If Brazil's cane ethanol industry is having a difficult time of it, surely the higher-cost sector for making the biofuel from waste crop must be a dead duck?
Not so, at least if Brazilian sugar and ethanol giant Raizen is anything to go by.
The Brazil-based group, a joint venture between Brazil's Cosan and Anglo-Dutch oil giant Shell, on Wednesday heralded a second plant for making so-called "cellulosic", or second generation, ethanol even as it opened its first production site.
Raizine said it will commence construction on new cellulosic ethanol plant when biofuel production costs converge with those of sugar-derived ethanol, which it expects to happen from 2017.
Raizen chief executive Vasco Dias made the comments on Wednesday at the inauguration of the group's first second-generation ethanol plant in Piracicba, which came online last year.
Raizen has previously announced its intention to bring 1bn litres per year of second-generation ethanol capacity on line by 20204.
Second-generation ethanol is produced from sustainable non-food feedstocks, and can be used as a road fuel for specialised vehicles, or blended into gasoline to meet government carbon reduction targets.
The Piracicba plant produces ethanol from cellulose, through the use of enzyme technology.
Cellulosic ethanol can be processed from specially grown non-food crops, including switchgrass, or from waste products including grain straw, forestry offcuts and sugar cane bagasse, the fibre left over from cane crushing.
In May, Raizen signed a multi-year deal with US biotechnology group Ceres to produce ethanol from genetically modified sweet sorghum crops
Many jurisdictions, including the US and the EU, incentivise the use of second-generation biofuels, giving it a considerable competitive advantage.
The competitiveness of second-generation ethanol has been threatened by the low price of conventional ethanol feedstocks, including grains and sugarcane.
The last crop report from industry group Unica showed that cane crushers were favouring ethanol production over sugar, thanks to the low global price of sugar and recent support for the Brazilian ethanol fuel industry.
Mr Dias said that the Piracicba plant currently produced ethanol at around R$1.40 a litre, compared with R$1.15 a litre for conventional ethanol.
He added that Raizen had signed a deal to export second-generation ethanol to Europe at a premium of R$0.3 per litre.
However, if the price of sugar were to recover from its current low levels, Brazilian mills would be incentivised to reduce the proportion of their cane crush devoted to ethanol production, in favour of raw sugar production, pushing up the cost of first-generation ethanol production and making second-generation product more competitive
By William Clarke