BNDES, Finep launch program to encourage ethanol innovation

By Brazilian Development Bank | February 25, 2014

The Brazilian Development Bank (BNDES) and Finep, Innovation and Research, recently launched a public call-to-submission for business plans aimed at agricultural-technological innovation in the sugar-based ethanol sector (PAISS Agriculture). Together, the two institutions will allocate R$1.48 billion ($634.08 million) for the 2014-2018 period.

The budget will allocate R$1.4 billion in reimbursable financing, which includes all the credit lines offered by the BNDES and Finep, as well as the variable-income instruments of both institutions. The PAISS Agriculture program will also make R$80 million in non-reimbursable resources available, of which R$40 million will be released through the Technological Fund (BNDES Funtec) and the remaining R$40 million through a Finep subsidy.

In March 2011, the BNDES and Finep had previously launched the PAISS Industry program, which is similar, but is aimed at providing support to industrial-technological innovation in the sugar-based ethanol and chemical sectors. These sectors enthusiastically took part in the plan. All told, some 57 companies were involved, and some 35 business plans were approved, with R$ 2.5 billion awarded or in the process of being awarded.

As a result, seven new industrial and demonstration plants are being implemented. Slated for March this year, in the state of Alagoas, GranBio, one of the companies to receive PAISS Industry resources, will begin commercial production of cellulosic ethanol.

Both the PAISS Industry and the PAISS Agriculture programs are initiatives put forth by the Brazilian government to unite the efforts of its main support organs. The aim it to boost Brazil’s presence in more advanced technology as has been seen in the production of conventional biofuels.

The productivity of Brazil’s sugarcane plantations, in 2007, reached a record high of 11,200 kilograms (kg) of total recoverable sugar per hectare (TRS/ha), almost 130 percent higher than in 1975, when the Proalcool program began. This performance is equivalent to approximately 3 percent per year. Nonetheless, the agricultural performance over recent years has begun to reveal a specific path of successive yearly falls in productivity. In the last ten years, the annual increase in productivity was less than 1 percent. 

The aim of the PAISS Agriculture program is to accelerate the development of new technology to increase agricultural efficiency in the sugar-based ethanol sector and, consequently, boost higher gains in productivity in the medium and long term.

To have an idea of the potential, if the annual gain in agricultural sugarcane productivity, which is currently less than 1 percent, were increased to 3 percent, it would be possible to add close to 12 billion liters of ethanol by the beginning of the next decade. This is equivalent to an increase of over 40 percent in relation to the current ethanol production.

In comparison, to reach the same production capacity for ethanol, an investment of R$40 billion would be required to build 40 new plants, each one with the capacity to process 4 million tons of sugarcane per crop. This would require close to 2 million hectares to expand sugarcane plantations.

The PAISS Agriculture program will provide support for business plans in innovation that are earmarked for sugarcane production sectors and other energy sectors that are compatible, complementary and/or that can become part of a consortium with the sugarcane-based agro-industrial sector for ethanol, provided they are included in one of the five pre-established credit lines.

The first credit line includes new varieties of sugarcane, especially those aimed at production on the region’s extreme limits, but have been adapted to agricultural mechanization and/or with higher levels of biomass and/or TRS present in the sugarcane. Emphasis will be on use of transgenetic improvements.

The second line will be aimed at machinery and equipment for planting and/or harvesting, as well as collecting hay and/or waste, with emphasis on expanding the use of agricultural techniques of precision.

The third line of credit will focus on integrated systems for managing, planning and controlling production; while the fourth line incorporates swifter and more efficient techniques for distributing saplings and innovative biotechnological apparatus for planting.

The fifth credit line will be for projects that include adapting industrial systems to suit energy sectors that are compatible, complementary and/or that can become part of a consortium with agro-industrial sectors for ethanol produced using sugarcane.

Selected business plans must be presented by May 16 this year. The preliminary result of the selection phase for plans and the recommendation of support plans are expected to be released on June 20. Appeals in the preliminary phase can be submitted up to June 30. The final result is expected to be announced on July 10. The first disbursements should be released later this year. All details of the PAISS Agriculture program can be obtained on the Finep and BNDES websites.