The Big Bagasse Biofuels Boom

| October 23, 2012

Deployment of next-gen bagasse-to-biofuels technologies could expand ethanol production in Brazil, India by 35 percent without land, water intensification.

After several years of technology and partnership development — advanced biofuels are coming to Brazil in a big way, and India may not be far behind.

The reason? Opportunities with bagasse, the leftover from crushed cane stalk after sugar is extracted at biorefineries.

The goal? Closing the gap between ethanol targets and current production — given the bull market in sugar prices and a desire by producers to maximize sugar production.

The potential expansion of capacity?

Guidance being given by the projects is that capacities could increase by up to 35 percent at existing mills, by adding on units to process bagasse. In Brazil, that would add up to 2.5 billion gallons (9.45 billion liters) in production capacity – more than enough to close the 1 billion liter ethanol gap that exists in Brazil of late, and open up substantial ethanol export opportunities in Brazil.

In India, additional production would likely contribute towards Indian renewable fuels targets, where industry has struggled to develop sufficient capacity given sugar demand, limits on use of food-based feedstocks, and policy uncertainty.

5 Trends

We see five trends driving the development of bagasse.

1. Technologies maturing. There’s been a lot of talk around bagasse, but cellulosic technologies initially targeted wheat straw and corn stover. Now, companies like Blue Sugars, Cobalt Technologies, Novozymes, Iogen, Beta Renewables, DSM and Codexis have developed technologies that are ready for commercial scale-up.

2. Partnership. So far, there have been few go-it-alone projects announced. Instead, technology companies from the US and the EU have generally teamed up with large aggregators of bagasse — Raizen and Petrobras amongst them. Copersucar in Brazil hasn’t announced a partnership yet — nor have the bigger players in India or other sugarcane centers such as the US, Cuba, or Pakistan. An outlier in this repect? BP Biofuels has been building first-generation capacity in Brazil — and has been developing next-gen cellulosic ethanol and biobutanol technologies in the US. They are expected to me a major player in next-gen fuels in Brazil, later in the decade.

3. Brazil now, India later. Deployment work is far ahead in Brazil – a combination of policy certainty, strong ethanol demand. Plus, the planned mechanization of the Brazilian sugarcane harvest will aggregate more waste biomass in the form of tops and leaves, and that will offset the role that bagasse plays as a feedstock for power generation to run the sugar mills.

4. Multi-feedstock. For all the excitement around bagasse, some of the most significant projects will target other feedstocks, including straw. GraalBio and Praj are, notably, going in this direction.

5. Co-location. To date, there have been no greenfield projects announced. It’s considered, economically, a must-have to access already-aggregated bagasse. For now, there are plenty of sites left to partner up with – but generally the most prized sites have been in Sao Paulo state, so far – closer to R&D support and downstream markets. Over time, more projects will develop in Minas Gerais and states father to the north and west.

7 Key projects to watch

1. Iogen and Raizen — Brazil’s largest ethanol producer gets underway with advanced biofuels. Last week, Iogen Energy was chosen by the Raizen Group, a large-scale sugarcane ethanol producer, to use its technology to convert biomass to ethanol at a new facility in Brazil. Iogen will develop and engineer the front-end design of a facility at Raizen’s existing factory near São Paulo. Iogen’s technology will allow Raizen to produce ethanol from sugarcane bagasse.

2. Novozymes — new enzymes project for Brazil is key to supplying several proposed projects. Last month, Novozymes said that it will announce by the end of 2012 plans to construct a plant in Brazil to supply enzymes to convert sugarcane into ethanol. The company is currently in discussion with potential Brazilian sugar and ethanol partners to evaluate the local market’s needs. Brazilian sugarcane millers hope to be able to process cane bagasse and other crop leftovers into fuel.

3. Petrobras and Blue Sugars — Brazil’s state oil company keys its advanced biofuels plans on a partnership with the first company to register cellulosic ethanol RIN credits in the US. In June, KL Energy changed its name to Blue Sugars, following extension of its long-term co-development agreement for cellulosic ethanol with Petrobras. Blue Sugars CEO Peter Gross noted that the company’s scale-up factor from our demo plant to full-sized industrial units is in the range of 10-15, and that Petrobras is already working on its first industrial cellulosic ethanol plant slated for start-up in 2015, after licensing Blue Sugar’s technology for use in its Brazilian sugarcane mills.

Gross told Bloomberg that it expects to produce cellulosic ethanol from bagasse at a cost of 40-50 cents per liter, and will supply technology to three Brazilian mills, by 2015.

4. GraalBio Investimentos, Beta Renewables, DSM and Novozymes — five projects starting in 2013. In May, GraalBio Investimentos revealed plans to invest $724.5 million in five cellulosic ethanol plants during the next few years. The first 21.6 million gallon facility in Alagoas that will use sugarcane bagasse as feedstock is expected to come online in December 2013.

Novozymes, a world leader in enzymes, will provide an advanced generation of enzymes. DSM will supply genetically modified yeasts that will ferment the second-generation ethanol. Beta Renewables and Chemtex, both part of Italian chemical group Mossi & Ghisolfi (M&G), will provide other process technologies and engineering. The first plant will produce cellulosic ethanol from sugarcane bagasse and straw.

5. Cobalt Technologies and Rhodia — biobased chemicals in Brazil, from bagasse, by 2013. In August, Cobalt Technologies and Rhodia announced they will begin joint development and operation of a biobutanol demonstration facility in Brazil. The Cobalt/Rhodia plant will utilize sugarcane bagasse to make n-butanol; bagasse is used at sugar mills to provide process energy to drive the mill and to supply power to the local grid; the Cobalt project will utilize that fraction of the bagasse that generates power for the grid, or any residual biomass that is burned as waste. Work will begin in August 2012 and will move to a mill site in early 2013 for integration testing. Operational testing at the demonstration plant is expected to be completed by Mid-2013.

6. Chempolis targets India. Last month, Finland’s Chempolis said that it expected to have a deal on bagasse and ethanol, in India, by the first half of 2013. The company is in discussion with several mills but hasn’t revealed identities.

7. Praj, Novozymes projects in India. In June, Praj and Novozymes announced plans to set up an advanced biofuels demonstration plant this year In India. According to the reports, Novozymes will supply enzymes to the India-based project, which will work on a variety of feedstocks including wheat straw, rice straw, corn cobs and sugarcane bagasse.



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