Jan. 31 (Bloomberg) — ETH Bioenergia SA, the Brazilian sugar-cane processor that gets 15 percent of its revenues from burning crop waste, will build a demonstration plant with Denmark’s Inbicon A/S to turn those residues into ethanol fuel.

The plant, which would start working in 2015, will be able to produce several million liters of ethanol a year and will be attached to one of its nine mills, Carlos Eduardo Calmanovici, director of innovation and technology at the Sao Paulo-based company, said today in a telephone interview.

ETH Bioenergia is seeking to boost income from its biomass, which is either left in the field or burned for making electricity that’s sold to the grid, Calmanovici said. Falling power prices in Brazil have spurred the company to study processing it into ethanol using Inbicon’s enzyme technology.

“Prices were much higher two years ago” for electricity in government-organized auctions for new power plants, he said. “It’s clear that only producing bio-electricity is not the best way to add value to biomass.”

The sales price of electricity fell to an average 87.94 reais a megawatt hour in a December auction, a decline of 34 percent from two auctions in 2010, according to national energy agency Empresa de Pesquisa Energetica.

Brazil produces all of the ethanol fuel for its cars from sugar-cane juice, he said. By 2020, it may produce as much as 1 billion liters of the fuel a year from the straw and crushed stalks coming from the crop. Brazil’s industry makes about 25 billion liters (6.6 billion gallons) of the fuel now.

ETH Bioenergia, a unit of Brazil’s largest construction company Odebrecht SA, expects to be able to produce 3 billion liters of ethanol and 2,700 gigawatt-hours of power from cane residues in 2015, the company said in a statement yesterday.

Inbicon has been operating a cellulosic-ethanol demonstration plant in Denmark for eight years, he said. The company is a unit of Denmark’s state-controlled utility Dong Energy A/S.

To contact the reporter on this story: Stephan Nielsen in Sao Paulo at snielsen8@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net