28/01/2008 (The Nation Multimedia, Thailand) - A new national biofuel organisation will be formed by the end of the year and will include representatives of the government, the private sector and the public.

It will be responsible for promoting the use of alternative fuels, and formulating a national policy for biodiesel and ethanol.

The need for alternative fuels is increasing because of huge rises in crude oil prices.

The Energy Ministry has spoken with the Commerce and Agriculture ministries, education institutions, farmers, the automobile association and oil retailers about the organisation's structure.

The plan will be tabled in Cabinet within one to two months, and could be up and running this year, Praphon Wongtarua, a senior expert at the Alternative Energy Development and Efficiency Department, said last week.

"Currently, many agencies are involved with alternative-fuel promotion, but they are working separately. There is no unity in managing ethanol and biodiesel and adding value and generating more revenue for the country," he said. The organisation will oversee the entire structure of biodiesel and ethanol production and consumption, from the planting of raw materials to the allocation of these to food and energy supply.

It will oversee research into other products, such as vitamins and antioxidants.

It will have two separate committees, one looking at policy and the other management.

The policy committee will have 21 members, nine from the government, six from the private sector and six representing the public. The management panel will have 13 members.

The public organisation will be funded from taxes on palm oil and between Bt50 million and Bt100 million in state funding.

A lack of a unified policy has been blamed for a recent spike in palm-oil prices, which forced the Commerce Ministry to allow imports.

Ethanol producer Thai Agro's chief executive, Somchai Lohvisut, agreed a unified approach was necessary. Without good management, problems will surface, like shortages of palm oil and tapioca due to rising demand here and abroad.

He said the need to balance supply and demand was urgent. "The new energy minister will experience trouble if he or she does not know the mechanism of the industry. This industry covers various areas, and requires different approaches.

"Even an experienced minister will need a team of experts," he said.

Meanwhile, spending on alternative-energy projects rose sharply last year because of rising of oil prices and government moves to increase consumption of ethanol and biodiesel, according to the Board of Investment.

Its executive investment adviser, Ajarin Pattanapanchai, said it granted the maximum permissible tax incentives for alternative-energy investment. It started offering breaks for this type of spending in 2004.

The board approved 89 projects worth Bt72.8 billion last year, a 331-per-cent year-on-year increase.

Of those, 40 were for biofuel plants with a combined value of Bt45.87 billion. Between 2004 and 2006 it approved 26 similar projects worth Bt6.54 billion.

There were 43 electricity and steam-generating projects approved, with a combined value of Bt22.9 billion. In 2006, 17 similar projects worth Bt10.86 billion got the nod.

Ajarin said board incentives for alternative-fuel projects were available in all locations. However, she added that there was a shortage of raw materials, particularly crude palm oil. Government policy remains unclear, too.

"Because of higher production costs, biodiesel manufacturers will find it hard to break even if oil prices do not reach US$100 [Bt3,300] to $120 a barrel. Finally, the government needs to subsidise them," she explained.

Thai Oil Palm and Palm Oil Association secretary-general Wiwan Boonyaprateeprat said the government should limit the number of biodiesel plants because of excessive demand.

"If the government does not control biodiesel production, it will have to import raw materials from abroad. This is not a good idea, because the price of crude palm oil is much more expensive than crude oil," she said.

The government should reconsider introducing compulsory use of B2 next month, because it will tighten palm-oil supply, she said.

"January and February are the low season for palm production. Therefore, I think this policy should become effective in April," she added.

Industrial Economics Office deputy director-general Nattapon Nattasomboon said the Industry Ministry was helping farmers to increase crop yields to serve the growing biofuel industry.

It encourages farmers to increase crop yields through advanced technology that uses biowaste to produce ethanol.

Nattapon said yields needed to improve because there was limited cultivation area.

"If we reduce exports of sugar and tapioca it will affect consumers because of increased prices," he said.