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Ethanol Fuel Use in Brazil, by Tom MacDonald (.doc)

Alcohol fuel experts from more than a dozen countries convened in Brazil for the Sixteenth International Symposium on Alcohol Fuels (ISAF XVI), held November 26-29, 2006 in Rio de Janeiro.  The event marked ISAF’s thirty-year anniversary, and the venue in Rio highlighted Brazil’s Proalcool Program, the world’s foremost example of market introduction of an alternative fuel.

Any remaining doubts about the success of Brazil’s ethanol fuel market can be allayed based upon the many authoritative reports delivered at ISAF XVI – half of the 70 symposium papers and presentations.   Firsthand observations of the use of ethanol in this diverse country of 190 million people provide further proof of success.  

There has been a long, sometimes difficult learning experience developing ethanol in Brazil.  But several weeks of direct exposure to Brazil’s efforts yields compelling evidence that Brazilians have embraced ethanol as an important and permanent fixture of their motor fuel supply.  The country is not only moving to expand its production and use of ethanol, but also has plans to increase exports of ethanol and ethanol-related technology to the world.

Many aspects of Brazil’s ethanol story are relevant for consideration in California and the rest of the U.S., where public policies involving ethanol are still being defined, even as the U.S. for the first time surpasses Brazil as the largest ethanol-producing country.  Some dramatic contrasts are apparent between the current Brazilian and U.S. ethanol markets.

Serious commercial production and application of ethanol as a fuel started at about the same time in the U.S. and Brazil, prompted by the first oil crisis of the 1970s.  Both countries began using ethanol as a gasoline blending component: in the U.S. a 10 percent ethanol blend originally called “gasohol”, and in Brazil a 5 percent ethanol blend.  Since that time, Brazil has adapted its motor vehicle pool to using blends with increasing percentages of ethanol, now up to 20 percent to 25 percent ethanol (E20-E25).

In the U.S., 10 percent ethanol (or E10 as it is now referred to) is still the maximum ethanol content allowable for use by the general vehicle population, with 6 percent ethanol (or E6) predominant in California’s market.  A recent move by the State of Minnesota toward future implementation of a 20 percent ethanol blend (E20) has thus far not been embraced by the auto industry or by other U.S. states.

The U.S. automotive industry, after a brief experiment with dedicated alcohol-fueled (methanol) vehicles in California, introduced flexible fuel (alcohol/gasoline) vehicle technology in the 1980s.  Commercial production of ethanol FFVs by U.S. manufacturers began in 1998, and FFVs have comprised a few percent of these companies’ new vehicle sales since then.  Most foreign automakers have yet to sell any FFV models in the U.S. market, and FFV model availability in the U.S. market generally has been sporadic from year to year, especially in California.

Brazilian automakers, after many years of fluctuating production in numbers of dedicated ethanol vehicles and gasoline vehicles, finally began shifting to FFV production in 2003.  Most automakers supplying the Brazilian market now offer FFV models, which already comprise about 80 percent of new vehicle sales.  U.S. automakers have always specified alcohol fuel formulations containing gasoline for their alcohol-fueled vehicles (e.g., E85).  Brazilian automakers, and the other automakers supplying alcohol vehicles to the Brazilian market, have developed vehicle technologies that can use E100 in Brazil.

The distribution infrastructure is well developed in Brazil, where E100 is dispensed at nearly every fueling station in the country.  In the U.S., E85 for use in FFVs is available at about 1,200 fueling stations, concentrated in a few states, representing about 0.5 percent of all U.S. gasoline stations.

Distribution infrastructure for ethanol in the U.S. lags behind Brazil in several other areas as well.  The U.S. pipeline system for transport of petroleum fuels remains off limits to ethanol, with only a few signs of progress toward adaptation of existing or new pipelines to accommodate ethanol.  Meanwhile, Brazil has shown that pipeline transport of ethanol is practicable, and new ethanol-compatible pipelines are being built there.

Despite the decades of experience, fueling facility storage and dispensing equipment for ethanol is still not fully certified as commercially available technology in the U.S.  The handful of E85 fueling stations installed thus far in California operate under experimental permits pending the testing and certification still needed for approval of vapor recovery systems.  Brazil does not seem to have any remaining technical issues with the E100 fueling systems in standard use throughout the country.     

Brazil’s ethanol industry produces two ethanol formulations – both from sugarcane – an anhydrous (water-free) grade for gasoline blending and a less costly hydrous (higher water content) grade for use in FFVs and dedicated ethanol vehicles.  The U.S. ethanol industry produces only anhydrous ethanol (largely from corn), all of which must have gasoline denaturant added before entering the fuel market, due to alcoholic beverage control regulations.  

Pure ethanol fuel (E100) dispensed for FFV and dedicated ethanol vehicles in Brazil is typically priced at from one-half to two-thirds the price of gasoline per gallon.  This means that E100 is usually a better value to the consumer, on an energy basis, than the ethanol-blended gasoline formulations (E20-25).  In the U.S., ethanol fuel (E85) is typically priced 10 to 25 percent below gasoline (containing from zero to 10 percent ethanol), making gasoline the better energy value in most cases.  Overall, Brazil’s motor fuel prices are nearly double U.S. prices, making Brazilian motorists more price conscious and responsive to price differentials than U.S. motorists.

Public acceptance and awareness of ethanol among the Brazilian public is much higher than in the U.S.  “Alcool” is prominently featured on all fueling station price signs, and it is rare to encounter a Brazilian driver who is not familiar with ethanol fuel and its price.  Fewer U.S. motorists are aware of ethanol as a motor fuel, and ethanol fuel dispensers are often inconspicuous even where they are available.  Reports are often heard of FFV owners in the U.S. who are not yet aware their vehicles can operate on ethanol.

U.S. auto companies continue to express concerns about misfueling of gasoline vehicles with alcohol, apparently based on some actual cases where motorists have fueled gasoline vehicles with E85.  Proposed solutions to this problem include the adoption of differently sized dispenser nozzles and fuel tank openings, like those used for diesel fuel.  Misfueling between ethanol and gasoline vehicles seems to be nonexistent in Brazil, probably because all vehicle fueling there is done by attendants (as practiced in the U.S. only in the State of Oregon).

Ethanol commands about a 40 percent share of the Brazilian gasoline market, compared with about a 3 percent share of the U.S. gasoline market.  Brazil, with a population of about 60 percent that of the U.S., uses only 10 percent of the highway motor fuel used in the U.S.  Also, more than half of Brazil’s vehicle fleet is fueled with diesel, resulting in a gasoline-plus-ethanol demand only about half that of California’s alone.  Thus, the 4 billion gallons per year of ethanol comprising 40 percent of Brazil’s gasoline supply is about the same volume supplying 3 percent of the U.S. gasoline supply (as of 2005), and equal to about one-fourth the volume of California’s gasoline market. 

Given these greatly contrasting motor-fuel market-profiles, even if the U.S. does follow Brazil’s lead and pursues all opportunities to expand ethanol use, it clearly faces a much greater challenge to supply a similar fraction of its fuel demand.  Conversely, arguments that cite these differences with Brazil to discount ethanol’s importance in the U.S. deserve similar cross-examination.  Ethanol is already making a significant contribution to the U.S. transportation energy supply, well beyond that of all other alternative fuel options.  Perhaps the best evidence of ethanol’s effectiveness is that oil companies supplying California’s gasoline have become key stakeholders in the push to maintain ethanol/gasoline blending in the state and open the market to E10.  Clearly, ethanol can play an instrumental role in supplying a nation’s motor fuel needs without garnering a 40 percent gasoline market share, as in Brazil.

In combination, the Brazilian and U.S. market experiences to date with alcohol fuels offer a wealth of technical and institutional knowledge and lessons learned to help guide the continued progress of alternative fuels worldwide.  More in-depth examination of the above subjects and other comparative features of the Brazil and U.S. experiences, along with those of other countries, will help to advance this progress.

Further information is available on Tom MacDonald's website, at: www.tmacenergy.com