* Demonstration plants have total capacity of 61 mln lts
* Lack of gov’t support, volatility are hurdles in Brazil
* Ethanol pioneer, Brazil technology seen reaching limit
By Inae Riveras
SAO PAULO, March 28 (Reuters) - Research to develop second-generation ethanol is advancing globally, but Brazil, which vaunts its sugar cane as the ideal raw material for such fuels, lags in the race, industry experts said on Monday.
Investments from foreign companies associated with local producers have arrived in the country. But funding for research remains scarce and ethanol producers themselves have been shy to bet more aggresively, said Jaime Finguerut, industrial research manager at the Cane Technology Center, CTC.
“There are structurual difficulties in Brazil, such as the lack of applied research in universities, besides the high price volatility in the sector,” Finguerut said at F.O. Licht analysts’ annual sugar and ethanol conference in Sao Paulo.
At the three-day conference that started Monday, analysts and industry officials will discuss themes ranging from new technologies to sugar output estimates and land use.
The production of biofuels from raw materials such as wood or cane stalks is seen as a breakthrough. It would allow an increase in biofuel production without the use of more food crops, whose prices are rising to alarming levels.
Many companies, several supported by governmental funding, have been investing in several kinds of technologies around the world but none has reached the point of offering the fuel on a commercial scale.
In the case of cane, new technologies could more than double ethanol output with the same volume of cane being harvested currently, only through the use of cane bagasse and leaves that are now either left in the fields or burned.
Graphic - cane use: r.reuters.com/myq28r
Graphic - cane crop: r.reuters.com/quv88q
The world’s largest cane research center, CTC ran a cellulosic ethanol pilot plant with Dedini, Brazil’s largest supplier of equipment for mills, from 1997 through 2002 but the facility was closed due to lack of financing, Finguerut said.
Backed by local ethanol groups, CTC is working on another project that should be available for tests in local mills in two years. Dedini is partnering with Danish industrial enzymes producer Novozymes (NZYMb.CO) in a project whose target is to have a prototype plant operating by the end of 2012.
“All studies show that (cellulosic ethanol) will be profitable, there is a huge potential, but it takes time for the sector to adapt,” said Jose Luiz Oliverio, the vice-head of technology and development at Dedini.
Around the world, research into cellulosic ethanol has progressed, said F.O.Licht’s managing director, Christoph Berg, adding that demonstration units around the global have already a combined production capacity of 61 million liters/year.
But none in Brazil, the world’s largest producer of sugar cane, accounting for more than half of the global sugar trade and the biggest ethanol maker for more than 30 years.
Cane-based ethanol holds equal market share in the nondiesel transport fuels market as gasoline.
A few years ago the United States surpassed Brazil as the world’s No.1 ethanol producer, and in 2011 Brazil’s output will be about half of that from the U.S. industry.
Experts agree that the conventional technology to produce the fuel is reaching its limits.
After an impressive increase in yields over the past few years — Brazil’s average cane yield is now at around 80 tonnes per hectare, up sharply from 1970’s 50 tonnes. Further cuts in production costs would only be possible with a breakthrough. (Editing by David Gregorio)