The use of coconut oil as a biofuel in the South Pacific
Few places are in greater need of improvements in energy supply than the small island developing states of the South Pacific. Electricity generation in these countries relies primarily on imported oil, and suffers from significant diseconomies of scale: high transport costs associated with importation of fuel and the sub-optimal size of generators result in electricity costs that may be twice as high as in industrialised countries (Leplus 2003, Weisser 2004). In most South Pacific countries, urban electricity supplies are provided by a single government-owned utility, while in rural areas, electricity is either generated at a household or community level or is absent altogether. In total, an estimated 70% of the region's population lacks access to electricity (Woodruff 2007).
The reliance of South Pacific countries on oil imports represents a major drain on their economies, a barrier to development, and a source of vulnerability (Jafar 2000). The oil price rise of 2008 hit the region hard: in the Marshall Islands, where oil imports are over 200% of total exports (Cloin 2007), an 'economic state of emergency' was declared due to the government-owned electricity supplier's inability to pay for fuel (Dornan 2009). Fossil fuel use is also responsible for rapid growth in South Pacific countries' carbon emissions, albeit from a very low starting point, undermining their claim to international sympathy in the debate on global warming (Asafu-Adjaye 2008, Grasso 2006).
In South Pacific countries there is substantial potential for the development of renewable energy from sources such as solar, wind, wave, hydroelectric, geothermal or biomass. One renewable energy source that has attracted particular interest in the region is the use of biofuel based on coconut oil as an alternative to diesel. Coconut oil can be locally produced, reducing the South Pacific's dependence on imports (Levantis et al 2006), and the burning of it emits no carbon other than that which was absorbed during the growth of the nuts. Here I review the potential of coconut oil as an energy source in the South Pacific and the issues that have so far prevented its wider adoption. This discussion focuses on electricity generation, although coconut oil also has potential as a fuel for transportation, and as a substitute for kerosene in domestic lighting (e.g. Etherington 2005).
Availability and demand
Dried coconut (copra) and coconut oil have historically been major exports from South Pacific countries. However, following a long-term fall in the world price of coconut products (South Pacific countries themselves have too small a share of the world market to have a significant influence over prices), the return on labour from harvesting and processing of the nuts has become so low that copra and coconut oil production in the region have declined dramatically (Etherington 2005), virtually ceasing altogether in countries such as Samoa (Hoff 2008). These islands' coconut plantations therefore represent an under-utilised resource.
It has been estimated that current plantations in the South Pacific have the potential to produce over 126 million litres of coconut oil per year, as shown in the table below (Cloin 2007, EIA n.d.). In the larger countries of Fiji and Papua New Guinea this would make only a very minor contribution to national energy production, but in smaller island countries such as Vanuatu coconut oil could theoretically replace a substantial proportion of the fossil fuel-derived oil currently in use. (These figures consider all fuel uses, not merely electricity generation.) However, this proportion is likely to fall as economic development in the region increases demand for energy (Weisser 2004).
Processing and use
To avoid high transportation costs, production and processing of coconut oil for fuel should be done close to the point of use; attempts to run generators on coconut oil imported from other islands have proved uneconomical (Woods et al 2006). Small-scale extraction of coconut oil can be done using either a mechanical mini-mill, which has typical installation costs of $25,000 and requires skilled operators, or using a hand-operated press, which is cheaper to install and produces higher-quality oil but is extremely labour-intensive (Cloin 2007). Mechanical mills can be powered using the oil itself, making the process relatively carbon-neutral (Leplus 2003).
Coconut oil can be used as a fuel in one of three ways:
The use of coconut oil as a fuel makes economic sense only when it is cheaper than diesel. For most of the past half century this has not been the case, but since the 1970s there has been a long-term global trend towards higher fossil fuel prices and lower prices for coconut oil. By 2006, the average price of diesel in the South Pacific (where transportation costs raise the price of diesel relative to that of coconut oil) had risen to around US$0.50 per litre, while that of coconut oil was only US$0.30 (Cloin 2007). At remote island localities, the price advantage enjoyed by coconut oil can be even greater (e.g. Woodruff 2007). Specific price data for Pacific countries since 2006 is hard to obtain, but on world markets the price of crude oil (from which diesel is refined) is currently around 30% higher than in 2006, while coconut oil prices have returned to approximately their 2006 levels (Mongabay 2010), following dramatic spikes in the prices of both commodities in 2008. This suggests that coconut oil has remained competitive with diesel as a fuel. However, the ongoing volatility in the prices of these commodities represents a major source of uncertainty for those seeking to invest in biofuels (Etherington 2005).
In some Pacific countries, such as Tuvalu, the economic situation is complicated by the existence of subsidies that encourage the export of coconut products rather than their domestic use, thus favouring imported diesel over locally-produced biofuel (Woods et al 2006).
At a national level, detailed analyses suggest that substitution of coconut oil for diesel as a fuel would have a positive effect on the balance-of-payments situation in typical South Pacific countries. However, in countries such as Vanuatu, in which coconut products remain a major export, the economic benefit derived from domestic use of coconut oil would be partially offset by the loss of potential export earnings (Cloin 2007).
Potential exists for South Pacific countries to seek investment in further development of renewable energy through the Clean Development Mechanism (CDM) established by the Kyoto Protocol, under which industrialised countries finance projects in developing countries that reduce carbon emissions and promote sustainable development. To be eligible for investment under the CDM, projects must achieve demonstrable emissions reductions that would not otherwise have occurred, and procedures must be established for monitoring and verification, which can be tricky in the case of biofuels projects (Bakker 2006). Most CDM projects so far have been in large countries such as China, India, Brazil and Mexico, with South Pacific countries largely failing to attract CDM investment due to the small scale of emissions reductions available (making the high transaction costs associated with CDM projects not worthwhile) and a lack of institutional capacity for managing projects (McGregor 2009). Of the 2,096 CDM projects currently registered worldwide, only two are in the South Pacific, neither involving biofuels (UNFCCC 2010). The returns available from use of the CDM for biofuels may also be quite small: Weaver et al (2007) estimate that a CDM project involving biodiesel production from coconut oil in Vanuatu would earn no more than US$0.04 worth of emissions reduction credits per litre of fuel.
Opportunities for South Pacific countries to obtain funding for renewable energy projects also exist under other schemes such as the Global Sustainable Energy Islands Initiative, a consortium of multilateral donors and NGOs, whose work has included a feasibility study into the development of a biodiesel refinery using coconut oil in Fiji (Roper 2005, GSEII 2005).
Experiences so far
Although coconut oil has yet to be adopted on a large scale for electricity generation, several demonstration projects have been carried out in the South Pacific region. The first was at Ouvéa in the French territory of New Caledonia, where generators running on crude coconut oil were installed in 1999 to provide power totalling 315 kW to an oil mill and two desalination plants (Leplus 2003). More recently, urban utility companies in Vanuatu and Samoa have successfully trialled the use of small quantities of coconut oil blended with diesel in their existing generators (Evans 2006).
Rural electrification schemes have also been carried out using coconut oil as a fuel source. An early demonstration project was on the Fijian islands of Vanubalavu and Taveuni, where dual-fuel generators capable of using coconut oil together with diesel were installed by the government of Fiji (with French support) in 2001. The intention was to provide the communities with both affordable electricity and an economic boost through the purchase of locally-produced coconut oil. At the time of installation the cost of electricity was estimated at US$0.25/kWh from coconut oil and US$0.43/kWh from diesel, with 68% of the former being recycled into the local economy. However, three years later both generators were being run entirely on diesel. A cyclone and lack of cooperation from oil producers had prevented adequate supplies of coconut oil being obtainable locally, and coconut oil imported from farther afield proved more expensive than diesel (Woods et al 2006).
The high price of fossil fuels in the South Pacific, and the economic as well as the environmental hazard associated with their use, make renewable energy particularly attractive in the region. New renewable energy projects also offer an opportunity to bring electrification to isolated island communities that previously lacked proper electricity supplies.
In coconut oil, Pacific islands have a renewable fuel source that is locally-produced, high-yielding, straightforward to process, and can be accommodated to a certain extent by existing diesel-based energy infrastructure. It is also environmentally friendly: not only is the burning of coconut oil carbon neutral, but its production and distribution can be done without significant emissions, if the oil is pressed locally using machinery operated by hand or powered using the oil itself. A further advantage of coconut oil in the South Pacific over other biofuels such as palm oil is that large, under-utilised areas of coconut plantation already exist in the region, so land use for coconut oil production need not compete with food production or biodiversity. Although coconut oil is not available in sufficient quantities to completely replace fossil fuel use, potential exists for it to make a substantial contribution to some Pacific countries' energy needs.
Following the success of initial trials, the addition of small quantities of coconut oil to diesel for use in electricity generation is likely to become widespread wherever the oil is available at a competitive price. However, realising the full potential of coconut oil as a fuel will require investment in oil processing infrastructure, and in specialised generators capable of handling the oil in larger concentrations. Unfortunately, investment in renewable energy in the South Pacific has historically been neglected due to a lack of awareness of the available options, lack of institutional capability, and a lack of financing opportunities (Weisser 2004). Another recurring problem has been a lack of involvement and collaboration with local stakeholders (Jafar 2000), which was evident in the partial failure of the Fijian scheme described above (Woods et al 2006). Further development of coconut oil as an energy source therefore requires better cooperation between governments, international donors, coconut growers and millers, and local communities, with an emphasis on long-term capacity building rather than short-term infrastructure investment.
Another problem is the volatility in prices of both coconut oil and fossil-fuel alternatives, which makes the return on any investment in biofuels uncertain. Initially, overcoming this problem may require subsidy for coconut oil production, together with the elimination of any existing subsidies that favour the use of imported fuel.
South Pacific governments are under little pressure to support renewable energy on environmental grounds, since the region's per capita carbon emissions are already a mere quarter of the world average (Nurse & Sem 2001). However, properly-implemented renewable energy schemes offer clear economic benefits. A greater capacity to use coconut oil as an alternative to diesel would buffer vulnerable South Pacific countries against changes in the world price of both commodities, providing them with a much-needed measure of economic stability and energy security. In addition, the prospect of reducing carbon emissions through biofuel use provides foreign donors with an incentive to help South Pacific countries invest in sustainable development of their energy resources.
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This was originally written as an essay for MSc Ecological Economics at the University of Edinburgh