Malaysia : once-vaunted biofuel industry grinds to halt

Malaysia's once-vaunted biofuel industry has seen production grind to a halt since a Mar 2010 announcement that the government's mandatory switch to the green energy will be delayed to June 2011. Malaysia had ambitions to become a global leader in biodiesel and unveiled grand plans for the industry as the price of crude oil spiralled, peaking in mid-2008. However, the future of the alternative fuels is now in question given cheaper crude prices and the higher cost of Malaysia's palm oil.

Malaysian Palm Oil Board (MPOB) figures show that the production of biodiesel, a mixture of diesel with 5% processed palm oil, dropped 99% from 12,640 tonnes in March to just 137 tonnes in July. Malaysia has approved 56 licences for biodiesel output, which would create a production capacity of 6.8 million tonnes, but most plants have not been set up. The country is the world's second-largest exporter of palm oil after Indonesia, and the two countries account for 85% of global production.

- Biofuel has never quite been a spectacularly good idea on a number of fronts :

1. The food vs fuel problem. To put it very simply, this comes out as : do we grow food for cars or do we grow food for people? And as we've found out when we try to do both, food prices rise, and that's about the only spectacular thing we see about biofuels - the accompanying rise in food prices.

2. The EROEI (energy returned on energy invested) problem, which would roughly translate into a lack of monetary returns, meaning that all these biofuel ventures aren't quite viable without subsidies.

3. The lead time problem, which means that even if we were to burn ALL the animals AND all the plant growth on the Earth, we would only satisfy just a fraction of the world's total annual energy needs. Some studies have put that fraction as 1/400. Or to put it another way, every year we burn through an energy equivalent of 400 years of all plant and animal growth on the planet's surface (re: this entry from almost 5 years back : "So much for biodiesel"). As you can see, it's a bit hard to compete with hundreds of millions of years of geologic time that gave us these fossil fuels. It's kind of a big problem.

So, with governments withdrawing subsidies, and a bit of a drop in crude oil prices, we are seeing this thing about biofuels not being such a good idea get proven out. But I wouldn't count out biofuels totally yet. In fact, with the ongoing currency wars, which Japan kicked off the week before, once crude oil prices really get going once again, we might see yet another resurgence of this old idea of burning food to fuel our vehicles. We could easily see record food prices, food shortages, and a whole lot of hand-wringing over the whole issue. Again. Let's just hope that next time it's different.

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