These data take into account the fact that sugar production uses 36% of the sugarcane produced (and almost all its bagasse):

Table 3.6: Net contribution to CO2 accumulation from the ethanol programme


106 tC (equiv.)/year

Fossil fuel utilization on the agro-industry


Methane emissions (mostly burning of residues)


Nitrous oxides emissions


Ethanol substitution for gasoline


Bagasse substitution for fuel oil (food and chemical industry)


Net contribution (Carbon uptake)


In 1996 the CO2 emissions avoided with the use of ethanol and bagasse corresponded to nearly 18% of total emissions from fossil fuel use in Brazil. Although this is an important contribution to CO2 reductions, the cost to Brazil of approximately US$ 200/tC is a significant one if the alcohol programme is viewed exclusively as a carbon substitution programme. Compared with other carbon mitigation options, this is a high cost. However, the social benefits in terms of increased rural employment, and the enhanced job quality and relatively higher wages for sugarcane workers compared with other agricultural sectors are considerable gains for the programme.

The balance between mechanization and the number and quality of new jobs created by the ethanol industry is likely to remain a key issue for several years. Mechanization using higher skilled labour could involve more efficient harvesting, field trash recovery, transportation and raw material conditioning, with fewer lower quality unskilled jobs. With improved cane trash recovery, the power generation sector of the cane processing units could operate for at least 11 months of the year and this would greatly improve the economics of producing energy from sugar cane. The trend will be towards better production technology and higher quality jobs requiring semi-skilled and skilled workers.

There are also techno-economic aspects of new power generation technology that need analysis. Energy co-generation is a common practice in the ethanol processing industry. Bagasse has an energy content of about 2GJ/t and this can be used in a co-generation facility to produce electricity and mechanical power for the mill drivers, as shown schematically below:

Further developments in co-generation technology are possible. Condensing extraction steam turbines are capable of generating an electricity excess of up to 100 kWh/t of cane, and modern biomass integrated gasifier/gas turbine plant can generate an electricity excess of 600 kWh/t. This would require additional investment that can be offset by selling the electrical excess, but the economics depend on the marginal cost of bulk electricity from other sources.

The main lessons learnt from the Brazilian alcohol programme are that:

3.7 The Role of Biomass in Rural Energy Supply

Modern conversion technologies and management practices can provide non-polluting and convenient biomass fuels. As outlined above, experience of bioenergy technology applications can be drawn from a wide range of operating conditions and in many different locations around the world. For example, the electrical loads of water pumping or domestic appliances in rural villages in developing countries are typically in the range 10-250 kWe. A bioenergy gasifier coupled to a small reciprocating engine and electrical generator are well-matched to these loads and biomass derived fuel could replace much of the diesel fuel used in this systems.

There are three major factors in assessing the future role of biomass in rural energy supply (Woods and Hall, 1994):

The constraints to the development of wider markets for biomass are:

Box 6 presents a case study in Thailand where the regulatory regime has provided a commercial incentive for small electricity producers to develop and sell power from co-generation or renewable energy technology independently of centralized planning by the national electricity authority (Forsyth, 1999).

Box 6: Small power producers in Thailand

Thailand has a well-developed grid-based electrical supply system. During the early 1990s, the government undertook a programme of privatization in order to increase the supply of new power projects and to improve efficiency of operation. Some 60% of new generating capacity between 1996 and 2011 is planned to come from independent power producers (IPPs). Small power producers were introduced as a category of IPPs, with relatively small power capacities of around 50-90 MWe. These comprise specialized users of fossil fuel co-generation plant operated by industrial manufacturers together with renewable energy producers, whose plant capacities are usually <30 MWe. The legislation provides a model of using technology and pricing to integrate renewable energy development into an existing grid system.

The number of IPPs has increased rapidly, with the majority of the supply coming from natural gas and coal fired power plant. However, 24 renewable energy proposals with a total contracted capacity of 189 MWe for export to the Electricity Generating Authority of Thailand (EGAT) grid had been accepted by the end of 1997:

Project type


Capacity (MWe)

EGAT sales (MWe)





Husks, wood chips




Palm oil




One such small power producer is TRT Parawood, located in southern Thailand. The company is one of Thailand's largest rubber wood sawmill operators, with a production of 4,000m3/month. In the late 1980s the company decided to invest in a 2.5 MWe co-generation plant for internal use and to sell excess power to the grid, and the plant was commissioned in 1996. The plant consists of an automated system for silo unloading, fuel distribution and a boiler feed. The fuel used in waste biomass material from the factory. The boiler produces superheated steam at high pressure, which is supplied to the condensing turbo-generator. Low pressure steam from the electrical generating system is used for kiln drying operations. The total cost of the plant was estimated to be US$2.2M, including civil works and buildings. By producing its own power, the company can save US$840,000/year in reduced energy purchase costs and sell excess power to the grid giving them an estimated income of US$48,000/year.

The description in Box 6 has shown that a key aspect in developing rural bioenergy systems is securing long-term access to local or regional electricity markets for sales of output power. Box 7 provides a description of two further aspects of bioenergy technology development, namely the stimulation of commercial and industrial activities for the design and supply of biomass technology (CO-GEN, 2000), and the use of biomass co-generation to assist in employment generation.

Box 7: Industrial development of bioenergy co-generation


The EC-ASEAN CO-GEN Programme is an economic cooperation programme between the European Commission (EC) and the Association of South-East Asian Nations (ASEAN), coordinated by the Asian Institute of Technology, Bangkok, Thailand. Its aim is to accelerate the implementation of proven co-generation technologies within the industrial sectors of the ASEAN region through partnerships between European and ASEAN companies. The programme provides information services and maintains databases of European technology suppliers and ASEAN potential customers. It is now involved in promoting reference projects in the form of full-scale demonstrations of proven technologies. These demonstrations are meant to be a showcase in ASEAN, aiming to convince other potential end-users to replicate the technologies.

The programme offers a contribution to the investment costs, training for plant personnel and monitoring by an independent organization. Examples of CO-GEN demonstration projects relevant to the agricultural sector include:

Co-generation in a palm oil mill, Malaysia

Palm oil residues are used as fuel for a steam-generating boiler, which produces enough steam for both a 1.2 MW electrical generator and the heat requirements of the mill. The investment costs amount to around US$700,000, energy savings can be made compared to normal electricity purchase from the grid. The expected payback is less than 3 years.

Co-generation in a rice mill, Thailand

Rice husks are used as fuel for a steam-generating boiler, which produces steam for hot water supply and for a 2.5 MW turbo-generator. The investment costs amount to US$4M, and savings in rice husk disposal costs, and reduced fuel oil and electricity purchases mean that the payback time is expected to be less than 4 years.

Use of Biofuels in a Sugar Mill in Nicaragua

Two Nicaraguan sugarmills will generate power from bagasse during the sugarcane season and during the rest of the year from eucalyptus from dedicated energy plantations. This type of power generation is more economic than power generation with fuel oil. It also has positive socio-economic and environmental impacts. Some 73% of the selling price of power from eucalyptus remains in the Nicaraguan economy, while this is between 14 and 30% in the case of electricity from fuel oil. Employment generation is more than 3 times higher in the case of eucalyptus than with fuel oil. CO2 and acidifying emissions of eucalyptus power generation are about a factor 30 lower than with fuel oil.

3.8 Bioenergy R&D and Technology Development

Solid, liquid and gaseous fuels produced from biomass can replace fossil fuels in many applications. A variety of bioenergy technologies have been developed and several options have emerged that promise to be competitive with conventional power generation options. Indeed, modern biomass furnaces for heat production are already fully developed and economically competitive in many cases. However, the biomass integrated gasification cycle for electricity generation, and combined heat and power production are not yet competitive with fossil fuels at current prices and nor is the production of transport fuels from biomass. Further market development will be required and additional development and demonstration to stimulate new and larger investments, which take more advantage of economies of scale.

One problem with traditional biomass use is the very low efficiency of conversion into useful energy. Biomass use can be modernized through techniques such as co-generation and production of liquid fuels as described above. Much work remains to be done, however, in taking forward bioenergy R&D and technology development, and a substantial level of industrial participation is essential to exploit the potential of biomass. Such work would include (EC, 1997):

Involvement by the equipment supply industry, project developers, energy companies, agro-industries, research institutions and local and national government organizations will be essential in order to undertake the necessary R&D and technology development.

17 An inter-agency initiative in this topic, which involves FAO, is outlined at <>.

18 The UNDP web site on sustainable livelihoods is <>.

19 See Annex A.2 for a detailed description of biomass definitions and terminology.

20 The 16 countries are: Bangladesh, Bhutan, Cambodia, China, India, Indonesia, Laos, Malaysia, Maldives, Myanmar, Nepal, Pakistan, Philippines, Sri Lanka, Thailand, Vietnam.

21 See for example, work in Denmark and Lithuania, <>.

22 USAID support through a GEF grant project has also enabled progress to be made in developing sugar cane co-generation in India. Some additional information on this project is given in Box 9.

23 Information in this section derived from Moreira and Goldemberg, 1999; Walter and Cortez, 1999; and de Carvalho Macedo, 1995.

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