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Ethanol from Sugarcane in Brazil
CHAPTER 4B
Ethanol from Sugarcane in Brazil: Economic Perspectives Luiz Augusto Horta Nogueira, Rafael Silva Capaz Institute of Natural Resources, Federal University of Itajubá, Itajubá, Brazil
Contents 1. Introduction 237 2. Ethanol from Sugarcane in Brazil: Context and Evolution 238 3. Economic Aspects of Ethanol from Sugarcane in Brazil 240 4. Final Remarks 244 References245
1. INTRODUCTION Based on its ample basis of natural resources, with an appropriate climate, large availability of land and water, and enough expertise on sugarcane agriculture and its processing for ethanol, Brazil has been promoting this biofuel since the beginning of the automotive era, motivated by energy security aspects, agroindustry promotion aims, and, more recently, by environment concerns. Ethanol blending has been mandatory in Brazil since 1931, pure hydrous ethanola use was introduced in 1975, and nowadays flex-fuel cars that are able to burn any blend of gasoline (E25) and hydrous ethanol are widely used. In 2008, ethanol production reached almost 28 billion liters, corresponding to about 50% of light cars’ energy demand. However, lately, government intervention in gasoline prices has shrunk ethanol demand, yet there are prospects for recovery in the medium term. This work briefly presents the evolution and current situation of the Brazilian ethanol program, stressing its economic aspects and the current competitiveness issues, as well as commenting on the decisive role of public policies to properly foster the market development of the biofuel market. Bioenergy has always been an important energy resource in Brazil, in different forms: sugarcane, used for bioethanol and bioelectricity production; wood, used as fuel in the industrial, residential, and power sectors; and vegetable oils and tallow used in biodiesel ethanol means an ethyl alcohol that has a purity of ≥99%, exclusive of added denaturants, meeting the requirements of ASTM D4806. Hydrous (or wet, also sometimes known as azeotropic) ethanol is the most concentrated grade of ethanol that can be produced by simple distillation, without the further dehydration step necessary to produce anhydrous (or dry) ethanol.
a Anhydrous
Industrial Biorefineries and White Biotechnology http://dx.doi.org/10.1016/B978-0-444-63453-5.00006-9
Copyright © 2015 Elsevier B.V. All rights reserved.
237
238
Industrial Biorefineries and White Biotechnology
production, all of which combined were the source of 24.4% of the total national energy supply (72.4 million ton in 2013), the second most important source of energy after petroleum.1
2. ETHANOL FROM SUGARCANE IN BRAZIL: CONTEXT AND EVOLUTION Sugarcane, a very efficient solar energy converter in chemical energy, has been cultivated in Brazil since the sixteenth century and currently is the third most important crop in terms of area after soybeans and corn.The largest sugarcane-producing area is the CenterSouth region, which accounts for >90% of Brazilian sugarcane production, as indicated in Figure 4B.1.The main producer state is São Paulo, which accounts for close to 60% of the total. In the 2012/2013-harvest season, the national cultivated area was approximately 9.4 million hectares,2 about 1% of the national area, and the total sugarcane production was 588.5 million ton.3 Of this total, about 50% of the sugar content in sugarcane was used to produce ethanol, as pointed out in Figure 4B.2. Neves et al.4 estimated that the sugarcane agroindustry contributes with about 2% of the Brazilian gross national product. In the 80s the São Paulo State already leading ethanol production, accounting for over 50% of national production, but in early 2000s, with the reduction of available land in São Paulo and rising land prices, new production frontiers have been opened, occupying areas previously used for pasture and, to a lesser extent, for annual crops in the Center-West region.5 The expansion of ethanol production occurred alongside significant productivity gains in agricultural and industrial activities, with benefits for sugar production as well,
Figure 4B.1 Sugarcane mills in Brazil.6
Ethanol from Sugarcane in Brazil
Figure 4B.2 Evolution of the sugarcane agroindustry production in Brazil.3
Figure 4B.3 Evolution of productivity of Brazilian sugarcane ethanol mills.7
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indicated in Figure 4B.3. Since the 80s, productivity grew at a cumulative average annual rate of 1.4% in agriculture and 1.6% in agroindustry, resulting in a cumulative average annual growth rate of 3.1% in ethanol production per hectare.7 As a result of these remarkable gains in productivity, the overall production cost has reduced approximately 70% during the last three decades. A detailed revision of the evolution of ethanol program in Brazil was developed in Ref. 8. In Figure 4B.4 is depicted the flow sheet of ethanol from sugarcane mills,9 presenting the main production stages, which can be assumed as cost centers, that is, agriculture, feedstock transport, industrial processing, and cogeneration. As can be observed, besides equipment, several inputs are required at each stage, corresponding to costs, and embodied energy. Obviously, the most efficient production routes are those that produce more per unit of input. This is determined by the yields in each stage, as well as by the level of recycling and use of by-products; as the use of sugarcane bagasse in the cogeneration scheme; as well as by the synergy and integration with complementary processes, for example, aiming to produce sugar, biodiesel, plastics, and chemical products. Actually, the sugarcane value chain is becoming increasingly diversified and complex, as represented in Figure 4B.5.10,11 More detailed perspectives on the different sustainable paths that can be adopted and the associated products are available in the literature.12
3. ECONOMIC ASPECTS OF ETHANOL FROM SUGARCANE IN BRAZIL After the huge expansion of ethanol production as a response to the oil shocks, between 1975 and 1985, and a stagnation period after 1985 due to the retraction of supporting policy associated with the decline of international oil prices, the interest in ethanol reawaked in last decade driven by economic and environmental reasons. In 2003, flexfuel cars were launched and were well accepted by consumers. Flex-fuel cars are able to use gasoline (in Brazil always with 20–25% anhydrous ethanol, E25), hydrated ethanol, or any blend of the two, allowing an increased flexibility on price, autonomy, performance, or availability conditions. Thus, the consumption of hydrated ethanol in the domestic market made a comeback; flex-fuel cars currently represent approximately 95% of the sales of new cars, and 23.8 million Brazilian vehicles can use pure ethanol (mostly cars with flex-fuel engines), which is approximately 71% of the national fleet of light road vehicles.13 As a direct consequence of success of flex-fuel cars, during 2003–2008, the Brazilian sugarcane industry expanded rapidly. New and more efficient mills were commissioned, and a consolidation process was initiated at the same time that positive indicators for the industry’s environmental sustainability were demonstrated.14 However, since 2008, the Brazilian ethanol agroindustry has stagnated, and the expansion process was interrupted. The main reason for this setback is the increasing lack of competitiveness due to government intervention in gasoline prices, a crucial aspect in a consumer market dominated
Ethanol from Sugarcane in Brazil
Figure 4B.4 Flow sheet of ethanol production from sugarcane.9
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Modern agricultural inputs
Wastes
Producer
Biodiesel plant
Fuel reseller
Car assembly industry
Car reseller
Fuel distributor
Fuel reseller
Electricity Sugar, distributor alcohol and electricity Food producer industry
Consumer
Wholesale Industry Retail
Capital assets for the industry
Trading companies Infrastructure Subprod.
International market
Industries wholesale retail
Figure 4B.5 Sugarcane value chain.10,11
by flex-fuel vehicles where consumers are able to choose the cheapest fuel, whether it be gasoline or ethanol, at a gas station. Officially motivated by inflation control, the Brazilian government (which controls and sets the products prices of Petrobras, the main oil products supplier) has intervened in the fuel market in two ways: maintaining the gasoline price at the refinery gate level (ex-taxes) below the approximated international parity prices formerly adopted, and progressively reducing the Federal taxes on fossil fuels. Although taxes have historically represented >40% of the final price of gasoline, the Federal government gradually reduced its tax since 2008, and in June 2012, the main Federal tax on gasoline dropped to zero.15 The impact of this policy has been determinant on the fuel market. Figure 4B.6 presents the evolution of the average prices of hydrated ethanol and gasoline in Brazilian gas stations since 2005. As can be observed, there is a strong correlation between these prices, determined by the fact that most of the current Brazilian light vehicular fleet consists of flex-fuel cars. In fact, the ratio of ethanol and gasoline prices is very important because in the case of flex-fuel vehicles, after considering the differences in heating value and efficiency when using these fuels, consumers have assumed the indifference price of ethanol as 70% of gasoline price. Put differently, if the price of ethanol is <70% of the gasoline price, the consumers would prefer ethanol. Under such conditions, ethanol pricing is essentially determined by gasoline pricing, setting a pseudo upper threshold for the ethanol price. Figure 4B.7, depicts the price ratio for the same period as Figure 4B.6, ratifying the progressive loss of competitiveness of ethanol with regard to the gasoline, primarily from 2011 onward.
Ethanol from Sugarcane in Brazil 2,00
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1,80 1,60 1,40 1,20 1,00 0,80 0,60 0,40
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Hydrated Ethanol
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Figure 4B.6 Average price of hydrated ethanol and gasoline (E25) in Brazilian gas stations. (Data from Ref. 16.) 90% 80% 70% 60% 50%
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Figure 4B.7 Ratio of prices of hydrated ethanol and gasoline (E25) in Brazilian gas stations (blue lines) and its parity ratio (red line). (Data from Ref. 3.)
Thus, as the Brazilian fleet is predominantly flex-fuel, ethanol demand has decreased as ethanol has been substituted by gasoline, and ethanol production has declined as can be observed in Figure 4B.2. As of May 2014, the gasoline price at Brazilian gas stations was approximately 20% below the value that would be expected if taxes were applied, and the ethanol price was mostly >70% of that price. More than 40 mills did not operate during the last harvest season (2013/2014), and the Brazilian government has taken little effective action to change this situation, which stresses the weight of public policies in the framework of bioenergy development. At the producer level, the impact of this loss of competitiveness can be summarized in two figures. Figure 4B.817 presents three different contexts: Expansion or new frontiers; Traditional (basically São Paulo State) and Northeast. The total production cost and the price paid for ethanol producers in these regions, confirming that the price was mostly
243
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1600
R$/m3 Total cost CT Price paid to producers Preço
1400 1200 1000 800 600 400
2007/08
2008/09
2009/10
2010/11
Figure 4B.8 Ethanol production cost and price paid to
Nordeste
Tradicional
Expansão
Nordeste
Tradicional
Expansão
Nordeste
Tradicional
Expansão
Nordeste
Tradicional
Expansão
Nordeste
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200 Expansão
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2011/12
producers.17
below the production cost. This context has been hard for both sugarcane planters and mills, since the price of feedstock is defined by a scheme considering sugarcane quality (sugar content) and product price (CONSECANA pricing model), in which about 68% of the final cost has corresponded to the raw material, as indicated in Figure 4B.9. In this context, facing product price distortions and without a clear perspective of ethanol consumption, it is difficult to promote investments for expanding ethanol production in greenfield units. Currently, a typical sugarcane mill, able to crush 625 ton of sugarcane per hour, which corresponds to 3.0 million ton processed in a 200-day harvest season, producing annually 260 million liters of ethanol (50% anhydrous, 50% hydrated) costs about R$ 400 million.5
4. FINAL REMARKS Looking for multiple objectives, from energy security to rural development, ethanol has been promoted for decades in Brazil as an important development strategy, bringing interesting positive synergies with food security18 and the generation of relevant social and environmental benefits.5 It is particularly interesting to observe that according to several studies, the ethanol from sugarcane presents good sustainability indicators, primarily due to the excellent performance of sugarcane as a solar energy converter.19 In this regard, biodiesel production is still improving, and a shift to more efficient sources of feedstock is currently in development. As made evident by the recent retraction of the Brazilian program of ethanol, the effective implementation of a sustainable biofuel market depends directly on a clear, well-designed,
Ethanol from Sugarcane in Brazil
1,400
R$/liter ethanol processing
1,200
feedstock
1,000 0,800 0,600 0,400 0,200 0,000
2007
2008
2009
2010
2011
2012
2013
Figure 4B.9 Cost breakdown in sugarcane ethanol production, São Paulo average values. (Estimated from Ref. 17.)
and properly implemented strategy based on a robust technology and the availability of domestic natural resources. Essential elements of this strategy include the following: Creation of a granted demand by requiring mandatory blending of biofuels in conventional fuels (drop-in concept) that can be expanded further by promoting the use of higher blending levels and even the use of pure biofuel. Adjusting the tax regime in the fuel market in order to add value to the externalities of biofuels in relation to conventional fuels. Informing consumers, producers, and decision makers about the implications, benefits, and risks of adopting and promoting biofuels. Supporting R&D activities in the several stages of feedstock production, processing, and biofuel logistics and final use, including management and capacity building. Systematic assessment of environmental and social impacts of the biofuel production chain. Promotion of diversification and flexibility of the biofuel agroindustry, considering innovative production routes, alternative feedstocks, and new products. With regard to the last topic, it is interesting to note the increasing participation of bioelectricity in the total income of sugarcane mills based on the optimization of the existent cogeneration plants and efficient use of the available lignocellulosic by-products from ethanol and sugar production.
REFERENCES 1. EPE, Energy Research Enterprise. National energy balance. 2014. Available from: https://ben.epe.gov.br/ BENSeriesCompletas.aspx. [cited 15.11.13]. 2. FAO, Food and Agriculture Organization. FAOSTAT—agriculture. 2013. Available from: http://faostat.f ao.org/site/339/default.aspx. [cited 30.11.13].
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3. UNICA. Statistics of sugarcane industry union. UNICAData; 2013. Available from: http://www.unicadata. com.br/. [cited 20.12.13]. 4. Neves MF, Trombin VG, Consoli M. Mapping the productive chain: a panoramic portrait of sugarcane agroindustry. In: Souza EL, de Macedo IC, editors. Ethanol and bioelectricity: the sugarcane in the future energy matrix. São Paulo: UNICA; 2009. p. 10–7. 5. BNDES, Brazilian Development Bank. Bioethanol from sugarcane—energy for sustainable development. Rio de Janeiro: BNDES; 2008. 6. ANEEL, Brazilian Electricity Regulatory Agency. Bioenergy. 2011. Available from: http://www.aneel.go v.br/. [cited 06.12.12]. 7. Goldemberg J. Brazilian Institute of Geography and Statistics, IBGE. Sugar Cane Industry Union, UNICA; 2012 [personal information]. 8. Moraes MAFD, Zilberman D. Production of ethanol from sugarcane in Brazil, 195. Natural resource management and policy, vol. 43. Springer; 2014. http://dx.doi.org/10.1007/978-3-319-03140-8_15. 9. Rocha MH, Capaz RS, Lora EES, Nogueira LAH, Leme MMV, Renó MLG, et al. Life cycle assessment (LCA) for biofuels in Brazilian conditions: a meta-analysis. Renewable Sustainable Energy Rev September 2014;37:435–59. 10. Carvalho LCC. Seminar MBA Agronegócios Fundace/Pensa. Ribeirão Preto: Setor Sucroalcooleiro; December 2004. 11. Neves MF, Pinto MJA, Conejero MA, Trombin VG. Food and fuel: the example of Brazil. Wageningen Academic Publishers; 2011. p. 41. 12. Dinjus E, Arnold U, Dahmen N, Höfer R, Wach W. Green fuels—sustainable solutions for transportation. In: Höfer R, editor. Sustainable solutions for modern economies. Cambridge: RSC Publ; 2009. p. 125–63. 13. ANFAVEA. Anuário Estatístico da Indústria Automobilística Brasileira. [Statistical yearbook of the Brazilian automotive industry]. São Paulo: National Association of Automotive Vehicle Manufacturers; 2014. 14. Macedo IC, Nogueira LAH. Cadernos NAE: biocombustíveis (NAE reports: biofuels). Brasília: Center for Strategic Affairs of the Republic Presidency; 2005. 15. MME, Ministry of Mines and Energy. Decrees and orders on CIDE (Federal tax on fuels) since 2002, informed by the division of renewable fuels. 2013. Brasília. [in Portuguese]. 16. ANP, National Oil, Natural Gas and Biofuels Agency. Fuel prices survey. 2013. Available from: http://www.anp.gov.br/?id=2368. [cited 11.11.13]. 17. CEPEA, Center for Advanced Studies in Applied Economics. Ethanol market prices. 2013. Available from: http://cepea.esalq.usp.br/etanol/. [cited 20.12.13]. 18. Nogueira LAH, Capaz RS. Biofuels in Brazil: evolution, achievements and perspectives on food security. Global Food Secur 2013;2:117–25. 19. Leal MRL, Nogueira LAH, Cortez LAB. Land demand for ethanol production. Appl Energy 2012;102:266–71.
Ethanol from Sugarcane in Brazil: Economic Perspectives Luiz Augusto Horta Nogueira, Rafael Silva Capaz Institute of Natural Resources, Federal University of Itajubá, Itajubá, Brazil
Contents 1. Introduction 237 2. Ethanol from Sugarcane in Brazil: Context and Evolution 238 3. Economic Aspects of Ethanol from Sugarcane in Brazil 240 4. Final Remarks 244 References245
1. INTRODUCTION Based on its ample basis of natural resources, with an appropriate climate, large availability of land and water, and enough expertise on sugarcane agriculture and its processing for ethanol, Brazil has been promoting this biofuel since the beginning of the automotive era, motivated by energy security aspects, agroindustry promotion aims, and, more recently, by environment concerns. Ethanol blending has been mandatory in Brazil since 1931, pure hydrous ethanola use was introduced in 1975, and nowadays flex-fuel cars that are able to burn any blend of gasoline (E25) and hydrous ethanol are widely used. In 2008, ethanol production reached almost 28 billion liters, corresponding to about 50% of light cars’ energy demand. However, lately, government intervention in gasoline prices has shrunk ethanol demand, yet there are prospects for recovery in the medium term. This work briefly presents the evolution and current situation of the Brazilian ethanol program, stressing its economic aspects and the current competitiveness issues, as well as commenting on the decisive role of public policies to properly foster the market development of the biofuel market. Bioenergy has always been an important energy resource in Brazil, in different forms: sugarcane, used for bioethanol and bioelectricity production; wood, used as fuel in the industrial, residential, and power sectors; and vegetable oils and tallow used in biodiesel ethanol means an ethyl alcohol that has a purity of ≥99%, exclusive of added denaturants, meeting the requirements of ASTM D4806. Hydrous (or wet, also sometimes known as azeotropic) ethanol is the most concentrated grade of ethanol that can be produced by simple distillation, without the further dehydration step necessary to produce anhydrous (or dry) ethanol.
a Anhydrous
Industrial Biorefineries and White Biotechnology http://dx.doi.org/10.1016/B978-0-444-63453-5.00006-9
Copyright © 2015 Elsevier B.V. All rights reserved.
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Industrial Biorefineries and White Biotechnology
production, all of which combined were the source of 24.4% of the total national energy supply (72.4 million ton in 2013), the second most important source of energy after petroleum.1
2. ETHANOL FROM SUGARCANE IN BRAZIL: CONTEXT AND EVOLUTION Sugarcane, a very efficient solar energy converter in chemical energy, has been cultivated in Brazil since the sixteenth century and currently is the third most important crop in terms of area after soybeans and corn.The largest sugarcane-producing area is the CenterSouth region, which accounts for >90% of Brazilian sugarcane production, as indicated in Figure 4B.1.The main producer state is São Paulo, which accounts for close to 60% of the total. In the 2012/2013-harvest season, the national cultivated area was approximately 9.4 million hectares,2 about 1% of the national area, and the total sugarcane production was 588.5 million ton.3 Of this total, about 50% of the sugar content in sugarcane was used to produce ethanol, as pointed out in Figure 4B.2. Neves et al.4 estimated that the sugarcane agroindustry contributes with about 2% of the Brazilian gross national product. In the 80s the São Paulo State already leading ethanol production, accounting for over 50% of national production, but in early 2000s, with the reduction of available land in São Paulo and rising land prices, new production frontiers have been opened, occupying areas previously used for pasture and, to a lesser extent, for annual crops in the Center-West region.5 The expansion of ethanol production occurred alongside significant productivity gains in agricultural and industrial activities, with benefits for sugar production as well,
Figure 4B.1 Sugarcane mills in Brazil.6
Ethanol from Sugarcane in Brazil
Figure 4B.2 Evolution of the sugarcane agroindustry production in Brazil.3
Figure 4B.3 Evolution of productivity of Brazilian sugarcane ethanol mills.7
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indicated in Figure 4B.3. Since the 80s, productivity grew at a cumulative average annual rate of 1.4% in agriculture and 1.6% in agroindustry, resulting in a cumulative average annual growth rate of 3.1% in ethanol production per hectare.7 As a result of these remarkable gains in productivity, the overall production cost has reduced approximately 70% during the last three decades. A detailed revision of the evolution of ethanol program in Brazil was developed in Ref. 8. In Figure 4B.4 is depicted the flow sheet of ethanol from sugarcane mills,9 presenting the main production stages, which can be assumed as cost centers, that is, agriculture, feedstock transport, industrial processing, and cogeneration. As can be observed, besides equipment, several inputs are required at each stage, corresponding to costs, and embodied energy. Obviously, the most efficient production routes are those that produce more per unit of input. This is determined by the yields in each stage, as well as by the level of recycling and use of by-products; as the use of sugarcane bagasse in the cogeneration scheme; as well as by the synergy and integration with complementary processes, for example, aiming to produce sugar, biodiesel, plastics, and chemical products. Actually, the sugarcane value chain is becoming increasingly diversified and complex, as represented in Figure 4B.5.10,11 More detailed perspectives on the different sustainable paths that can be adopted and the associated products are available in the literature.12
3. ECONOMIC ASPECTS OF ETHANOL FROM SUGARCANE IN BRAZIL After the huge expansion of ethanol production as a response to the oil shocks, between 1975 and 1985, and a stagnation period after 1985 due to the retraction of supporting policy associated with the decline of international oil prices, the interest in ethanol reawaked in last decade driven by economic and environmental reasons. In 2003, flexfuel cars were launched and were well accepted by consumers. Flex-fuel cars are able to use gasoline (in Brazil always with 20–25% anhydrous ethanol, E25), hydrated ethanol, or any blend of the two, allowing an increased flexibility on price, autonomy, performance, or availability conditions. Thus, the consumption of hydrated ethanol in the domestic market made a comeback; flex-fuel cars currently represent approximately 95% of the sales of new cars, and 23.8 million Brazilian vehicles can use pure ethanol (mostly cars with flex-fuel engines), which is approximately 71% of the national fleet of light road vehicles.13 As a direct consequence of success of flex-fuel cars, during 2003–2008, the Brazilian sugarcane industry expanded rapidly. New and more efficient mills were commissioned, and a consolidation process was initiated at the same time that positive indicators for the industry’s environmental sustainability were demonstrated.14 However, since 2008, the Brazilian ethanol agroindustry has stagnated, and the expansion process was interrupted. The main reason for this setback is the increasing lack of competitiveness due to government intervention in gasoline prices, a crucial aspect in a consumer market dominated
Ethanol from Sugarcane in Brazil
Figure 4B.4 Flow sheet of ethanol production from sugarcane.9
241
242
Industrial Biorefineries and White Biotechnology
Modern agricultural inputs
Wastes
Producer
Biodiesel plant
Fuel reseller
Car assembly industry
Car reseller
Fuel distributor
Fuel reseller
Electricity Sugar, distributor alcohol and electricity Food producer industry
Consumer
Wholesale Industry Retail
Capital assets for the industry
Trading companies Infrastructure Subprod.
International market
Industries wholesale retail
Figure 4B.5 Sugarcane value chain.10,11
by flex-fuel vehicles where consumers are able to choose the cheapest fuel, whether it be gasoline or ethanol, at a gas station. Officially motivated by inflation control, the Brazilian government (which controls and sets the products prices of Petrobras, the main oil products supplier) has intervened in the fuel market in two ways: maintaining the gasoline price at the refinery gate level (ex-taxes) below the approximated international parity prices formerly adopted, and progressively reducing the Federal taxes on fossil fuels. Although taxes have historically represented >40% of the final price of gasoline, the Federal government gradually reduced its tax since 2008, and in June 2012, the main Federal tax on gasoline dropped to zero.15 The impact of this policy has been determinant on the fuel market. Figure 4B.6 presents the evolution of the average prices of hydrated ethanol and gasoline in Brazilian gas stations since 2005. As can be observed, there is a strong correlation between these prices, determined by the fact that most of the current Brazilian light vehicular fleet consists of flex-fuel cars. In fact, the ratio of ethanol and gasoline prices is very important because in the case of flex-fuel vehicles, after considering the differences in heating value and efficiency when using these fuels, consumers have assumed the indifference price of ethanol as 70% of gasoline price. Put differently, if the price of ethanol is <70% of the gasoline price, the consumers would prefer ethanol. Under such conditions, ethanol pricing is essentially determined by gasoline pricing, setting a pseudo upper threshold for the ethanol price. Figure 4B.7, depicts the price ratio for the same period as Figure 4B.6, ratifying the progressive loss of competitiveness of ethanol with regard to the gasoline, primarily from 2011 onward.
Ethanol from Sugarcane in Brazil 2,00
US$/liter
1,80 1,60 1,40 1,20 1,00 0,80 0,60 0,40
Gasoline (E25)
Hydrated Ethanol
l-1 3
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Figure 4B.6 Average price of hydrated ethanol and gasoline (E25) in Brazilian gas stations. (Data from Ref. 16.) 90% 80% 70% 60% 50%
3 l-1
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Figure 4B.7 Ratio of prices of hydrated ethanol and gasoline (E25) in Brazilian gas stations (blue lines) and its parity ratio (red line). (Data from Ref. 3.)
Thus, as the Brazilian fleet is predominantly flex-fuel, ethanol demand has decreased as ethanol has been substituted by gasoline, and ethanol production has declined as can be observed in Figure 4B.2. As of May 2014, the gasoline price at Brazilian gas stations was approximately 20% below the value that would be expected if taxes were applied, and the ethanol price was mostly >70% of that price. More than 40 mills did not operate during the last harvest season (2013/2014), and the Brazilian government has taken little effective action to change this situation, which stresses the weight of public policies in the framework of bioenergy development. At the producer level, the impact of this loss of competitiveness can be summarized in two figures. Figure 4B.817 presents three different contexts: Expansion or new frontiers; Traditional (basically São Paulo State) and Northeast. The total production cost and the price paid for ethanol producers in these regions, confirming that the price was mostly
243
Industrial Biorefineries and White Biotechnology
1600
R$/m3 Total cost CT Price paid to producers Preço
1400 1200 1000 800 600 400
2007/08
2008/09
2009/10
2010/11
Figure 4B.8 Ethanol production cost and price paid to
Nordeste
Tradicional
Expansão
Nordeste
Tradicional
Expansão
Nordeste
Tradicional
Expansão
Nordeste
Tradicional
Expansão
Nordeste
0
Tradicional
200 Expansão
244
2011/12
producers.17
below the production cost. This context has been hard for both sugarcane planters and mills, since the price of feedstock is defined by a scheme considering sugarcane quality (sugar content) and product price (CONSECANA pricing model), in which about 68% of the final cost has corresponded to the raw material, as indicated in Figure 4B.9. In this context, facing product price distortions and without a clear perspective of ethanol consumption, it is difficult to promote investments for expanding ethanol production in greenfield units. Currently, a typical sugarcane mill, able to crush 625 ton of sugarcane per hour, which corresponds to 3.0 million ton processed in a 200-day harvest season, producing annually 260 million liters of ethanol (50% anhydrous, 50% hydrated) costs about R$ 400 million.5
4. FINAL REMARKS Looking for multiple objectives, from energy security to rural development, ethanol has been promoted for decades in Brazil as an important development strategy, bringing interesting positive synergies with food security18 and the generation of relevant social and environmental benefits.5 It is particularly interesting to observe that according to several studies, the ethanol from sugarcane presents good sustainability indicators, primarily due to the excellent performance of sugarcane as a solar energy converter.19 In this regard, biodiesel production is still improving, and a shift to more efficient sources of feedstock is currently in development. As made evident by the recent retraction of the Brazilian program of ethanol, the effective implementation of a sustainable biofuel market depends directly on a clear, well-designed,
Ethanol from Sugarcane in Brazil
1,400
R$/liter ethanol processing
1,200
feedstock
1,000 0,800 0,600 0,400 0,200 0,000
2007
2008
2009
2010
2011
2012
2013
Figure 4B.9 Cost breakdown in sugarcane ethanol production, São Paulo average values. (Estimated from Ref. 17.)
and properly implemented strategy based on a robust technology and the availability of domestic natural resources. Essential elements of this strategy include the following: Creation of a granted demand by requiring mandatory blending of biofuels in conventional fuels (drop-in concept) that can be expanded further by promoting the use of higher blending levels and even the use of pure biofuel. Adjusting the tax regime in the fuel market in order to add value to the externalities of biofuels in relation to conventional fuels. Informing consumers, producers, and decision makers about the implications, benefits, and risks of adopting and promoting biofuels. Supporting R&D activities in the several stages of feedstock production, processing, and biofuel logistics and final use, including management and capacity building. Systematic assessment of environmental and social impacts of the biofuel production chain. Promotion of diversification and flexibility of the biofuel agroindustry, considering innovative production routes, alternative feedstocks, and new products. With regard to the last topic, it is interesting to note the increasing participation of bioelectricity in the total income of sugarcane mills based on the optimization of the existent cogeneration plants and efficient use of the available lignocellulosic by-products from ethanol and sugar production.
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