California Biomass Collaborative Brazilian Ethanol Industry: Sugarcane s Sustainability Today and Tomorrow BRAZILIAN SUGARCANE INDUSTRY ASSOCIATION Joel Velasco joel@unica.com.br
OUTLINE Introduction: Who, What, Where Sustainable expansion reality today 1% of arable land = 50% gasoline #1 renewable source in Brazil +80% GHG emissions reduction Sugarcane is a superior feedstock Carbon absorbing machine High and growing yields Continuously improving technologies Sustainability of Gas prices? 2
3 Introduction: Who, What, Where
WHO WE ARE UNICA is the leading sugarcane industry association, representing 110 producers and mills in Brazil Responsible for 60% of all ethanol and sugar production in Brazil. Emerging as a leader in the generation of bioelectricity International presence, now in Washington & Brussels, to engage in constructive dialogue 4
WHAT WE PRODUCE 26B LITERS +550 MT +3000 MW 33 MT 5 Note: Estimates based on available data.
WHERE ARE WE South-Central region represents 87% of sugarcane harvest 6 Sources: NIPE-Unicamp, IBGE and CTC
7 SUGARCANE PLANTING AREA (2008/09)
8 Brazil s sugarcane is sustainable today
1% OF ARABLE LAND DISPLACES 50% GASOLINE All sugarcane ethanol produced in Brazil occupies area smaller equal to 8% of California Millions of hectares (2007) % BRAZIL TOTAL ARABLE LAND 851 354.8 total land % arable land 1. Total Crop Land 76.7 9.0% 21.6% Soybean 20.6 2.4% 5.8% Corn 14.0 1.6% 3.9% Sugarcane 7.8 0.9% 2.2% Sugarcane for ethanol 3.4 0.4% 1.0% Orange 0.9 0.1% 0.3% 2. Pastures 172.3 20% 49% 3. Available area Total arable land (crop land + pastures) 105.8 12% 30% 9 Source: IBGE. Elaboration: UNICA.
COMPARISON OF SHARE OF RENEWABLE ENERGY Source: Ministry of Mines and Energy (MME), BEN(2008 preliminary estimate). 1 0
SUGARCANE IS NOW #1 RENEWABLE IN BRAZIL Sugarcane is #1 source of renewable energy with 16% of total energy consumed though Brazil has 80% of its electricity from hydros 2006 vs. 2007 Comparison Source: Ministry of Mines and Energy (MME), BEN(2008 preliminary estimate).
AVOIDED GHG EMISSIONS [VS. YESTERDAY S GAS] Note: Reductions in well-to-wheel CO 2 -equivalent GHG emissions per km, from bioethanol comparared to gasoline, calculated on a life-cycle basis. Source: IEA International Energy Agency (May, 2004), based on a review of recent articles. 12
13 sugarcane is an advanced biomass feedstock
A CARBON ABSORBING MACHINE? 3 METERS 2 METERS 1 METER 1 METER 2 METERS 22-36 tons C/ha 3-5 tons C/ha Unlike corn, sugarcane is replanted only every 5-77 years 3 METERS 4 METERS 14 Source: PoloBio via Weber Amaral from various sources
CANE VS. PASTURES: OPPORTUNITY COSTS Annual net income per hectares US$ 45-90 US$ 280-410 15
CANE VS. PASTURES: CARBON UPTAKE Annual tons carbon per hectare 3-8 t C/ha 22-36 t C/ha 16
AVERAGE PRODUCTION YIELDS Liters per hectare Source: 17 IEA International Energy Agency (2005), USDA, MTEC. Elaboration: ICONE and UNICA.
ENERGY BALANCE 18 Source: Based on various estimates compiled by World Watch Institute.
BREAKDOWN OF SUGARCANE S ENERGY 19 Source: UNICA
TECH: HIGHER YIELDS WITHOUT MORE LAND Million hectares Cultivated area Hydrolysis Genetic improvement Billion liters Assumptions: a) productivity gain based on new technology is absorbed by ethanol production (we assume that sugar production is not affected); b) genetically modified varieties available in 2015. with a sugar content 20% higher than the current varieties. These new varieties will occupy 10% of the area in 2015. 30% in 2020 and 60% in 2025; c) we assume that the hydrolysis of cellulose technology is already implemented by 2015. and will be used in 20 to 40% of the plants in 2020 and 2025. respectively. Hydrolysis will allow a productivity gain of 37 litres per ton of cane sugar.
TECH: REDUCTION OF MANUAL HARVEST Thousand hectares available for harvest 3.000 2.500 2.000 1.500 1.000 500 Unburned Burned 66% 34% 47% 53% Sugarcane mechanical harvesting continue to grow during the crop year 2008/09 and properly will overcome the burned sugarcane areas. 0 2006/07 2007/08 Source: 21 INPE and UNICA
TECH: GROWING ROLE OF BIOELECTRICITY Note: ave.mw = MW firm capacity Assumptions: a) 2006/2007 harvested area; b) 2012/13 harvest prediction based on the following values: 1 ton of sugar cane produces 250 kg of bagasse e 204 kg de straw, 1 ton of cane (only bagasse) generates 85,6 KWh for exporting, 1 ton of cane (bagasse + straw) generates 199,9 KWh for exporting, the straw inferior calorific value = 1,7 bagasse inferior calorific value, capacity factor = 0,5. Source: Cogen, Unica. Prepared by: Unica
INSURANCE AGAINST SUBSIDIES $20 Billion $45 Billion Exports BIOELECTRICITY ETHANOL Domestic 51% SUGAR Exports Domestic 32% Note: 2006/2007 real values; 2015/2016 the percentage of the 2015-2016 projection were calculated using as a base the potential for production and exports, considering the constant prices of 2006. 23
WORLD LAND USE According to FAO, the total harvested area is about 1.4 billion hectares while only 15 million devoted to ethanol production. Source: FAO, F.O.Licht, Datagro, UNICA, USDA, European Commission. Elaboration: UNICA Note: Others include the harvested area for the remaining crops like fruits, fibers, nuts, pulses, roots and tubers, spices and other vegetables.
GROWTH IN AGRICULTURAL LAND IN BRAZIL Base 100 in 1982 Note: 1) 2007 * - estimated data ; 2) Sugarcane include cane destined for ethanol production, sugar production and other uses (animal feed, spirits, etc); 3) Sugarcane destined for ethanol production has been calculated using the data of MAPA. Source: IBGE.
NO FOOD VS. FUEL ISSUE WITH SUGARCANE Since 1990 sugarcane ethanol volumes have increased 130% and sugar around 350% Sugar Area Ethanol Annual growth rate 2.7% in the last decade Sources: IBGE (2007) and UNICA. Elaboration: UNICA. Note: * estimated
27 sustainability of gasoline prices?
GASOLINE IS NOW THE ALTERNATIVE FUEL Gasoline Ethanol Source: ANP e UNICA. Prepared by Unica
GROWING SHARE OF FLEX FUEL FLEET Million units 29 Source: Copersucar and Unica.
FLEX FUEL ENGINES HISTORY 30
DEMAND GROWS WITH FLEX FUEL Monthly sales of hydrous ethanol Accumulated sales of flex fuel vehicles Source: ANP and ANFAVEA. Elaboration: UNICA
ETHANOL IS MUCH CHEAPER (2007) Average Gasoline (E-25) retail prices were R$2.50, ranging from a low of R$2.18 (Sep) to a high of R$2.93 (Jan). Average Ethanol (E-100) retail prices were R$1.49, ranging from low of R$1.08 (Oct) to a high of R$2.22 (May). Average price for ethanol export (FOB, no sales tax) in Brazil was R$0.77 (Hydrous) and $0.85 (Anhydrous). R$ 2.75 R$ 2.50 R$ 2.25 R$ 2.00 R$ 1.75 R$ 1.50 R$ 1.25 R$ 1.00 R$ 0.75 R$ 0.50 JAN FEB MAR APR MAY JUN JUL AGO SEP OUT NOV DEC Retail Gasoline (E-25) 2.521 2.509 2.510 2.528 2.533 2.517 2.497 2.486 2.480 2.479 2.488 2.504 Retail Ethanol (E-100) 1.586 1.584 1.581 1.663 1.668 1.513 1.401 1.359 1.339 1.320 1.398 1.489 Hydrous Ethanol for CBI (R$/Liter, FOB) 0.916 0.892 0.950 0.839 0.793 0.750 0.703 0.755 0.670 0.667 0.680 0.667 Anhydrous Ethanol for US (R$/Liter, FOB) 1.032 0.980 1.104 0.990 0.884 0.820 0.766 0.745 0.784 0.737 0.725 0.650 Note: Brazilian Gasoline has 25% ethanol content. There is no "pure" gasoline available in Brazil. Sources: ANP, Brazilian Oil & Gas Agency; UNICA, Brazilian Sugarcane Industry Association; Reuters. 32
FOOD VS. OIL PRICES Deflated values for March 08 with CPI - base 100 in jan/95 In the last decade, while food prices increased 36%, oil prices jumped 500% Oil Food Agricultural non-food raw materials Note: Agricultural non-food raw materials include cotton, wood.,wool, timber and leather. Sources: FMI (2007) and US Bureau of Labor Statistics (2007). Elaboration: UNICA.
GLOBAL AVAILABILITY OF SUGARCANE 100 countries could supply biofuels to 200 nations, while currently 20 oil producers provide fossil fuels to the rest of the world. Source: British Sugar
SUMMARY Sustainable expansion reality today 1% of arable land = 50% gasoline #1 renewable source in Brazil +80% GHG emissions reduction Sugarcane is a superior feedstock Carbon absorbing machine High and growing yields Continuously improving technologies Proliferation of criteria and schemes is counterproductive Multilateral and multistakeholder forum must consider the sustainability of feedstock/processes, including fossil fuels, in a balanced way (environmentally adequate, socially fair and economically feasible). 35
BRAZILIAN SUGARCANE INDUSTRY ASSOCIATION Joel Velasco joel@unica.com.br