PHILIPPINE ethanol production is expected to hit 320 million liters this year, up 8.1%, as declining sugarcane output and high prices encourage more market entrants going forward, the United States Department of Agriculture (USDA) said.
“For 2020, production is again likely to increase as additional distilleries begin operations,” the USDA’s Foreign Agricultural Service said in its latest country report on Philippine biofuels.
Biofuels are blended with conventional fuels as called for by Republic Act No. 9367 or the Biofuels Act of 2006. The current blend mandates are 10% and 5% for ethanol and biodiesel, respectively. Their consumption is largely a function of the mandated blend. Molasses from sugarcane is used in ethanol production, while coconut oil is the feedstock for biodiesel.
The law is meant to develop indigenous and renewable energy sources to cut the country’s dependence on expensive imported fuel. It also seeks to mitigate greenhouse gas emissions, while helping create jobs in rural areas. Among others, RA 9367 provides fiscal incentives to biofuels producers and distributors including income tax holidays, duty-free imports, and value-added tax exemptions.
The report said the expected higher production next year will come from two plants with a combined capacity of 68 million liters to add to the existing 380 million liters from 12 plants as of 2018. No additional ethanol plants are expected to operate in 2019.
“Competitiveness of the local sugarcane industry is a major challenge. The Philippines has one of the lowest average sugarcane yields in Asia,” it said.
Total raw sugar production in 2019/20 (December/November) will hit 2.1 million metric tons (MMT), unchanged from the previous year, with cane production expected at about 22 MMT, it said.
In recent years, the industry has switched from sugarcane to molasses, with the high and rising sugar prices — and consequently of molasses — a serious challenge, the report said.
“From Sept. 1, 2019 to Oct. 20, 2019, the average ex-mill price of molasses was P12,153 ($238) per ton or 52% from the P8,014 ($157) per ton average mill site price during the Sept. 2 to Oct. 21, 2018 period,” it said, adding that nearly 80% of the total molasses in the country is used for ethanol production.
“A proposal to import molasses to augment local feedstock supply is being studied at the Philippine Senate as local ethanol producers can only import molasses when approved by the SRA (Sugar Regulatory Administration),” it said.
Meanwhile, the report expects biodiesel production this year of 220 million liters, or unchanged from the previous year.
The USDA report said blending of ethanol peaked at 10% in 2014 but declined to below 9% in recent years. For biodiesel, consumption growth is driven by increased diesel use since 2009 with the blend rate peaking at 2.8% in 2016 due to increased motor vehicle sales.
“There are moves to allow molasses imports, but this will require an amendment to existing laws,” the report said.
For biodiesel, the planned 5% blend in 2015 has not happened because of feedstock supply concerns.
The Department of Energy has kept the ethanol and biodiesel blends this year at 2019, “but it is unclear when and whether blend targets from 2020 onward will be revised,” the USDA said. — Victor V. Saulon