Raízen Announces 5 New Plants to Produce Second Generation Ethanol (E2G)

This Monday, November 7th, the Brazilian Raízen - joint venture between Cosan S.A. and Shell plc, announced the signing of a contract of 3,3 billion euros to provide approximately 3,3 billion liters of Second Generation Ethanol (E2G, from brazilian portuguese Etanol de Segunda Geração) to Shell, through the construction of five new cellulosic ethanol plants. As soon as these five new plants are done (between 2025 and 2027), Raízen will have nine E2G plants in total.

Raizen is an integrated energy company operating in sugar, ethanol, lubricants and renewable energy production, as well as distributing fuel through Shell gas stations. E2G is expected to reduce sugarcane by-products’ waste, by treating straw and sugarcane bagasse through hydrolysis and double fermentation, producing what is called second generation ethanol. According to Raizen, E2G emits 80% less greenhouse gasses than fossil fuels, 70% less than US’ corn ethanol and 30% less than first generation ethanol. Because it has the same composition as first-generation ethanol (E1G), it could be used in the same way as regular ethanol is used- for now, however, it is mostly used in commercial aviation and to produce “green plastic” (biodegradable plastic made from renewable sources such as plants). The estimated CAPEX for the new enterprise is not trivial though and reaches about 1,2 billion BRL(~USD230MM) per E2G plant, but it is expected to pay off. The pandemic and the war in Ukraine reinforced the importance of sustainability and the need to deglobalize and diversify the global supply chain, which boosted the production of E2G, doubling its prices over the last year, and increasing the interest in the product.

For more information on the E2G market in Brazil, contact Factor-Kline.