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March 1, 2016

Biomass Pellets Could Become Newest Commodity from Brazil

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The Brazilian company Cosan and the Japanese company Sumitomo Corporation announced a joint venture in Brazil to produce biomass pellets from sugarcane residue that can be used to produce energy. The announcement came in a ceremony held last Friday at the Brazilian Embassy in Tokyo. The companies want to capitalize on the increased demand for renewable and sustainable energy.

Cosan, which is one of the largest energy and infrastructure companies in Brazil, developed the technology to turn sugarcane residue into biomass pellets that be used to substitute for coal, natural gas, or oil for the generation of electricity or heat.

According to Agrolink, the new joint venture, called Cosan Biomassa already has a plant operating in the region of Jau in the interior of the state of Sao Paulo with a capacity of 175,000 tons of pellets per year. The plan is to expand the capacity of the plant to 2 million tons by 2025 and 8 million tons in the future. Cosan has invested 80% of the capital in the venture and Sumitomo 20%.

Biomass pellets is a new commodity born out of the desire to reduce carbon emissions by using renewable and sustainable energy sources. The European Commission estimates that the current worldwide demand for biomass pellets is 25 million tons annually and that it will increase to 40 million tons within five years. Currently, most of the biomass pellets are produced from trees planted for that purpose in Europe, Canada, and the United States. In 2015, the U.S. and Canada exported 6 million tons of biomass pellets to Europe and Asia.

Cosan Biomassa expects the main markets for their pellets to be Europe, Japan, and South Korea as well as domestically in Brazil. They hope to make the first shipment of pellets later this year to a large European energy producer. Japan is expected to import 10-20 million tons of biomass pellets by 2030 with a lot of those pellets coming from Brazil.

There has been a lot of interest in recent years in developing different ways to utilize the sugarcane residue from sugar mills. Only about one-third of the potential energy stored in a sugarcane plant is used to produce sugar or ethanol. The other two-thirds of the potential energy is stored in the plant residue.

Currently, sugarcane residue is being burned to generate electricity to operate the mills and to sell back into the electrical grid. In 2014 there were 355 operating sugar mills in Brazil and 177 of those mills generated electricity by burning sugarcane residue. These mills supplied 10% of the electricity consumed in Brazil. Sugarcane residue is also being used to produce cellulosic or second generation ethanol as well.

Converting sugarcane residue into biomass pellets is just the latest development in an attempt to utilize more of the sugarcane plant. It can be a valuable byproduct helping to offset the current low prices of sugar and ethanol. If fully utilized, the sugarcane sector in Brazil could generate 80 million tons of biomass pellets annually or three times the current market for biomass pellets. Just the state of Sao Paulo alone could produce 45 million tons of pellets.