Brazil: Energy Resources

Extend network

National Electrification Rate (2009): 98.9%

Rural Electrification Rate (2009): 92.0%

The Brazilian National Interconnected System (SIN), as of 2010, consisted of approximately 96,140 km of transmission and distribution lines, predominantly of 230 kV and below.

As of 2010, transmission and distribution losses in the country stood at 16.4%.

Energy procedure

The Brazilian National Energy Plan for 2008-2017, recently published by the Ministry of Mines and Energy, aims at increasing the energy capacity from 99.7 MW to 154.7 MW.

The National Energy Plan for 2030 (http://www.epe.gov.br/Estudos.htm) sets forth long-term government strategies to meet the country’s energy needs in a sustainable way.

The annual Ten Year Energy Development Plans work with macro-economic, environmental, social and technological variables to assess the most sustainable course of action to meet Brazil's future energy needs. The Plans indicate the appropriate deadlines for the implementation of new projects, and provide forecasts of supply and demand levels for the period covered.

Energy debates

Reorganisation of the electricity sector to attract private investment and ensure reliable supply.

Wide-ranging energy policy changes are expected to be introduced in 2013, in an effort to promote economic growth. In particular, the costs of power to residential and commercial consumers are to fall by 18% and 32% respectively, An Energy Development Account (CDE) is also to be established, and its initial funding has increased to 8.46 billion Reais (US$4.2 billion). This account will now be responsible for all subsidies to the electricity generation, transmission and distribution sectors. Finally, oil and gas auction blocks have been expanded for the forthcoming auction round (as of March 2013), with 68% more acreage being offered than initially expected.

Energy sources

Total installed electricity capacity (2011): approx. 115GW Hydro-power: 70.8% Thermo-electricity (coal and gas fired): 28.2% Wind Power: 1.0%

Total Primary Energy Supply (2009): 240,162 ktoe Crude Oil: 39.6% Biofuels and Waste: 31.6% Hydro-electric: 14.0% Natural Gas: 7.1% Coal and Peat: 4.6% Net Electricity Imports: 1.4% Nuclear Energy: 1.4% Geothermal/Solar/Wind: 0.2% Oil Products: 0.1% Heat: 0.05%

Total Electricity Generation (2009): 466,468 GWh Hydropower: 83.8% Biofuels: 5.0% Oil: 3.1% Natural Gas: 2.8% Nuclear: 2.8% Coal and Peat: 2.1% Wind: 0.3% Other Sources: 0.1%

Brazil produces enough energy to cover 80% of its demand. Brazil is the largest consumer of energy in South America.

Brazil has vast hydro-electric resources and accounts for more than 60 hydro-electric facilities with installed capacities of at least 100 MW. Twenty-three of these facilities have installed capacities greater than 1,000 MW. Together with Paraguay, Brazil operates by some measures the world’s largest hydro-electricity complex, the Itaipú facility on the Paraná River, with a capacity of 13,600 MW. The remaining electricity generated in Brazil comes mostly from coal and gas-fired thermoelectric plants. In recent years, Brazil has run an overall power surplus, allowing exports to its neighbours.

In May 2012, Brazil produced 2.78 million barrels per day (bbl/d) of oil and gas equivalent. According to the Oil and Gas Journal (OGJ), Brazil had 14 billion barrels of proven oil reserves in 2012, the second-largest in South America after Venezuela. Petrobras´s discovery of large offshore Campos and Santos Basin oil fields in 2007, containing five to eight billion barrels of oil expanded the country´s proven reserves by 40-50%.

Brazil has also discovered enormous “pre-salt” oil fields, around 18,000 feet below the ocean bed, under a thick layer of salt. Brazil's pre-salt announcements immediately transformed the nature and focus of Brazil's oil sector, and the potential impact of the discoveries upon world oil markets is vast. Some analysts estimate there is more than 50 billion barrels of oil equivalent located in these reserves. However, considerable challenges must still be overcome in order to bring these reserves to fruition. The difficulty of accessing reserves, considering both the large depths and pressures involved with pre-salt oil production, represent technical hurdles that must be overcome.

Brazil has the largest coal reserves in Central and South America, the proven recoverable reserves are around 10 billion tons. In 2006 Brazil produced 7 million tons of coal, while coal consumption reached 23.8 million tons. In 2009, Brazil produced 2,241 ktoe of coal, and imported a further 9,076 ktoe. Almost all of Brazil’s coal output is steam coal, of which about 85% is fired in power stations.

Brazil holds the sixth largest uranium reserves in the world. Brazil has two nuclear power plants, the 630-megawatt (MW) Angra-1 and the 1,350-MW Angra-2. State-owned Eletronuclear, a subsidiary of Eletrobras, operates both plants.

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.

National Agency of Petroleum, Natural Gas and Bio-diesel (ANP): The ANP is responsible for all matters relating to the regulation of the upstream and downstream oil, natural gas and bio-diesel sectors, including an oversight role in the oil and gas bidding rounds.

Competition

In 2003 the federal government started promoting some changes which encourage private sector access to the energy market.

A wholesale market has been created in 1998. A “regulated” pool that buys power from generators and shares the costs between distributors under set prices was launched in 2004 together with a ‘free market’ where distributors and generators can negotiate their own contracts. Distributors buy electricity in the regulated pool via long-term contracts. Short-term differences between distributors’ actual demands and purchases in the ‘regulated’ pool can be negotiated in the ‘free market’. Big consumers can choose between buying directly in the ‘free market’ and buying indirectly in the ‘regulated’ pool through a distributor.

Energy efficiency

In 1985, in response to heavy dependence on interruptible imported petroleum, Brazil, along with many other oil importing countries, shifted its energy strategy to focus on domestic sources of energy and energy efficiency. Brazil created PROCEL as a cell within its national utility (Electrobras), to begin focusing on energy efficiency. Since that time, PROCEL has been very active in promoting efficient use of energy; but while there are many success stories, market-based mechanisms to stimulate private sector investment in energy efficiency in Brazil, are largely absent.

In October, 2011, the Ministry of Mines and Energy (MME) reported the approval of the "National Plan for Energy Efficiency - PNEf - Premises and Basic Guidelines" by Ordinance No. 594

The document guides the actions to be implemented in order to achieve energy saving targets in the context of the National Energy Planning.

Industry

Tax incentives, guarantee funds.

EE in industries through ESCOs.

Energy management standards

Utilities

Utility Energy Efficiency Obligation requiring EE investments (“wire-charge”).

ESCO accreditation program.

Transport

Voluntary fuel economy labelling.

Residential

Mandatory minimum energy efficiency standards (MEPS) and mandatory labelling (PBE) for some appliances/ equipment.  

Smart Metering: Replacing the 65 million energy meters in 6 to 10 years.

Credit guarantees for EE projects in buildings promoted by local ESCOs.

Public

Educational campaigns for consumers, to promote becoming legitimate bill-paying customers.

Increasing public lighting efficiency.

National Electrical Energy Conservation Programme (PROCEL).

National Programme for Energy Development of States and Municipalities (PRODEEM).

National Energy Efficiency Programme (NEEP) to decrease Brazil's annual electricity consumption by 10%, by 2030.

Capacity concerns

Although hydro-electric power is a very cost-effective source, in 2001 droughts caused power shortages and energy rationing. This situation was attributed to the lack of investment within the sector. Rationing lasted until May 2002. The consumption of electricity was drastically reduced, resulting in major economic consequences. The estimated social cost of the rationing was close to 3% of the GDP.

A better integration of electricity and natural gas industries is needed to provide energy security in Brazil. It involves a redefinition of the role of thermoelectric plants, which must be dispatched on a regular basis to afford an attractive remuneration to natural gas infrastructure. Indeed, the very low rate of dispatch of gas power plants persists because Petrobras, the company which controls the natural gas industry, prioritizes the fuel for other markets (industry and transport, mainly). Therefore, only 30% of existing natural gas capacity has sufficient fuel to operate at present.

As a result of the ongoing drought, Brazil is constructing additional short-term natural-gas-fired generation in order to ease the burden on the nation's hydro-electric dams, with reservoir levels falling to near-critical capacity. Thermoelectric stations in the country are now operating at 70% capacity, with electricity costs in the country rising to US$148/MWh as of October, nearly triple the cost of July.

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, www.epe.gov.br) was created in 2004 with the specific mission of developing an integrated long-term plan 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.

Energy regulation role

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

Ownership

Electricity market In Brazil, large government-controlled companies dominate the electricity sector.

Federally-owned Eletrobrás holds about 40% of capacity, with state-companies Cepel, CGTEE, Chesf, Eletronorte, Eletronuclear, Eletrosul, Furnas, Itaipu Binacional, Distribuição Piauí, Distribuição Rondônia, Distribuição Acre, Amazonas Energia, Distribuição Alagoas, Distribuição Roraima and Eletropar. Currently, about 27 percent of the generation assets are in the hands of private investors. Considering the plants under construction, as well as the concessions and licenses already granted by ANEEL, this figure is expected to grow up to 31% in the medium term and to reach almost 44% over 5-6 years.

The Operador Nacional do Sistema Eléctrico - ONS, operates the national transmission grid, which consists of two large grids (one in the north, one in the southeast which were connected in 1999) and numerous smaller systems in isolated regions. Until 2007, transmission was almost exclusively under government control through both federal (Electrobras) and state companies (mainly Sao-Paulo-CTEEP, Minas Gerais-Cemig, and Parana-Copel). However, under the new sector regulatory model, there are about 40 transmission concessions in Brazil. Most of them are still controlled by the government, with subsidiaries under federal company Electrobras holding 69% of total transmission lines.

In 2010, there were 63 utilities with distribution concessions, all independent of state control. As of 2007, about 64% of Brazilian distribution assets were controlled by private sector companies.

Hydrocarbons and natural gas markets 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 of five 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 four 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

The Inter-American Development Bank (IDB), as of April 2008, was supporting several projects in the power sector in Brazil, notably the Renewable Energy Service Delivery Project: This project is a technical cooperation that seeks to implement several pilot projects on renewable energy services to isolated communities in Brazil.

Law No. 10,438, of April 26, 2002, created an incentive program for renewable energy called PROINFA (Programa de Incentivo às Fontes Alternativas de Energía), aimed at stimulating the development of wind, biomass and small hydro plant projects in Brazil. Such program provided for the guarantee of energy purchases by the state-owned corporation Eletrobrás, under 20-years’ power purchase agreements, at attractive prices and exemptions or discounts in the payment of certain power sector charges. At the same time, the Brazilian Development Bank - BNDES (Banco Nacional de Desenvolvimento Social e Econômico) and other financial institutions, made available to these projects, long-term credit facilities. PROINFA was originally conceived to include two phases, the first one having already taken place, representing 144 renewable energy projects.

In the first phase, the Program calls for the generation of 3,300 MW of renewable energy with a national business participation rate of 60%, aiming to maximize the country’s regional potentials, create jobs, reduce CO2 emissions through thermal (fossil) displacement, and promote energy contracts with differentiated conditions for conventional sources, as well as a specific tariff/MWh for each source. The second phase fixes a 90% nationalization rate and a 15% Brazilian electrical energy annual consumption rate to be supplied by these sources. The goals of this phase are expected to be reached within twenty years, and the price will be a weighted average between competitive hydroelectric and thermoelectric (natural gas) prices.

PROINFA as described in the Decree No. 5025, 2004, was established in order to increase the share of electricity produced by projects designed based on wind power, biomass and small hydro hydropower (SHP) in the National Interconnected System (SIN). According to Law No. 11,943 of May 28, 2009, the deadline for the start of operation of these projects ends on December 30, 2010.

The Alternative Energy Auction of July 2011 (Regulation Portaria MME 113 of Feb 1, 2011) authorises ANEEL, the national electricity regulator, to organise alternative energy auctions, and sets pre-qualification criteria for developers participating in the auctions. The Government has also sought to reform the biodiesel auction framework to include a resubmission procedure to stimulate competition, and an updated IT framework for ANEEL to process bids more efficiently, including a web-based bidding process.

Reliance

Most imported electricity comes from Argentina and Paraguay. Total electricity imports in 2009 were 41,064 GWh, or roughly 8% of total domestic supply, while exporting a further 1,080 GWh.

Brazil is one of the largest coal importers in the world. Major coal suppliers of Brazil are the United States and Australia.

Role of the government

The institution responsible for energy issues in Brazil is the Ministry of Mines and Energy (Ministerio de Minas e Energía –MME). This Ministry through the Secretary of Energy (Secretaria de Energía – 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 a 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, and remains the dominant piece of legislation relating to renewable energy regulation.

Regulatory barriers

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

At present, the overall regulatory and policy planning framework for renewable energy has not been updated for nearly a decade, and whilst considerable attention has been given to the development of bio-diesel, and the country's newly-viable pre-salt oil fields, limited development has occurred for the majority of other renewable resources.

Energy regulator

National Electric Energy Agency (ANEEL) created in 1996. http://www.aneel.gov.br/

National Agency of Petroleum, Natural Gas and Bio-diesel (ANP) 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.

Brazil installed 320 MW of new wind turbines in 2010.

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.