Enter Brazil. For more than 30 years, Brazil has lead the world in sustainable biofuels production. At the dawn of a new decade, Brazil is emerging as a world leader in advanced, sustainable biofuels investments, along with new technologies from private sector partners in the US and EU. In 2010, Brazil’s progress in private sector biofuels investment is charging ahead, while EU and US government policies are effectively reducing ethanol biofuels targets due to political uncertainty and slower growth related to cellulosic biofuel feedstock production economics.
Sustainable Policies Matter
Based on US , EU and UN sustainability government policy standards, Brazil’s sugar cane ethanol is environmentally, economically, and politically achievable today. Paradoxically, using the same sustainability criteria, cellulosic biofuels in the US and the EU are not yet economically achievable in substantial volumes. As the US and EU governments continue to debate sustainability criteria, the Obama’s US EPA administration has already scaled back 2010 cellulosic biofuels targets during an election year, as ethanol subsidies and tax credit benefits are challenged by the imminent arrival of the E10 blend wall in the US. This uncertain policy environment in the US and EU has private investors looking to greener pastures, and entering into a new dance mixing emerging technologies and sustainable feedstocks with Brazil.
US/EU/UN sustainability criteria have ironically lead to positive investment outcomes in Brazil during a challenging economic recession world-wide. During this time, Brazil’s sugar cane production facilities and conglomerates have lead to favorable terms for 1st generation sugar cane ethanol acquisitions, and attractive conditions for next-generation, integrated cellulosic biorefineries. These reasons explain the new wave of investments in Brazil, where Shell and BP have entered into to multi-billion dollar ventures (Shell-Cosan JV at $12 billion, BP’s $8 billion through 2015) heralding this new trend of US-Brazilian emerging markets technology-feedstock ventures.
US, EU Dance With Brazil
During this time, another wave of next-generation renewable drop-in fuel companies Amyris, LS9, Cobalt, Dupont are investing in and partnering with Brazil’s sugar cane fermentation biorefineries. Why? Because their emerging technologies from cellulosic microbes (yeast, algae, fungus and bacteria) can utilize the same ethanol fermentation facilities in the US corn belt and in Brazil’s sugar cane belt to produce bio-crude, green diesel, petrol and biojet.
Here’s the big idea. Take an existing ethanol factory or conglomerate. Drop-in a new Amyris, LS9, Gevo, Cobalt microbe/bug in the same fermentation vat and what do you get? An Integrated Biorefinery that can utilize sustainable sugars to produce renewable diesel, aviation fuel, and biobutanol – fuels that are compatible with existing petroleum pipelines, storage, gas stations, and automotive engines today.
In the near future, these fermentation-based biorefineries will be able to convert multiple inputs from cellulosic sugars- bagasse, switchgrass, wood chips, municipal solid waste, and glycerin – into a diverse set of outputs, including renewable diesel, aviation fuel, bio-crude oil, biochemicals and biopolymers with significant GHG reductions and carbon emissions compared to petrochemical hydrocarbons. By 2012 the US is expected to see a similar wave of investments.
2nd Gen Economic Advantages
In Brazil and the US, the key advantage to future integrated biorefineries is in the simplicity – and diversity – of operations. By utilizing multiple inputs (cellulosic sugars from various feedstocks) in low-cost fermentation vats with new microbes, and by producing multiple outputs (green diesel, petrol, biojet) these biorefineries will not repeat the same mistakes 1st generation corn ethanol and biodiesel plants made by utilizing one commodity as an input to produce one commodity as an output.
Integrated Biorefineries In Sight
Shell, BP, Chevron and their cellulosic sugar babies Amyris, LS9, and Virent are using diversified refinery concept with (a) multiple feedstocks and (b) diversified hydrocarbon outputs– ethanol, biodiesel, renewable diesel, green petrol, aviation fuel, biocrude from algae, biobutanol, biochemicals, and biopolymers. The future benefits of these integrated biorefineries will demonstrate leadership and much-needed economic certainty that is challenged by US and EU cellulosic biofuels economics, mandates and markets today. This will benefit the other big emerging markets of China and India as the dance progresses, and eventually US markets when conditions are more favorable.
Long before the Olympics arrive in Rio in 2016, Brazil’s leadership in sustainable biofuels, coupled with advanced technologies from US and EU industry partners, will illuminate evolutionary pathways in achieving successfully integrated, diversified, biorefineries. In particular, India, the world’s 2nd largest sugar producer, and the world’s most populated nation, is most likely to benefit from this progress along with China and other key emerging market nations.
It is no secret US biofuels policy in the spring/summer of 2010 remains asleep at the wheel at the EPA and Congress. Before the elections in the Fall of 2010, the EPA and Congress have a prime opportunity to wake up and deliver a more stable regulatory and investment environment for US biofuels for 2010 and beyond. Until then, US investors will continue to dance the Bossa Nova and ride the new wave into Brazil.