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Renewable Energy Policy Brazil

Renewable Energy Policy Brazil. Claudia do Valle cvalle@lima.coppe.ufrj.br. Background in Renewable Policy - Brazil. Background in Renewable Policy – Alcohol Program. Alcohol program – ambitious program lauched by the Brazilan government in the seventies Gained momentum in the eighties

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Renewable Energy Policy Brazil

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  1. Renewable Energy PolicyBrazil Claudia do Valle cvalle@lima.coppe.ufrj.br

  2. Background in Renewable Policy - Brazil

  3. 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)

  4. 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)

  5. Alcohol Program - recently • 2005, Production: 16 million m3 Capacity: 18 million m3 Plants:313 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)

  6. Eletricity supply - Brazil 100 500 90 450 80 400 70 350 60 300 TWh 50 250 (%) 40 200 30 150 20 100 10 50 0 0 1970 1980 1990 2000 2002 2005 Hidro Termo Importada TWh Background in Renewable Policy Hydropower

  7. 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

  8. 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

  9. 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

  10. 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

  11. 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 country’s 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

  12. 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

  13. 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

  14. PROINFA 2 • PROINFA’s 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.

  15. 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

  16. 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)

  17. Barriers • Initially, the wind energy producers also complained about Proinfa’s 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.

  18. 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.

  19. 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.

  20. 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

  21. 1.200 1.000 800 600 TWh 400 200 0 2006 2008 2010 2015 2018 2022 2027 Hidro PCH fora PROINFA Termo Biomassa fora PROINFA importação Outras PROINFA 1 PROINFA 2

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