Grupo de Economia da Energia

The future of biofuels

In biofuels on 29/03/2010 at 01:30

By José Vitor Bomtempo

The late Professor Keith Pavitt, one of the major starters of the studies in the economics of innovation, he used to say to his mentees that the goal of a research is not necessarily answer the questions, but make them better or “more answerable” as he used to say. I want to start this blog making some questions that we can do when we think about the future of biofuels and industry based on renewable raw materials. We will try to bring elements and discuss, as the master Pavitt wanted, in order to become these questions clearer, better formulated, if possible. After all, to begin we have to mention the masters, as Inácio Rangel said; no one solves problems that can not formulate clearly. So this is the initial effort for which the blog will try to help: improve our questions about the future of biofuels.

Two news that were highlighted in recent weeks may help us think about the future of the biofuels industry and the probable position of Brazil in this industry. They are two very different events: the announcement of a possible breakthrough in the enzymatic hydrolysis by Novozymes and Shell Cosan joint venture.

On February 15th, Novozymes, a prominent company in the enzyme industry, announced a reduction in the cost of enzyme for production of ethanol from cellulosic materials, taking it to the range of 50 cents/gallon of ethanol. This result allows us to achieve the famous parity with American corn ethanol – in the range of US$ 2 / gallon – which is still much more expensive than Brazilian ethanol. But the trajectory of technological progress draws attention. We have to mention that in the late 90s DOE “gave” US$ 15 million to Novozymes to reduce by 10 times the cost of cellulase enzyme. This was done in three or four years. Now, it is on this basis that Novozymes announces achievement of a further reduction.

The second news is the announcement of Shell and Cosan joint venture, in early February, which would generate a great production and marketing of ethanol. Details and effects can be seen here.

The business, in addition to its dimension in terms of market, represents an interesting change of Shell in its operations in biofuels, becoming a major producer of ethanol. Until then, Shell had business interests in five different biofuels projects that explored five different technological platforms, all linked to so-called “advanced biofuels” or second or third-generation biofuels. Due to this, Shell made a serious entry in the production of ethanol. At the same time, Cosan ascend to international level and incorporates a portion of Shell’s innovative assets in the joint venture: Iogen and Virent.

In different ways, two events – which will certainly come back later – underline the main lines of the process for establishing biofuels industry of the future. And then we come to the questions to discuss to make them better, more “answerable.”

The main assumption is that biofuels industry of the future will be very different from the current one. It will be neither limited to current products – ethanol and biodiesel – nor the current processes and feedstocks. In the establishment of such industry, a large number of technological alternatives and new business models have been tested. What about the future? What about Brazilian role in this industry? Does the competitive position in ethanol ensure a leading position in the integrated biomass exploration industry of the future?

How are we preparing ourselves for that business strategy? In addition to associations and joint ventures, which technological efforts our companies are undertaking? What about current ethanol producers’ role in the future? And what about chemical and petrochemical industry in Brazil? And what about PETROBRAS?

Which science, technology and innovation politics are being put into practice by MCT? Are they towards future of the industry and the creation of competitive advantages in the new bases being developed? Or are they towards maintenance of the current competitive advantages, based on the successful Brazilian ethanol industry?

I think we have too many questions to begin. We are willing to formulate them better in the coming articles. See you there.

Click here to access other texts on this blog in English

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  1. […] our first article on the future of biofuels, we start from a clear premise: the biofuels industry of the future will […]

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