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Russia does not Stake on Generation 1 Bioethanol Production

As of January 1, 2009 there was no fuel-grade ethanol production in Russia. There was no bioethanol import and export either, since the range of products eligible for foreign economic activity (FEA) does not define codes of goods, corresponding to various types of biofuels. According to the effective legislation bioethanol and ethyl alcohol containing composite fuels represent excisable goods, which impacts notably the domestic market development.

Based on various sources, there are about ten bioethanol production plant construction projects in Russia, from which only one (SC “Titan”, Omsk Region) is underway. Some experts believe, that any Russian food alcohol production plant can be easily converted to the production of bioethanol. In this case production costs (without excise taxes) will make up 9-10 rubles per liter, which is even less than production costs in the production of food alcohol, as there is no need to use alcohol purification equipment. Other experts are more pragmatic, considering that only those plants may easily convert their production lines, where capacity exceeds 140 K deciliters. They also underscore, that such conversion will require essential investments in technology.

A high excise tax for ethanol (23.5 RUR per liter) limits the production of bioethanol for the domestic market. In Russia bioethanol is classified as belonging to the general category of “Ethyl alcohol based on all kinds of feedstock (including crude alcohol based on all kinds of feedstock)” and is not interpreted in the legislation as a special application product. This circumstance contrasts strongly with the situation in other countries, where bioethanol is free from excise obligations. According to the Russian law there is only one way to avoid paying excise tax: when ethanol-containing products are exported, excise taxes are returned to the manufacturer. In essence, bioethanol can be produced for external markets without being excisable and without changing the effective legislation.

A relatively high production cost and a high market price for grain represent factors, limiting the production of bioethanol in Russia. If the market price for grain does not go down, the use of grain as feedstock for bioethanol production will become non-value-added. On the other hand, beet bin molasses may really become alternative feedstock.

At the same time experts believe, that bioethanol, produced in Russia, has a good outlook for being promoted in the markets of the European Community and Japan. The potential bioethanol market in Russia is estimated by experts as 850 M liters.

To sum up, generation 1 bioethanol production based on food feedstock is not actually developing. The main interests of the industry are focused on the production of generation 2 bioethanol of plant cellulose. There are some early success stories: one of the plants of OJSC “Corporation “Biotechnolgies” produced a test batch of butanol of wood. The biobutanol produced was used (in various proportions with gasoline) as fuel to run three LADA KALINA vehicles. The interim and final measurements performed indicated a substantial reduction of atmospheric emissions by the engines of these vehicles. Up to 30 butanol production plants are planned to be constructed throughout the country.

For reference: according to the figures, provided by the US Department of Energy, the United States consumes more energy than any country in the world. Half of this energy is used for transportation needs, while 98% of this energy results from the use of oil.

Despite the on-going discussions both among experts and in public on advantages and disadvantages of bioethanol, considerable bioethanol production has been recently deployed in the US to achieve 44.7 billion liters production rate within the nearest years.

The number of bioethanol production plants is constantly growing in the US. In 1999 there were only 50 plants, while in the present-day US 194 bioethanol production plants are operating. There were 110 plants as of 01.2007, while a year later (in January 2008) there were already 134. 28 plants more, their total capacity making up 7.8 billion liters are under construction (according to data by American Coalition for Ethanol). Even the financial crisis which broke out at that time and is still going on did not affect implementation of biofuel programs. Noteworthy is that 21.8% of plants belong to farmers.

The material is based on the review, made by Abercade Consulting.

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