INSIDE: RESEARCHERS STUDY CATTAILS AS A PELLET FEEDSTOCK

Spring 2011

Pellet
Prowess
How Brazilians Plan to Create
a Market for Bagasse Pellets
Page 18

Plus:
How Standards Benefit Producers
and Protect Consumers
Page 12

Manufacturers Share Thoughts on

Production, Marketing, Competition
Page 30

Why North American Biomass

Suppliers are Watching the UK
Page 42

www.biomassmagazine.com/pellet-mill-magazine
« International

18 PELLET MILL MAGAZINE | SPRING 2011

 International »

Capitalizing
on
Cane Waste
Every year during Brazil’s January-to-March
sugarcane off-season, managers of the 440-
odd cane mills take pause beside mountains of
fibrous cane waste that litter their lots, and curse
the fact they must pay someone to haul it away.
BY BOB MOSER
PHOTOS BY DEMIAN GOLOVATY

SPRING 2011 | PELLET MILL MAGAZINE 19

« International

Brazil is the world’s top sugarcane producer, and

its ever-growing cane industry earns billions annu-
ally making sweeteners, ethanol, alcohols and even
electricity by burning most of the cane fiber, called
bagasse. But they can’t burn it all. Each year Brazil accumulates
millions of tons of bagasse that, until now, have been treated as a
burden instead of a blessing.
Pellet producers have tried and failed for decades in Brazil to
capitalize on the low-cost, high-value feedstock of cane bagasse.
But a small handful of new entrepreneurs are taking a fresh stab
at bagasse pellets, whipping up new formulas to treat the feedstock
and building domestic market demand from the ground up.
Why bagasse as a pellet feedstock? It has a high energy con-
tent and burn quality. It’s also an existing agricultural byproduct
that avoids impacting the food chain. If bagasse were left to rot, it
would break down and release greenhouse gases, particularly meth-
ane, which is 20 percent more dangerous to the ozone than carbon
dioxide (CO2). That’s why bagasse pellets can earn carbon credits
for European utilities, which are pursuing new sources to meet the
European Union’s 20 percent renewables mandate by 2020.
Green Energy Group is the most prominent company of a
rumored handful currently testing the pellet waters in Brazil. It’s
also easily the furthest along in convincing domestic and foreign
CANE KINGS: Brazil's 440 cane mills crushed more than 556 million tons
buyers to try bagasse pellets. Started in 2006 by three entrepreneur- of sugarcane during the 2010-'11 harvest season.
ial engineers, the group sees gold in industrial-grade pellets for both
Brazilian factories and the European market.

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‛The Brazilian pellet market hasn't developed at all
because every [pellet] producer in the past has only
thought export. This is very incipient in Brazil, it's just
the beginning. We’ve had to create the market from
scratch here, educating customers one at a time.’
—Diego Maurizio Zannoni, CEO, Green Energy Group
“There is very high demand in the EU if the price is right,”
says Gloria Jacobovitz, a consultant that helped GEG prep its busi-
ness plan, get feedback in Europe and win international loans. “In
Brazil it’s a market that has to be built, but it makes financial sense,
and if Brazil’s federal or state governments want to cap CO2, there’s
a market for this.”
From the Ground Up
If bagasse pellet sales were easy, Brazil would already be
a world leader in consumption and export. Its 440 cane mills
crushed more than 556 million tons of sugarcane during the
2010-’11 harvest season, up 3 percent from the year prior. After
squeezing out every ounce of sugary juice, as much as 30 percent
of that cane weight ends up as fibrous bagasse (nearly 167 million
tons last season).
All of Brazil’s cane mills today burn their bagasse for energy,
using between 60 and 100 percent of their supply depending on
the mill’s size. On average, they burn 80 percent, so the remaining
FINICKY FIBERS: Bagasse fibers are longer and more uneven than other feedstocks.
International »
20 percent of bagasse is waste material with few secondary mar-
kets. That’s potentially 33.4 million tons of bagasse last year alone
for new products like pellets.
But it hasn’t been easy. It’s been slow and arduous, highlight-
ed by thousands of hours in the lab and on the road for GEG
staff, perfecting recipes for both pelletizing bagasse, and weaning
industrial clients off fossil fuels.
“The Brazilian pellet market hasn't developed at all because
every (pellet) producer in the past has only thought export,” says
Diego Maurizio Zannoni, GEG CEO. “This is very incipient in
Brazil, it's just the beginning. We’ve had to create the market from
scratch here, educating customers one at a time.”
Brazil’s pellet production has been limited until now to an
inconsistent 200,000 tons or less per year, produced by small log-
ging companies almost solely from wood chips or debris, and sold
domestically where the power supply is unreliable. The market
is so small that it’s been hard to keep track of who is producing
what each year, says Celso Oliveira, president of the Brazilian
Association of Industry Biomass. He’s also head of the bagasse
pellet venture Brazil Biomass and Renewable Energy, which is
pursuing export deals in Holland and Japan.
GEG’s first challenge was creating its own formula for pellet-
izing bagasse, believing no one in the market had yet perfected a
cost-effective, high-standard option that’s on par with the energy
content of wood pellets.
SPRING 2011 | PELLET MILL MAGAZINE 21
« International
‛I think bagasse pellets are promising, but those mill owners are making so much money right now with sugar
and ethanol, I don’t think they’ll focus on anything else. Pellets are a cheap product with potentially big
transport costs, one more reason why mills aren’t focusing on it.’
Bagasse pulp is full of impurities and hash, and its fibers are
longer and more uneven than other feedstocks. GEG wanted a pel-
let that would meet the highest export market standards, to avoid
tying their hands if domestic market demand didn't pan out.
They came up with a cylindrical pellet that’s 6 to 10 millimeters
in diameter, and four to six times that diameter in length. It has a
low calorific value at 4.0 kilocalories per kilogram (kcal/kg) (or 4.5
kilowatt hours per kg), and an energy equivalent of 0.4 kg of oil
per pellet. Because it produces roughly 1.5 kg of ash per 100 kg
burned, these pellets likely won't qualify for residential use, and will
be limited to industrial clients for now.
To pelletize, 2 kg of bagasse (with 50 percent humidity) pro-
duce 1 kg of pellets (at 8 to 10 percent humidity). Essent Trading,
a Dutch energy trader owned by German utility RWE, has certified
GEG’s bagasse pellet as meeting European Union standards for
solid biofuels.
The company is close to finalizing a $45.5 million loan through
the Inter-American Development Bank, which would provide two-
thirds of the financing needed for plant construction this year in
22 PELLET MILL MAGAZINE | SPRING 2011
—Paulo Costa, director, First American Scientific
the city of Votuporanga, northern São Paulo state. With an initial
production capacity of 40,000 tons per year, the plant is located in
the heart of Brazil's cane country, near multiple mills to provide
bagasse, and within 300 kilometers (186 miles) of a huge market of
potential industrial customers.
Competing Interests
The sugarcane industry is developing new ways for mill own-
ers to utilize excess bagasse, via cellulosic ethanol and year-round
energy cogeneration. The former remains years away in terms of
cost-efficiencies, and for mills interested in cogeneration, entering
the power business is often cost-prohibitive.
Around 100 Brazilian mills currently produce surplus electricity
consistently for sale to either the grid, or contracted buyers. Cane
mills may need to retrofit their turbines and electrical systems to tap
into the local grid, a costly endeavor that most hesitate to pursue un-
less they are guaranteed energy contracts.
Those contracts are tough to get. Stiff competition from wind
and hydropower producers at a public energy auction in late 2010

BURN BASICS: Because bagasse pellets produce roughly 1.5 kg of ash per 100 kg burned, the pellets probably won't quality for residential use and will
be limited to industrial customers.
left the cane industry with just 16 percent of 1,159 megawatts in
long-term contracts. Many cane millers have grown bitter with the
auction system, believing tax breaks for wind put biomass at a dis-
advantage.
Connecting to the national electric grid may also raise costs be-
yond a competitive advantage for small cane mills and their limited
megawatt potential. Brazil's Ministry of Energy has stood behind the
cane industry's aggressive goal to double its cogeneration capacity by
2020, but the government only projected a small increase in biomass’
slice of the 2020 national matrix—from 4.8 to 5.1 percent.
Transport costs in Brazil are among the highest in the world,
due to poor roads and infrastructure. Cane mills in São Paulo state
can be as far as 500 kilometers from the nearest port, adding cost
that could up-end export options while the Brazilian currency re-
mains strong against the U.S. dollar, according to Paulo Costa, Brazil
director for First American Scientific, which makes machines that
pulverize organic waste material.
“I think bagasse pellets are promising, but those mill owners are
making so much money right now with sugar and ethanol, I don’t
think they’ll focus on anything else,” Costa says. “Pellets are a cheap
product with potentially big transport costs, one more reason why
mills aren’t focusing on it.”
International »
Making the Choice Easy
Most industrial thermal power users have hesitated with ba-
gasse pellets because of a total lack of experience with the fuel
source, and upfront costs they’d face for boiler changes. GEG has
adapted for doubters, splitting the company into two branches that
promise clients all of the savings of biomass fuel with none of the
risk.
Under the BrasPower label, GEG will cover all the costs of
installing and maintaining new pellet boilers and power equipment
at a client’s factory, just to hook them on buying fuel from the com-
pany’s other branch, BrasPellet.
GEG has three clients signed up in the textiles and food and
beverage markets to install boilers and start burning bagasse pellets
in the first quarter of 2012. The company plans to produce 520,000
tons of pellets per year by 2015-’16, which would generate 2,030
gigawatt hours of power annually.
“We'll manage everything if they wish, and we're offering this
turnkey solution now just to develop successful examples to help
build this market,” Zannoni says.
Author: Bob Moser
Freelance Writer
bobmoser333@gmail.com
SPRING 2011 | PELLET MILL MAGAZINE 23