Brazil: Energy Resources

Extend network

National electrification rate (2007): 95%

   In urban areas: 98.8%
   In rural areas: 73%

Brazil’s National Interconnected Grid is one of the largest interconnected systems in the world with more than 85,000 km of transmission network.

Energy procedure

In June 2010 the World Bank approved a US$495 million loan to improve financial and operational performance and the commercial management of Brazil’s six electricity distribution companies by reducing electricity losses, increasing bill collection rates, and improving quality of service. A new 334 MW hydropower plant is being constructed at a cost of US$1.3 billion. The plant will be completed by September 2011. In a wind energy auction, 1,805 MW were purchased at US$96 per MWh and 2,047.80 MW at $US85.40 per MWh. The cost per MW makes wind energy fully competitive compared with conventional sources The Inter-American Development Bank (IDB) has approved a US$200 million loan for an electricity generation project using excess heat and gas from the production of the steel. The investment will contribute to the site’s 99% gas recovery and 98% water recycling.

Energy debates

The Ministry of Mines and Energy announced that it will hold renewable energy auctions for wind, biomass and hydroelectric plants. Additionally, these auctions will include proposals for natural gas power plants.

Energy sources

Electricity Brazil installed electricity capacity (2008): ~ 104 GW.

   Hydro: 84%
   Biomass: 5%
   Thermal: 13%
   Nuclear: 3%

The country generated 461 billion kilowatthours (Bkwh) of electric power, while consuming 421 Bkwh. Brazil is the world’s second largest hydroelectricity producer after China, with a production of 390 TWh in 2009. Brazil is gradually introducing solar and wind energy into its energy matrix. It is the first energy consumer in South America and the world's second largest ethanol producer. Brazil’s energy matrix:

   Renewables: 47.2%
   Non-renewables: 52.8%

Regulatory roles

National Electric Energy Agency (ANEEL):

   Regulation of prices and other aspects of the electricity industry, concession granting for the operation of electricity companies, supervision of concession agreements.

Competition

In 2003, the Lula administration established new goals for providing a reliable energy supply, stabilizing prices for consumers and providing incentives for renewed long-term investment in the energy sector. The new plan created two energy trading markets, the first of which regulated a pool whereby energy could be purchased from generators that shared the costs among distributors with regulated prices; and the second, the creation of a free market environment where distributors and generators could negotiate their own contracts. This dual plan removed responsibility from ANEEL (the National Electric Energy Agency) and transferred it back to the Ministry of Mines and Energy under three new agencies: the Company for Energy Research (EPE), responsible for long-term research and planning in the power sector; the Electrical Energy Commercialization Chamber (CCEE), in charge of oversight and implementation of the trading negotiations in the energy pool, and the Electric Sector Monitoring Committee (CMSE), in charge of the security of supply for the entire nation. These three bodies were established to provide the government additional influence over the energy sector as well as ensure that energy is provided from thermal plants by competitive pricing and availability. Currently, all 64 power energy distributors purchase their energy at a single price generated from the new pricing formula.

Energy efficiency

109 TWh of electricity savings by 2030. Total energy intensity has been decreasing at a moderate pace since 2000 (less than 0.5% per year between 2000 and 2009), and more slowly than the world average (1.3%/ year). The reduction in final energy intensity (final energy consumption per unit of GDP) was slightly faster over the same period. Since 2000, CO2 emissions per unit of GDP (CO2 intensity) have decreased more rapidly than total energy intensity (almost 2% per year), thanks to fuel switches to CO2-free fuels and, in particular, to the declining market share of oil (47% in 2000 compared with 40% in 2009).

Capacity concerns

Most of the large generating plants are located far from the high demand centres like Rio de Janeiro and São Paulo. This means that there are high transmission and distribution losses that amount to some 15% to 16% of total domestic demand supplied.

Government agencies

The Ministry of the Environment holds the environmental  responsibilities in Brazil. One of its associated institutions is Ibama, the Brazilian Institute for the Environment and Renewable Natural Resources, which is in charge of executing the environmental policies dictated by the Ministry. The Power Research Company (EPE) was created in 2004 with the specific mission of developing an integrated long-term planning for the power sector in Brazil. Its work serves as input for the planning and implementation of actions by the Ministry of Energy and Mines in the formulation of the national energy policy. www.epe.gov.br

Energy regulation role

Regulation of prices is delegated to the specific regulatory institutions in the electricity and petroleum industry.

Ownership

Electricity The Brazilian electricity sector was originally based on a set of vertically integrated companies, for the most part under public ownership. Difficulties in keeping up with growing demand worsened in the 1990s. This triggered major market-oriented reforms in 1996, inspired by reforms in the UK and Latin America. The new system was designed to encourage competition in generation and retailing, while transmission and distribution remained regulated activities with provisions for open access. Other reform measures were the establishment of an independent system operator,  the privatisation of most distribution utilities and transmission expansion. As a result of this reform, the power sector is now composed of a wide variety of agents, numbering more than 1,250. The agents are large and small generators; thermal power plants burning fossil fuels; independent producers, mostly with gas-fired power plants; transmission companies; large consumers; power traders; and distribution utilities that operate in the network business and serve captive consumers. The sector includes one very large government-controlled holding company (Eletrobras, the ex-monopoly incumbent) for generation, transmission and distribution assets. There are 64 utilities in the distribution segment in Brazil. These companies supply electricity to about 61.5 million consuming units. Of these consumers, 85% are residential, and large consumers (3MW or more) may contract for their power in the free wholesale market, or direct with distribution companies. Hydrocarbons and natural gas Petrobras is the largest producer of oil and natural gas in Brazil. The company reportedly controls over 90% of Brazil’s natural gas reserves. Other important participants in the sector include Sulgas and Britain’s BG.

Degree of independence

The Board of the ANEEL is composed by 5 Directors, including a General Director appointed by the President after being approved by the Senate. The Board of the National Agency of Petroleum, Natural Gas and Bio-diesel is composed of 4 members appointed by the President and ratified by the Congress.

Energy debates

The World Bank, Energy Sector Management Assistance Program (ESMAP), Brazil Background Study for a National Rural Electrification Strategy: Aiming for Universal Access (March 2005).

Energy framework

In December 2008 Brazil’s president signed the National Climate Change Plan (PNMC). The plan largely focuses on reducing deforestation. The Plan also contains provisions regarding energy efficiency and renewable energy. It seeks to increase energy efficiency across various sectors of the economy in line with best practices, and to maintain the high renewable energy mix in Brazil’s transport and electricity sectors.

   The Ministry of Mines and Energy announced the National Energy Efficiency Plan (PNEf). The new plan focuses on improving the sustainability of the energy sector, introducing more renewable energy into the national grid, reducing grid losses and improving energy efficiency criteria. PNEf will provide energy savings of 106 TWh in the next two decades, which is the equivalent what the residential sector consumes in one year.
   The National Electricity Conservation Program PROCEL (Programa Nacional de Conservaçao de Energia Elétrica) saved nearly 70TWh in 2010. A total of 100TWh in energy savings are expected in 2011. PROCEL is planning the implementation of more exhaustive testing for appliances, assessing the benefits LED for public lighting, and testing new biofuels for transport.

Reliance

Based on its January 2011 Short-Term Energy Outlook, EIA forecasts Brazilian oil production to reach 2.9 million bbl/d in 2011 and 3.0 million bbl/d in 2012. Brazil’s liquids consumption averaged 2.52 million bbl/d in 2009. As a result of this rising oil production and flat consumption growth, Brazil became a net oil exporter in 2009. Brazil still imports some light crude oil to meet the needs of its refinery fleet.

Role of the government

The institution responsible for energy issues in Brazil is the Ministry of Mines and Energy (Ministerio de Minas e Energia –MME). This Ministry through the Secretary of Energy (Secretaria de Energia – SEN) formulates the guidelines and policies for the national energy sector and coordinates and supervises their execution. Energy Planning is undertaken by Empresa de Pesquisa Energética (EPE). The final approval of Energy Planning is the responsibility of the National Council of Energy Policy (NCEP). The Comitê de Monitoramento do Setor Elétrico (CMSE) monitors trends in power supply and demand. If any problem is identified, CMSE will propose measures to avoid energy shortages, such as special price conditions for new projects and reserve of generation capacity. The Ministry of Mines and Energy host and chair this committee.

Regulatory framework

PROINFA is considered a milestone in the regulatory framework applicable to renewables in Brazil.   PROINFA informed that 68 companies have deployed more than 1,591.77 MW worth of renewable energy projects. According to Law No. 11943 of May 28, 2009, the deadline to start operations for the new energy projects was December 2010. The program provides for the deployment of 144 RE plants, totaling 3,299.40 MW of installed capacity. Purchase of all the electricity generated is guaranteed for 20 years.

Regulatory barriers

Small hydro: long authorization process and lack of transparency. Wind power: the lack of specific bidding processes makes project deployment unrealistic.  

Energy regulator

The National Electric Energy Agency (ANEEL) was created in December 1996. However, the first board of directors was nominated in December 1997, when ten companies had already been privatised. http://www.aneel.gov.br

A National Agency of Petroleum, Natural Gas and Bio-diesel was created in 1997. http://www.anp.gov.br

Renewable energy

In 2009, Brazil had 660 MW of installed wind capacity. Brazil has a potential for wind power of 143 GW. Major biomass sources are firewood, sugar cane products and other agricultural waste. Sustainable biomass could have a potential of 20 GW. The use of biofuel (ethanol) is promoted through the Brazilian Alcohol Program (PROALCOOL), which encourages the production of renewable biomass fuel as an oil substitute. The potential for off-grid solutions in Brazil is huge, but largely untapped. Existing isolated diesel systems are often inefficient, unreliable, expensive to run, and a continuous drain on government funds. Grid extension is not an economically viable option for many remote and dispersed users. However, early off- grid pilot projects in Brazil have not focused enough on sustainable service models and productive uses, creating the wrong impression of high operation and maintenance costs and limited benefits.