January 2020

Special Focus: Sustainability

Brazilian developments in the biofuels market

Since the 1970s, Brazil has been a world reference in automotive biofuels, especially bioethanol produced from sugarcane. In 1973, the Organization of the Petroleum Exporting Countries (OPEC) forced a sharp rise in oil prices, triggering a massive slowdown in the country’s economic growth, which had been going through what was dubbed the “economic miracle,” with growth at an average of 12% of GDP. This study gives an overview of the biofuel sector in Brazil, along with the main business challenges and opportunities in this area.

Since the 1970s, Brazil has been a world reference in automotive biofuels, especially bioethanol produced from sugarcane. In 1973, the Organization of the Petroleum Exporting Countries (OPEC) forced a sharp rise in oil prices, triggering a massive slowdown in the country’s economic growth, which had been going through what was dubbed the “economic miracle,” with growth at an average of 12% of GDP. This study gives an overview of the biofuel sector in Brazil, along with the main business challenges and opportunities in this area.

Global expansion of renewable energy

According to several independent sources, the expansion of the biofuel and renewable energy market is a global trend. Forecasts show that renewable energy will increase from 19% in 2019 to nearly 39% by 2040 (FIG. 1).

FIG. 1. Scenarios forecasting moderate and rapid transitions toward the use of renewable energy by 2040. Sources: IEA World Energy Outlook 2017, EMN Cardume 2018, IHS Markit Global Scenarios 2017, BP Energy Outlook 2018, Shell Global Shell Scenarios 2016, Shell Global Sky Scenario 2018, and ExxonMobil Outlook for Energy 2018.
FIG. 1. Scenarios forecasting moderate and rapid transitions toward the use of renewable energy by 2040. Sources: IEA World Energy Outlook 2017, EMN Cardume 2018, IHS Markit Global Scenarios 2017, BP Energy Outlook 2018, Shell Global Shell Scenarios 2016, Shell Global Sky Scenario 2018, and ExxonMobil Outlook for Energy 2018.

A comparison of the Brazilian and global energy mix

Many indicators show that the use of renewables will increase in the future. For example, renewables usage will aid in countries hitting their greenhouse gas (GHG) emissions reduction targets listed in the Paris Agreement. The Paris Agreement is a treaty under the auspices of the United Nations (UN) Framework Convention on Climate Change, which sets out several measures to reduce GHG emissions by 2020 to prevent global temperatures from rising more than 2°C—and ideally keeping them below 1.5°C—through sustainable development. The agreement was negotiated at the 21st Conference of the Parties (COP21) and approved on December 12, 2015. It has been ratified by 185 of the 195 signatory countries. The signatories to the Paris Agreement must invest across the board in decarbonizing their energy mix and introducing more clean energy. Among all the major economies in the world, the country that stands out for having the cleanest energy mix of all is Brazil. With a population of approximately 212 MM, Brazil has the fifth-largest population, the fifth-largest land mass, and the ninth-largest economy. Its energy production differs greatly from the global average. A breakdown of Brazil’s energy mix is shown in FIG. 2.

FIG. 2. A comparison between the global energy mix and Brazil’s energy mix in 2015. Source: IEA.
FIG. 2. A comparison between the global energy mix and Brazil’s energy mix in 2015. Source: IEA.

Around the world, fossil fuels account for 81% of total energy production. However, in Brazil, only 58% of energy comes from this source—approximately 42% of its energy is generated by renewable sources. No other major world economy has such a clean energy mix as Brazil.

Main sources of biofuel production in Brazil and sustainable development

A variety of raw materials can be used for biofuels production. The choice depends on considerations such as productivity, reliability of supply and, above all, production costs. These factors determine the technical and economic feasibility of biofuels production. They will vary by country according to the climate, the type of soil, and the availability of arable land, among other factors.

FIG. 3 shows the areas of land (in MM hectares) available for agricultural expansion around the world. The region with the largest area for agricultural expansion is South America. FIG. 4 illustrates the region’s potential by country. As shown in FIG. 4, Brazil has the greatest agricultural potential in the world. The country’s vast expanses of arable land mean it could play a key role in supplying food for the global population, while also becoming a key player in biofuels production on a global scale.

FIG. 3. Agricultural potential around the World, MM hectares. Source: Food and Agriculture Organization of the UN.
FIG. 3. Agricultural potential around the World, MM hectares. Source: Food and Agriculture Organization of the UN.
FIG. 4. Area available for agricultural expansion in South America, MM hectares.
FIG. 4. Area available for agricultural expansion in South America, MM hectares.

The three main crops grown in Brazil for biofuels production are sugarcane, soybean and maize. These crops can be used to produce the following biofuels:

  • Sugarcane is used to produce jet fuel
  • Soybean oil is used to produce biodiesel
  • Maize is used to produce biogas.

A significant challenge that Brazil faces is to encourage agricultural production without the destruction of its ecosystems. Biofuels production should respect two basic factors: food security and sustainable development.

Food security. It is entirely unacceptable to use land that could be producing food when there is hunger in the world. This is not a problem in Brazil, which is the fourth-largest agricultural producer in the world, after China, India and the U.S. Unlike these countries, Brazil has huge swathes of unoccupied arable land that could equally be used for crops for human consumption or for biofuels production.

Sustainable development. The most widely accepted definition of sustainable development is “development that satisfies the needs of the current generation without compromising the ability of future generations to meet their needs.” It is development that does not exhaust the resources required for the future. This is an area where Brazil is lagging. For example, large areas of the Amazon forest—the biggest tropical forest in the world—have been systematically destroyed in recent decades for illegal logging, extensive cattle grazing and the expansion of soybean farming. FIG. 5 shows the area covered by the Amazon forest (green), along with the deforested areas (yellow).

FIG. 5. The Amazon forest (green) and areas of deforestation (yellow). Source: Mapbiomas.org.
FIG. 5. The Amazon forest (green) and areas of deforestation (yellow). Source: Mapbiomas.org.

Much of the deforestation of the Amazon is associated with soybean production. Brazil is the world’s second-largest soybean producer, producing slightly less than the U.S. Most of this output is exported to China. Soybean exports provide Brazil with billions of dollars of annual revenue, which aids the country’s trade balance, while simultaneously constituting a major threat to the country’s tropical ecosystems.

The destruction of the Amazon is a current and global topic. According to a recent article in The Economist1, “… in the past 50 years, Brazil has relinquished 17% of the forest’s original extent, more than the area of France.” Nonetheless, “deforestation is not a necessary price of development. Brazil’s output of soybeans and beef rose between 2004 and 2012, when forest-clearing slowed by 80%.”

To prevent the destruction of new areas of tropical forest for soybean production, the Brazilian government launched the RenovaBio program in 2017. This program, based on environmental, economic and social sustainability, is Brazil’s plan to boost biofuels production in the country. Under this program, only areas registered by December 26, 2017 (the program’s enactment date), can be certified for growing crops for biofuels production. With the increased production of biofuels, Brazil’s GHG emissions should decrease, helping it meet its Paris Agreement targets.

The RenovaBio program’s goal is to reduce the country’s carbon intensity (the quantity of carbon, by weight, emitted per unit of energy consumed) by 7% to 2028 (FIG. 6). The hope is that the RenovaBio program will mitigate the emissions of 80 MMt of carbon equivalent in the next several years. FIG. 7 illustrates carbon dioxide (CO2) emissions with and without the RenovaBio program.

FIG. 6. Forecast reduction in carbon intensity in the Brazilian energy mix, 2018–2028.
FIG. 6. Forecast reduction in carbon intensity in the Brazilian energy mix, 2018–2028.
FIG. 7. Projected CO2 emissions with (blue line) and without (red line) the RenovaBio program.
FIG. 7. Projected CO2 emissions with (blue line) and without (red line) the RenovaBio program.

Brazil’s biofuels production: Challenges and opportunities

The following is a detailed look at the challenges and opportunities in biofuels production in Brazil.

Bioethanol. Ethanol produced from sugarcane is Brazil’s main biofuel. A national ethanol program (Proálcool) was created in 1975 in response to the 1973 oil crisis. To this day, it is the biggest biofuel program in the world, stimulating the production of a clean, green, renewable fuel. Since the late 1970s, Brazil has manufactured cars that run exclusively on ethanol, resulting in reduced gasoline consumption and the creation of thousands of jobs in rural areas. With a blend of 25% ethanol in gasoline, Proálcool promoted savings in gasoline consumption and provided the country’s sugar and ethanol production sector a boost, creating employment opportunities in rural areas. Furthermore, thanks to the addition of ethanol to gasoline, Brazil was one of the first countries to remove lead from its gasoline, thereby eliminating this pollutant from the air in the country’s towns and cities. Brazil avoids consuming 1.2 bbl of oil for every ton of sugarcane it transforms into fuel. Since the beginning of the Proálcool program, Brazil has avoided consuming 1.09 Bbbl of oil. This is equivalent to $60 B, along with avoiding the release of 644 MMt of CO2 emissions into the atmosphere. The first flexible-fuel cars—which can run on blends of ethanol and gasoline at any proportion—were launched in the country in 2003. By 2017, 82% of all the cars made in Brazil were flexible-fuel models.

The sugarcane plantations are in the northeast and southeast of Brazil, and cover 5.7% of its arable land. The plantation locations do not threaten the Amazon forest, and the main ethanol production hubs are far from the Amazon. The ethanol produced in inland parts of Brazil is transported via pipeline and exported from a Petrobras terminal on Ilha D’Água Island in Rio de Janeiro. FIG. 8 shows the trajectory of the ethanol pipeline in Brazil and its planned expansion, which would enable ethanol to be exported from Brazil’s largest port in Santos.

FIG. 8. The ethanol pipeline in Brazil and planned expansions. Source: Brazilian Agribusiness Association.
FIG. 8. The ethanol pipeline in Brazil and planned expansions. Source: Brazilian Agribusiness Association.

Brazil’s sugarcane and ethanol industry was seriously affected by the price caps enforced from 2011–2014. During this time, the Brazilian government kept domestic fossil fuel prices below international prices, resulting in the closure of several ethanol production facilities and increased indebtedness in the sector, which was equivalent to approximately $25 B. At present, the sector has significant idle capacity. Of the 444 sugar and ethanol production facilities, 101 (23%) are idle. It is hoped that, in the coming years, Brazil’s RenovaBio program will boost ethanol production. Therefore, significant business opportunities exist in Brazil’s ethanol business, with prospects for growth in the domestic market. However, this will depend on the sector’s capacity to service its accumulated debt and consolidate its planned investments, as well as on the overall macroeconomic circumstances in the coming years.

Biodiesel. Brazil’s biodiesel production is increasing and could overtake production levels in the U.S. soon. At present, all diesel sold in Brazil contains 11% biodiesel. This level is expected to increase gradually until it reaches 15% in March 2023. From 2018–2023, Brazil’s biodiesel production is forecast to increase from 1.4 Bgpy to more than 2.6 Bgpy, corresponding to an 85% rise in domestic demand.

Several raw materials can be used to produce biodiesel. In Brazil, soybean is by far the most widely used (FIG. 9). The dominant technology route for biodiesel production is alkaline transesterification, using methanol as the esterifying agent. In the last decade, the author’s company has developed a biodiesel production technologya that uses vegetable oil to produce diesel fuel. The process consists of the hydrogenation of a stream of diesel oil blended with vegetable oil in a hydrotreatment unit. A schematic of the process is shown in FIG. 10. This process could be used in virtually any type of hydrotreatment unit. The only modification needed is an extra tank to store the vegetable oil, which must be pumped to blend with the diesel that is fed into the unit.

FIG. 9. Raw materials used to produce biodiesel in Brazil.
FIG. 9. Raw materials used to produce biodiesel in Brazil.
FIG. 10. Schematic of the hydrogenation of a stream of diesel oil blended with vegetable oil in a hydrotreatment unit to produce biodiesel.<sup>a</sup>
FIG. 10. Schematic of the hydrogenation of a stream of diesel oil blended with vegetable oil in a hydrotreatment unit to produce biodiesel.a

As the vegetable oil passes through the reactor, the molecules are cracked, leading to the formation of methane (CH4), propane, carbon monoxide (CO), CO2, water and n-paraffins. The diesel and hydrotreated vegetable oil have an improved sulfur content and cetane number, along with lower density and viscosity, which could be positive for incorporating denser streams in a pool of diesel streams. However, its lubricity and plugging point are inferior.

Although this process is technically feasible, it has not been used because vegetable oil is more expensive than diesel. As such, biodiesel in Brazil is sustained by legislation, which requires it to be added to all diesel sold in the country, with most of this being obtained via the classic process of alkaline transesterification.

Biogas. Biogas is a fuel that comes from the biological degradation of organic matter without the presence of oxygen, or anaerobic fermentation, in a controlled biological process. The typical composition of biogas produced from an anaerobic degradation process is:

  • CH4: 50%–70%
  • CO2: 30%–50%
  • N2: 4%
  • H2: 1%
  • Hydrogen sulfide (H2S): 2%
  • O2: 1%.

Approximately 90% of all biogas plants in the world are equipped with continuously stirred tank reactors. This industrial process reproduces a natural process—the anaerobic degradation of organic matter—and can use agro-industrial waste, manure, slaughterhouse waste or municipal solid waste as its substrate. Instead of using waste materials, biogas can also be produced from dedicated substrates, such as energy crops, which can serve as feedstock for its production.

According to REN21’s Renewables 2016 Global Status Report, biogas electricity accounts for approximately 20% of all biopower production and 4% of global heat generation worldwide. The EU is the world leader in biogas electricity production. The global installed biogas capacity reached 15 GW in 2015, with 10.4 GW in Europe, 2.4 GW in North America, 711 MW in Asia, 147 MW in South America and 33 MW in Africa. Europe is also the world’s leading producer of biomethane. In 2015, Europe had 459 plants producing approximately 1.23 Bm3py biomethane; total biogas production reached approximately 18 Bm3py in the same year. Most biomethane production plants are in Germany (185 plants), the UK (80 plants) and Sweden (61 plants).

Around half of the biogas electricity produced in Europe is from Germany. It is worth comparing Brazil’s potential as compared to Germany’s in this respect. While Brazil has 2,500 Canadian-design biodigesters, most of which are no longer in operation, Germany has 9,009 liquid fermenters. However, two considerations should be made:

  • Brazil’s utilized agricultural area covers 187 MM hectares, while Germany’s covers 17 MM hectares2
  • When the soil is worked correctly (e.g., direct sowing, preserving the organic matter in the soil), Brazil’s agricultural yield could be greater than Germany’s because of the higher amount of solar radiation. If we consider a case where maize is the feedstock for biogas production, the electricity generated in Brazil per hectare could be as much as 30% greater than the electricity obtained in Germany.3

These two factors show the potential for the growth of biogas production in Brazil, which has the potential to become the world’s largest biogas producer. However, this is still far from being a reality. For this scenario to come to fruition, mass investments would have to be made in biogas plants. This would be a real investment opportunity if there were public policies to boost it, since Brazil’s small farmers would have trouble obtaining the credit needed to build biodigesters.

Another opportunity is the carbon credit market. Given that so many countries need to decarbonize their energy mix because of their commitments under the Paris Agreement, a policy could be developed to encourage the purchase of carbon credits through the financing of new biomethane plants in Brazil.

It should be stressed that Brazil does not produce industrial anaerobic digestion plants, which shows the great market potential it has for the establishment of manufacturing to produce such equipment, as well as the potentially huge consumer market for the acquisition of such equipment.

Aviation biofuel. The global aviation industry is committed to reducing its environmental impact, and has set ambitious targets to attain carbon-neutral growth by 2020 and to reduce its CO2 emissions (against 2005 levels) by 2050. The industry is responsible for approximately 2% of all manmade CO2 emissions. It is a small but growing proportion, and forecasts show that it will reach 3% by 2030.

The most promising raw materials for producing aviation biofuel are plants that contain sugars, starches and oils. Brazil is the world’s largest sugarcane producer and the second-largest soybean producer, and it has the lowest-cost eucalyptus production. This could guarantee competitiveness in the production of these three crops—which are natural candidates for raw materials for aviation biofuel in Brazil—through the three most widely studied routes: alcohol-to-jet fuel, hydroprocessing of esters and fatty acids, and gasification with Fischer-Tropsch (FT) synthesis.

A study4 in Brazil using special softwareb developed at the Brazilian Bioethanol Science and Technology Laboratory (CTBE) at the Brazilian Center for Research in Energy and Materials (CNPEM) offers economic analyses of different scenarios considering the entire sugarcane production chain. The conclusion reached is that the most competitive scenario for aviation biofuel production from sugarcane bagasse, considering different oil prices ranging from $40/bbl–$100/bbl, would be via FT synthesis. However, this study is only theoretical and investigates only the use of sugarcane bagasse. More research is needed to validate these results and to assess the technical and economic feasibility of other feedstocks, which could be found to be promising. In addition, bench-scale, pilot-plant and semi-industrial studies need to be done to collect more data to identify the most promising route.

It is important to stress that Brazil has no FT plants. Although research indicates that this route could be the most economically feasible, depending on the oil price, big capital outlays would still be required to build FT plants, not to mention the other infrastructure and silos to ensure the year-round production of the feedstock in Brazil that would be necessary to obtain this product at a low operating cost.

Takeaways

No country in the world has such great potential for agricultural expansion in the coming years as Brazil. It has huge areas of available land, a plentiful supply of water and a favorable climate. All these factors are promising for its future as potentially the biggest producer of foods and biofuels in the world within a decade. However, agricultural expansion and the expansion of soybean production in the north of the country are seriously jeopardizing the integrity of the Amazon forest and other Brazilian ecosystems. While Brazil has modern legislation designed to preserve the country’s natural resources, its enforcement of this legislation is extremely precarious.

Brazil could become the biggest biodiesel producer in the world if the biodiesel content in diesel is increased from 11% to 15%, which is still uncertain. However, infrastructure shortfalls for the storage (silos) and transportation of soybeans along the country’s roads, and its export via its ports, are major logistical bottlenecks that cause significant production losses.

Ethanol production from sugarcane was seriously hampered from 2011–2015 by the Brazilian government’s macroeconomic policy to subsidize gasoline to the domestic market. However, the sector has chances to recover, and bioethanol production should increase from 28 Blpy to 50 Blpy in 2030. This will depend on the consolidation of investments in the coming years and the recovery of the sector, which will also depend on domestic and international macroeconomic factors.

Biomethane production in Brazil is far short of its potential. Significant investments are needed to build new biogas production facilities and associated infrastructure for its distribution. This constitutes an opportunity for foreign investors, since associations of small farmers have trouble accessing credit in Brazil and could benefit from the purchase of carbon credits.

Aviation biofuel production is, so far, no more than a promise. Brazil has a significant supply of raw materials that could be used to produce it, but the country does not have the technology nor the industrial facilities necessary to produce aviation biofuel on any scale or at a competitive price. HP

NOTES

a Refers to Petrobras’ H-Bio process technology
b Refers to the Virtual Sugarcane Biorefinery

LITERATURE CITED

  1. “Deathwatch for the Amazon—The threat of runaway deforestation,” The Economist, August 2019.
  2. Simon, S., “The potential of energy crops in Germany and Poland,” Workshop “Optimal land use for bioenergy production without jeopardising food self-sufficiency and food security,” Institute of Soil Science and Plant Cultivation conference, September 2011, Pulawy, Poland.
  3. Coelho, M. A. A., doctorate thesis, Universidade Federal do Rio Grande do Sul (UFRGS), Escola de Engenharia, Programa de Pós-Graduação em Engenharia de Minas, Metalúrgica e de Materiais, Porto Alegre, Brazil, 2019.
  4. Klein, B. C. et al., “Techno-economic and environmental assessment of renewable jet fuel production in integrated Brazilian sugarcane bio refineries,” Applied Energy, 2018.

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