Government urged to rethink E85 policy

Government urged to rethink E85 policy By Vijo Varghese

The Nation

Published on June 11, 2008







Auto majors discuss the viability of ethanol-based fuels in Thailand

The energy battle is an ongoing one. There is no finite end to it unless we find some way to extract 100 per cent of solar energy. For now though, let us turn our attention to the debate on whether ethanol-based fuels or biofuels as they are also called, are the way to go for Thailand.

The Thai government recently said E85 would be available at fuelling stations by the end of this year, a plan that was previously set for 2012. It shows the urgent need for an alternative fuel to cut oil imports.

But the problem is what many call the "chicken and egg" situation. There is no point having fuel at the fuelling stations if there are no cars that can run on this type of fuel. Besides a fuel-management system designed for biofuels, other parts in a cars engine will need to be changed to accommodate ethanol-based fuels. This means the government needs to provide enough incentive for carmakers to produce E85-vehicles in Thailand.

There are four main players in this picture. First is the government, which needs to figure out which way the country needs to head. Next,  the oil companies that need to set up refineries and ensure that biofuels are available at fuelling stations. Third, the auto-makers, who need to manufacture cars that can run on biofuels. Fourth, and perhaps the most important is the consumer, who needs to have enough incentive to choose biofuel as opposed to regular petrol.

To promote the manufacturing of biofuel-capable vehicles in Thailand, the cabinet recently provided some tax privileges to auto-makers. The privileges start with a zero-per-cent import tax on parts that make the vehicle E85-capable (limited to three years). The excise tax has been decreased to 25 per cent for E85-vehicles (with engine size less than 2-litres), similar to those given to E20-capable vehicles.

We chat with auto-makers, an ethanol producer and an adviser to the government about the nation's energy future.

Volvo

The famous Swedish carmaker is one of the major promoters of biofuels in Thailand and is also one of the first to have an E85-capable car running in Thailand. The Volvo C30 E85 comes with a 1.8-litre engine and a manual transmission and costs about Bt1.8 million.

President of Volvo Cars Thailand Paul Stokes said, "What is important to understand is that an E85-vehicle is bi-fuel, which means it is capable of running on any fuel from pure petrol, to any mixture of ethanol up till E85. So this provides the advantage of going across Thailand even

in regions where biofuels are not available."

Stokes said he was unhappy with the incentives that the government had provided to produce E85-vehicles in Thailand. "The zero-per-cent tax privilege for E85 CBU [completely built unit] parts is quite useless as the monetary benefit from this is almost negligible. Besides, this would mean that we would have to ship the parts of the engine separately which only adds to costs," he said.

Stokes said turning to ethanol-based fuels was to a large extent the only option that Thailand had, mainly due to its large agricultural base. The ethanol production in Thailand did not affect food prices as it mainly came from sugar cane.

"Thailand needs to take advantage of its position and promote biofuels. But the right incentive has to exist for auto companies to invest in producing cars here.

"The current incentives are not sufficient and we are hoping that the government will come up with something more attractive," Stokes said.

"In Sweden, many incentives are given besides just the decrease in the price of the car and cheap fuel. If the government wants to successfully implement E85 in the long term, then it is important to provide other incentives such as cheaper registration, lower insurance and lesser road tax for E85-capable vehicles.

"The money that the country saves on oil imports can be channelled into promoting people to use biofuels," Stokes said.

Chevrolet

This carmaker is one of the leaders in compressed natural gas (CNG) technology in Thailand and is the only company in Thailand that produces factory-fitted CNG vehicles.

The Chevrolet Optra sedan comes with a three year, 100,000 kilometres warranty. An even more recent product is the dual-fuel Colorado pickup. The Colorado CNG runs on a mixture of 65-per-cent CNG and 35-per-cent diesel and will switch to 100-per-cent diesel when the CNG runs out.

Asean Public Policy of General Motors Thailand director Khanchit Chaisupho said, "We have seen high growth in sales of our CNG products in the past months. It shows a clear trend that consumers are looking at alternative fuels due to high fuel prices. Globally, GM is a leader in alternative technologies ranging from hydrogen fuel-cells, hybrids, CNG vehicles and biofuel vehicles. Thailand, however, has enough raw materials to produce ethanol to support E85.

"But the new incentives that the Cabinet has put forth, do not promote both CBU imports and CKD production of E85-vehicles in Thailand. Why it that the excise tax for E85-vehicles is similar to that of E20-vehicles? Why is there only a three-year limit for the zero-per-cent waiver of import tax for E85 parts? Why is the excise tax decrease for E85-fuel so less?" he said.

Khanchit said if the government really wanted to promote E85-vehicles, then the excise tax should be lower than that of E20-vehicles. The three-year waiver for E85-parts is useless as it will take time for auto companies to draw up a strategy and it is not worth making changes for such a short period.

"I hope that the government draws up a new policy for E85, as the current one is not usable for auto companies which are interested in importing or producing E85-capable vehicles. Without a clear direction to head in, the government cannot expect auto manufacturers to invest in any sort of alternative fuel," he said.

Petro Green

With more than fifty years of experience and success in the sugar and sugar cane industry, Mitr Phol Sugar Group is a household name for most people in Thailand. Petro Green, a subsidiary of Mitr Phol was established in mid-2005 and is today the largest producer of ethanol in Thailand, with an investment of more than Bt4 billion.

"Ethanol is a renewable source of fuel and unlike oil, its prices will not rise drastically like what we have been seeing in Thailand. It is a source of fuel that benefits the local industry as it ensures that money stays within the country, unlike crude oil, which we buy from foreign countries. It also benefits the quality of life of farmers who produce sugarcane," Petro Green director Pravit Prakitsri said.

The excise tax on E85-fuel will be reduced to Bt2.57 per litre from Bt3.68, when it is introduced later this year. Considering that E85 is less fuel efficient as against petrol, it is important that the fuel is cheaper to offset the amount of extra fuel that the consumer has to fill. Studies show that fuel consumption for E85-vehicles is about 20 per cent to 26 per cent higher than an engine using petrol.

"The excise tax that the government has set is too high. The right figure should be about Bt0.55 so that people will consider filling up their cars with E85. The price of ethanol will not rise either, as supply is also high. Currently, Thailand produces 20 million tonnes of sugar cane to produce ethanol, and about 50 million is exported. In the future, if demand for ethanol grows locally, we can decrease exports and focus more on producing ethanol locally," Pravit said.

Adviser to the Energy Committee of the Thai Parliament

"We have come to a phase in which oil prices will no longer drop, they will only rise. It is therefore important for us to find a solution to this problem. Transportation is not the only problem that we are looking at. We need to consider alternatives," Captain Dr Samai Jai-In said.

He said Thailand was the first country in Asia to sell E10-gasohol. The country is also the first to implement ethanol-based fuels on such a large scale. He did, however, recognise the need to continue this effort and work toward lesser dependency on crude oil.

"Ethanol-based fuels are one of the most important forms of alternative fuel and we will continue to promote them and support an industry that will allow more widespread use of bio-fuels," he said.