1G and 2G Biofuels in Brazil: competition or complementarity? Conference on Bioeconomy and Second Generation Biofuels.

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1 2 December 2016, London 1G and 2G Biofuels in Brazil: competition or complementarity? Conference on Bioeconomy and Second Generation Biofuels Geraldine Kutas

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 30 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 (2015) Renewable sources: 41.2% Natural gas 13.7% Coal 5.9% Uranium 1.3% Other, non-renewables 0.6% 25% of energy comes from biomass Other renewables 4.7% Wood and vegetal coal, 8.2% Sugarcane 16.9% Oil and derivatives 37.3% Hydro-electricity 11.5% Source: Balance Energético Nacional (BEN) 2016 #1 source of renewable energy

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

5 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 increased as ethanol is produced far away from consumption centers Need to grow vertically Economic opportunity available Mandate for cellulosic ethanol in the U.S. almost no tariff to access the U.S. market Harness the full potential of the plant as straw became Production level is still low in the U.S, 2 commercial plants inaugurated in 2014 and 2015, 3 demo plants and 20 projects in the pipepline

6 2G ETHANOL IN BRAZIL 1st unit to produce ethanol 2G in the country (since set/2014), on a market scale. It uses straw and bagasse ~ 80 million liters/ year¹ It produces ethanol from sugarcane bagasse ~ 40 million liters/ year¹ This project aims to study inovations ~ 3 million liters This project uses sugarcane straw and bagasse ~ 65 million de liters/year¹ Research Institutes & Universities ¹ Annual Productive Capacity

7 2G SUSTAINABILITY: OPTIMIZING RESOURCES Biomass availability: sugarcane bagasse (already available at production sites) and sugarcane trash (tops & leaves left in the field) need to be collected and transported to the mill. Technology: at present, enzymatic hydrolysis is the most feasible alternative for 2G ethanol - production can be integrated with 1G; other technologies becoming available to produce sugarcane-derived jet fuel, diesel and green chemicals.

8 2G PRODUCTIONS COSTS R$/l 1,6 1,4 1,2 Cost of 1G ethanol 1 0,8 0,6 0,4 0, Source: BNDES Competitive at $40/barril

9 OPPORTUNITIES AND CHALLENGES Opportunities Increase ethanol production by 50% with the same planted area No seasonality: production all the year long Product is almost carbon neutral Synergies with 1G/sugar mills: use of logistics, clean energy, distillation,etc. Challenges Competitive biomass: today, it costs around 110 R$/t (26 /t) of dry matter to bring the straw to the mill Pre-treatment/equipment: impurity of raw material, corrosion, replacement of broken pieces C5 sugar conversion still need to be demonstrated at commercial scale Enzymes: still need to improve efficiency Treatment of effluents and water Absence of public policy, in Brazil, to promote cellulosic ethanol

10 COMPLEMENTARY TECHNOLOGIES Integration of 1G and 2G unit plants is key to reduce costs: shared supply chains, clean energy, logistics optimal use of biomass, currently underutilized economies of scale incentives for biorefineries and development of new products The two technologies will co-exist: the demand for fuel is growing despite the crisis 1G will leverage the deployment of 2G

11 SUGARCANE BIOREFINERY SUGARCANE BIOREFINARY 2G Ethanol Storage Tanks 2G Bio HC 1G Ethanol Sugar Plant Bagasse Heat & Electricity Sugarcane Fields (Sugarcane Trash)

12 NEW USES

13 OTHER PROJECTS BASED ON SUGARCANE Diesel and jet fuel from sugarcane

14 CONCLUDING REMARKS Brazil is endowed with an abundant and cheap source biomass. It s scalable and it s sustainable. Integration is key: 1G will cover the increased costs of 2G The two technologies will co-exist to answer the growing demand for fuels Despite being a late comer, Brazil can leapfrog other countries thanks to its biomass potential and vast experience in 1G However, long-term policies are crucial to further promote 2G and unleash this potential Brazil is aiming at exporting value-added products.

15 Thank you!