Robin Yapp, Contributor
September 28, 2011 | 3 Comments
There is an old joke that says Brazil is the country of the future – and always will be. But with rapid economic growth, the government claiming that some 40 million people have been lifted out of poverty in the past decade and the 2014 World Cup and 2016 Olympics in Rio de Janeiro on the horizon, it seems the joke is about to fall flat. Brazil's time has arrived and the country of sun, sea and samba is keen to showcase itself to the world as a positive example of how to exploit renewable energy sources as well as how to perform on the football pitch.
According to the Intergovernmental Panel on Climate Change, up to 77 percent of the world's energy needs could potentially be supplied from renewable sources by 2050, despite the current figure being a much more modest 13 percent.
Many heads of government around the world wondering how they can play their part in such a dramatic transformation could be forgiven for looking enviously at Brazil, where the figure already stood at 44.8 percent in 2010 and is forecast to rise to 46.3 percent in 2020.
While this increase may seem small in percentage terms, it fails to take into account the huge growth that will be seen in the country's raw energy demands — and the fact that the next decade could see the foundations laid for renewable energy to quickly become even more dominant in the years that follow.
A Growing Demand for Energy
In the next decade demand for energy is expected to increase by around 60 percent in Brazil, fuelled by millions of people spending more on consumer goods for their homes and cars, economic growth continuing to outstrip that seen in developed nations and heavy spending to improve infrastructure ahead of the two greatest sporting shows on earth.
However, Brazil has also committed to reducing its CO2 emissions by between 36 percent and 39 percent by 2020, making it vital that the country concentrates on clean sources of energy.
Investment of around BRL190 billion (US$122.6 billion) is needed for Brazil to meet the challenge, according to a 10-year energy plan recently published by EPE, Brazil's Energy Research Company, which conducts research for the Ministry of Mines and Energy. Of this, around BRL100 billion ($63.8 billion) will go towards renewable projects not yet contracted, 55 percent on large hydropower and 45 percent on wind, biomass and small hydro.
In terms of electricity Brazil already meets 83 percent of its needs from renewable means, gaining recognition from the Washington-based Pew Environment Group as "one of the lowest carbon electricity matrices in the world."
At present electricity consumption per person per year stands at just 560 kWh in Brazil. This compares with some 1900 kWh in the U.K. and more than 4500 kWh in the U.S. But, faced with on-going development, the country now needs to increase the installed potential of the national grid from the 110 GW at the end of last year to 171 GW by the end of 2020.
The EPE report details some of the reasons why Brazil needs a rapid expansion of its ability to produce electricity.
The population of South America's biggest country is expected to rise from 191.5 million in 2010 to 205 million in 2020, while the number of new homes will also increase by around 15 million over the period to hit 75.5 million as more people live alone.
A consumer spending boom is expected to see the average number of televisions per home rise from 1.37 to 1.71, the proportion of homes with washing machines increase from 64 to 74 percent and the proportion with air conditioning to rise seven percentage points to 27 percent. The four percent of Brazilian homes that do not currently house a refrigerator are all expected to have one by the start of the 2020s.
Production of steel in Brazil could double in the next decade with cement and aluminium also likely to rise almost two-fold. The industrial and transport sectors will account for two thirds of the country's total energy demand in 2020.
Electricity shortages have long plagued the Brazilian economy but President Dilma Rousseff knows the country cannot afford to suffer more blackouts when the eyes of the world are on the nation in the coming years.
But there are a variety of reasons to be optimistic. Given the substantial investment from both within Brazil and overseas, the nation's vast and almost entirely untapped wind potential is also beginning to attract attention to the fact that few other countries are as well-blessed in terms of solar power prospects.
At present large-scale hydropower looms largest in meeting Brazil's needs. The 10-year plan predicts installed capacity from such plants will rise from just under 85 GW at present to more than 115 GW.
The principal new hydropower project is the 11,233-MW Belo Monte dam to be built on the River Xingu in the state of Pará in the Amazon, which is due to start generating power in January 2015 with its full potential online by January 2019.
It will be capable of supplying enough power to serve 18 million homes housing 60 million people, according to EPE, though in reality much of its output is likely to go towards industry.
Over half of the investment in Brazil's 10-year energy plan will be spent on hydropower (Source: fotopedia/kevin.j)
Belo Monte, to be built through a public-private partnership led by the company Norte Energia, has been described by Edison Lobao, Brazil's Energy Minister, as the "jewel in the crown" of the country's development program and will be the world's third biggest such plant. But it has proved highly controversial due to claims that it will displace indigenous groups as well as the fact that it will achieve less than 30 percent of its capacity during the dry season.
EPE insists that the cost to consumers of meeting the increased demand for electricity through only wind and biomass would be double that of energy produced by Belo Monte and that the dam will help Brazil maintain "one of the cleanest energy matrices of all industrialised countries."
Despite the installation of Belo Monte and various other hydroelectric plants, the proportion of Brazil's electricity supply coming from hydropower will be expected to actually fall from 75 percent of the total in 2010 to some 67 percent in 2020.
Meanwhile, other renewable sources, such as biomass, small-scale hydropower and, principally, wind will see the 9 GW they accounted for last year triple to 27 GW in 2020. This will take their contribution to the country's electricity supply from eight to 16 percent, keeping the overall contribution of renewables to electricity at 83 pecent.
By far the biggest jump in contributions will come from wind power, which currently supplies around one percent of Brazil's electricity but would supply seven percent by 2020 under the current plans.
Despite its 9,650 km of Atlantic coastline and the fact that much of its northeast is blessed with some of the strongest and most consistent winds in the world, Brazil only reached 1 GW of wind power in May of this year.
The EPE plan, which is currently out for consultation, predicts that the figure will hit 12 GW by 2020 – but Pedro Perrelli, executive director of the Brazilian Wind Energy Association (ABE Eolica), feels this forecast is highly conservative.
"We are actually expecting almost double that, around 22 GW," he said. "What the wind industry is asking of the government, in order to consolidate as a self-sustaining industry, is around 2,000 MW to 2,500 MW of contracts per year." Perrelli added: "12 GW [by 2020] is not enough to sustain a full industry," saying: "Wind power in Brazil is less than five years old, really. In 2005 we had only 29 MW installed and now we have 1,070 MW. We think we understand in this planning that EPE is playing safe."
In 2001 when Brazil's first wind atlas was published, the country's wind power potential was estimated to be 143 GW at 50 meters. New measurements looking at 80-100 meters now suggest that the true potential is in fact 350 GW.
This compares to the country's total power generation capacity of 113 GW at the end of last year, and also means that wind potential in Brazil is now officially greater than hydropower potential, which is estimated at 261 GW.
The country's first wind-only auction took place in December 2009 and saw 71 projects contracted with 1,800 MW of capacity. Six turbine manufacturers — GE, IMPSA Wind, Siemens, Suzlon, Vestas and Wobben Windpower — received orders.
The following year 2,037 MW of wind power were contracted at two government-sponsored auctions and are due to come online by September 2013.
Brazil currently has 51 wind farms and 30 more under construction, but that number is certain to rise dramatically in the near future. Already some BRL25 billion ($16.1 billion) are due to be invested by 2013 on wind projects.
This year a total of 429 wind projects with a potential of 10.9 GW have been approved to take part in auctions as REW goes to press, and ABE Eolica expects around 2.5 GW to be contracted in order to start supplying electricity by March 2014.
Brazilian wind energy is the cheapest in the world (based on last year's auction prices) because its wind farms are so productive. Experts believe 2011 could see a further fall on the average BRL131/MWh ($84.50/MWh) developers agreed to sell at last year.
Most of the wind projects competing at auction are located in Brazil's poverty-stricken northeast region, in states such as Bahia (90 projects with 2295 MW potential), Ceará (103 projects with 2427 MW potential) and Rio Grande do Norte (116 projects with 3012 MW potential).
"Wind is transforming areas in the northeast that were importing energy from the south," said Perrelli. "They will start to produce more energy than they are able to consume so that they will be able to create stronger economies and to export energy."
Turbine manufacturers are lining up for a slice of the market, with GE and Alstom Wind building factories in Brazil and Gamesa and Suzlon also announcing local manufacturing plants. Foreign suppliers are now eligible for funding from BNDES, the Brazilian state development bank, so long as 60 percent of content is sourced locally and the supplier commits to manufacturing turbine generators in Brazil in a short space of time. There is also great potential for factories in Brazil to supply wider markets in Latin America and the U.S.
Another key element in meeting Brazil's energy needs is ethanol, which the EPE report says will play an ever greater role due to an increase in the nation's fleet of flexible-fuel vehicles that are able to run on gasoline, ethanol or any mixture of the two.
Brazil currently has the second largest national biofuel market and is first in terms of resources readily available for further expansion, according to the Pew Environment Group's 2010 report Who is Winning the Clean Energy Race?
The national fleet of cars, lorries and buses is expected to double from 29 million vehicles to 56 million in the next decade, and demand for ethanol is expected to almost triple from 27 billion litres to 73 billion litres as a result.
EPE sees Brazil's production of oil tripling to 6.1 million barrels per day by 2020 due to the vast offshore fields discovered deep under the ocean and a thick layer of salt, which the state company Petrobras is exploring and drilling in conjunction with foreign firms.
Yet the proportion of total national energy consumption accounted for by oil and its derivatives is predicted to fall from 38.1% in 2010 to 31.9 percent in 2020.
According to the report, around 50 percent of Brazil's oil production will be exported by the end of the decade, thanks in large part to the continued rise in ethanol use in the domestic market.
Mauricio Tolmasquim, the president of EPE, predicted that Brazil will be "the first oil exporter country in the world that will have a very renewable energy matrix itself."
Despite the huge increase in oil production, Tolmasquim said, "ethanol is more competitive and consumers with flexi-cars prefer to use ethanol," which he suggests means that Brazil will not have to follow the trend that "nearly all oil producer countries are big carbon emitters."
"First Brazil will be an important oil exporter and second it will have one of the lowest carbon emission energy matrices," Tolmasquim continued.
"Brazil will be a strategic partner for the western countries that need a lot of oil. It is a democratic country with a good regulatory framework. I think it will be very important in terms of stabilising the supply of oil."
Technological advances, particularly in the use of energy in industry, will further allow the country to avoid consuming the equivalent of 440,000 barrels of oil a day by 2020 — around a quarter of current demand.
Improvements to the Grid
There is also great potential for efficiency savings in electricity, as at present between 15 percent and 17 percent of electricity generated in Brazil is lost. EPE predicts that improvements in this area in the next decade will be equivalent to a 7,000-MW hydropower station being added to the national grid.
In October 2009, a blackout affected tens of millions of Brazilians when power line failures shut down the giant 12,600 MW Itaipu hydroelectric power plant on the border with Paraguay that supplies almost 20 percent of Brazil's electricity.
In the next decade investment of BRL46.4 billion ($29.9 billion) will see transmission lines extended from around 100,000 km in 2010 to 142,000 km in 2020, largely due to connections between new power plants in the north such as Belo Monte and the rest of the country.
"We know very well what happened in the lost decades, in the 1980s and 1990s when nothing was done and then industry started suffering because there was not enough energy available," said Perrelli. "It has to come to an end. We still have open spaces inside the grid between the transmission lines that are so big that you could fit a country like France inside," he added.
Looking beyond the current decade-long plan, Fiuza and Tolmasquim of EPE agree that one of Brazil's best-known attractions — the sun — will also have a huge part to play in future energy assessments.
Fiuza said he has seen unpublished estimates suggesting solar potential in Brazil "could be four or five times the wind power potential," and he expects his company to be heavily involved in exploiting it as the costs of doing so come down.
"The solar potential for Brazil is huge," he said. "We have to explore wind sources that are cheaper in the first instance and think about solar in four or five years."
Tolmasquim agrees: "We are probably not going to use all the hydro potential in the Amazon because we have to balance the potential with the environment." He adds: "The cost of solar power is reducing very quickly in the world, so probably after 2020 it will be very important in Brazil."
If developers can't wait that long, then there are clearly many other emerging opportunities — with significant plays available in the wind, and bioenergy sectors particularly. Brazil is evidently a country of the future, and that's no joke.
Robin Yapp is the Brazil correspondent for The Daily Telegraph.
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