Biofuels in Brazil--The Ethanol Experience

Biofuels in Brazil The Ethanol Experience Paulo C. R. Lima, M.Sc., Ph.D. Energy Consultant for Brazilian Congress Main biofuels in Brazil > Ethanol (present and future) > Biodiesel (future) > Sugarcane bagasse > Charcoal Brazil´s potential Millions of hectares Brazil´s area Total area for agriculture Cultivated area – all crops with sugar cane for ethanol ~ 850,00 320,00 60,40 5,34 2,66 Source: Ministério da Agricultura, Pecuária e Abastecimento Fonte: Carvalho L. C. C - 2005 Cultivated area: 5.5 million ha It could be 20 times greater Ethanol in Brazil        Proálcool: world´s 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 Sugarcane production and key facts Flex-Fuel Vehicles Ethanol export Law nº 8.723, 1993 (22%+/2% e 1% allowance) 350 303 383 440 PROÁLCOOL 263 (1.000.000 t) 149 91 1975 1980 1990 1995 2003 2004 2005 Source: UNICA – União da Indústria Canavieira do Estado de São Paulo Ethanol production 2006: 17 million cubic meters 14,37 15,4 13,87 13,02 14,72 15,28 12,59 1.000.000 m3 10,59 11,54 12,62 Source: UNICA 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 IMPACTS OF ETHANOL PRODUCTION Social 70.000 farmers Environment 16 million cars powered by More than 1 gasoline with 25% ethanol million flex addition fuel cars 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) SUGARCANE Productivity improvement (Center-South) (ton per hectare-year) 80 53 1977 Source: Amorim e Lopes - 2005 2003 ETHANOL Increase of productivity (Center-South) 7000 6500 liters/ha-year 6550 6000 5500 5300 5000 4500 4200 4000 1980 Source: UNICA 1986/1988 2004 Learning curve Ethanol price at distillery Gasoline price at refinery Source: Goldemberg,J. & Macedo,I., 2005 Ethanol production costs  Production cost: US$0.18–0.25 per liter  Average export price in 2003: US$ 0.23 per liter  New plants  Processing capacity: 2.1 million tons of sugarcane per year 3  Production capacity: 430 m /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 NEW DISTILLERIES (around 50) New plants Energy balance of ethanol production 12 10 8 6 4 2 0 Sugarcane Sugar beet Wheat straw Corn Wood energy output/input ratio ethanol feedstock 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 Source: Aneel/Unica 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 Perspectives for ethanol in developing countries BIODIESEL Brazil has 90 million hectares available for producing oil crops. 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 R&D projects 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” Source: Gomide, R. B. - 2006 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 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 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 1º Auction 2º Auction 3º and 4º Auctions Agência Nacional do Petróleo, Gás Natural e Biocombustíveis - ANP - Estimated volume: 850 million liters to fill 2% - Brazil’s diesel consumption is near 40 billion liters BIODIESEL PLANTS Source: Gomide, R. B. - 2006 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 Tributos Federais: Decretos nº 5.297/04 e 5.457/05 Biodiesel Tributos federais Agricultura Familiar no Norte, NE e Semi-árido com mamona ou palma Agricultura Familiar Norte, NE e Semi-árido com mamona ou palma Regra Geral Diesel de Petróleo IPI CIDE Alíquota Zero Inexistente Redução de 100% Alíquota Zero Inexistente Redução de 68% Alíquota Zero Inexistente Redução de 31% Alíquota Zero Inexistente = diesel mineral Alíquota Zero R$ 0,070 R$ 0,148 PIS/COFINS Total tributos federais R$/litro R$ 0,00 R$/litro R$ 0,070 R$/litro R$ 0,151 R$/litro R$ 0,218 R$/litro R$ 0,218 Matriz Energética Brasileira Recursos Renováveis 43.6% Biomassa 29.1% Hidreletricidade 14.5% Urânio (U 3 O 2 ) 1.5% Carvão Mineral 6.5% Gás Natural 8.7% Petróleo e Derivados 39.7% BIODIESEL Áreas não exploradas de 90 milhões de ha estão disponíveis para produção de grãos no Brasil Matriz de Energia Elétrica E m p re e n d im e n to s e m O p e ra ç ã o C a p a c id a d e In s ta la d a T o ta l T ip o % % N .° d e N .° d e (k W ) (k W ) U s in a s U s in a s H id ro 6 0 4 7 1 .5 4 9 .7 2 1 7 0 ,1 3 6 0 4 7 1 .5 4 9 .7 2 1 7 0 ,1 3 N a tu ra l 72 9 .8 8 6 .9 5 3 9 ,6 9 G ás 9 8 1 0 .8 1 2 .7 0 1 1 0 ,6 0 P ro c e s s o 26 9 2 5 .7 4 8 0 ,9 1 Ó le o D ie s e l 520 3 .5 6 5 .9 9 4 3 ,5 0 P e tró le o 538 4 .7 2 9 .9 6 4 4 ,6 4 Ó le o 18 1 .1 6 3 .9 7 0 1 ,1 4 R e s id u a l Bagaço de 222 2 .2 9 0 .2 5 0 2 ,2 4 C ana L ic o r N e g ro 13 7 8 2 .6 1 7 0 ,7 7 B io m a s s a M a d e ira 25 2 1 2 .8 3 2 0 ,2 1 264 3 .3 1 2 .1 2 9 3 ,2 5 B io g á s 2 2 0 .0 3 0 0 ,0 2 C asca de 2 6 .4 0 0 0 ,0 1 A rro z N u c le a r 2 2 .0 0 7 .0 0 0 1 ,9 7 2 2 .0 0 7 .0 0 0 1 ,9 7 C a rv ã o C a rvã o 7 1 .4 1 5 .0 0 0 1 ,3 9 7 1 .4 1 5 .0 0 0 1 ,3 9 M in e ra l M in e ra l E ó lic a 10 2 8 .5 5 0 0 ,0 3 10 2 8 .5 5 0 0 ,0 3 P a ra g u a i 5 .6 5 0 .0 0 0 2 ,3 3 A rg e n tin a 2 .2 5 0 .0 0 0 5 ,8 5 Im p o rta ç ã o 8 .1 7 0 .0 0 0 8 ,0 1 V e n e zu e la 2 0 0 .0 0 0 0 ,0 8 U ru g u a i 7 0 .0 0 0 0 ,2 0 T o ta l 1 .5 2 3 1 0 2 .0 2 5 .0 6 5 100 1 .5 2 3 1 0 2 .0 2 5 .0 6 5 1 0 0 Produção de Energia Primária 106 tep CARVÃO MINERAL 2,15 PETRÓLEO 76,84 GÁS NATURAL 16,85 URÂNIO 3,57 HIDRÁULICA 27,59 BIOMASSA 63,40 CARVÃO MINERAL PETRÓLEO GÁS NATURAL URÂNIO HIDRÁULICA BIOMASSA Miscellaneous thoughts/quotes/notes… addendum 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. It’s taken 30 years to take off. Q: “What’s 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.” Cont’d   Improvements in this technology will lead to 300,000 of Brazil’s poorest losing their jobs by 2014. “There is no way for Brazil to use renewable energy…costs are way too high.” 17 Nov 2005 Nastari / Datagro @ NIPE Unicamp 37 “The Amazon is the world’s air conditioning system.” “The free market will lead us to the end.” “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 warming… …of course, I’m not a defender of Mr. Bush, but the United States has great technological capability and we are going to need this.” Citation for Addendum  Brazilian Chamber of Deputies. Personal Interviews and Presentation. July 2007. 17 Nov 2005 Nastari / Datagro @ NIPE Unicamp 40