Ethanol as a household fuel in Madagascar
Practical Action
A financial analysis was conducted for an ethanol micro-distillery plant, producing 120 litres per
day, using the four production scenarios detailed below. An ethanol price of 35 US cents per litre
would provide a positive return for micro-distilleries in each of the scenarios, except for those
using sugarcane as a feedstock without the sale of by-products.
Scenario
Price of ethanol (US$) Payback period
Low-cost feedstock w/ by-products
0.14
10 years
Sugarcane w/ by-products
0.26
11 years
Low-cost feedstock only
0.34
10 years
Sugarcane only
0.46
10 years
Table 6: Break-even price of micro-distilleries operating with different feedstock/product scenarios
Deforestation
If ethanol replaced the use of wood and charcoal for household cooking on a large scale, this
would have a significant impact on the forests of Madagascar. Currently it is estimated that 90%
of wood for household cooking (either as wood or by conversion to charcoal) is from unmanaged
sources, resulting in forest degradation. The value of avoided deforestation was calculated by
taking the equivalent amount of charcoal that would be required to produce the same energy as
that provided by ethanol stoves, assuming that a traditional charcoal stove consumes 513 kg of
charcoal per household per year, which worked out in total at 1.4 million hectares of forest (FAO,
2005).
Using a factor of 418 tons/ha carbon sequestration capacity of natural forests, an emissions
reduction of 585 million tonnes of carbon was calculated, equating to US$324 million.
Employment and reduced household labour
A large scale ethanol household fuel program could have significant poverty reduction benefits if
managed correctly, mainly through the decentralisation of energy production and the increased
use of a very clean household cooking fuel. Combining the labour required to produce the
sugarcane feedstock and the labour required to produce the ethanol and transport it to market
(analysis of other micro-distilleries from Brasil and the US allow an estimation of 4.5 full-time
staff required per micro-distillery) gives an estimate of 0.05 days labour per litre of ethanol.
The increase in labour employed in producing ethanol will be offset in part by the reduction in
employment in the charcoal industry, estimated at 10.6 man days per tonne of charcoal. Based
on the projected rate of adoption of ethanol as a household fuel, this yields a net increase in
employment of 571,000 additional jobs over the 30 year period, predominantly in rural areas.
Overall summary
Calculating the net present value (NPV) of all the economic categories, using an ethanol price of
35 US cents per litre, over a 30 year penetration period, discounted at 10% over a 30 year
operating period, Table 7 reports the total economic benefits over 30 years using a sugarcane
plant selling by-products, and includes increased fuel and stove costs to households and returns
on investment to distillery operators (including the production costs of ethanol, as well as the
sales of ethanol and related co-products).
Note: disability-adjusted life years (DALYs) was estimated at 0.03 per household per year, for a
household switching from charcoal to ethanol as the household fuel, result in a total of 442,000
DALYs saved over the 30-year period, equivalent to a total discounted value of US$34 million.
Economic benefit
NPV of benefits over 30 years (US$ million)
Increased costs to households of fuel and stoves
-175
Return on investment to micro-distillery operators
74
Avoided deforestation (dependent on valuation approach 87.5-324
Avoided DALYs
34
Time savings
368
Table 7: Overall NPV for economic factors over 30 year period
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