Application and development potential of bioethanol in Brazil advantages and disadvantages of flexible blending. Géraldine Kutas

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1 Application and development potential of bioethanol in Brazil advantages and disadvantages of flexible blending Fuels of the Future January 2016, Berlin Géraldine Kutas Head of International Affairs

2 ABOUT UNICA The Brazilian Sugarcane Industry Association (UNICA) is the leading sugarcane industry association in Brazil. Its more than 130 member companies, voluntarily engaged, represent over 50% of the ethanol and 60% of the sugar produced in Brazil. UNICA has around 30 staff members and its expertise covers key areas including the environment, energy, technology, international trade, corporate social responsibility, sustainability, regulation, economics and communications It has offices in four locations: São Paulo (headquarters), Brasília, Washington DC and Brussels Sugarcane production: 635 million tons 28 billion liters 2 nd world largest producer: 25% of production and 20% of world exports 15 million MWh 3.3% of Brazilian electricity consumption 35 million tons Largest producer and exporter in the world: 20% of global production and more than 40% of exports

3 BRAZILIAN ENERGY MATRIX (2014) Renewable sources: 39.4% Other, non-renewables 0.6% Natural gas 13,5% Wood and vegetal coal 8,1% Other renewables Coal 4,7% 5,7% Uranium 1,3% Sugarcane 15.7% Oil and derivatives 39,4% 24% of energy comes from biomass Hydro-electricity 11.5% Source: Balance Energetico Nacional (BEN) 2015 #1 source of renewables

4 HOW ETHANOL IS CONSUMED IN BRAZIL Mandatory blend: Blend mandated by the government: 18-25% Very useful in case of tensions on the market No pure-gasoline sold in Brazil Consumption: +/- 11 bn liters Increase since 2012: + 37% Pure ethanol: Market-driven Consumption: +/- 17 bn liters Flexibility is here Increase since 2012: + 78%

5 SHORT-TERM AND LONG-TERM SCENARII Short-term Brazil s economy is expected to drop 2.5% in 2016 compared to last year. Demand for fuel will shrink, impacting mainly anhydrous ethanol But, more sugar will be produced as the deficit in the international market is forecasted to increase Long-term Brazil is approaching its crushing capacity 80 mills have closed their doors since 2008 (20%) Domestic demand will expand New investment is urgently needed. We need a clear and stable policy on: Price formation of fuels Energy taxation Role played by ethanol in the energy matrix COP 21/INDC presented by Brazil is a first step in the right direction

6 OPPORTUNITIES: INDC Brazil publishes one of the most ambitious and detailed INDC. Main provisions affecting the sugarcane sector: a 16% share of sugarcane-derived products in the Brazilian energy mix. The Brazilian energy matrix is expected to grow from 280 mn tep to 400 mn tep in % of electricity will come from renewables on top of hydro-electricity Recovering 15 million hectares of degraded pastures 45% of the energy mix will be from renewable sources All the measures included in the INDC should provide a 37% reduction of Brazil s GHG emissions by 2025 compared to Economy wide. How to get there: New crushing capacity Increase productivity, develop new varieties 2 G ethanol

7 BREAKDOWN OF SUGARCANE S ENERGY Energy equivalent of 1 ton of sugarcane = 1.2 oil barrel Source: UNICA

8 FROM 1G TO 2G ETHANOL Brazil, a late comer to 2G ethanol Great performance of 1G in terms of GHG savings No pressure on land availability for expansion No food versus fuel debate No legislation promoting 2G ethanol So, what s happened? 90% on average Degraded pastures (+25 mn ha) Grain production doubled in the last decade Production costs increase as ethanol is produced far away from consumption centers Need to grow vertically Economic opportunity available Harness the full potential of the plant as straw became Mandate for cellulosic ethanol in the U.S. and discussions at the EU level Production level is still low in the U.S, almost no tariff to access the U.S. market 2 commercial plants in operation, 3 demo plants and 20 projets in the pipepline

9 COMMERCIAL PLANTS - GRANBIO Inaugurated in st commercial 2G mill in Brazil, located in Alagoas Use cane straw as raw material Production capacity: 82 million liters CO2 emissions according to CARB: 7.49 gr of CO 2 equ/mj Cluster model Production of bioelectricity with lignin Plan to use energy cane: more resistant, twice the Q of biomass, better CO 2 savings Granbio-Rhodia partnership to produce biochemicals (bio n-butanol)

10 COMMERCIAL PLANTS - RAIZEN Inaugurated in 2015 Situated in Piracicaba First 2G facility to be colocated to an existing 1G and sugar mill (Costa Pinto, 80 years old) Use bagasse and cane straw as raw material Production capacity: 40 million liters Production of bioelectricity with lignin C5 will be tested commercially in October/15 Plan to open 7 additional 2G facilities

11 DEMONSTRATION PLANTS 1 st commercial 2G unit in 2016 Demo plant in Denmark using bagasse Ongoing 2G research since 2004, plans to launch commercial production in 2016 Demo plant launched in 2014 with a capacity of 100 tonnes processed biomass/day Universities & research institutions

12 CONCLUDING REMARKS 2016 will be key for the future of ethanol in Europe: Communication on the decarbonisation of transport Proposal for a new Renewable Energy Directive, etc This is an opportunity we can t miss. Projections show that, by 2030, 93% of vehicles will still run on liquid fuels in Europe However, ethanol was absent from COP 21 discussions We should cooperate more instead of fighting each other. Brazil will never replace the EU ethanol production, but we can be a useful complement and we can learn from each other There are a lot of EU investments in the the sugarcane sector in Brazil. We have more in common than you think

13 Thank you! Vielen Dank!