Green Manufacturing, Energy Efficiency

Are theyAchievable?

With power interruption becoming the norm, implementing green manufacturing has been almost impossible in Ethiopia. Although there are many companies that have embraced the idea of using green energy as a source of power, poor electricity supply has forced them to be dependent on fossil fuels. Especially cement factories, and industries that require high voltage, have no choice but to spend increasing amounts of foreign currency to import coal and fuel. Such a reality, coupled with inefficient energy usage, is profoundly costing the country. EBR’s Ashenafi Endale explores.

Established half a century ago, Kaliti Metal Factory, now owned by Tsehay Industries, is trying to use green energy as a source of power, instead of relying on fossil fuels. The company’s bid to develop a cleaner and more sustainable energy system, however, has not been easy to pursue.

This is because Kaliti Metal Factory is experiencing recurrent power interruptions, which is forcing the company to work way below its production capacity and reducing its revenue. Unable to sustain their green wish, the company had no choice, but to stick to using fossil fuel energy as the main source of power.

“Even though we embraced renewable green energy a long time ago, doing so has not been simple from the outset,” says Mathewos Asele, General Manager of the Factory. “So, we usually use fuel-based generators because the electricity supply fluctuates, and this has a big impact on our productivity and the wellbeing of machineries.”

Ethiopia is far from satisfying the national demand for fossil fuels and is capitalizing on its abundant renewable sources such as wind and solar. This has a tremendous impact, especially on industries. Medium- and large-scale industries account for 90Pct of the total energy consumed in the manufacturing sector. Oil products are the major source of energy for industries, accounting for 60Pct, while coal and electricity (green energy) contribute 20Pct, each.

Energy supply to the manufacturing sector is insignificant, as the lion’s share of the 4,244MW renewable energy generated in Ethiopia, goes to households. Households in Ethiopia consume 91Pct of the energy produced, whilst the transportation sector accounts for 6.3Pct, and the services and industrial sectors constitute less than two percent of the total energy use.

Currently, Ethiopia has 18 power plants, of which 14 are hydropower with a total installed capacity of 3,814MW. The remaining 324MW is generated by three wind farms, 104MW from diesel generators, and 7.3MW from Aluto geothermal plant, according to Ethiopian Electric Power (EEP).

Myth vs Reality
Increasing the share of green energy whilst keeping Ethiopia’s grand target—becoming Africa’s manufacturing by 2025—remains overambitious and far from being realized. The timeline has since been pushed to 2030 after the recent introduction of the ten-year Homegrown Economic Reform plan.

Meanwhile, the Ministry of Trade Industry (MoTI) has finalized two strategies dubbed ‘Green Manufacturing’ and ‘Energy Efficiency’, to be officially launched in 2020. Since early 2019, urgent meetings have been ongoing to collect recommendations on these strategies. The strategies are crafted and presented by USAID experts, which has committed to finance the implementations. The Green Manufacturing strategy targets shifting energy utilization in the manufacturing industry from fossil fuels to renewable energy and reducing environmental pollution resulting from the usage of energy sources like coal, furnace and fuel. Although Ethiopia has previously introduced a regulation with penalties to prevent industrial pollution, it has been well compromised.

But the new strategy says new industries established post-2019 are required to meet the standards before becoming active, while industries that were operational before 2019 will be pushed to abide to the changes. Though the standards are thus far voluntarily, the strategy plans to gradually make them mandatory for industries, by first using incentives then moving on to pollution tax.

The other strategy, which deals with energy efficiency, envisages effective utilization of the available energy—with cheaper prices, less waste, and attractive profits. This aims to prevent the annual energy loss from inefficient use, which currently stands at 20Pct from total power generation, mainly by industries. The energy efficiency document proposes a 40Pct cut in the carbon dioxide released by industries by 2025.

“Once the strategies are launched, no industry can be operational without an approval for compliance in energy efficiency audit and environmentally green facilities. All energy that is now being used in Ethiopia is either inefficient or polluting. Diesel energy is frequently used, despite polluting the environment,” said Teka Gebreyes, State Minister of Trade and Industry. “If industries do not move towards renewable energies within a specific timeframe, we will introduce polluting taxes.”

Although Ethiopia led the green economy initiative through the decade-old Climate Resilient Green Economy (CRGE) program, it lacked a green manufacturing aspect even though it envisaged middle-income status by 2025 with zero emissions. “Lack of capacity, fixed mandate, and high turnover rates contributed to the weak implementation of energy and environmental standards in Ethiopia, according to Shiferaw Damtew, Director at Industrial Parks Development Corporation (IPDC). “Ethiopia’s green industry and CRGE strategy are less effective, mainly because universities fail to play their crucial role of producing competent and skilled graduates.”

The new strategies are drafted to support the implementation of the CRGE in manufacturing industry. However, the private sector, energy production stakeholders, and sectoral institutions under MoTI complained that they were not part of the strategy making process. “I have no clue about it because they did not ask for our recommendation,” says Sileshi Tadesse, Director of Textile Industrial Development Institute (TIDI).

The strategies have also faced major criticism from the Ethiopia Energy Authority (EEA), established recently to regulate the energy industry. “We have already rolled out our own energy efficiency road map until 2030, with regulations and directives to implement it,” explains Getahun Moges, Director of EEA.

The Authority has envisaged saving 1,700GWh a year and reducing industrial energy waste by 64Pct in the next decade. In doing so, the country will save ETB28.5 billion up to 2030 and another ETB6.3 billion in terms of monetary value from energy audits and voluntary agreements with industries.

For now, the presence of extremely energy-intensive industries such as cement factories means more greenhouse gas (GHG) emissions. Most industries rely on fossil fuels for thermal energy to support industrial processes. “Majority of existing industries in Ethiopia operate with old technologies. They employ old technologies that are not energy efficient,” says Bekele Mekuria, Director of Food and Beverage Institute.

Currently, big industries in Ethiopia use two types of energy sources. The first is heat energy, which can be found either from coal or liquid fossil fuel. Industries also access heat energy from biofuel and domestic waste. The second is green energy (electricity) supplied by government. But relying on the latter has not been easy owing to recurrent power interruptions severely affecting productivity and leading to huge output losses. For some companies, it is not possible to fully rely on green energy. “Only 50Pct of energy consumption of cement industries comes from green energy as heat energy cannot be replaced by green energy,” stresses Mesfin Abi, Chief Executive Officer of Habesha Cement, which only utilizes 46Pct of its installed production capacity of 1.4 million ton cement per year.

Cement industries need heat up to 1,800 degrees centigrade for production, which is produced mainly from biomass, fuel or coal. But it can be replaced by green waste components, like the fast spreading weed plant found in Afar and leftovers from agro-processing plants. “But this has a big problem: consistent supply. Agreements and contracts are critical to sort, recycle and supply such plants, green wastes, and agro-industry wastes to accepting industries. Facilitating this must be the government’s role, which is already taken it into consideration by MoTI,” adds Mesfin. There are over 14 heavy industries in cement and textile using substantial volumes of heavy fuel, coal, and other non-green energy resources for high temperature raw material processing.

Ethiopia’s annual coal import bill is more than USD250 million. If the country could replace a third of this with green local biomass heat energy, it could save 80Pct of the foreign currency. But for Heyeru Hussein, Coordinator of Green Manufacturing Project at Ethiopian Chamber of Commerce and Sectoral Associations, the strategies drafted to facilitate this have some flaws. “The new draft strategies on green manufacturing and energy efficiency overlooked the importance of a platform for implementation and the avoidance of clashes of mandate amongst government institutions,” he adds.

The Chamber is already working on 120 industries—45 each in the leather and textile sub-sectors as well as 30 in handicraft—on reducing pollution, energy efficient production processes, and resource exploitation. It recommends textile industries use yarn made from the palm tree rather than cotton, which needs chemicals. The Chamber is also pushing its leather members to use vegetable tanning instead of chrome and paper over plastic packaging. “European and USA markets do not buy leathers treated with chrome. So, our tanneries export semi-processed leather to China, eliminate the chrome, bring back the leather, make leather products with it, and finally re-export to those markets. They do so because it takes huge investment to install plants that do not use chrome, a type iron metal,” says Heyeru.

Nonetheless, Heyeru says the Chamber has no capacity to work in heavy industries like cement, in similarity with MoTI. “This is because solving problems for a cement factory requires solving problems in 1,000 to 12,000 micro and small industries, which are linked to it. This requires huge capacity, which the Chamber is unable to do.”

Currently, the Ethiopian government has established two advisory platforms for coordination, advisory and implementation. One of which is established at IPDC and is tasked with consulting and regulating industries inside industrial parks, while the other under MoTI is mandated to oversee industries outside of the parks. “We are already building capacity on green and efficient energy, industrial water and waste management, and corporate social responsibility (CSR) in industrial parks. We trained over 35 personnel last year. But producing a road map and strategy is critical towards standardization at the national level and sustainability,” argues Hiwot Hailu, Clean Energy Advisor for IPDC.

Now, each industrial park is spending USD50 million to comply with energy and environmental standards. Adding to this, Timnit Woldegiorgis, Advisor at the MOTI and Coordinator of the strategy preparation, recommends establishing a steering committee and technical working groups for the proper implementation of the strategies. “The action plans of the strategies will be included in the annual plans rolled out by government and each industry.”

Be that as it may, IPDC’s Shiferaw Damtew says an environmental tax program is highly necessary in Ethiopia. “It will cut out the closing and opening of non-complying industries,” he says. “Ethiopia has the legal framework for energy efficiency. But it could not be implemented because there is no synergy between the micro and macro levels. There is also no energy audit in Ethiopia, even though it is in the legislation. Certification is also absent.”

Ethiopian industries lose significant amounts of energy supplied to them because they lack the concept of energy conservation particularly while using motors, lights, pump compressors, and boilers. Resultingly, energy expenses constitute 55Pct of the total production cost in cement, 50Pct in ammonia, 30Pct in steel, 30Pct in glass, 25Pct in fertilizer and paper, 20Pct in ceramics, and 13Pct in textile industries. For instance, annual cost due to inefficient use of electrical energy at Mugher Cement Factory stood at ETB80.6 million, while that of fuel oil energy stood at ETB72.4 million, according to the research paper Energy Utilization Assessment in Ethiopian Industries (Case Study at Mugher Cement Factory), published by Alebachew Tilahun in 2016.

International Energy Agency recommends digitization as a modernized energy efficiency mechanism, in addition to its policy recommendations on strengthening trust in digital technologies and infrastructure, transforming the job market, increasing access to energy data, minimizing negative environmental impacts, and encouraging technology and business model innovation. For Lars Peter, one of the consultants who prepared the draft strategies, energy efficiency in Ethiopia is at its infancy, let alone achieving such an endeavor that requires huge capital. “For now, energy regulation in Ethiopia should focus on the capacity building of industries and regulators. Once the regulation starts strictly, it can use financial and fiscal stimuli to encourage compliance. It must gradually move from voluntary to mandatory modes. For instance, China first made it mandatory for only industries that relatively consume higher energy.”

Moreover, Peter underlies Ethiopia needs to undertake three tasks to achieve energy efficiency and green manufacturing. “The first is to assess how much is the industry energy loss and pollution. Then, the country needs to set goals how much it must reduce annually. Energy efficiency should be treated like any business. It might need fiscal incentives to make clean energy cheaper and profitable for industries,” he says. “Baseline survey, target, and actions in energy management programs are required. However, accessing quality data from industries is critical but remains highly difficult.”

Peter also recommends the adoption of a revolving fund for effective energy efficiency. “The fund can help industries install facilities needed for efficient energy usage. Once the first batch of industries meet standards without affecting their own financial flows, they will repay the fund loan to be transferred to the next batch.”

Birhanu Gizaw (PhD.), an industrial engineer with 30 years of experience at Addis Ababa University, argues it is better to regulate energy production than controlling each industry. “Irresponsible energy use and pollution have remained side effects of civilization, though industrialized economies are shifting towards renewable energies like wind, hydro, geothermal and even tidal energy from the oceans.” He also recommends nuclear energy, recognized as green energy, as the most viable energy source for developing economies.

For Birhanu, Ethiopia does not have to walk a similar path. “Ethiopia needs to start taxing industries who fail to comply with green energy requirements after all the voluntary efforts,” he underscores. “Even currently, I believe cement industries should be taxed for their emissions and pollutions. It is simple to calculate emission tax, if the location of the factory and energy usage of a plant is known.”

8th Year • Dec.16 – Jan.15 2020 • No. 81