Brazil, Attitude Before Altitude, Part 3: 12 Companies finding lush pastures in the Deep South

May 19, 2011 |

Changing attitudes? 100 percent of the Brazilian sugarcane harvest will be mechanized by 2017.

In our new three-part series, we look at attitudinal changes powering the huge growth in Brazilian renewable energy.

In part 3, we look at 12 companies and compare and contrast the Brazilian and US paths to advanced biofuels. Does Brazil have a “must emulate” model?

As BP Biofuels chief Phil New put it, “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.”

In the first part of our series, we looked at the community level. We found evidence amongst the public of a wider acceptance of and support for renewable energy, based on a combination of good pricing for urban users and economic development opportunity for the rural regions. In Brazil, the Green Party is not agitating against 10 percent ethanol blends as a “crime against humanity” or anything like that. In Brazil this week, a legislator from the Green Party criticized the national government for lowering the ethanol blend to 18 percent as a move that would hurt investment prospects for renewable energy.

In the second part of the series, we looked at the government level, and found a stronger commitment to advancement by consensus. We saw that Brazil has embraced typical economic development incentives such as research grants, financing incentives and re-zoning, but has generally stayed away from subsidies, mandates and tariffs. Overall, the vision is for public-private partnership based in low-carbon development at affordable prices for consumers.

In this third and final part, we look at the companies, technologies and feedstocks.

What we found is a stable, straightforward system of feedstock and technology that seamlessly prepares the way for advanced cellulosic biofuels. It’s based essentially in sugarcane – though there is room for expansion in jatropha and other oilseed crops, they are an order of magnitude lower in importance than the attention given to cane.

Brazil vs US: feedstocks

In Brazil, there’s sugar, the bagasse, and the vinasse and straw. Right now, they are used, respectively as the value-add product, for power, and fertilizer. The country is going to quickly expand the acreage, continue to work through breeding and agronomy on yield, and add on cellulosic options as they come forward for bagasse, vinasse and cane straw.

By contrast, the US is working on (at least) the traditional corn/soy food crops; energy grasses and canes such as switchgrass and miscanthus; dedicated wood biomass such as poplar; agricultural residues such as corn stover; wood residues such as sawdust and forest slash; animal residues such as renderings; municipal residues such as municipal solid waste; and new energy biomass platforms such as microalgae.

Brazil vs US: processing technologies

In Brazil, there is traditional yeast fermentation, and some research into cellulosic ethanol, much of it through Petrobras’ CENPES research arm, but it is limited to a few topics and generally focused on enzymatic hydrolysis.

In the US, researchers are working on a vast array of processing technologies. There is traditional yeast fermentation; there is hydrotreating; thermo-catalytic technologies such as used by Virent; biofermentation paths as embraced by the likes of LS9, Cobalt, Gevo and Amyris; gas fermentation such as used by INEOS Bio, Coskata and LanzaTech; pyrolysis technologies such as used by KiOR; Fischer-Tropsch conversion of syngas such as used by Rentech; two-step enzymatic hydrolysis such as used by POET, Abengoa and DDCE; consolidated bioprocessing such as used by Mascoma and Qteros. Not to mention the host of technologies for growth, harvesting, dewatering and processing utilized in microalgal fuels.

Brazil vs US: The economics of celluosic biofuels

In Brazil, the primary target for cellulosic conversion is generally agreed to be bagasse, and it is already aggregated because it is separated from the sugar syrup in the crush or diffusion process, at the mill. Right now, bagasse is used for power generation and in what is generally agreed to be what UNICA’s former US representative Joel Velasco once called “inefficient boilers that were really designed for other purposes.”

In Brazil, as soon as technology arrives that gives a low-carbon value-add to the bagasse, based on standard payback economics, it will be deployed. As the technology is deployed throughout the processing fleet, cellulosic biofuels will scale. There are more than 200 million tons of bagasse already aggregated today, and as much as 1.4 billion tons will ultimately be available as Brazil expands its sugarcane cultivation. Even at 80 gallons per ton yields, and using no more than 25 percent of the bagasse, there are opportunities to make as much as 28 billion gallons of ethanol this way.

In the US, cellulosic biomass is not processed at the mill; for example, corn stover and cobs are left on the field. Only the kernel comes to the mill for processing. US cellulosic biomass is already aggregated at sawmills, waste treatment centers and rendering plants, but these are available in fairly restricted amounts, perhaps no more than 20 percent of the feedstock that will naturally aggregate at sugarcane mills. Candidates for scaled cellulosic biofuels in the US, at scale, requires the development of a harvesting and distribution system for purpose-grown woods, energy grasses and canes, or agricultural residues.

Brazil vs US: path to financing

As a result of the simplicity of the Brazilian approach, though the costs are staggering ($50 billion by 2016, according to ETH) , the Ministry of Mines & Energy understands the problem.  has been able to tackle the problem in a straightforward manner. They have approved up to 64 million hectares for sugarcane cultivation, much of it to be converted from idle land or low-yield cattle raising, and are currently designing a package of financing assistance to help the producers complete the build out.

In the US, the costs are staggering too – 500 biorefineries costing as much as $200 billion will be required to meet 2022 RFS goals, according to the USDA. But there is no agreement on a government program to achieve the financing goals, nor is anyone in the private sector indicating that the project finance markets consider the prospect a lay-down.

Brazil vs US: attitudes on biofuels policy

The Brazilian attitude? To scale biofuels, the industry needs adequate financing, adequate feedstock, a path from first-generation to advanced biofuels based on sound economics, and a low-carbon vision. Not all the pieces are in place, but they are assembling.

The US attitude? Soaring volumetric goals matched by virtually no sense of how to get there in terms of real financing, a lack of direction on feedstock, a portfolio of processing technology options so vast that there is virtually no chance that all of them will even have a chance to demonstrate themselves at commercial scale, and a fractious debate over the carbon intensity and economic viability of virtually every aspect of the US biofuels program.

Here at the Digest, we think Brazil has a lot to offer not only as a good place to do business, but as a case study in how to get the business of biofuels done.

Companies are getting it, and getting down there. The rush of US executives to Brazil prompted us a few months back to offer a few useful phrases in Portuguese.

Bom dia – Good morning.
Prazer em conhecê-la! – Pleasure to meet you.
Gostaria de comprar uma fábrica etanol – I would like to buy an ethanol plant.

Here are 12 companies that are finding opportunities in Brazil today.

ADM

In May, ADM and Cargill said they plan to invest $560 million in soybean biodiesel facilities—which with Bunge’s recent investment announcement will bring the total new production up to an additional 2.2 billion liters in the national market in the next few years.  In April, ADM agreed to buy the remaining 51% of Limeira do Oeste ethanol mill in Minas Gerais from its current partner Canaa Participacoes. Limeira crushes 3 million metric tons of cane annually.

Amyris and Sao Martinho

In April, Amyris announced the completion of the first industrial-scale production facility, in Piracicaba, São Paulo, Brazil at a facility owned by Biomin do Brasil Nutriҫão Animal Ltda., a company focusing on animal nutrition. The production facility is located expects to begin Biofene production in May. Amyris feeds sugar cane syrup into three dedicated 200,000 liter fermentors containing Amyris proprietary yeast.

BP

In March, BP announced that it has agreed to pay approximately US$680 million to acquire 83 per cent of the Brazilian ethanol and sugar producer Companhia Nacional de Açúcar e Álcool (CNAA). When CNAA’s assets are fully developed, this is expected to increase BP’s overall annual Brazilian production capacity to 370 million gallons (1.4 billion litres of ethanol equivalent per year, nine million barrels).

Bunge and Solazyme

In May, Solazyme and Bunge announced a two-year joint development agreement to develop algal oils utilizing Brazilian sugar cane feedstock. Development will take place at Bunge’s facility in Moema, Brazil, and at Solazyme’s laboratories in South San Francisco and Campinas, Brazil, ultimately targeting the construction of a commercial facility with 100,000 metric tons of output oil coming online in 2013.

Cosan-Shell (Raizen) – Codexis

Though Shell has been pursuing advanced biofuels since the early 2000s with its investment (along with PetroCanada) in Iogen, it has more than doubled down with a series on investments and moves, primarily related to its buildup in Brazil with the Raizen JV with Cosan. The JV aims to raise its ethanol capacity to 1.6 billion gallons by 2016, to create synergies of up to $2 billion, and boost sugarcane-crushing capacity to 100 million metric tons a year from current output of 60 million tons.

“You have to think about who controls the technology,” says Codexis CEO Alan Shaw. “Companies like Shell have come in, focused on the fuels market, and we have developed a cellulosic platform with them that unlocks the value of the biomass. The biomass isn’t worth a premium unless you have the technology to unlock the value, and I don’t see that companies like Shell letting the costs of feedstocks get commoditized as long as a small group of companies have control of the technology and are aimed at making low-cost fuels. We are the key technology for unlocking new values in Cosan, Virent and Iogen.”

Glencore

In December, Glencore paid $80 million for a 70% stake in the Brazilian ethanol plant Rio Vermelho, its first ever investment in the cane sector. The facility produces only ethanol and can crush up to 1.3 million metric tons of sugarcane per year. The company is expected to expand the mill’s production capacity as well as add sugar and co-generation production.

Guarani

In April, Bloomberg reported that Guarani will invest $475 million in expanding its cane-crushing capacity by 17 percent to 24.5 million metric tons, pledging to complete the expansion by 2015. The company said it has received more than $1 billion in new financing from BNDES, Rabobank International, BNP Paribas, Banco Bradesco SA, Credit Agricole SA, Itau Unibanco Holding SA and Natixis.

Dedini

In May, Dedini said it was working on machinery to use sweet sorghum as an ethanol feedstock.  Dedini is also talking with eight developers regarding buying a sorghum processing mill that Dedini expects to build by 2013.  In March, the company commenced offering add-on modules for existing plants to break down vinasse into biogas and biomethane. Each have applications as fuel for the mill’s steam-powered boilers that generate electricity, which would allow mills to use bagasse that is normally burned for another purpose.

LS9

“Our near term focus is on Brazil,” LS9 CEO Ed Dineen told the Digest last December. We don’t see ourselves having only one partnership in Brazil. Its more likely a multiple set of partnerships. One, for example, could be purely around sugar supply, and we do the processing into chemicals and fuels. One might be a partnership along the whole chain of chemicals and fuels, where we proceed jointly. At this stage, we’re not locking into any one particular direction.” Dineen added, “Over the last couple of years, progress has accelerated in Brazil, where you see critical mass building up as it has done in other developing countries. Remember, there was a tipping point in China, too.

Petrobras – KL Energy

In April, Petrobras’ joint venture with São Martinho, called Nova Fronteira Bioenergia, began planting sweet sorghum for ethanol production next week. The plan is to plant the short-cycle crop on land that is not used for cane and harvest it during the cane inter-crop season in order to help reduce pressure on domestic supplies during that period. Within three years, the JV plans to produce 28 million liters of ethanol per crop on about 7,000 hectares.

In February, KL Energy said it would test its cellulosic ethanol production process using Brazilian sugarcane bagasse. Modifications have been made to allow for the physical and chemical differences between bagasse and woody biomass and, most importantly, a new fermentation process has been designed.

Qteros

Qteros CEO John McCarthy recently told the Digest, “When I first came to Qteros – we weren’t developed enough to take on Brazil. Now we are. Brazil is extremely important, and we have a large investor in Soros who is a player in Brazil. My takeaways from experiences with Verenium and other stops in my career, in terms of Brazil? It’s a complicated market. You have got to be working with one of right big 5 or 6 players. You got to create a very compelling economic argument with bagasse in terms of its conversion to fuel instead of power. The argument is a bit of a push right now.”

Total

Last December, Total tipped its hand on strategy when it disclosed that it will enter the Brazilian cane industry through its technology partner Amyris—who is in turn teamed with Sao Martinho—and hopes to secure 5%-10% of Brazilian cane by 2020. The country intends to produce to produce chemical products like biolubricants, jet biofuel, biochemicals, biodiesel out of sugarcane.

We think Total is vitally interested in the junction between the Amyris technology – fermenting diesel and jet fuel from sugar — and the opportunities to produce low-cost sugars from sugarcane in Brazil, primarily in the region surrounding Sao Paulo state but also in the northeast of the country, the traditional bastion of the Brazilian cane industry. We think Total Brasil is on the verge of commencing a build up of assets in Brazil as feedstock source and, potentially in deployment points.

Category: Fuels

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