biofuel national policy - learning from experience of brazil
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Biofuel National Policy - Learning from Experience of Brazil. - PowerPoint PPT PresentationTRANSCRIPT
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Jai UppalB.Sc. Chem. Engg., M.S.E. (Michigan, USA)
F.I.E.. L.M.I.I.Ch.E., L.M.I.M.A.
Sr. Advisor, Center for Alternate Energy Research (CAER),
Gen. Secretary, Samyak Vikas Sanstha Email: jaiuppal @ yahoo.com / jaiuppal @ gmail.com
M: +919811171121
New Delhi, October 13, 2008
Biofuel National Policy- Learning from Experience of Brazil
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Relevance of Biofuels –Sugarcane/Ethanol Example
• Sugarcane is one of the most energy efficient crops • It produces between 60 tonnes to 150 tonnes of
sugarcane per ha• It is a tropical and subtropical crop suitable for India• Has low consumption of water per unit weight of
biomass but high overall consumption • 1 ha sugarcane can produce ~5,000 l/ha Ethanol +
10,000 kWh power + equal amount of Thermal Heat or another ~5000l/ha of Ethanol from cellulose
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Sustainability Criteria of Biofuels• Water Use – sugarcane most efficient crop per Kg of Biomass
created. However, in future micro-irrigation !• Employment – Rural Employment - Ethanol: Employment
rate per unit energy higher than oil - 150:1, Employment per unit Capital investment much higher
• Environment – processing (bio-composting and Concentration-Incineration) and in use as transport fuel – Oxygenate – reduces pollution – mandatory in USA. Issue of monoculture/crop rotation, Use of fertilizer/pesticides – Not very relevant for India
• Indian climate is not suitable for growing Sugarcane !• Land Use – Minuscule area of Global cultivated land used for
Ethanol • Energy Balance• Food Vs Fuel
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Relevance of Ethanol from Sugarcane
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Energy from Sugarcane
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(Sugar)Cane Potential
Source - Reinarch
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Production of Biodiesel from Various Feedstocks (Courtesy - Axens)
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Criteria for a Policy on Biofuels
• It should be compatible with the Integrated Energy Policy of the country
• It promotes use of Biofuels in the short term as well as long term so the volumes grows and efficiency increases
• It sets clear short and long term targets and Roadmap
• It must be stakeholder friendly along the value chain – Farmers; Producers; Customers (Oil companies etc.); Consumers; facilitators etc. Creates a Win-Win situation for everyone.
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Criteria for a Policy on Biofuels
• Long term rational incentives in Infancy based on ‘need’ with a gradual sunset clause
• Creates easy availability of soft fund for investment in the sector
• Firm enforcement of the Policy• Promotes RD&D for the emerging sector – increase
productivity per ha, reduce costs and make it more eco-friendly
• Recognizes need for regular stake holder consultation and is flexible - yearly planning and Stakeholder consultation mechanism since biofuels depend on agro-climatic conditions
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Brazilian Experience • Oil shock of 1973 – Brazil heavy dependence on imported
oil – F.E. situation critical. One of the Remedies – reduce dependence on imported oil
• Urgent need to reduce the country’s dependence on expensive imported petroleum & low global prices of sugar
• 1975 - National Alcohol Program – “Proalcool” – started with 5% and target of using E20 by blending
• Initial Opposition from Petroleum and Auto lobby• Inter-ministerial group set up on Ethanol to address
issues & set yearly targets with stakeholders participation • Oil Shock of 1979 – Target to use Hydrous neat alcohol
by using cars with special Ethanol engines.
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Brazilian Experience
• 1980 - Created the PRO-ÓLEO – National Program for production of Vegetable Oils for Fuels (Not implemented)
• Encourage: sugarcane plantation, Ethanol manufacturing in Sugar mills, and use by Oil companies, Auto, public etc
• By 1984, ‘neat’ hydrous ethanol cars accounted for 94.4% of overall production
• In 90s all subsidies removed - rapid drop of use of neat alcohol cars - neat Ethanol car sales fell to about 1% of total cars
• Crude oil prices slump to $10 per barrel by 1998, but government continues its 25 year persistence Simultaneously, Ethanol production costs continue to fall as efficiency grows.
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Brazilian Experience• Production costs fall because increase in agriculture
yields and processing efficiencies • New Auto revolution of 2003 when FFVs introduced –
giving consumer an unmatched flexibility to mix any blend of Ethanol and Petrol – auto costs almost same.
• Since 2007, 90% of all new cars sold are FFVs• At present Ethanol replaces 50% gasoline – significant
contribution of Oil (new pipeline) & Auto Cos (FFVs) • Revolution of generating power from bagasse (11,500
MW by 2015) is further reducing cost of Ethanol & providing flexibility to Ethanol producers
• Since late 90s There is no government subsidy for the production of sugar or ethanol in Brazil.
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Brazilian Experience
• Brazilian ethanol saved till 2007 foreign exchange of US $85.8 billion in fuel imports & does not import oil
• Success of the PROÁLCOOL program: Ethanol production risen from 555 million liters in the 1975-76 to over 20 billion liters in 2007-08
• Sugarcane for ethanol occupies only 3.4 million hectares, or roughly 1% of the country’s 355 million hectares of arable farmland & substitutes 50% of petrol.
• well-to-tank analysis, sugarcane ethanol produces 9.3 to 11 units of clean, renewable energy for every unit of fossil energy utilized (efficient Indian distilleries do not use any fossil energy)
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Ethanol Time/Volume Vs Price
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Brazilian Experience
• Biodiesel Policy - National Program of Biodiesel - PROBIODIESEL 2000
• Established a national network to study biodiesel from soybean and ethanol - 2002
• 2003 (22/12) - Interministrial Working Group (14 Ministries) for formulation and implementation policies of PROBIODIESEL;
• IM concluded that that introduction of Biodiesel could bring Social, Environmental, Economic and Strategic benefits
• Enabling legislation passed
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Brazil - Incentives for Biodiesel• Law 11116 (May 2005) and Decree 5297 (Dec.
2004):• Exemption on Excise tax;• Tax Reduction for biodiesel producers:• Incremental Reduction if:
– The raw materials are purchased from family agriculture;
– The raw material is from Palm or Castor trees coming from
– the North, the Northeast or the semi-arid region of the country;
– Zero tax for the combination of the above factors of ~ USD 90/m3.
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Brazil - Incentives for Biodiesel
• Law 11097 (Jan. 13, 2005) - Introduces Biodiesel in Brazil’s Energetic Matrix and also: – Authorizes B2 from 2005– Mandatory 2% (B2) from 2008 (800 million
Liters/Year)– Mandatory 5% mixture of Biodiesel (B5)
from 2013;– Encourages cooperative arrangements
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Brazil - Incentives for Biodiesel• Resolution # 3 (Sept. 23, 2005) from “National Council for Energetic
Policy”:– Mandatory Obligation for oil producers and importers to purchase all biodiesel
produced from companies or associations (awarded with SFS) from January 1, 2006;
– This Biodiesel will be sold through public auctions promoted by The National Agency for Petrol, Natural Gas and Biodiesel (ANP).
– Criticism: too much dependence on market forces for an industry in infancy – insufficient incentives and support price
• Most important lesson from Brazil – Real benefits of Biofuels will come after decades of perseverance (Source:Paulo T. de Sousa Jr/Antonio René Iturra)
• Infant RE (Biofuel) programs cannot survive the ruthless world of unfair competition without ‘mother’s protection in its infancy’.
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Learning from Policies of Successful Countries
• Political Will – Broad consensus • Widespread Public support thru awareness – role of media• Perseverance & Persistence – Acid test oil below $80 per
bbl.• Rationale for Biofuels – Energy security, Economic,
Farmers welfare, rural employment, Environmental benefits, appropriate agro-climatic conditions
• Long-term incentives for industry in infancy• Investment in R&DD – (eg. Jatropha Demonstration
Project. We need a Karanj Demonstration Project! We may a need one on Algae – We need to be brave to be a world leader)
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Recap of Indian EBP
• Budget of Feb 2002 -Excise duty concession on Ethanol of Rs 0.70 reduced to Rs 0.30 per litre with year to year validity in the budget – not renewed after Feb 29, 2004
• Dr SJ Chopra Technical Committee Report of March 20, 2002 that Ethanol most appropriate oxygenate for India
• September 13, 2002 notification making 5% Ethanol blending in gasoline mandatory in 9 States & 4 UTs by January1, 2003 - a notice period of just 3.5 months
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Recap of Indian EBP
• Notification regarding mandatory provision made conditional with new notification Oct 2004– blending subject to availability, market forces & import parity price
• Substantial Progress made - nearly 1200 mill L Ethanol capacity built up.
• Purchase Policy for Biodiesel October 2005 – Buy biodiesel at Rs. 25 per litre inclusive of all taxes and duties at 20 depots from January1, 2006 – a good but low price gives wrong signal
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Recap of Indian BD experience
• Large capacity of more than 500,000 tonnes set up
• Most of the plants lying closed due to lack of competitive price feedstock – imported/Indian and low price of diesel
• At least 2 large plants on 100% EOU• One large plant retrofitted to produce BD –
supplied to PMTC when diesel prices were high but stopped after the diesel prices fell and imported raw material prices increased.
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National (Indian) Biofuel PolicyPolicy aims at mainstreaming Biofuels An indicative target of 20% by 2017 for the blending of
biofuels has been proposed – should be latest by and not a fixed date target. – Ethanol target can be met by 2012 given the right policies.
10% Ethanol mandatory from Oct 2008Bio-diesel production will be taken up from non-edible
oil seeds in waste / degraded / marginal lands.The focus would be on indigenous production of bio-
diesel feedstock• Biodiesel on Wasteland and not on fertile irrigated land• Biodiesel blending recommendatory – (why not oil
companies will buy whatever/wherever available ?)
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NBP – Pricing Aspects Minimum Support Price (MSP) with the provision of
periodic revision – details to be worked out (Risk vote bank politics; centre or state)
• Consider extension of SMP for oil seeds - can it compete with crude ?
NREGP would be applicable (already)• Marketing, distribution limited to OMC – (If Higher PP
from private sector, then ?)• Minimum Purchase Price (MPP) for the purchase of bio-
ethanol by the OMCs would be based on the actual cost of production and import price
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NBP – Pricing & Incentives
Take into account entire value chain for determining price of BD.
• In case of biodiesel, the MPP should be linked to the prevailing retail diesel price – State-wise variation &
• Compensation to OMC for lower diesel and fuel prices (already subsidy to petrofuels?)
Biofuels from Biomass will get incentive and concession – it needs subsidy
• Bioethanol enjoys concessional ED of 16%(???) (& Molasses ED Rs 750 per tonne increased from Rs500) (I propose to reduce the excise duty from 16 per cent to 8 per cent on a few items including -----veneers and flush doors, specified packaging material, and breakfast cereals - FM08-09 Budget speech)
Role of States – nominate nodal agency, land matters, infrastructure for Biofuels
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NBP- Finance Related Aspects
Envisages that bio-fuels may be brought under the ambit of “Declared Goods” by the Government to ensure unrestricted movement of biofuels within and outside the States.
• Import of Free Fatty Acid (FFA) oils would not be permitted (why?)
• Export of Biofuels would be permitted after meeting the domestic requirements (what happens to 100% EOUs set up or to be set up in future ?)
100% FDI in Biofuels sector thru automatic approval• Law needed to enforce mandatory provisions!
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NBP- Institutional Mechanism• For R&D in bio-fuels, a Sub-Committee under the
Steering Committee would be constituted led by the DBT, MoA & MoRD and coordinated by MNRE – Thrust generation II Biofuels
MNRE has been given the responsibility for the National Policy on Biofuels and overall co-ordination
National Biofuel Coordination Committee to be chaired by the Prime Minister with Secretary, MNRE would be the Convener.
& The Bio-fuel Steering Committee to be chaired by Cabinet Secretary – Secretary MNRE to be member secretary
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Short term Challenges • Availability & cost of appropriate feedstocks –
increase productivity and cyclic nature (weather resistant ) esp. for BD
• How to increase availability of feedstock and how to match with production capacity of BD ?
• How to financially support the grower for first 3 to4 years ?
• Increasing productivity (AgT/BT) – Biomass, starches/sugars (sugarcane – 100 T/ha/yr) and Jatropha, Algae etc. for BD
• Technology to process new feedstocks – biomass, algae etc• Technology to make Biofuels that are most appropriate
(economical & eco friendly) – Can we make biofuels that are ‘best’ liquid or gaseous fuels for the transport sector ?
• Give a boost by incentives applicable to RE – ED concession, Accelerated Depreciation etc.
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Short term Challenges• Biofuels Development Fund for R&DD is proposed but should
similar to SDF for soft loans for setting up new projects also. How will it be funded?
• No mention of FFVs to provide flexibility to consumers • Allow Biofuel blending at petrol pumps by private sector
(pure Ethanol for FFV, Ethanol-diesel blends, Biodiesel blends??)
• For economics & decentralized system it may be better to have higher blends in surplus states up to 20% or FFVs - reduce transport costs
• Prepare BIS standards for E20, B20, FFVs now so that it can be used so it sends right signal
• Addressing restrictions in setting up of Ethanol plants by state governments and movement of Ethanol
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Thank you !