Biofuels in Brazil The Ethanol Experience

1
Biofuels in BrazilThe Ethanol Experience
Paulo C. R. Lima, M.Sc., Ph.D. Energy Consultant
for Brazilian Congress
2

• Main biofuels in Brazil
• Ethanol (present and future)
• Biodiesel (future)
• Sugarcane bagasse
• Charcoal

3
Brazils potential
Millions of hectares
Brazils area
850,00 Total area for
agriculture 320,00
Cultivated area all crops
60,40 with sugar cane
5,34
for ethanol
2,66
Source Ministério da Agricultura, Pecuária e
Abastecimento
4
Fonte Carvalho L. C. C - 2005
Cultivated area 5.5 million ha It could be 20
times greater
5
Ethanol in Brazil

• Proálcool worlds greatest program
• Started in 1975
• The addition of ethanol increases the octane
  number
• Additive that replaces Methyl Tertiary Butyl
  Ether (MTBE) and Ethyl Tertiary Butyl Ether
  (ETBE)
• More than 3 million flex-fuel vehicles (ethanol,
  gasoline or any mixture of them)
• Gasoline with 20 a 25 of anhydrous ethanol
• Ethanol is competitive

6
Ethanol export
Sugarcane production and key facts
Flex-Fuel Vehicles
Law nº 8.723, 1993 (22/- 2 e 1 allowance)
440
383
350
PROÁLCOOL
303
263
149
91
(1.000.000 t)
1975
1980
1990
1995
2003
2004
2005
Source UNICA União da Indústria Canavieira do
Estado de São Paulo
7
Ethanol production
2006 17 million cubic meters
15,28
15,4
14,72
14,37
13,87
13,02
12,59
12,62
11,54
10,59
1.000.000 m3
1995/1996
1996/1997
1997/1998
1998/1999
1999/2000
2000/2001
2001/2002
2002/2003
2003/2004
2004/2005
Source UNICA
8
Ethanol market

• Brazil
• 13,2 of total energy consumption in road
  transport sector
• 40,4 of total fuel consumption for Otto Cycle
  vehicles (it was 56,9 in 1988).
• USA ethanol represents just 2,5 of total fuel
  consumption of Otto Cycle vehicles.

Source Nastari, P. M. - 2005
9
IMPACTS OF ETHANOL PRODUCTION
Social
Environment
16 million cars powered by gasoline with 25
ethanol addition
More than 1 million flex fuel cars
70.000 farmers 395
distilleries 1million people
3,0 million cars powered by hydrated ethanol
From 1992 to 2003, the jobs on sugarcane crop has
reduced by 33, according to PNAD (Pesquisa
Nacional de Amostras Domiciliares)
10
SUGARCANE
Productivity improvement (Center-South)
(ton per hectare-year)
Source Amorim e Lopes - 2005
11
ETHANOL
Increase of productivity (Center-South)
7000
6500
6550
6000
liters/ha-year
5500
5300
5000
4500
4200
4000
1980
1986/1988
2004
Source UNICA
12
Learning curve
Ethanol price at distillery
Gasoline price at refinery
Source Goldemberg,J. Macedo,I., 2005
13
Ethanol production costs

• Production cost US0.180.25 per liter
• Average export price in 2003 US 0.23 per liter
• New plants
• Processing capacity 2.1 million tons of
  sugarcane per year
• Production capacity 430 m3/day
• Capital cost US 60 million
• Raw material cost US 0.143 per liter of ethanol
  
• Capital cost US 0.017 per liter of ethanol

Source Nastari, P. M. - 2005
14
NEW DISTILLERIES
(around 50)
New plants
15
Energy balance of ethanol production
16
ELECTRICAL ENERGY Installed Power
(sugarcane bagasse)
(MW)
Electricity consumption for sugar and ethanol
processing Power capacity connected to the
national grid Short term potential Medium term
potential
2300
1600
6000 to 8000
15000 to 22000
Source Aneel/Unica
17
Cogeneration potential

• Plants can generate 80 kWh/sugarcane ton in
  excess (low pressure systems)
• Investment can be recovered in 3 to 4 years
• Cogeneration can have an important impact on
  income of ethanol producers (25-28)
• Sugarcane bagasse, stem tips and leaves can
  provide great amount of energy

Fonte Nastari, P. M. - 2005
18
Perspectives for ethanol in developing countries
19
BIODIESEL
Brazil has 90 million hectares available for
producing oil crops.
20
Law nº 11.097 / 2005 - Introduces biodiesel into
the Brazilian energy matrix - 2 has to be
added to diesel in 3 years (by January 2008) -
800 million liters - 5 has to be added in 8
years (by January 2013) - 2 billion liters - Oil
and gas royalties can be used to finance biofuels
RD projects
21

• Law 11.116 / 2005
• - Special monophase regime for federal taxation
  (PIS/PASEP and COFINS)
• - Biodiesel producers has to be authorized by ANP
  (National Agency for Oil, Gas and Biofuels)
• - Special record at Secretaria da Receita Federal
  (Ministry of Finances)
• Decree nº 5.297
• - Defines the value of PIS/PASEP and COFINS
• - Creates the Social Fuel Stamp

22
Source Gomide, R. B. - 2006
23
Social Fuel Stamp IN 01 / 2005 Ministério do
Desenvolvimento Agrário - MDA

• Requirement for concession
• Buying of raw material of family farming
• 50 NE
• 10 North and CW
• 30 SE and South
• Formal contracting
• Technical assistance and training

24

• Resolution nº 3 / 2005
• Conselho Nacional de Política Energética - CNPE
• - Public auctions to anticipate the 2 goal. Raw
  material from family farming and Social Fuel
  Stamp
• Portaria nº 483 / 2005
• Ministério de Minas e Energia - MME
• - Guidelines for public auctions to be executed
  by Oil, Gas and Biofuel National Agency

25

• Resolution nº 31 / 2005
• Agência Nacional do Petróleo, Gás Natural e
  Biocombustíveis - ANP
• Auction Bidding nº 061 / 2005
• Auction Bidding nº 007 / 2006
• Agência Nacional do Petróleo, Gás Natural e
  Biocombustíveis - ANP

26
1º Auction
27
2º Auction
28

• 3º and 4º Auctions
• Agência Nacional do Petróleo, Gás Natural e
  Biocombustíveis - ANP
• - Estimated volume 850 million liters to fill 2
  
• - Brazils diesel consumption is near 40 billion
  liters

29

• BIODIESEL PLANTS

Source Gomide, R. B. - 2006
30
CONCLUSION
- Brazil has a great potential for biofuel
production but a small potential to promote
citizenship - Biofuels legal framework is
confusing and inconsistent - Ethanol and
biodiesel are subject to different public
policies - Ethanol can be treated as social
fuel like biodiesel - The Brazilian legislation
does not define any incentive for cooperativism
and small distilleries or production units -
Family farming depends on industrial producers
31
Tributos Federais Decretos nº 5.297/04 e
5.457/05

Biodiesel
Biodiesel
Diesel
Diesel
Tributos
Tributos
de
de
Agricultura
Agricultura
federais
federais
Norte, NE e
Norte, NE e
Petr
ó
leo
Petr
ó
leo
Familiar no
Familiar no
Semi
-
á
rido
Semi
-
á
rido
Agricultura
Norte, NE e
Agricultura
Norte, NE e
Regra Geral
com
Regra Geral
com
Familiar
Semi
-
á
rido com
Familiar
Semi
-
á
rido com
mamona ou
mamona ou
mamona ou
mamona ou
palma
palma
palma
palma
Al
í
quota
Al
í
quota
Al
í
quota
Al
í
quota
Al
í
quota
Al
í
quota
Al
í
quota
Al
í
quota
IPI
IPI
Al
í
quota Zero
Al
í
quota Zero
Zero
Zero
Zero
Zero
Zero
Zero
Zero
Zero
CIDE
CIDE
R 0,070
Inexistente
Inexistente
Inexistente
Inexistente
R 0,070
Inexistente
Inexistente
Inexistente
Inexistente

diesel
Redu
çã
o de
Redu
çã
o de
Redu
çã
o de

diesel
Redu
çã
o de
Redu
çã
o de
Redu
çã
o de
PIS/COFINS
PIS/COFINS
R 0,148
R 0,148
mineral
31
68
100
mineral
31
68
100
R/litro
R/litro
R/litro
R/litro
R/litro
R/litro
R/litro
R/litro
R/litro
R/litro
Total tributos
Total tributos
federais
federais
R 0,218
R 0,218
R 0,151
R 0,070
R 0,00
R 0,218
R 0,218
R 0,151
R 0,070
R 0,00
32
Matriz Energética Brasileira
33
BIODIESEL
Áreas não exploradas de 90 milhões de ha estão
disponíveis para produção de grãos no Brasil
34
Matriz de Energia Elétrica
35
Produção de Energia Primária 106 tep
36
Miscellaneous thoughts/quotes/notesaddendum by
James Page

• There is a required trade-off between energy and
  food production. With half of the world hungry,
  this is not a good idea at all.
• The green revolution began in the 70s. Its
  taken 30 years to take off.
• Q Whats the better alternative? Nuclear?
  With all the risks? Or do we continue to flatten
  pristine environments of the Amazon?
• A We need technology to change this and
  increase yields and product in traditional areas
  where markets function better.

37
Contd

• Improvements in this technology will lead to
  300,000 of Brazils poorest losing their jobs by
  2014.
• There is no way for Brazil to use renewable
  energycosts are way too high.

38
The Amazon is the worlds air conditioning
system.

• The free market will lead us to the end.

39
The world is watching the United States and
waiting for a change on their position on the
omission of the gases with regard to global
warmingof course, Im not a defender of Mr.
Bush, but the United States has great
technological capability and we are going to need
this.
40
Citation for Addendum

• Brazilian Chamber of Deputies. Personal
  Interviews and Presentation. July 2007.