Why are so many renewable fuel companies heading for Brazil? Positive economic indicators? Possibly. Positive attitude? Absolutely.
I frequently ask investors, “If you had to invest every cent you had in a single venture, would you choose a so-so technology run by Warren Buffett and Bill Gates, or a great technology run by mediocre management?”
Investors invariably opt for “Buffett and Gates”, because, no matter how hot the technology or the market opportunity, in the end investors believe that it is people who unlock the value in technology and secure it.
Over the past 12 months, it has become hard to count the number of advanced biofuels companies that are setting up partnerships, or exploring them, in Brazil – but it is in the dozens. Hard to count up all the dollars that Shell and BP are investing here in biofuels, but it is in the billions.
What exactly is happening in Brazil? Is it becoming an important place to do business, or an important place to study how business in the future will be done?
For some weeks we have been conversing with Brazilian executives, trade and industry officials, and this week we are reporting from Brazil itself, in this three-part series, “Brazil: Atttitude before Altitude”
Now traditionally, series of these sort start from the top down. The usual macro-economic, spreadsheet-driven blither blather on available acreage, fiscal incentives, presence of research universities, presence of PhDs, or the yield characteristics of the soil in Timbuktu County.
But we are mindful of “Buffett and Gates,” and we’ve opted to start, like all good biomass, from the ground up.
It is more than a story of ethanol at the pump, or a story of making ethanol or biodiesel for the pump, or advanced biofuels and chemicals.
We think there’s something special going on in Brazil well worth your attention, a genuinely intriguing social experiment in reinventing the country from the ground up, disguised as a renewable energy policy.
We see it already in place in the certain regions, spreading from the small farm to the large farm, and into the regional city, and ultimately into the major city. Reviving the countryside itself with an integrated vision of how sustainable agriculture, biomass, renewable energy can work together in harmony to produce better food, better fuels, and better lives. And a completely different idea of the proper role of the public sector in fostering a new economy.
Now, visions that are at an early-stage do not invariably succeed, and much of what you will read in this story is at a fairly early-stage. We should well remember the enthusiasm with which Lincoln Steffens declared, after visiting a series of Potemkin villages in the early days of the Soviet Union, “I have seen the future, and it works.” It didn’t.
So, dial down the hype meter, but consider the possibility that something very special is occurring, that cannot be counted simply in gallons of biofuels produced, or megawatts of renewable electricity transmitted.
Sindy is a sixteen year-old girl, living on a small family farm in the state of Paraná in the far southwest of Brazil. Ordinarily, she’d be making plans right now to move on to a job and a life, in town or city far away from her close-knit family in Santa Helena – because that’s the way it always has been for the family on a small farm. The farm’s too small to support the extended family, and the village never had many good jobs outside of the farms.
It’s a story that’s been told in Iowa, in the French Ardennes, in the Nigerian heartland, on the Canadian prairie. It’s been told in the Palouse, the Pampas, the Panhandle, the Missouri Valley and up into the Black Hills and Milk River country. It’s a commonplace, untold sadness in modern farm life felt in the Ukraine, Australia’s Riverina, the wilds of southwestern China, and the Veldt.
Better jobs, better lives, better opportunities? The city calls relentlessly, lo these two hundred years past. It is a hallmark of the fossil age, where energy was concentrated through the burning of fossil reserves, enabling the Industrial Age, the great cities, the factories, the cars, the birth of the suburbs, appliances and all the things that burn power and create affluent lifestyles.
But Sindy? she’s become involved in a rural youth organization in her municipality of Santa Helena that fosters community involvement, personal development, and aims to retain young people. Her peer group may well become the first generation that stays on the land, or gains education and comes back to the land, where as we will see a new sector of jobs are emerging as industrial biotech and agriculture begin to merge.
Not that Sindy’s family is engaged in the production of biofuels, or industrial biotech. In fact, Sindy’s family, the Spohrs, aren’t even in the business of making biomass for renewable energy, or any other kind of energy for that matter. They are running a small organic farm, one of the first in the region.
But their project is one of the many that is a consequence of renewable energy. A recently inaugurated government program, part of the overall transformation of the region, allows them to sell their organic goods directly to the government, which has relieved them of the intolerable costs and aggravation of distribution to the cities, where the rise of specialty organic supermarkets is providing a market.
Twenty or so miles up the road, Pedro Rittenmeyer is a fifty-two year old small farmer, raising 40 animals, including 18 cows, on a 24 hectare small farm, producing 200 liters of milk per day. He’s of German descent, as are so many families of the region. In fact, one local wag once said, “if you find a good plantation, you’ll find a good German from the south working on it.” The farm is run by just he and wife now – the children have gone off and taken jobs in the cities.
A few years ago, he was a violator. Overrun by animal waste, like many small farmers, that had nowhere to go, it was being dumped all throughout the region into rivers, and onto fields. Today, Pedro has gone from violator to picture postcard for sustainable agriculture.
The difference? He joined with 33 other small farmers in a sustainable co-operative, building anaerobic digester units to produce methane from their animal slurries, and a pipeline to move the biogas to a central generator that will provide power the community, to the grid, thermal energy for local agriculture, and methane for transportation fuel. It’s residue is a valuable fertilizer which has been improving soil quality.
For Pedro, who has invested $1500 to date in the system and will not be connected to the pipeline for several months, the results are seen in a simpler, more direct context than just kilowatts produced.
“We had too many flies,” he explains. “There was mud, dung, everywhere, and it all eventually flowed to the river. Today, the quality of life is better. The land is cleaner, and the grass is better. The milk I produce is higher quality, and I get better prices for it. It’s something extraordinary, turning my problem into something that changes attitudes, changes behaviors, and changes the milk.”
For Pedro Köhler, the opportunity went beyond his own farm.
Not all that far from the Rittenmeyer farm, Pedro Kohler was a small farmer as well, self-taught on the subject of biogas and anaerobic digesters. He had his entire farm powered on biogas when his self-funded, self-designed project came to the attention of Itaipu, and the renewable energy officials in the local community.
One thing they noticed right away. Kohler had invented a key piece of safe, simple technology, easy to operate, that turned small farms into good prospects for biogas. He developed a rigid-box digester unit, which he has subsequently patented. He now has formed a fast-growing company, BioKohler, which is consulting on the entire local project, as well as other projects for small farms around the country.
The local project, which Pedro is consulting on, and is funded by the local municipality and the regional development funds from the Itaipu hydroelectric project, will generate enough power, when the pipeline is completed, for the 105 homes in the local area, an additional 250 homes when the project is connected to a grid, or heat power for corn drying.
In a few months, a module will be installed to produce compressed renewable biogas for road transport, that will be used to power local trucks and other farm vehicles over time.
Not to overlook corn drying. Project coordinator Cicero Bley estimated that 25 percent of the cost of corn is in the transportation of corn to central processors for drying. Now, the corn stays local.
The total project works well enough on the numbers, producing 240,000 Kwh per year from the 34 participants, for a total community investment of $1.2 million, including the digesters, the 25 km of pipeline, the generators and thermal systems. So there’s payback in the form of the power alone, and the increased profit from farming (e.g. higher milk prices, and reduced corn costs).
Interestingly, the project has drawn interest from across Brazil, and there have been applications from large farmers in the area to join to biogas co-operative. Large farmers will be able to realize additional income of up to $3000 per month from biogas sales and fertilizer savings alone. So, a small farm project may well “go big”.
Spohr, Rittenmeyer, Kohler. Three family farms completely unconnected just a few years ago. But now, they have been drawn together in by the same forces that are driving renewable energy and the rise of sustainable agriculture around the world.
What was the link? Renewable energy, with attitude.
In their case, the catalyst was the 10 gigawatt Itaipu hydropower project at Iguassu Falls – a project commenced in the early 70s, finally completed in the late 2000s. Itaipu, which by itself supplies 20 percent of the Brazilian power requirements, has become far more than a power project. It has fostered, through investment and consciousness raising, a new thinking in regional, sustainable agriculture.
It’s a dream at least as old as the Great Depression, when the folksinger Woody Guthrie penned his “Roll On, Columbia”, which eventually became the official folk song of Washington State.
Roll on, Columbia, roll on
Roll on, Columbia, roll on
Your power is turning our darkness to dawn
So roll on, Columbia, roll on.
And on up the river is Grand Coulee Dam
The mightiest thing ever built by a man
To run the great factories and water the land
So roll on, Columbia, roll on
But, if the vision is old, is the timing right?
As DSM CEO Feike Sijbesma said this week in a landmark speech at the BIO World Congress, “the so-called fossil-age will make a shift to the bio-based-economy. In two or three centuries from now, people will look back on our civilization as a merely brief moment in history where we in a period of just about 250 years shifted our total economy to coal, oil and gas. To make the shift back to living with, and especially off, nature, we need to start this shift now. We are at a turning point towards a next green industrial revolution to secure our feed and fuel needs in the future.”
What have the Brazilians discovered about the mechanics of that revolution. They have discovered that renewable energy is based on a combination of technology and attitude. A building of large scale energy projects that foster small-scale experiments in a host of sustainable practices – all based in the idea that what’s good for business, and good for people, can be good for the environment too.
More than that, a recognition that a new way of looking at things means a lot more based on local success stories that spread virally throughout the community.
Attitude Before Altitude
You know, one thing you never hear in Brazil is bad-mouthing of renewable energy, or much badmouthing of ethanol. It’s a source of national pride.
The country is awash in ethanol – blended at anywhere between 22 percent, and on up. Last year, it chalked up 53 percent market share, vs gasoline. The reason? Some of that is cost. Some of that is a lot of other factors, flex-fuel car availability, and so on. But for sure, in the US and other countries, attitudes about ethanol outside of rural areas range from tepid support, to widespread indifference, to a whole bunch of steamed-up dissenters.
A whole lot of bad mouthing, in our experience, simply comes from bad attitude. Which in this case comes from seeing renewable energy, and especially renewable fuel, simply as a commodity.
Supply-side regulation, vs. demand-side
Brazilian Deputy Minister Marcos Zimmerman told a group of reporters this week, “You cannot look at ethanol as a commodity, where you are content to have the price go up, go down. Today you produce sugar when sugar is higher, tomorrow you produce fuel when the fuel is priced higher. In Brazil, when you have more than 50 percent of the fuel coming from ethanol, and you have the seventh largest economy in the world, you need the fuel to be regulated so that there is a firm commitment from those who produce, and stability.”
Zimmerman makes a point. The greatest strength of renewable fuels is that they fungible, as are the underlying crops. You can make food, feed, fuel, chemicals and a lot more. That’s strength. But isn’t it also a weakness? Imagine the chaos in the electric power markets if solar, wind, hydro, geo, coal or nuclear were in any way fungible into something else besides heat or power?
Zimmerman points out that what will prevent the potential for indirect land use change that destroys rainforest is government action to protect the rainforest.
Interesting how they look at protecting the market for ethanol by regulating its production, rather than mandating it, or supporting it through tax incentives. Supply-side, rather than demand-side. Hmmm.
In part II and part III of our series, we will look at the politics, the technologies, and the players in Brazil, as we continue to look at the Brazilian bio-revolution, in “Attitude before Altitude”