The secrets of Sagoib: Raizen’s betting big on 2G ethanol, here’s the story

September 1, 2022 |

In recent weeks we’ve seen transformation after transformation in Brazil. Certainly, though the biggest news is yet to come, because we do not know yet who will own the BP Bunge ethanol assets, which are up for sale. 

We reported last week that “UAE state investor Mubadala Investment Co and Raizen are the final bidders in the sale of BP Bunge Bioenergia, with no bidders in the second round and the other potential buyers rejected earlier in the process. Parallel negotiations are ongoing with both parties as the difference between the two bids was relatively small. There is no guarantee of a sale or when a sale could be finalized if one comes through, even though negotiations are said to be in the final stages.”

BP-Bunge is the largest portfolio of ethanol assets in Brazil, excepting the Raizen portfolio itself. Anyone who has a desire to control biomass, who has a system for extracting value, is going to take a deep interest in the portfolio. Price is always an object and sometimes the player with the best ability to realize value from assets is not the one able or willing to pay the top price. So, as the Zen master says, we’ll see where this deal shakes out.

While we wait, we had a chance this week to speak with Raizen CEO Ricardo Mussa. Naturally the subject of BP Bunge was off-limits for a public company. We focused in on Raizen’s plans for a 20-plant expansion in the cellulosic ethanol portfolio.

Here’s what we learned. First of all, we are not trading in the usual verbs of the advanced bioeconomy, or 2G ethanol, which are develop, explore, process, pre-treat, distill, ferment, catalyze, offtake, store, ship, de-bottleneck, invest, invest, invest, and possibly “invest until it hurts.” 

Instead, our conversation focused on nouns: quality, freshness, uptime, synergies, expansion, circular. These are words used by supermarkets, food companies, auto makers — giants of the economy, established, confident, bold and growth-oriented. Something has changed in 2G ethanol — let’s explore that today.

“Biomass is the bottleneck now,” Mussa tells us. He’s referring to the fact that many of the technology hurdles have been addressed in 2G. That’s been the story with many of the technology companies. Clariant, Praj are two. We haven’t got a due diligence drone flying around inside the Raizen reactor, but we’ll take that on faith — it’s a publicly traded company run by serious people with eight years of operating experience. 

Beyond the technology bottlenecks, then, what is the bottleneck? 

Raizen CEO Ricard Mussa

As Mussa, has explained, it becomes the biomass. It has to be.

The alternative is the offtake — in that instance, there’s no buyer for the product, no way to get it into the market. It’s been a major issue in the United States — especially given the E10 blendwall issue, which has been the Great Blendwall of China, more or less, and groups like the RFA and Growth Energy have had to knock it down, brick by brick. 

Why not the same in Brazil? Three reasons, in the end.

1. Raizen is a major operator of downstream fueling assets.
2. Nearly all Brazilian passenger cars can use E100.
3. Brazilians have the same thirst for sustainable solutions that everyone else does.

The math goes like this: 1+2+3=Demand. So, the limit becomes, how much biomass do you own? And there are three flavors to that problem, which we can explore right now.

1. The one who owns more biomass, wins, More biomass, more ethanol, more money, more profit.

2. The one who can keep their plant operating 12 months, instead of 9 or 10 months as is the case with sugarcane ethanol, wins. More throughput with the same capex equals more ethanol, more money, more profit.

3. The one who owns cellulosic biomass can operate over 12 months. There’s enough biomass to make it work.

The Secret to Success

Which brings us to a remark by Mussa that should be paid close attention to. It’s about the secret that Raizen learned in operating its 2G ethanol facility all these years. Lean closer, so I can whisper it. Closer. Lean in just a little closer still. That’s good.

Quality, that’s the secret. The one who has high quality biomass is in the 2G ethanol business. The one with low-quality biomass is in the co-gen business, burning biomass to generate heat and power to run the process.  “It’s the freshness of the bagasse,” Mussa said. “And when you have the straw, you don’t need to user the high-quality bagasse to generate heat and power.”

Now, the second secret. For this one, disable your browser, now, sit in a dark room without pencil or paper. Got there? Good, I won’t whisper it to you. I’ll write it backwards so no one except you and I will know it. S-A-G-O-I-B. Yep, Sagoib, that’s the secret. Spell it backwards, you’ll get the idea.

How do we make the sacred substance Sagoib? We use an anaerobic digester and we put in all that lovely vinasse that is usually the waste product from sugarcane ethanol production and often, elsewhere, dumped in a field. But not here, they use Snegonahtem — spell that backwards, too, it’s not a Mexican temple city. Those Snegonahtem produce Sagoib. That’s the magic elixir at Raizen. It replaces natural gas, it replaces high-quality bagasse, for heat and power. More bagasse, more ethanol, more money, more profit. That’s the secret: Sagoib. But don’t tell anyone. You promised. 

The Biorefinery of the Future, Now

So, what we’re talking about is an advanced biorefinery. It’s not just producing 2G ethanol using sugar and advanced yeasts and enzymes. There’s multiple feeds, multiple products, all of it designed to increase throughput. Beyond what could be achieved at a greenfield 2G project. Beyond what can be produced at a standalone 1G plant.

“It’s the synergies,”as Mussa explains. “It makes it possible to expand, and we can bring ethanol to Europe,, for example.” And then there’s the prospect of converting all that lovely low-carbon ethanol to SAF. The super low-carbon kind that can command north of $8 per gallon is the right markets when you tot up all the credits.

As Mussa points out, that’s where Raizen become more than the sum of its parts, Cosan and Shell, because the Shell partnership brings the expertise in SAF technology. The Cosan side brings all those years of acquiring and managing biomass. 

But there’s more, and that’s the uptime. As we mentioned, you get more time running he plant with the 1G-2G combination, because you have the expanded pool of biomass. And, you get something else, something as precious as Brian Foody could ever make all of us in the Advanced Bioeconomy understand, the true gold of 2G, which is the experience in running and optimizing the process. There are significant challenges in  handling 2G biomass. There are impurities as big as tennis shoes that comes into with the straw off a field. The reactor clogs. The metal dissolves after all that harshly-treated biomass is pumped through it.

And ethanol as a hydrogen venture, as well

As we were prepping this story, we learned that Raízen has establshed an R&D program to positioned ethanol as a global hydrogen carrier. Shell Brazil, Raízen, Hytron, University of São Paulo (USP) and SENAI CETIQT signed a cooperation agreement for the construction of two plants to produce renewable hydrogen (H2) from ethanol. The partnership aims to validate the production technology through the construction of two plants designed to produce 5 kg/h of hydrogen and, later, the implementation of a plant 10 times larger (44.5 kg/h). In addition, the agreement includes a hydrogen refueling station on the USP campus, in the city of São Paulo. The buses used by students and visitors to the campus will no longer use diesel and traditional internal combustion engines but rather hydrogen produced from ethanol and engines equipped with fuel cells. Scheduled to start operating in 2023, the initiative constitutes a low carbon solution for heavy transport, including trucks and buses, with the first hydrogen ethanol fueling station in Brazil and in the world.

“Local, decentralized, low-investment production of renewable hydrogen through ethanol reform is an interesting alternative for sectors such as heavy transport, in which the use of this solution, whose availability and scalability are essential, have a significant growth perspective. In addition to heavy transport, we are currently looking for partners who are interested in applying this technology for the decarbonization of other industries,” said Mateus Lopes, Raízen’s director of Energy Transition and Investments. Together with Shell, the company will be responsible for leading the development of the market of H2 from ethanol.

20 2G ethanol plants on the way

A solution is possible. It comes from designing a better process. That comes from operational experience. The result is reliability. In the end, that’s the sine qua non, in the absence of which no responsible board of directors will give the greenlight to plant number two. That’s reliability.

So, Raizen has the one. They are building two more for $395 million. They have committed to building twenty in this decade. And if that sounds like John F. Kennedy committing the US to a moonshot, that’s probably a good comparison.

In this case, the moon is there, we know how to reach it, we have the technology, we have the business model we have the operating experience, we have the will. Now, Ricardo Mussa mentions with a smile, all we need is the biomass. Plenty of it in the BP-Bunge deal if Raizen’s bid is successful. I wouldn’t count on them for an overbid, but at the right price, there’s a deal to be made. 

20 plants, end of the decade. Think of concepts like quality, freshness, uptime, synergies, expansion. And of course, the secret ingredient, Sagoib. (Ssh, don;t tell anyone.)

Category: Top Stories

Thank you for visting the Digest.