around $2.50 per annual gallon <strong>of</strong> ethanol capacity may be a reasonable first estimate. Hence,the investment required for an operation <strong>of</strong> 36M gallons could reach $90M or more.In the case <strong>of</strong> biodiesel, the challenges are more daunting as the agricultural infrastructure forfeedstock production simply does not exist in <strong>Jamaica</strong>. We understand that castor beans andjatropha are considered the most promising feedstocks. However, practices in Central andSouth America indicate that African palm has the highest oil yield, whereas castor beans arecultivated extensively only in Brazil. Moreover, there is no large-scale commercial experiencewith jatropha anywhere in the world, hence developing a national program based on this crop,regardless <strong>of</strong> its promise, entails high risk and significant investment. On the positive side,capital requirements for new biodiesel production facilities are approximately $1.00 per gallon<strong>of</strong> biodiesel capacity, including storage tanks for feedstock, chemicals, and product.Furthermore, for biodiesel, economies <strong>of</strong> scale are not as critical as for ethanol. Biodieselplants tent to be modular allowing for easy capacity expansion at any time.Establishment <strong>of</strong> a bi<strong>of</strong>uels industry in <strong>Jamaica</strong> will eventually depend on the success <strong>of</strong> projectfinancing. Usually such financing is secured through a combination <strong>of</strong> debt and equity at adebt-to-equity ratio <strong>of</strong> 80:20 or lower. Equity will be sought from local and internationalinvestors, whereas the debt will be secured from regional and international banks provided thatlong-term contracts for key components <strong>of</strong> the plant’s operation can be arranged:Cane or oil-seed supply contractsEthanol or biodiesel <strong>of</strong>f-take contractsBy-product (e.g. molasses) <strong>of</strong>f-take contractsElectricity sales agreements (if excess power is available)Such long-term contracts, covering 10-20 years, reduce the risks <strong>of</strong> the project and make thereturn on the investment attractive. Fig. 6, which shows a typical project finance structure,demonstrates the complex arrangements necessary for a successful bi<strong>of</strong>uels industry. Saleableby-products <strong>of</strong> an ethanol project include molasses, carbon dioxide (CO 2 ), fertilizer, biogas, andcarbon credits, whereas for a biodiesel plant they are glycerin, fertilizer, and carbon credits.Excess electricity, if any, requires the operation <strong>of</strong> a cogeneration plant within the bi<strong>of</strong>uelsfacility.Procurement <strong>of</strong> the design and engineering <strong>of</strong> the plant should be done through an opensolicitation calling for expression <strong>of</strong> interest in a turn-key operation to ensure that one entitycan be held responsible for the entire facility. To help the <strong>Jamaica</strong>n economy, terms <strong>of</strong> thesolicitation should mandate the use <strong>of</strong> local labor, contractors, and fabrication to the extentpossible.36
Figure 6: Typical financing structure for a bi<strong>of</strong>uels projectIn addition to the bi<strong>of</strong>uels production facility itself, additional significant investment will berequired:Road improvement and construction will be needed to allow for efficienttransportation <strong>of</strong> sugarcane to the ethanol plant and ethanol fuel to Petrojamand other blending facilities around the island. In general, the condition <strong>of</strong><strong>Jamaica</strong>’s road infrastructure appears to be in urgent need <strong>of</strong> repairs andexpansion.A public education campaign is sorely needed to inform <strong>Jamaica</strong>ns about theproperties, proper use, and benefits <strong>of</strong> bi<strong>of</strong>uels.Sugarcane harvesters will need to be introduced, if cane harvesting will bepartially or fully mechanized to enhance productivity at least on relatively flatland. Each harvester reportedly costs in excess <strong>of</strong> $250K. Even if largeharvesters are out <strong>of</strong> the question, the use <strong>of</strong> other means to accelerateharvesting, such as hand-operated cane mowing machines used in Brazil, shouldbe seriously considered.Tank clean-up at gas stations will be needed, if not already done, to removegasoline deposits and preserve fuel quality, since ethanol has detergentproperties. Moreover, repairs to or replacement <strong>of</strong> leaky gas station tanks willbe needed to prevent water from entering E10 storage facilities and causingphase separation, which can damage car engines.If and when blends over E10 or B20 are introduced, adjustments to gas stationtanks and pumps will be necessary to enable them to handle such bi<strong>of</strong>uelsblends (replacement <strong>of</strong> rubber components with neoprene or EPDM).The costs <strong>of</strong> each <strong>of</strong> the above can be estimated only when appropriate data are available.37