July 2018: ​​​​​​​Biofuels-The Next Big Opportunity for Latin America & India

Indian Entrepreneurs have made overseas FDI to Latin America and the Caribbean (LAC) to the tune of US$ 14.9 Billion dollars according to Export-Import Bank of India (EXIM) and investments were specially made towards agriculture and mining industry followed by manufacturing.

Looking ahead, one of the sectors, which could be a big potential for both India-LatAm entrepreneurs is ‘Biofuels’.

Global biofuels are an important clean energy investment worthy of the savvy investor’s consideration. According to the UN Food and Agricultural Organization (FAO), global biodiesel production and consumption will be more closely aligned as growth increases 39% in the next decade (from average 2012-2014 figures). Bio-fuels are fuels produced directly or indirectly from organic material i.e. Ethanol & Biodiesel.

Seeds are the foundational element of agriculture crops and other feedstocks, which are the starting point for any generation of biofuels. Latin American biofuels producers are working with seed development and experimentation with various alternative energy crops like algae, Jatropha and Salicornia.

In India, Oil provides energy for 95% of transportation and the demand for transport fuel continues to rise. The domestic supply of crude will satisfy only about 22% of the demand and the rest will have to be met from imported crude. India’s dependence on import of oil will continue to increase in the foreseeable future.

In biofuels, India has a ray of hope. As such biofuels – ethanol and biodiesel- are gaining worldwide acceptance as a solution to environmental problems, energy security, reducing imports, rural employment and improving the agricultural economy.

Use of 5% ethanol-gasoline blend is already approved by BIS and is in the progressive state of implementation in the country. BIS standards for 10% blend need to be drafted after conducting trials and fixing parameters.

The Rationale for Bio-fuels in India:

  1. First, there is little alternative to the petroleum-based fuels i.e., motor spirit or gasoline and High-Speed Diesel (HSD) for the transport sector which is the major consumer of petroleum products.
  2. Secondly, biofuels are environmentally superior fuels and their use becomes compelling if the prescribed emission norms are to be achieved.
  3. Thirdly, there is need to meet the global environmental concern about climate change, ensure energy security, reduce imports, generate employment for the poor and achieve several other objectives.

Economics of Production:
The major factors that affect the ethanol cost are the yield of sugarcane and cycle of production, the sugar contents in the juice, efficiency in juice extraction as well as in fermentation, and lastly utilization of waste. Under the existing price structure, sugar production provides higher value addition than sugarcane to ethanol.

 

In $/MT

 USABrazilIndia
Sugarcane to Sugar28.2810.719.36
Sugarcane to Ethanol-4.218.215.66

Latin America & Bio-Fuels:
Latin America has a debt of gratitude to the sector that gave birth to the entire renewable energy industry in the region: biofuels, in the form of ethanol and biodiesel.  Argentina (5th Largest) and Brazil (2nd Largest) quickly became among the world’s largest producers of biodiesel but via different strategies. Brazil-focused on supplying its internal market blend requirements while Argentina became the world’s largest exporter, primarily to Europe.

  • Brazil’s commitment to staying on the cutting edge of the biofuels sector – including renewable aviation and jet fuel – is evident by a new collaborative research center for the development of sustainable aviation biofuel research, led by Boeing and Embraer.
  • Colombia is an important Latin American nation for biofuels in that it is forecasted to grow in both productions and in consumption. With a blending mandate of B10 (10%+ biodiesel in conventional diesel) and a mandated range of E8-E10 (8-10% ethanol blend in conventional petrol/gasoline), these growth forecasts are backed by concrete policy frameworks.
  • Costa Rica is already world-renowned as one of the planet’s most eco-friendly nations on a macro scale. Its stated goal to become the world’s first carbon-neutral country means it has instituted aggressively pro-green policies that infiltrate virtually all sectors of society, including commerce and business.

Way Forward for India and Latin America:
Latin American biofuels producers have the expertise and insight to implement up-to-date, proven and comprehensive business strategies that align technology development, biochemicals development, and biofuels production in a synergistic way.

India and Latin America could cooperate and maintain synergy by maximizing not only cross-border connections but also working across subsectors within the wider arena of biofuels.

A great opportunity lies in a glaring and current problem is the pollution plaguing the entire north Indian plains. The short-term solution for this issue exists in the quick and scaled-out expansion of biofuel-powered public transport across the country. India’s transport policy needs to prioritize renewable vehicular fuels for large transport; e-mobility alone will not achieve the ambition of creating a sustainable transport sector.

Latin American firms could leverage India’s economies of production in the Biofuel Industry, which is set to explode into a $15 billion market by 2020.



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