Brazil’s Beleaguered Biofuel Business

The issue of biofuels has been around since at least the early 20th century. According to National Geographic, Henry Ford built his first Model Ts for use with ethanol, and many early diesel engines were designed to run on peanut oil.

But the biggest obstacle with biofuels has been having the proverbial cake and eating it to. More specifically, whatever you do with land, you can’t do something else with that same piece of land. Housing or crops? Crops or grazing? Grazing or housing? It’s a lesson Brazil’s learning these days as well.

As wrote recently, in 2007 Brazil was in the midst of a biofuels boom. The country made more ethanol than anybody outside of the United States. Brazil has lots of sugar cane, and they were fermenting lots of it to produce biofuel. Brazil’s experience was being studied as a way to produce biofuels, create jobs and reduce the world’s dependence on fossil fuels.

Then… well, a few things happened.

People started criticizing biofuels for taking up millions of acres to grow the plants needed to convert into fuel. This land, they said, could be used to grow food. Don’t people need to eat more than they need to put gas in their cars? And doesn’t reducing the acreage to plant biofuel crops instead of food increase the price of food?

The answer to that objection was going to be a plant called jatropha.

As of December 31, 2008, jatropha was “soaring,” according to The Wall Street Journal’s Environmental Capital blog, being tested in flight as a commercial airline fuel by Air New Zealand. The future was bright.

Most crops used as biofuels, such as soybeans and corn as well as Brazilian sugarcane, are plants that could be consumed by hungry humans, and which need lots of water, fertilizer and good, arable farmland. Jatropha’s a large inedible bush with fruit pods with black seeds which when crushed produce oil suitable for conversion into diesel fuel.

Plus it was thought at the time that jatropha, which grew wild in tough conditions, needs little water or fertilizer and can grow in land unusable for crops suitable for human consumption. In 2007 Nature reported that DaimlerChrysler’s Stuttgart labs pronounced biofuel produced from jatropha “fully satisfying… concerning power, efficiency and emissions.”

But attempts to cultivate jatropha proved that while the plant does grow in tough conditions, it doesn’t grow well or produce enough fuel under such conditions. Turns out it needs lots of nice land, just like other crops do. Oh, well. Today, jatropha’s a niche crop grown mainly on subsistence farming levels in India, Brazil, China and other places on eroded farmland that’s not good for much else.

Another thing that happened is ethanol got expensive. As the recent Nature article points out, “The price of pure ethanol at the pump is so high that in most [Brazilian] states it is cheaper to fill up flexible-fuel cars with gas blends that contain about 20% ethanol. The shift back to fossil fuels, combined with rapid growth in the number of cars on the roads, has worsened city smog and caused emissions in the transport sector to spike.”

Some of that is just plain bad luck. Ethanol in Brazil was growing like crazy, leveraged to the hilt in 2008 when that whole economic crisis thing hit. Investments in the sector dried up, companies were forced to harvest cane from old, less-productive sites, Nature says, instead of new ones. Returns plummeted.

But the real body blow was when the Brazilian government froze the price of gas to try to bring inflation under control. Hey, if fossil fuels were reliably inexpensive, who needs ethanol?

Ethanol also suffered when Petrobras, Brazil’s huge national gas company, decided not to build a mooted pipeline. As Bloomberg News wrote recently, in 2007 Brazil produced 22 billion liters of ethanol, and the industry projected that would rise to 36 billion liters a year by 2016. The Brazilian government proposed building a pipeline to carry 21 billion liters of ethanol a year.

Well, the economic crisis happened, investment dried up and production dropped. In November Bloomberg reported that Petrobras decided to “suspend investment” in the $3.1 billion ethanol pipeline. Ethanol industry officials fear this means the government is losing interest and the pipeline will be shortened or delayed.

“The government, in a way, abandoned the ethanol sector after” oil discoveries in the so-called pre-salt region, Adriano Pires, the head of the Brazilian Center for Infrastructure, a consulting firm in Rio de Janeiro told Bloomberg. “Sugar mills are looking to the government and no one in the government will say what will happen.”

Given that output of the vastly more profitable crude oil will most likely drop this year for the first time since 2004, and the government’s losing lots of money providing subsidized gas to the voracious domestic demand, the Brazilian government is deciding that it needs to put available resources in that sector instead of ethanol.

This means that 90 percent of the ethanol produced in Brazil will continue to be transported by truck, which means prices will stay higher than if it was moved by a far cheaper pipeline — some estimates are that a pipeline could decrease the transport costs of ethanol by as much as seven or eight percent.

But Brazil isn’t writing off ethanol entirely. Recently the country has been dabbling in sweet sorghum. According to industry journal Alt Energy Stocks,  California-based Ceres just announced that “it has signed a sweet sorghum market development agreement with Syngenta. The companies will work together to support the introduction of sweet sorghum as a source of fermentable sugars at Brazil’s 400 or more ethanol mills.”

Syngenta and Ceres are collaborating on small-scale trials, Alt Energy says, and “larger demonstration-scale field evaluations with mills this season,” as well as agreeing to “coordinate outreach to ethanol mills and develop industry training programs.

Alt Energy thinks prospects for sweet sorghum are “robust” in Brazil: “The crop can extend the ethanol production season by up to 60 days in Brazil, can be grown on fallow sugarcane land and processed using the same equipment, and requires less water and other inputs than sugarcane.”

Still, the uptake isn’t enthusiastic. “Where the company expected planting in the tens of thousands of hectares this year, it will remain in the thousands, according to management, for the 2012-13 cane season.”

There’s also some action in next-generation ethanol, cellulosic ethanol. This is ethanol produced from the tough cellulose in plant stalks, as says, but the technology really isn’t quite there yet: “Cellulose is difficult to break down and ferment, but several facilities in the United States are on the verge of making commercial cellulosic ethanol — for example, by using specialist enzymes to break down the long-chain cellulose molecules.”

But at best that’s a long-term promise. Right now there doesn’t seem to be any relief on the horizon for Brazil’s beleaguered biofuel business.


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