Yahya Ulusoy, Rıdvan Arslan, Yücel Tekin Uludağ University, Vocational School of Technical...

Yahya Ulusoy, Rıdvan Arslan, Yücel TekinUludağ University, Vocational School of Technical Sciences

Ali SürmenUludağ University, Engineering and Architecture Faculty

Uludağ University 2

Content:

1. INTRODUCTION2. CORNERSTONES OF ALTERNATIVE FUELS AND

ENGINES INTEREST3. A HISTORY OF BIO-DIESEL IN TURKEY4. WHAT WAS WRONG WITH THE POLICIES ?5. WHAT SHOULD WE DO?6. COCLUSION


INTRODUCTION

Use of alternative fuels and economical cars is a critical issue, not very recently but since 1973.

Maybe temporary or not, but increase in raw petroleum prices and related petroleum products have reached at a level of crises by mid 2008.


Each crises or global or national energy movement should be met as early as and by as appropriate precautions as possible.

In Turkey energy market is “of highly governmental characteristics”


Therefore governmental policies are still of determinative importance.

Failure in these policies means a direct failure (i.e. a caotic feature) in the fuel or energy market.

…economical losses, backrupties, upsets, radical returns to conventional ones exc.


CORNERSTONES OF ALTERNATIVE FUELS AND ENGINES INTEREST

1.The most important energy crises of the last half century is that of 1973’s.

Under the economical conditions of Turkey by 70’s a shock was inavitable and that is what we practised.


Reaction by the Government:To provide finance from the Eurepean

sources for the extra energy expenses.

Reaction by the ordinary consumer:-Use the cars less-Buy smaller cars-Use a diesel car or replace the gasoline engine with a diesel one


The last one is very important and known as what is called “dieselisation” attempt. Because diesel fuel was very cheap besides that diesel concept was more economical.


Neither academicians nor the governmental authorities emphasized the facts that;-Much lower diesel price is a socio-political preference. There is no technical or economical reasoning for that.- Diesel engines on originally gasoline engine cars create serious power train (gear box) problems.


But the most importantly:

This crise didn’t create an impact for a long term vision on future of the energy problem of TURKEY.


On contrary “engine dieselification” movement ended dramatically with a substantial increase in diesel fuel prices owing to appetizing volume of engines “dieselified”.

This is defined as “pulling the bite”. Customer was “fished” by the government.


2. Introduction of NG as a domestic and industrial fuel in Turkish market early 90’s.

NG is promoted as an environmentally-friend modern and very cheap fuel. Really it was…But in a ten years period price of natural gas was two-fold


Reaction by the Government:-We are so sorry!-There are some rules of economy

Reaction by the ordinary consumer:-We are fished!


As a matter of fact Turkish Government “fished” itself; Encouraged building NG conversion plants by private sector, bought electricity very expensive and sold cheaper.


Including governmental authorities everybody perceived that;

There was no mid- or long term strategies or projections over the future energy needs and preferences of Turkey


3. Use of LPG as an engine fuel in Turkey.

LPG formerly was a subvanted fuel for domestic and industrial use.


Since 1973 petroleum crisis it was known that LPG could be used as a very cheap engine fuel.

But neither energy authorities nor academic world mentioned about use of LPG as an engine fuel in negative or positive sense.


In 1995 LPG was legalized as an engine fuel.

Between 1996-1998 Turkey was a paradise of LPG-fueled car use.


-Number of LPG-fueled vehicles increased exponentially.

-Cars were in queue in front of machine shops for conversion

-Storehauses were full of imported LPG kits


Nobody said that; Stop it !... This price of LPG is artifical It is some sort of social support for kitchens… We can’t allow LPG to be used as auto fuel for commercial

purposes Wait until we evaluate the situation and

get a decision for the autogas.

-Storehauses were full of imported LPG kits


But after 2001 economical crises of TurkeyTurkish Government ”pulled the bite” again and declared very high

prices for LPG as autogas.

With these new prices, LPG lost its attractiveness against gasoline seriously.

Similar economical and social results….


Once it is understood that;

There is no “alternatif fuel idea” in mind of formal energy authorities

ORGovernmental energy policies (if any) can

not follow the dynamism of the private sector in alternative fuel attempts.


But at least they are supposed to give an early enough respose to private sector or puplic applications.

Even saying “stop and wait until a governmental legislation or decision” would threaten the puplic and prevent uncontrolled investments and employment in LPG sector.


After this LPG crisis, diesel engines were remembered again

and

Bio-diesel is introduced to attention of investors and customers firstly.


And we made this warning:

“...Government has not shown any reflex until a considerable decline in economical measures. The reaction of government about both NG and LPG after this decline was quite a “nightmare” for Turkish consumer. ……These two unpleasant experiences injured the confidence of people to the Turkish Government. The new attempts for bio-diesel as an automotive fuel remind the same policies and render the private investors timid in any effort”


We were wrong in defining the investors as “timid”.

In contrary; despite all descouraging experiences in

the past they were very bold in bio-diesel investments as well.


A HISTORY OF BIO-DIESEL IN TURKEY

Foregoing scientific analyses show that agricultural potential of Turkey and technical infrastructure for bio-diesel production is very suitable .


Therefore the European Directive 2003/30/EC stating that

“the share of bio-fuels over the energy use in the transport sector should be 5.75 % by 2010”

is achievable.


Due to this fact, first stage of bio-diesel movement

roughly between 2000-2005

was quite a success practically, although not formally controlled and disciplined for a certain period.


A number of factors, pushing bio-diesel production up, were practiced in early history of bio-diesel use in Turkey…

such as;


1. Decrease in the gap between crude oil and vegetable oil prices after 1995 created a heading towards use of bio-diesel.

2. A general governmental policy to increase variety in energy sources is declared.


3. Production cost of bio-diesel was half the sale price of normal diesel by early 2000’s, which would lead competitiveness in the mind of investor.

4. Abundance in some national oil stocks; mainly in cotton oil.


5. Low investment cost for bio-diesel production plants.

6. Some incentives are declared for production of oil crops.


7. Petroleum Market Low exempted bio-diesel use from Private Consumption Tax.

8. Governmental authorities, although not officially but privately, promised that they will not allow for any discouraging movement in this market; gave confidence.


“THERE CAN’T BE PRIVATE CONSUMPTION TAX FOT BIO-DIESEL”

Dr.Hilmi Güler, Minister of Energy and Natural Sources

9.11.2003


Conference; '‘NATIONAL FUEL: BIO-DIESEL''

‘I SUPPORT BIO-DIESEL. I WILL DO EVERYTHING ON MY SHARE THROUGH MY MINISTRY AND TURKISH GOVERNMENT' ANKARA, 10/08 /2005 Dr. Mehdi Eker, Minister of Agriculture


Some fruits of these encouriging factors:

1. By 2005, 286 bio-diesel producers.

2. Total initial (designed) capacity was 2.3 million tonnes.(But only about 60-70 of them, with a total capacity of 1.5 million tonnes, were able to be qualified for licence of production. 1.5 million tones was enough to take the second place after Germany).


Number of Bio-diesel producers in Turkey: 286

Production Capacity: 2 320 000 ton (2. in EU)

Figure 1. Bio-diesel plants in Turkey


3. Bio-diesel producers, as majority of their plants were built in the period 2004-2005, had realized a bio-diesel production of 90.000 tonnes in total.

(42000 tonnes of the vegetable oil, needed for this production, was imported. Smuggling???).


4. 65 % of the bio-diesel producing companies established by the agricultural product traders. 50 % of these have oil milling plants.


5. In addition to individual investments, unions of agricultural cooperation have taken bio-diesel production in their agenda of activity.

Çukobirlik have built its plant,Antbirlik have already received approval of capacity.


Unfortunately 2006 is a point of turn in bio-diesel production.

Bite is pulled again ! Investors are fished (this time for

nothing) !


1. High rate of Private Consumption Tax was set up for bio-diesel in April 2006.

It was going to be exempted of PCT if; Bio-diesel was 100% nationally produced

and blended with diesel fuel at 2% BD-98%.

Bio-diesel was sold not through the first hand but through gas stations, i.e. if the sale

was legalized. This was no good !!!


These decision were wright ! Because;

Without PCT more than 90 % of the plants were technically insuefficient.

Even very primative conditions.

And maybe more than 50% were dealing with smuggling.


So that by the end of 2006 only

Only 215 firms (out of 268) applied for licensing.

20 firms fulfilled the requirements. 3 firms could formally received licence

It is expected that at the end of the legalization process only about 50 firms was going to be qualified.


2. CCEM laid down ITS Convenience Certificate and ITS Certificate for Production Convenience as conditions.

3. Bureaucracy…Unreasonable delays happened in providing licence from Control Committee of Energy Market.


4. There was not an accredited laboratory for necessary bio-diesel quality test in Turkey.


At the end;

200 firms, out of 286 terminated their production as they were no more able to resist the conditions.

Many plants were sold to scrap dealers.

The rest survive under extreme conditions due to high PCT (Private Consumption Tax)


Bio-diesel production stayed at 10.000 tonnes by late 2006.

In 2007 the production was only 3.000 tonnes and the number of bio-diesel producing companies were only a few.


Inactivation of bio-diesel plants due to these drawbacks resulted with appearance of “out-of-standard” and what is called “under stair” small production units; producing illegally.


3000 non-standard machines were put on the market.

Home scale production machines are also introduced into the market.

Practical consequences of this illegal and non-standard production were an unqualified bio-diesel production and an uncontrolled situation in the market.


WHAT WAS WRONG WITH THE POLICIES ?

A healty policy requires

Projection (to future) Prediction Planning Observation (control) Intervention just in time (when

required)


WHAT WAS WRONG WITH THE POLICIES ?

In Turkey, related ministries and governmental institutions on bio-diesel production and set up of legal situation, couldn’t inspected the seriousness and couldn’t predicted future of the bio-diesel market.


In all cases of alternative fuel events (except NG) they just watched fast growing private initiatives and didn’t intervene in the situation early enough.


In other words,instead of “just in time”they applied “past in time, just in caos” intervention

The first action was taken in 2006 by CCEM to avoid the uncontrolled situation and having technically standard and legally acting plants being built.


They missed the necessity of integration between related policies, such as energy policies and agricultural capabilities.

National vegetable oil production was not enough even for 2 % blend.

This decision was supposedly protecting the Turkish agriculture.


They are not able to account for socio-culturel behaviours of Turkish people.

Declaring an increase in the bonus for oil crops. But, for example, raps and safflower oils were not taking place in the kitchen culture of consumer.

It didn’t work.


Resultantly;

An integrated infrastructure for bio-diesel production and marketing couldn’t be established by the related authorities to bring together and organize efficiently the pieces of the process for a healthy bio-diesel production.


WHAT SHOULD WE DO?

Dimensions of bio-diesel concern: Agriculture Industry Energy Environment Transportation Social concerns


84% of bio-diesel production cost is due to agricultural expenses. This means a great majority of income from agriculture-based bio-diesel production will return to agriculture as an added value.


According to provisions of EU and Renewable Energy Program, an evaluation, based on the money paid for fuels even is 2007, results in that monetary transfer from fuel station to agriculture will reach to 30 % by the end of 2030 after a continuous yearly increment.


Table 2. Transferred to agricultural sector due to bio-diesel use

Paid for fuels Biofuel usage ratio

Biofuelcost

Monetary transfer from fuel station

to agriculture

12 Billion $ % 2 240 Million $ 204 Million $

12 Billion $ % 5 600 Million $ 510 Million $

12 Billion $ % 10 1.2 Billion $ 1.02 Billion $



when this is achieved, more than 3 billion US $ will be transferred to agricultural sector due to bio-diesel use only.


Decrease in share of agricultural production in GNP (Gross National Product) results with a decrease in number of people employed in this sector.

This means a successful planning of

agricultural potential will be one of the major tools of decreasing unemployment.


Improvement in rural development is the key step for the people to have a job in their own region, which ensures considerable employment.

Agricultural fields, not utilized efficiently,

could be devoted for oil crops. By this way we could create employment, prevent immigration and enhance the rural development.


In Turkey, as it needs too many political, economical and technological steps, bio-diesel production shouldn’t be based on oil seed import.


Establishment of very dynamic and powerful civil economic organizations, such as farmer unions, in hand of well educated professional managers, should be supported.


Middle and big scale investors don’t want to take any risk in the problematic area of agricultural production.

The guarantee way of bio-diesel production for them is 100 % vegetable oil import. This is not acceptable in our country for socio-economical reasons.


Ministry of Agriculture should set up incentives to have the oil seed producers investing for bio-diesel production besides oil production.

By this way added values of the bio-diesel use could be transferred to agriculturel sector and unwillingness of powerful inventor in corporation with farmer could be rendered ineffective.


Consumer should be rendered familiar with raps, soybean and safflower for domestic use such that production of these could be more attractive.

An efficient substitution of excessively produced plants with those stated above should be planned and be realized under the observation of Ministry of Agriculture.


Fields suitable for crops production but not seeded should be involved in production as early as possible with well determined (attractive and competitive) price policies.

PCT should be abolished.


CONCLUSION

Nobody objects to increases in fuel prices unreasonably. If it is important and if global economical movements and foreign currencies requires, increases in prices are inavitable.

But Governments are responsible of projections, predictions, planning, implementation and control.


If there arise a new prospect as an alternative fuel, you are supposed to guide the consumer.

Objection is to that private enterprise or puplic search for and create solution and government run after them.


On the other hand small scale private sector is very bold but not conscious. And a great proportion of them takes this attmpts as an opportunity for great benefits at short terms.

Most of them have bed intention and do not like work legally…

Some of them are smugglers…


It is not only global movements that effect the future of the alternative fuel attempts

But national political and/or economical instability and uncertainties surrounding energy and agricultural policies are the nightmare of the future projects.


Bio-diesel is an highly integrated issue of various concerns. Should be dealed seriously and a multidiscipliner general planning should be made.


THANKS…

Yahya Ulusoy, Rıdvan Arslan, Yücel Tekin Uludağ University, Vocational School of Technical...

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