The Brazilian Connection: As renewable jet fuel gains traction, Brazil’s sugarcane is more popular than ever

The Brazilian connection in renewable jet fuel

“Do you know the way to San Jose?
I’ve been away so long. I may go wrong and lose my way.
Do you know the way to San Jose?
I’m going back to find some peace of mind in San Jose.”

—Do You Know the Way to San Jose? by Burt Bachrach and Hal David

A travel agent working the Silicon Valley corridor joining San Francisco and San Jose could be writing a lot of business booking tickets from San Jose to Sao Paulo these days. Just about every advanced biofuels CEO and key VC player has been there, is planning to go there, or is in Sao Paulo right now.

Unlike Americans heading to South America in search of fortunes from white powder a generation ago, there’s nothing illicit about the Brazilian Connnection.

But these pilgrims in search of the Holy Grail of biofuels – cheap sugars – should expect expect to find no peaceful easy feeling in the sugarcane fields of Sao Paulo state.

Like all good pilgrims, they may well hope for salvation in the long-term, but should expect suffering in the here and now. As John Bunyan observed in Pilgrims Progress, “God’s people are like bells; the harder they are hit, the better they sound.”

The search for cheap sugars (profiled in the Digest article “Sugar, Sugar” from last July) affects almost every company working on the ethanol platform (really, everyone there except the gasification technologies such as Coskata). It also impacts those like LS9, Amyris and Virent that use “magic bugs” or catalytic reforming to transform sugars into renewable diesel, renewable gasoline, renewable jet as well as green chemicals.

Sao Paulo is the gateway to the Central South region of Brazil that forms the heart of the global sugar industry. Though Thailand, Vietnam, Angola, Pakistan, Cuba, the Philippines and the US are among those with extensive sugarcane or sugarbeet plantations, only India gives Brazil a real run for its money as a major sugar producer.

Though cheap sugars from cellulose remain the objective of the renewable diesel and renewable jet technologies – for now, the optimal “sustainable, affordable, reliable, available” source of low-cost sugars are sugarcane and sugarbeet.

What’s driving the urgency in renewable jet fuel? Here are the highlights:

Industry usage: about 60 billion gallons per year.

Aviation fuel crisis, part I: Jet fuel prices have increased 141 percent since 2000, according to IATA. The Energy Information Administration projects a $3.20 cost per gallon for jet fuel by 2020 -

Aviation fuel crisis, part II: The industry is facing billion of dollars in added costs from their prospective, required carbon credit purchases as of 2012 via their entry into the EU’s Emissions Trading Scheme

Aviation end-users want only four things from renewable jet: sustainable sourcing, scale, cost parity, and a drop-in replacement for  fossil-based fuels. Companies such as SASOL, Rentech and Dynamic Fuels have approved fuels for aviation use, and the Bio-SPK fuel spec is expected to be FAA certified as a drop-in replacement in the next year. Sugar – especially cellulosic sugars — are available in sufficient quantities to supply a meaningful percentage of aviation fuels in the near-term.

So that leaves us with cost parity and scale. As of now, jet fuel costs $88.40/barrel, or $2.10 per gallon. The EIA’s reference case 2020 price is $134.40. Producers are aiming to be generally competitive with $80-$100 oil – in the near-term, they need cheap non-cellulosic sugars to achieve this. Hence the gold-rush traffic levels between Silicon Valley and Sao Paulo.

Amyris recently announced their pilot project there. Expect more announcements throughout the year.

So, we come back to scale. Renewable jet fuel is likely to be used in blend ratios of no more than 50 percent in the near term, creating a potential market of 30 billion gallons. How much of that is likely to commit? At cost parity, based on approved fuels specs, and sustainably sourced? All of it.

We don’t have stable yield projections for yields per ton for renewable jet fuel made from Brazilian sugarcane, but given that ethanol yields are in the 560-800 gallons per acre range, we can make a general estimate of 350-500 gallons per acre, based on the BTUs.

To produce 30 billion gallons from sugarcane would require 60 million acres of new sugarcane production area in Brazil – it it were all produced there. NIPE/UNICAMP project that there are 200 million acres available for sugarcane in Brazil, with 25 million under cultivation today.

Cautionary notes:

1. The technologies are in development. All are driving down costs. Some have a “fur piece” to go.
2. Financing. Capital is hard to come by in this market, and at $3-$5 of capital for every gallon of capacity, a full buildout for aviation biofuels
3. Sugar prices. Heading seriously north. In 1999, 5.5 cents per pound. Today, 23 cents per pound. Prospectively, as high as 30 cents per pound in 2010, according to yesterday’s Digest report.  No one is going to make $2.10 jet fuel based on 30-cent sugar.
4. Linkage of the sugar price to oil. These days, commodities like palm oil are linked to petroleum. Sugar has resisted the trend – when oil prices crashed 75 percent in 2008, sugar rose for the year. But if oil and sugar become linked, it will make it difficult for processors to make money unless the spread is sufficient, retarding the prospect of financing.

The other platform – hydroprocessing of renewable oils

And…let’s not forget the oil platform, where companies like Sustainable Oils, Terasol and Sapphire Energy have supplied oils to UOP for processing into renewable jet fuel – which landed all of them awards for Biofuels Company of the Year from the Digest. (Solazyme, the #1 ranked company in the 50 Hottest Companies in Bioenergy – is a bit of a hybrid. Their algae platform can use Brazilian sugar, but produces oil, which is then hydroprocessed into jet fuel).

Their issues: getting the acreage, financing construction – much the same as the sugar platform. But algal oils have special challenges in dewatering and stable growth in an industrial environment, while crops like jatropha and camelina are working on increasing yields and acreages – in the near-term, will be able to supply only a small percentage of the potential demand for renewable jet fuel – even a billion gallons from the two feedstocks would be unlikely in the next five years.

In other news on the oil platform, BioJet and camelina developer Great Plains Oil & Exploration announced a plan to jointly develop integrated Camelina cultivation and associated refinery projects in the U.S., Europe, South America, and Asia. BioJet will bring its international network and management experience in developing renewable jet fuel projects. Great Plains will provide its extensive experience in Camelina growth and processing. It is estimated that within 5 years, Camelina production from currently planned team projects will yield approximately 200 million gallons per year of renewable jet fuel, 65 million gallons per year of co-products, and 2.3 million tons per year of Camelina meal, for use as a high-quality animal feed.

Great Plains has contracted approximately 85% of the Camelina acreage currently planted in North America and plans to rapidly expand its acreage in 2010 and beyond. BioJet is a supply chain integrator in renewable jet fuel for the aviation sector. Its operations include feedstock generation, technology, refining, logistics, and distribution to end users in the aviation sector.

The bottom line

“I have a key in my bosom, called Promise, that will, I am persuaded, open any lock in Doubting Castle”
John Bunyan, Pilgrim’s Progress

No matter the challenges, there are strong tailwinds in favor of aviation biofuels, among them:

• Instead of a truculent end-user community (see the Digest’s report today on US convenient Stores, auto makers and petroleum refiners asking the EPA not to approve E15 ethanol blends), there is a hopeful, eager end-user community.

• Instead of a plethora of distribution problems, there are solutions like the pipeline from Tesoro’s refinery that will ship renewable jet fuel made from camelina directly to Seattle-Tacoma International.

• Instead of a wide variety of competing altenergy technologies – in passenger, there is all-electric, compressed air, gasoline-electric hybrid, CNG and biofuels — we have one existing alternative: for commercial aviation today, its fossil fuels or biofuels.

Brazil is one of the most complex and important aviation markets — as a large country, like China and the US it is has an important domestic traffic, as well as extensive international routes to Europe, Africa and the US. Brazilian airlines using biofuels will be well-positioned to compete on cost, compared to any carrier who did not use aviation biofuels and paid a steep carbon emissions charge to operate to Europe. That may confer an advantage on Brazil in the struggle for hub dominance in the main international corridors.

Not to mention that – although there is a 54-cent per gallon tariff on Brazilian ethanol made from sugarcane – there is no tariff on renewable jetfuel made from Brazilian sugarcane.

Despite the scale-up challenges, renewable jet fuel is the most promising sector in biofuels today. And Brazil is well positioned to be a key player.

Jim Lane is editor & publisher of Biofuels Digest — and a former publisher of the Official Airline Guide (OAG).

Free Subscription to the Daily Biofuels Digest e-newsletter

Entry Information