posted by William R. Stott
Published: February 29, 2016
Sumitomo Corporation today signed a contract to acquire up to 20 percent of Cosan Biomassa S.A. ( "Cosan Biomassa"), a subsidiary of the world's largest sugar and ethanol company, Cosan S.A.Industria e Comercio ( "Cosan S.A.") and producer of sugarcane pellets for power generation, subject to the prior approval of anti-trust authorities in some jurisdictions.
Biomass is a renewable energy source such as solar, wind and small-scale hydro power that provides cleaner, sustainable energy. Such investments in renewable energy are increasingly important with Japan's commitment to reduce its greenhouse gas emission by 26% by 2030 as part of the Paris Climate Treaty.
"Brazil is already among the largest producers and exporters of agricultural commodities in the world. Pelletized biomass is a new commodity being created to serve the low carbon economy," said Mark Lyra, Cosan Biomassa CEO. "By making use of sugarcane residues and benefiting from the economic and environmental advantages that the shift to rail logistics brings to the game, Brazil is positioned to become the Saudi Arabia of renewable energy."
"By the year 2030, we foresee that Japan will consume as much as 10 million+ tons of pelletized biomass, the majority of which would come from overseas. Renewable energy including biomass will play a prominent role in our power generation sector by that time. We believe a relevant portion of this demand will be met by agricultural waste, particularly sugarcane biomass pellets produced in Brazil. Sugarcane's productivity and abundant availability tied to the fact that we are using its residual byproduct as a raw material gives us a unique sustainability condition when compared to other biomass sources in the world," says Yoshinobu Kusano, General Manager, Biomass Business, Sumitomo Corporation."
Cosan Biomassa has developed a fuel pellet made from sugarcane residues such as bagasse from the sugar mill and straw left over in the sugarcane field, and built a large-scale production plant (annual capacity 175,000 tons) for the first time in the world last September, which commenced a commercial production in December 2015.
Through the participation of Sumitomo Corporation, Cosan Biomassa will increase its exports to Japan and Europe along with increased domestic sales. It is said that there is a potential of 45 million tons/year of sugarcane pellets from the sugarcane farms in Sao Paulo state alone, Cosan S.A. being a dominant player there thorough its group company. With this abundant availability, the venture would aim for 2 million tons by 2025, and as much as 8 million tons in the future, subject to future growth of the market as well as a satisfactory return.
Sumitomo Corporation regards biomass energy as a promising source of renewable energy, and started importing biomass fuel for power generation to Japan in 2008. In addition, Sumitomo Corporation's subsidiary, Summit Energy Corporation, has been managing a biomass power plant and plans to build more. Sumitomo Corporation has been in search of competitive and sustainable resources outside of Japan to supplement domestic biomass resources and to step into the European market, where the bulk of fuel pellet demands exist. The company regards Cosan Biomassa as an ideal resource to fulfill both needs.
Today, Sumitomo Corporation and Cosan S.A have begun strategic collaboration for the development of the sugarcane pellet business through Cosan Biomassa.