2. Why is ethanol interesting?
Sustainability:
it reduces impact on environment
Economic benefits:
- very positive energy balance
- convenience for producers over gasoline
Latecomers advantages
New generations:
improved sustainability
Learning curve:
decrease in prices
3. BIOFUEL: definition
• Combustible materials directly or indirectly derived from biomass,
commonly produced from:
Plants
Animals
Micro-organism
Organic wastes
• Biofuel may be:
Solid
Liquid
Gaseous
• Purpose create a renewable energy, the so-called “bioenergy”, that
can be used for:
Transportation
Heat and electricity production
http://www.unep.fr/scp/rpanel/pdf/assessing_biofuels_full_report.pdf
5. Why Biofuel?
“The era when industrial development strategies could be formulated without reference to
energy sources, is over”
• Before 18th century “Malthusian Trap
• In the 18th century Industrial Revolution: the key to opening the Trap was the tapping
of fossil fuel, initially coal
• Today Latecomers’ impediments due to:
- Energy security
- Economic security
- Environmental security
One Solution: BIOFUEL
Source: J. Mathews: “A Biofuels Manifesto: why biofuels industry creation should be ‘Priority Number One’ for the World Bank and for developing countries”
6. Advantages (1)
• Biofuel is cheaper than oil it overcomes the problems concerning:
Energy security: oil supply are
peaking reaching the half way
mark to its exhaustion, prices
arise
Economic security: over-
reliance on imported oil created
when it was cheaper the
poorer the country, the greater
its dependence on oil imports
and the greater its vulnerability
to price increase
Source: J. Mathews: “A Biofuels Manifesto: why biofuels industry creation should be ‘Priority Number One’ for the World Bank and for developing countries”;
J. Mathews: “Energy flows and the process of industrialization”
7. Advantages (2)
• Biofuel provides environmental security it can avoid a man-made planet’s
catastrophe due to pollution and climate change because:
It represents the first step on a clean
technology development trajectory
It burns more cleanly
It generates fewer greenhouse gases
It promotes rural development and
social inclusion
It is safer than fossil fuels: nothing
happens if a spill occurs
NOTE: To this purpose, feedstocks have to be grown and harvested in a sustainable way, avoiding the
Indirect Land Use Change (ILUC) “the unintended consequence of releasing more carbon emissions
due to land use changes around the world induced by the expansion of croplands for ethanol or
biodiesel production in response to the increased global demand for biofuels”
Source: http://en.wikipedia.org/wiki/Indirect_land_use_change_impacts_of_biofuels
Source: J. Mathews: “A Biofuels Manifesto: why biofuels industry creation should be ‘Priority Number One’ for the World Bank and for developing countries”;
J. Mathews: “Energy flows and the process of industrialization”
8. Latecomers advantages
• It reduces poverty thanks to new jobs
• It can generate new export industries
• It can be the focus of new international alliances
• It promotes South-South cooperation
• Potential entrance into the industry by countries with a low level of science and
technology
Source: J. Mathews: “A Biofuels Manifesto: why biofuels industry creation should be ‘Priority Number One’ for the World Bank and for developing countries”;
:J. Mathews: “Energy flows and the process of industrialization”
9. Disadvantages in sustainability
• Losses in biodiversity
• Greater water consumption
• Substantial use of fertilisers and pesticides
• Possible destruction of tropical forests
• Increase in food prices due to conflicts between agriculture vs. ergoculture
• First-generation will remain a niche product compared to fossil fuel
BUT BRAZIL OVERCOMES ALMOST ALL OF THESE DISADVANTAGES WITH ITS
ETHANOL PRODUCTION FROM SUGARCANE
Source: J. Mathews: “A Biofuels Manifesto: why biofuels industry creation should be ‘Priority Number One’ for the World Bank and for developing countries”;
SATW: “Biofuels – Opportunities and limits”; J. Mathews: “Energy flows and the process of industrialization”
10. BIOETHANOL
DEFINITION: A fuel for internal-combustion engines that is made by
fermenting biological material to produce alcohol (ethanol)
GENERATIONS
I Generation II Generation III Generation IV Generation
- Feedstocks: - Feedstocks: - Feedstocks: - Feedstocks:
seeds, grain, corn, non-food sources micro-algae and artificial organism
sugarcane (e.g. waste micro-algae (as Craig Venter
biomass) found synthetic
- Used part: only - Used part: whole bugs which could
sugar or starch plant make fuels such as
ethanol)
Source: SATW “Biofuels – Opportunities and limits”
11. Ethanol in Brazil
• Biggest ethanol producer worldwide (20 billion liters per year)
• It covers a large percentage of national fuel consumption No niche product
• Presence of vast tracts of sunshine and desolate landscapes No food vs. land for fuel
issue and no deforestation
• Moreover, Brazilian sugarcane has better characteristics with respect to US corn and
EU sugar beets:
Perennial crop (vs. annual crop of corn and sugar beets):
Lower need of energy input for cultivation
Cheapest form of ethanol (corn
Requires little care three-times costlier)
Lower labor, transport and input costs
Inferior use of pesticides
Higher energy gain (up to 8:1 vs. corn’s four-times less energy efficiency)
Less greenhouse gas emissions
Shorter processing time
Faster growth
Source: J. Mathews: “A Biofuels Manifesto: why biofuels industry creation should be ‘Priority Number One’ for the World Bank and for developing countries”;
SATW: “Biofuels – Opportunities and limits”
12. Ethanol Life Cycle Assessment
Analysis of the environmental impact (LCA) and the economic feasibility (LCC) of sugarcane ethanol fuel,
making a comparison between gasoline and ethanol as fuels and between E10, E85.
Ethanol as a sustainable transportation fuel
• The potential for ethanol production is equivalent to about 32% of the total gasoline consumption worldwide,
when used in E85 for a midsize passenger vehicle (Kim, Dale study) -> such reduces consumer’s use of fossil
fuels and the attendant impacts on climate change, especially GHG and CO2.
• To produce 1kg of ethanol only 12,6kg of sugarcane is needed in future case and 30kg in the base case
• GHG decrease by 81% when replacing gasoline by ethanol fuels
Sources: E. van der Voet, G. Huppes, “Life cycle assessment and Life cycle costing”, chapter published in Renewable and Sustainable Energy Reviews 2009.
Kim S, Dale BE. “Global potential bioethanol production from wasted crops and crop residues”. Biomass and Bioenergy 2004
13. CO2 budget of the Brazilian ethanol
program
Historical CO2 sugarcane emission scenario takes into account lifecycle emissions due to ethanol
production and avoided emissions due to the displacement of fossil fuels both because of ethanol
and bioelectricity
C balance 17 years later C balance immediately
1992 Net missions=zero Net missions=zero
Source: S. Pacca, J.R. Moreira, “Historical carbon budget of the Brazilian ethanol program” , Energy Policy 37 (2009) 4863-4873
14. LCC of sugarcane ethanol in Brazil
An analysis of the Economic Feasibility of bio-ethanol as transport fuel based on
the comparisons between:
Technologies & costs for the car-driving function: driving on gasoline and ethanol fuels
Ethanol produced from two processes:
Base case that involves bio ethanol co-production of sugar from sucrose and electricity
from bagasse and wastes using the current technology
Future case that involves bio ethanol co-production of sugar from sucrose and electricity
only from wastes
• Life Cycle Costing indicates the cost (tax excluded) of 1 kilometer driven by a midsize car
using gasoline, E10, E85 and 100% ethanol
• It’s a steady state model because no discounting and depreciation are taken into account
• As the lifetime of the ethanol refinery is assumed to be 10 years, the capital investment
is divided over 10 years
Source: E. van der Voet, G. Huppes, “Life cycle assessment and Life cycle costing”, chapter published in Renewable and Sustainable Energy Reviews 2009
15. LCC Tables
- Based on gasoline production cost at
0.59 $/kg
- Driving with ethanol is more economical
than gasoline
Even with the assumption of
doubling the prices of both crude
oil and sugarcane:
driving on ethanol fuels is much
cheaper in both
the base and the future case
Source: E. van der Voet, G. Huppes, “Life cycle assessment and Life cycle costing”, chapter published in Renewable and Sustainable Energy Reviews 2009
16. Brazilian Ethanol Industry: NCA?
•Home Natural Endowment
•Climate conditions •Large domestic market and
•Land fertility increasing demand
•R&D
•Demand-side stimulus:
Demanding regulatory
standards: E(10), E(25)
National Alcohol program
• Flex-fuel engine innovation
breakthrough
FACTOR DEMAND
CONDITIONS FACTORS
FIRM, RELATED &
•Historically fragmented sugar •Industrial cluster
and ethanol industries RIVALRY & SUPPORTING in São Paolo
•The top ten ethanol producers STRUCTURE INDUSTRIES •Sugarcane harvesting and sugar
control only 24% of the market production industry
•210 companies, 368 sugar and •Industrial equipment
manufacturing (Dedini)
ethanol mills and 128 sugar plants in
•Chemicals and biotech industry
the State of Sao Paulo
(Canavialis and Alellyx)
• Increasing openness to FDI •Distribution
• Toward consolidation? (Petrobas, ADM, Bunge, Cargill)
17. Factor conditions
• Natural home resources:
- 5mil hectares sugar cane crops
- Enormous amount of arable land available
- Tropical climate
- Water abundance
- Land fertility
• Cheap labor
• R&D:
- Strong private investment
- Strong Agricultural and biofuel research institutions
Mission: providing feasible solutions for the sustainable development of Brazilian
agribusiness through knowledge and technology generation and transfer
18. Demand factors
Evidences
• First oil crisis in 1973
• Sugarcane capacity had reached a high and prices collapsed
Government stimulus: Alcohol program
Supply-side Demand side
• Low interest loans to build •Country’s gasoline to be
ethanol plants running with blended with ethanol (E10)
technologies that allow them to E(25)
produce either sugar or ethanol •Dedicated engines running
on pure alcohol were
• Petrobas was ordered to developed by the CTA in Sao
purchase a guaranteed amount Paulo
of ethanol from producers and •The government ensured the
to make ethanol available at pump price of pure alcohol would
filling stations be 64.5% of the gasoline price
• In the mid-1980s the program dipped since the price of oil fell to record lows
• In 1997: Liberalization process
• In 2003 flex-fuel vehicles (FFVs) were introduced
DEMAND
which are capable of running with blends from E0 to E100
FACTORS In 2008 FFVs represent 88% of total Brazilian car sales in Brazil
•US$16 billion Investment (1979 -1990)
Brazil is now turning to ethanol as aviation fuel as well
• US$120 billion Savings in oil imports
19. Ethanol learning curve
The Alcohol program is the most important empirical
example of learning curve.
The high competition in the ethanol activity has caused
the prices to move towards production costs
in the medium and long term.
• Progress ratio of technology (PR): Δ prices /cumulative sales
• Low PRs mean efficient technology penetration
• Brazil: (1980-1985) PR 93% , (1985-2002) 71%
• Europe underperformed in solar PVs, wind and combined
cycle gas turbines with higher PRs in the same time periods.
Source: Ethanol learning curve, by Goldemberg, Coelho, Nastari, Lucon
20. Related and supporting industries
The ethanol cluster in São Paulo
São Paulo state dominates the production of sugarcane
and is also the primary center for ethanol production in Brazil
(UNICA, Sugarcane Industry Association, 2009)
• Climate
• Soil properties
• Strong sugarcane crop yields
(the central-south region accounts for 85% of total sugar cane and
ethanol production)
• Cost competitiveness
• Closeness to the economic centers of the south region
APLA is an entity seeking to develop and unite all the whole ethanol productive chain which is composed of
industries that produce equipment, research and technical development centers, associations of the ethanol
sector and producers:
• 10 distilleries
• 70 industries
• 5 Institutions and Research and Development Centers
• 19 Public and Private Entities
21. APLA - Members
Ministério de Desenvolvimento,
Indústria e Comércio Exterior
22. Ethanol Value Chain:
Are all steps covered in Brazil?
Sugar Refining Ethanol
extraction & distillation Distribution end-use
Cultivation and
harvesting of Bagasse
sugar cane
Industrial equipment Petrobas, ADM,
manufacturing industry: Bunge, Cargill
Cogeneration equipment, machinery
Chemical & Biotech (Santal, Dedini)
industry: fertilizing and
herbicides (Canavialis and
Alellyx)
Bagasse is used in the co-generation process
the burning of bagasse with improved technologies
produces a large electricy surplus that is supplied to
the grid.
23. Equipment and manufacturing providers
• Founded in 1920 Rod. Rio Claro - Piracicaba (Brazil)
• Develops, manufactures, and sells capital goods and services in Brazil
• It offers parts, components, equipment, complete plants, and units
• High-efficiency technology in:
reception, staging, extraction and processing of the juice to produce sugar and ethanol
• New technologies for sustainable plants, greenfield or existing plants with the addition or
replacement of existing equipment
24. Commodity dealers
•Headquartered in Decatur, Illinois, USA
•The world’s premier agribusinesses, with operations on six continents
•Ethanol(from corn) and biodiesel leading producer
•ADM delivers clean-burning ethanol to refiners through an expansive network of trucks, railcars,
barges and terminals
•Since 1997 Brazil is an important part of ADM’s growing global business:
- delivering of crops from production areas to processing plants
- production of biofuels fertilizers and chemicals
•Headquartered in London, UK
•The sugar trading and marketing arm sources sugar and ethanol through our origination
network
•In Brazil, Thailand and other geographies
•Production activity complementary to the distribution one : 8 sugarcane mills in Brazil
•Several mills have cogeneration plants
•The mills are close to the main domestic markets in Brazil and have excellent access to export
logistics systems
•Headquartered in Minneapolis, USA
•International producer and marketer of food, agricultural, financial and industrial products and services
•Investor in an entity that operates an ethanol dehydration facility in El Salvador with origination from
Brazil. Distribution of the anhydrous ethanol produced by this business.
•Operating an ethanol terminal in Santos, Brazil, and two sugar cane mills and distilleries in Brazil.
25. “Both the Brazilian ethanol big customer and ethanol
top competitor. It is also the fourth biggest ethanol
producer itself”
The Economist, Sept 2010
• Headquartered in the city of Rio
de Janeiro
• Publicly traded corporation
(majority stockholder is the
Government of Brazil)
• A leader in the Brazilian oil
industry
• More than 100 production
platforms, 16 refineries, 30.000
km of ducts and more than 6.000
gas stations
• Petrobras Biocombustível, a
wholly-owned subsidiary aimed to
develop and manage biodiesel
and ethanol production projects
• Its subsidiary, Petrobras
Internacional Braspetro BV,
incorporated Brazil-Japan Ethanol
Co., Ltd. in Japan
26. What does the
Diamond leave out?
• Energy ratio
• International Competition:
EU and US trade barriers
Therefore, Porter’s Diamond is efficient up to a point
27. Ethanol Energy Balance
Energy contained in a given volume of ethanol
Fossil energy required for its production*
*in the form of fertilizers, pesticides, diesel fuel spent in mechanized
harvesting and the transportation of sugarcane to the processing mill,
J. Goldemberg
The net energy balance for ethanol production in Brazil is high: 8.1
Energy Balance
Country Type Energy balance
United States Corn ethanol 1.5
Brazil Sugarcane ethanol 8.1
Germany Biodiesel 2.5
United States Cellulosic ethanol† 2
(Sources:“Ethanol for a Sustainable Energy Future”, J.Goldemberg, Science ,2007; “Brazilian ethanol is sustainable and has a very positive energy balance” IEA Report
28. Trade barriers
Europe United States
• Ethanol imports (non denaturalized • U.S. secondary tariff on ethanol:
alcohol): €0.192/l $54 cents/gallon
• Small quantities of ethanol (expiration date at the end of
Tariffs (denaturalized): €0.0102/l 2010)
• Duty free treatment for some • Preferential access for developing
countries (No Brazil) countries
• 2003 CAP “Energy Crop Payment”: • 2004 Volumetric Ethanol Excise
€45 per hectar Tax Credit (expiration date on
• Since 2005: 31dec 2010):
-oilseeds producers have received -tax credit for gasoline blenders
Subsidies support through the single farm ($45 cent/gallon)
payment system -credit to cellulosic ethanol
- Cereals also used to receive per producers ($1/gallon)
hectare compensatory payments - small-producer tax credit for
before the reform of the CAP. ethanol ($10cent/gallon)
Source: Eu And U.S. Policies On Biofuels: Potential Impacts On Developing Countries M. J. Jank, G. Kutas, L. F. D. Amaral, A. M. Nassar
29. 2004 VEETC
Highlights:
Since 1980s the corn ethanol industry has received:
• $45bln on ongoing government subsidies
• costing $6 bln out of the tax payers pockets every year
Subsidies are expiring on 31 Dec 2010:
• TAX CREDIT to blend Ethanol With Gasoline
• IMPORT TAX On Foreign Ethanol (on sugarcane ethanol from Brazil)
Ongoing debate on:
Should ethanol subsidies be renewed or not?
Source: http://www.nytimes.com/2010/10/12/business/energy-environment/12iht-renbrazil.html?_r=1&pagewanted=all
30. Ethanol Subsidies
IN FAVOR OF AGAINST OF
• Business group
• Florida Sugar Lobbies
• Corn Ethanol Producers
• Environmentalist organizations
• Editorial writers and
journalists
They are both working hard to
What benefits can competition bring to
extend this date for three decades in U.S. consumers ?
order to limit competition • it equals better quality ethanol
• it lowers prices at the pomp
Source: UNICA video “All I Need to Know About U.S. Ethanol Subsidies”
31. Overstated Claims
IN FAVOR OF AGAINST OF
• 100.000 jobs lost BUT Productive farmers & ethanol
refiners will keep their job
• Domestic biofuel production will Without the tax credit and tariff
BUT
plummet by 40 % domestic ethanol production will
increase to 14.5 billion gallons by
2014
• Increase only of 5% in imports from
• US more dependent on foreign BUT foreign suppliers
biofuel producers • Greater access to clean affordable
and renewable fuels like sugarcane
fuel ethanol would actually help
diversify US energy supplies
Source: UNICA video “All I Need to Know About U.S. Ethanol Subsidies”
32. BioFuel’s Latest Challenge
30 Nov 2010
World premiere: Lufthansa first
airline to use biofuel on commercial
flights
Bio-synthetic kerosene to be used from
April 2011
The “burnFAIR” project is designed to
research the long-term alternatives to
conventional aviation jet fuel and at
underpinning the sustainability of air traffic “We know that biofuel is an issue we
In April 2011, Lufthansa is to begin a six- must address carefully” observed
month trial with an Airbus A321 in which Lufthansa Chairman and CEO
one of its engines will use a 50-50 mix of Wolfgang Mayrhuber.
biofuel and traditional kerosene.
During the six months trial, Lufthansa will
“Our fuel is sustainable. No rain
save around 1,500 tones of CO2 emissions. forest will be deforested for Lufthansa
Lufthansa will be the world’s first airline to biofuel.
utilize biofuel in flight operations within the In the procurement of biofuel, we
framework of a long-term trial.
ensure it originates from a sustainable
The project will cost Lufthansa an estimated
supply and production process. Our
€6.6 million.
licensed suppliers must provide proof of
