Renewable Energy Policy Brazil

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Renewable Energy PolicyBrazil

• Claudia do Valle
• cvalle_at_lima.coppe.ufrj.br

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Background in Renewable Policy - Brazil
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Background in Renewable Policy Alcohol Program

• Alcohol program ambitious program lauched by
  the Brazilan government in the seventies
• Gained momentum in the eighties
• Faced some problems in the nineties due
  international price of sugar and reduced oil
  price
• All gasoline in the country is blended with
  anhydrous ethanol (20 to 26)
• 3.5 millions cars run on pure hydrated ethanol
  (2004)

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Alcohol Program - recently

• The new technology Flex Fuel and the oil prices
  opened a new perspective for Brazilian domestic
  market
• Also, the Kyoto Protocol and the commitments to
  reduce GHG caused a boom in the alcohol market
  mainly focusing the international market
  (exporting)

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Alcohol Program - recently

• 2005,
• Production 16 million m3
• Capacity 18 million m3
• Plants313
• 2,7 million hectare

Up to 2010 Investments of 10 billion dolar 89 new
plants Plus 8 million m3 of alcohol Plus 2
million hectare
Country area 851 Cultivable area 383
Available 91 Cultivated area for ethanol
3 (million hectare)
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Background in Renewable Policy Hydropower
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Hydropower - recently

• New Power Sector Regulations (NPSR) replaced the
  wholesale energy market by a pool of consumer
  power distribution concessionaires, wo are forced
  to purchase new generation capacity in order to
  meet the forecasted market growth
• Public biddings
• The guiding principles of theNPSR
• Recognize hydropower as the major source for
  expanding electricity services

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Recents Developments - Biodiesel

• Discussed since 2003
• Biodiesel Program lauched December 2004 aiming to
  add 2 of biodiesel to diesel oil (reaching 5 in
  2013)
• The program intends Income and Job generation
  focusing on family agriculture production,
  particularlyin North-east region of Brazil

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Recents Developments - Biodiesel

• Tributary model established to promote social
  inclusion by the production of social biodiesel
  from family agriculture
• Tax incentives - (100 North and North-East
  regions from family production 70 other
  regions)
• Social label Just companies that have this seal
  can participate in the auction (50 raw material
  from family agriculture in North-East and
  Semi-Arid regions 30 South-South-East 10
  North and Middle -West
• Despite Brazilian biodiesel presently having no
  possibilities of entering in the European
  Markets, it has na enourmeous potential in the
  intenal market and for exporting to countries
  that have no appropriate lands

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Recents Developments - Biodiesel

• Four auction corresponding to 840 million
  liters to be supplied in 2007
• Petrobrás intends to contruct 3 plants in
  North-East and Semi Arid region using raw
  material from family agriculture each plant has
  the potential of producing 50,000 ton of
  vegetable oil and include 483 municipalities

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Renewable Energy Source in the Electricity Sector

• The use of RES-E in the electricity sector such
  as SHP, wind and New Biomass is small, when we
  consider the huge existing potential
• The small share of RES can be related to the high
  generation cost of these sources when compared to
  hydropower and thermopower. Furthermore promoting
  RES-E still has face the challenge of the
  countrys huge hydropower potential - only 26
  or the brazilian hydro potential is currently
  being utilized but most of them is located in
  the Amazon region where no studies are
  available to assess the share of the hydro
  potential that is really feasible, bearing in
  mind possible environmental impacts and the
  distance from generation to consumption markets

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Renewable Energy Source in the Electricity
Sector PROINFA

• The more important regulatory framework for RES-E
  was the approval of Law 10,438/2002 establishing
  PROINFA that aims to increase the share of
  wind, power, biomass energy and SHP) in the
  supply of the Brazilian grid system.
• PROINFA is divided in two phases
• PROINFA 1 intends to add 3,300 MW RES-E
  (equally divided among wind, biomass, SHP) to the
  interconnected system by 2008.
• Similar to feed-in systems fixed premium price
  established by Law with a cap of 3,300 MW

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PROINFA 1

• As biomass sector resisted to participate in
  PROINFA 1 (It does not appear too biomass
  projects) the RES-E potential was re-divided
  between Wind and SHP (1422 MW wind, 1191 MW SHP
  and 685 MW biomass from bagasse)
• 144 contracted projects but up to now only two
  wind energy projects (a total of 200 MW) and
  about 300 MW from SHP began their construction
  phases

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PROINFA 2

• PROINFAs second phase was projected to ensure
  that after 20 years, wind energy, biomass and SHP
  would supply 10 of the annual electric power
  consumption of Brazil. Public calls for bids
  would be made ensuring that a minimum of 15 of
  the annual power market growth would be supplied
  from these three sources.

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PROINFA 2

• As the law that launched PROINFA was an
  initiative of the previous government, the new
  regulations of the power sector, introduced by
  the new administration that took office in 2003,
  changed PROINFA 2. A possibility being considered
  is that new renewable energy (biomass, wind and
  SHP) enter in the power pool and their additional
  cost be diluted through the average energy price
  in such a way that the average price of energy
  for end consumers should increase up to a cap of
  0.5 (annual) and 5 in the periodo (20 years).
• In this way, the promotion instruments will
  change from Feed-in system to a tendering system

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Barriers

• Premium price insufficient to remunerate biomass
  electricity generation In fact the amount
  negotiated (price) in the electricity auction
  (electricity pool) for thermopower was higher
  than the premium price established in PROINFA for
  biomass. And, in this case, the biomass producers
  (entrepreneurs) preferred to offer biomass
  electricity in the pool of conventional
  electricity (auction)

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Barriers

• Initially, the wind energy producers also
  complained about Proinfas premium price, but
  since last year the exchange is positive for
  Brazilian currency, and then, there has been no
  more complains. Anyway there is still risk of not
  commissioning of some projects due financial and
  investments constraint. Also due efficiency,
  because of the selection criteria was by the date
  of environmental license - what favored
  projects with a low capacity factor.
• Uncertainty of PROINFA 2, which does not attract
  new investments as establishment of wind energy
  manufacturers in Brazil.

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Perspective for RES-E in Brazil

• PROINFA was adopted during a political period
  that was favorable to expanding the use of RES
  with the aim of making the best use of the
  Brazilian potential of these sources, disseminate
  the technology nationwide and, encouraged mainly
  by some pilot-projects in wind energy in the
  northeast of Brazil and in the use of sugarcane
  bagasse in the sugar-alcohol industry. Further
  contributing to this scenario were the difficulty
  in obtaining credit for the construction of large
  hydropower plants, the price of the natural gas
  imported from Bolivia, the global trend,
  particularly European, of supporting clean
  energies, and the concerns related to the Kyoto
  Protocol.

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Perspective for RES-E in Brazil

• Nevertheless, there is always a basic question
  when thinking about the Brazilian case How
  strongly do the government and policy makers
  really want to promote RES-E? With the adoption
  of the New Power Sector Regulations and the
  tendency of RES-E entering into the Pool and
  participating in the tendering procedures only
  the most competitive sources will be able to take
  a share of this market. This can be true if we
  see the price of thermopower in the new energy
  auction and considering some of the existing
  incentives for SHPs (outside PROINFA). But,
  mainly wind energy will suffer a major negative
  impact and will have problems ti ensure its
  economic feasibility.

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Conclusion

• Large hydropower main electricity source in the
  NPSR
• Ethanol Increasingly production
• Biodiesel Market being structured
• RES-E
• Biomass from sugar cane can participate in the
  competitive market
• SHP there are incentives outside PROINFA
• Wind - the price is still not competitive and
  will suffer if the government do not establish a
  clear policy to this source

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