"By 2020 you're looking at 15 percent of the national demand (for electric energy) in Brazil," said Adhemar Altieri, a spokesman for Brazil's center-south Unica sugar cane industry association.

The burning of the fibrous, cellulosic cane stalk after crushing to extract the sucrose already provides 3 percent of Brazil's electricity needs, as well as powering the mills.

As the ethanol sector grows to provide fuel for Brazil's fast-growing fleet of "flex-fuel" cars, which can run on any mix of ethanol and gasoline, new mills are being fitted with more efficient boilers that recover more heat from burning bagasse to provide more renewable power.

"It is renewable, it is clean and it is a by-product of something else. It just increases the (benefits) of the biofuel," Altieri said.

By happy coincidence, the cane harvest when bagasse is most plentiful coincides with the South American country's dry season, when water levels dip at the country's hydroelectric dams that supply about 85 percent of the nation's energy.

"It is another benefit you are getting from (cane). Now you can light up a city. Before, it was just enough to run your operation," Altieri said during a visit to the Barra Bonita cane mill, the world's largest, owned by Brazil's Cosan.

WITH POWER, RESPONSIBILITY

Many older mills run inefficient boilers to avoid being left with a mountain of bagasse at the end of the harvest. This can be costly to dispose of, and the high cost of retrofitting a more efficient system is proving a turn-off to some mills. Altieri said some owners were trying to coax the government to provide financial help.

Mills which commit electricity to the national grid will be contracted to provide a specified quantity for 15 years, rather than just selling off their excess on the spot market, and they are liable if they do not meet their commitment, Altieri said.

The Barra Bonita plant, which began crushing cane in 1945, uses all of its electric energy on the site but it hopes to up generation capacity in the next three years to boost revenue from selling the extra power to the national grid. (Editing by Reese Ewing and Matthew Lewis)