Challenges which Hinder the Growth of the Sugar and Alcohol Sector in Brazil

by Roberto Coelho* (Advanced Biofuels USA) As discussed at the recent F.O. Licht’s conference, Sugar and Ethanol Brazil, the current status of the installed capacity in Brazil has grown enormously in recent years with the launch of 29 new power plants between 2008 and 2009. Meanwhile, due to the 2008 economic crisis, there was a significant reduction in the number of plants, many of them newly inaugurated.
The potential increased by BRL 100mi and then decreased by BRL 39mi. Although there was a net gain and increased milling capacity in some mills, the market is still declining significantly. This is a problem for the consumption / production of world’s ethanol since Brazil is the second largest ethanol producer in the world, the world's largest sugar exporter.
It is considered the international leader in biofuels and the first economy to have reached a sustainable use of biofuels. Brazil and the United States lead in the production of ethanol, and in 2008 accounted for 89% of world production.
Brazil has a comparative advantage of 6.4% over the last 10 years, and over the last 3 years, Brazil has been losing this index compared with other countries, especially Thailand, which has grown impressively. But, still, Brazil ranks first by far.
To increase the production of ethanol in Brazil, a technology of enzymatic hydrolysis uses straw (a sub product of mechanical harvesting of sugarcane) and sugarcane bagasse in the process of manufacturing fuel. The intention is to get a procedure called industrial feasibility for second-generation ethanol, where the fuel is generated with what remains of the first milling of sugarcane. This requires both a genetic reorganization of sugarcane to develop a variety of sugarcane with a higher percentage of fibers (energy cane) and developing enzymes that can extract sugar from the cell walls of these fibers with ease, thus enabling more fuel to be produced from the same amount of feedstock. This second-generation ethanol seems like a good alternative, but economically feasibility remains uncertain.
One of the reasons why ethanol is important is the reduction in carbon dioxide emissions. Brazil is a leader in terms of reductions of greenhouse gases using the process of ethanol production.
Another important point about the role of ethanol, is its participation in the mix with gasoline for fuels. The harvest of 2013/14 was a record harvest with 4.5 billion liters of increase for domestic use. Thus, it was possible to meet the growing domestic market, reducing dependence on imported gasoline and Petrobras’ losses.
In this period there was also an increase from 20 to 25 percent ethanol in gasoline, reducing gasoline consumption from 3.78 billion to 2.88 billion liters. This influences the Brazilian trade balance. However, it is important to note here that there is a combination of increase in this mixture and control in gasoline prices (which indirectly generates a control price of ethanol). These facts indicate a huge loss of ethanol’s competitiveness. (See Energy Self-Sufficiency in Brazil https://advancedbiofuelsusa.info/energy-self-sufficiency-in-brazil)
In fact, ethanol is now a major concern for the industry, involving politics and a large number of uncertainties in the regulatory environment.
Brazil has considerable biomass availability and the potential for the production of second-generation ethanol is significant. There are several projects being launched in pilot and in commercial scale, which should contribute to a large gain in the market. The second generation ethanol can increase productivity by 45% and in the future, also reduce costs.
It is expected that the share of ethanol in the fuel matrix in Brazil will increase significantly. The country has a growing demand for ethanol, and sugarcane would need to double its production to meet the need. To meet government planning goals, 39 new plants are needed by 2022. If this is not achieved, the option would be to import more gasoline. The problem is that in 2016 we know we will not reach the target of 4 plants as planned. As for the international ethanol market, it did not expand as expected.
In addition to this, the elimination of the government taxes on gasoline makes this fossil fuel more attractive and consequently reduces the renewable fuel (ethanol) market. This contraction of the ethanol market should eventually cause an increase in consumer prices, depending on subsequent adjustments to government fuel pricing policies.

**Roberto Coelho lives in Sao Paulo, Brazil. He graduated in Architecture and Business Administration and has an MBA in Business. He volunteers as a reporter and writer for Advanced Biofuels USA to contribute for changes in the world so we can live better sustainably.