The lands of sun and rain: biofuels turns to Brazil for sugar, markets, models

December 6, 2010 |

This week, we celebrate the 50 Hottest Companies in Bioenergy, and generally these are hot processing technologies – but where will they produce? What are the feedstocks that can provide for an industry that is moving beyond technology demonstrations, towards scale.

Many eyes, if not most, have turned towards Brazil, among the leading lands of sun and rain. Between its available acreage, its sophisticated systems for growing and processing sugar cane, and its vibrant domestic market for biofuels, its a tempting target indeed.

High-tech companies such as Amyris, Solazyme, LS9, KL Energy, and many others have been moving aggressively to establish partnerships that will allow them to access Brazil’s low-cost, at-scale sugars.

Today in the Digest, we look at two distinct voices in terms of outlining a vision for the future of cane, and sugar as a feedstock for biofuels.

We’ll look at a speech given last week to the International Sugar Organization by BP Biofuels chief Phil New, and we also spoke with Joel Velasco, the US representative of UNICA, the Brazilian sugarcane trade association.

Are the lands of sun and rain the answer? Algae producers are looking at lands of sun and saltwater – but cane has the “here today, at-scale” quality that is creating substantial traction for those using low-cost sugars as a base for their fuels.

Speaking with Joel Velasco at UNICA

“I don’t think the industry is going to survive if all we do is talk about ethanol,” said UNICA’s Joel Velasco, as we spent some time catching up on the subject of sugar, Brazil, and the future of bio-based industries. “There’s Amyris, Virent, Solazyme and LS9, taking sugar to a hydrocarbon – but don’t forget the bioplastics side. Coke is gung ho about converting all bottles one-third from renewable sources.”

“What do they all have in common? They’ve got to go places where there is land, sun and rain. There are 100 countries in the world that grow sugarcane in the tropics that could be producers.”

As the representative of a trade association, Joel’s got an angle. But I don’t mind. At the end of the day, who amongst us lacks one, in these axe-grinding, agenda ranting times we live in? As trade reps go, Joel’s got a good brief – I mean, making the case for Brazil in a bio-based world is like making the case for Disneyland to a world populated by five-year olds. And Joel has a pretty good rap. So its worth getting into it.

BD: Brazil’s got a substantial advantage in the race for low-cost biofuels – is that sustainable as we move towards the next generation of technologies?

JV: This is the first few laps of a lengthy race and we’ve got our work cut out for us to maintain our lead. I joke that the technology will invented in California and put to use in Brazil. Consider, for example, the flex fuel car, invented at Ford by Roberta Nichols, but today there are more flex fuel cars in Brazil than in the US fleet. More than 40 percent of the Brazilian fleet. It’s a little like the like the Apple Macintosh – designed in California, but built in China, because its more effective to produce abroad. For brazilians there’s a challenge. I tell them that you will either be paying royalties to these technology start ups because they took the risk in developing these technologies, or you have to step up and develop them yourselves.

BD: What’s UNICA’s role in making the case for that transition?

JV: From a trade association point of view, we want the bar to be continually raised, to keep the industry moving. Let’s welcome that challenge.

BD: What will be the role of partnerships – will it expand beyond the type being signed between Amyris and its Brazilian production partners?

JV: When Petrobras invested in Guarani – that was a sign of things to come, and an outcome of what is already happening. Total invested in Amyris. Every other oil major has been in and out of the space. If you want to be in the fuels business you have to embrace partnerships.

BD: Is the Shell-Cosan deal a good example of that trend?

JV: Shell and Cosan is a good sign of an biofuels industry looking to expand beyond its reach of ethanol. Then, Shell wants to be in the biofuels space and wants to align with the a market leader. In Brazil, we still have a state oil company that controls two thirds of distribution, but with Shell deal, Cosan is now the second largest fuel distributor with 20 percent market share. They had acquired Esso and now Shell. This is going to take marketing down to the retail level, help them improve their knowledge of trends in the industry, and capture more value.

BD: We’ve heard from time to time that some Brazilian cane processors have stayed away from developing higher uses for their waste bagasse because they need to power being generated to run their systems.

JV: Overall, there are 650 million tons of sugar cane. One third is sucrose and water, one third is bagasse, and one-third is trash. Part of that bagasse has to be used for steam and power for that mill, but the  average mill is selling about 10 KWh per ton of cane crushed to the grid as surplus. And that’s with inefficient boilers that were really designed for other purposes. And we  should have a lot more bagasse in the future, as we are going through the process of implementing the ban on burning cane in the field. When you burn cane, in the field , you burn one-third of the foliage – like the corn stover. As you mechanize,  one third of the total biomass is bagasse now available for processing. Of that one third, 40 percent has to stay on the ground for nutrient and ground cover, but the remainder can move off the field and will be brought to the mill.

BD: what is the growth outlook for the industry, in terms of hectares of cane, in addition to these opportunities you’ve mentioned with bagasse.

JV: One of things we  did at UNICA, is to ask the government “please regulate us,
please tell us where we can go.” We now have ecological zoning, and satellite imagery to help us in this. We have set up some no-go areas – for example, the Amazon wetlands, and we’ve taken areas with native vegetation off the table, and then with the right climate and water, w’ve looked at the remainder to see where you can grow cane. Overall, 7 percent is available, and 150 million acres could be allowed. Given that, you have a 20 fold increase over the 8 million acres grown today. It all is going to depend on whether there is a need for it, and a market for it.

BD: Speaking of opening markets, what do you foresee for the ethanol tax credit and the tariff in the United States.

JV: The VEETC is 50/50. I never thought that environmentalists and the tea party group would come together saying “get rid of the VEETC and tariff”. But I really look forward to 2011, to getting beyond corn vs cane.”

From Phil New’s speech to the ISO

The speech is downloadable in its entirety here.
The glucose economy

“The distinguished academic, Nobel Laureate and now US Energy Secretary – Stephen Chu – has articulated a fascinating vision of a global “glucose economy” to supplant mankind’s dependence on oil. Here, fast-growing crops would be planted where the climatic conditions are right. They would be converted into glucose and the glucose would be shipped around much as oil is today, for eventual conversion into biofuels and bioplastics.”

Advantaged biofuels

“People frequently talk in terms of first and second (or even third) generation biofuels. This terminology is convenient when conveying the role advanced technologies and practices have in helping to increase the availability, sustainability and performance characteristics of biofuels. But it doesn’t mean later generations are necessarily better than their predecessors. For example, Brazilian sugar cane ethanol today is an advantaged biofuel. It is at least as good in terms of efficiency and sustainability as many so-called advanced biofuels that are in development and will compete in the long term.”

The growth potential

“The US mandate alone will drive a 50% compound annual growth rate in cellulosic biofuel capacity, involving the development of 220 world-scale cellulosic biofuels plants and, conservatively, around $100 billion of investment – this in addition to the 170 existing corn ethanol plants. For Brazil – by 2020 – a further 90 world-scale mills will need to be constructed, in addition to the existing 330 mills, to meet the expansion in domestic demand, requiring at least $40 billion of funding.

“Delivering this scale would mean that the projected annual growth in volumes from the global biofuels industry between 2010 and 2030 will outstrip the best that any individual OPEC or non-Opec oil producer has been able to achieve in growth terms over the past 5 years.”

Low-cost, low-carbon, and scalable

“[Biofuels] need to be low-cost – our benchmark for success is $1 a gallon, so that the biofuels can compete with oil when it is about $40-50 a barrel. They must be low-carbon – genuinely low-carbon from well-to-wheels, or from plough-to-piston basis once all measurable emissions, absorption and mitigation factors are accounted for.
Advanced biofuels also need to be scalable. There is no point making boutique biofuels. Only mass production and mass distribution can turn the dial.”

Food vs fuel, and using lowest cost land

Over the longer term, industrial-scale biofuels are not in competition with food crops. If the industry is to compete with $50 oil it can only grow sustainably at scale by utilising the lowest cost useable land – not the premium cost, prime arable land such as the cornfields of the US mid-west.

The role of partnership

“We recognise that the creation of an advanced biofuels industry will require unique combinations in capabilities and skills.It will require players such as BP who are used to mobilising capital of billions of dollars in developing complex, resource to market projects which have long term investment return horizons.

It will also require players familiar with industrial scale farming and skilled in the husbanding of the vast tracts of marginal land required to bring on our new energy crops. Each world scale US plant will need around 50,000 acres, each Brazilian plant 50,000 hectares. And it will require players working at the forefront of the technologies required to underpin the new products produced. This is why partnerships are at the core of our business model.”

Category: Fuels

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