Brazil: Policies and ScenariosBrazil: Policies and Scenarios

Summary: Rafael KaliskiSummary: Rafael Kaliski

Critique: Tom WrightCritique: Tom Wright

IntroductionIntroduction

Brazil is the 5Brazil is the 5thth most populous country most populous country GDP US $3,300 as of 2000.GDP US $3,300 as of 2000. Energy use has increased 250% between 1975 Energy use has increased 250% between 1975

and 2000.and 2000. Hydropower accounts for 90% of all electricity / Hydropower accounts for 90% of all electricity /

39% of total energy use.39% of total energy use. Petroleum 2Petroleum 2ndnd-largest energy source 34% of total -largest energy source 34% of total

energy use.energy use. Bio-Energy 16% of energy consumed.Bio-Energy 16% of energy consumed. Renewable energy sources 56%.Renewable energy sources 56%.

ObjectivesObjectives

Similar to U.S. Similar to U.S. – Diversify energy sourcesDiversify energy sources– Reduce import dependence Reduce import dependence – cut inefficiencycut inefficiency

Ensure Adequate energy supplyEnsure Adequate energy supply– HydropowerHydropower

A Drought resulted in a power shortage (2001)A Drought resulted in a power shortage (2001)

Reduce Energy Sector InvestmentsReduce Energy Sector Investments– PrivatizePrivatize– For Profit state-owned companiesFor Profit state-owned companies

Reduce Adverse Environmental ImpactsReduce Adverse Environmental Impacts Contribute to Social DevelopmentContribute to Social Development

AcronymsAcronyms

PROCEL – The National Electricity PROCEL – The National Electricity Conservation Program.Conservation Program.

ANEEL – The federal Regulatory agency for ANEEL – The federal Regulatory agency for the Electricity Sector.the Electricity Sector.

NTSA – The National Testing and NTSA – The National Testing and Standards Agency.Standards Agency.

Policy 1: Adopt Minimum Efficiency Standards Policy 1: Adopt Minimum Efficiency Standards for Appliances, Motors and Lighting Productsfor Appliances, Motors and Lighting Products

If adopted, consumers would automatically If adopted, consumers would automatically purchase relatively efficient products.purchase relatively efficient products.

PROCEL and NTSA have already established PROCEL and NTSA have already established energy efficient test procedures and an efficiency energy efficient test procedures and an efficiency labeling program.labeling program.

Efficiency standards might provide 20 to 30 Efficiency standards might provide 20 to 30 percent energy savings for new refrigerators / percent energy savings for new refrigerators / freezers, AC, and lighting products.freezers, AC, and lighting products.

For motors efficiency standards might provide 2 to For motors efficiency standards might provide 2 to 8%, depending on size.8%, depending on size.

Policy 2: Expand Utility Investments in Policy 2: Expand Utility Investments in End-Use Energy EfficiencyEnd-Use Energy Efficiency

In 1998, ANEEL began requiring distribution utilities to invest at least In 1998, ANEEL began requiring distribution utilities to invest at least 1% of their revenues in energy efficiency programs. But only ¼ of 1% 1% of their revenues in energy efficiency programs. But only ¼ of 1% must be spent on efforts that help consumers use electricity more must be spent on efforts that help consumers use electricity more efficiently. This later changed to ½ of % to be invested in R&D.efficiently. This later changed to ½ of % to be invested in R&D.

This policy would expand funding for energy efficiency programs to This policy would expand funding for energy efficiency programs to about 2% of utility revenues.about 2% of utility revenues.

Part of the money would be spent by utilities and part would be Part of the money would be spent by utilities and part would be directed to state and federal energy efficiency programs.directed to state and federal energy efficiency programs.

The additional cost of these energy efficiency programs could be The additional cost of these energy efficiency programs could be recovered by utility rates.recovered by utility rates.

A 10-20% Bonus could be given to utilities based on the net societal A 10-20% Bonus could be given to utilities based on the net societal benefit, evaluated by ANEEL.benefit, evaluated by ANEEL.

PROCEL could assist the utilities to design effective programs and PROCEL could assist the utilities to design effective programs and implement coordinated market transformation initiatives regionally or implement coordinated market transformation initiatives regionally or nationally.nationally.

Policy 3: Adopt Energy Codes for New Policy 3: Adopt Energy Codes for New Commercial BuildingsCommercial Buildings

No city or state has adopted energy efficiency No city or state has adopted energy efficiency requirements for new commercial buildings.requirements for new commercial buildings.

This policy would convene a group of experts to develop This policy would convene a group of experts to develop and publish a national model energy code, including and publish a national model energy code, including requirements for different climate zones.requirements for different climate zones.

A key part would be to train builders, architects, building A key part would be to train builders, architects, building inspectors, and code enforcement officials from inspectors, and code enforcement officials from municipalities. PROCEL could carry out this effort with municipalities. PROCEL could carry out this effort with experts from educational institutions.experts from educational institutions.

Energy demand grew nearly 8% per year from 1995 to Energy demand grew nearly 8% per year from 1995 to 2000. The Electricity demand is projected to increase 6% 2000. The Electricity demand is projected to increase 6% per year in the future.per year in the future.

This policy could eliminate 10 to 15% of the future growth This policy could eliminate 10 to 15% of the future growth in electricity demand.in electricity demand.

Policy 4: Expand Use of Combined Heat and Policy 4: Expand Use of Combined Heat and Power Systems Fueled by Natural GasPower Systems Fueled by Natural Gas

CHP systems have cost-effective cogeneration potential CHP systems have cost-effective cogeneration potential estimated to be between 9 and 17 GW.estimated to be between 9 and 17 GW.

The recent increase in Natural Gas supply opens up new The recent increase in Natural Gas supply opens up new opportunities for CHP systems.opportunities for CHP systems.

The below policies should be implemented in support of The below policies should be implemented in support of CHP.CHP.– Require utilities to purchase surplus power via long term contracts.Require utilities to purchase surplus power via long term contracts.– Require utilities to interconnect CHP systems to the power grid.Require utilities to interconnect CHP systems to the power grid.– Give priority to CHP projects as new gas supplies become Give priority to CHP projects as new gas supplies become

available.available.– Provide financial incentives for CHP systems.Provide financial incentives for CHP systems.– Reduce import duties on CHP equipment.Reduce import duties on CHP equipment.

Policy 5: Adopt Minimum Efficiency Standards Policy 5: Adopt Minimum Efficiency Standards for New Thermal Power Plantsfor New Thermal Power Plants

The increased supply of natural gas has sparked interest in The increased supply of natural gas has sparked interest in the construction of natural gas-fired power plants.the construction of natural gas-fired power plants.

The majority of Thermal Power plants being constructed The majority of Thermal Power plants being constructed are simple cycle plants, 30 to 35% efficiency.are simple cycle plants, 30 to 35% efficiency.

If minimum efficiency standards were adopted, 55% If minimum efficiency standards were adopted, 55% efficiency, all new thermal power plants would have to be efficiency, all new thermal power plants would have to be combined-cycle plants, 50 to 60% efficiency.combined-cycle plants, 50 to 60% efficiency.

Also current simple cycle plants, which are used more than Also current simple cycle plants, which are used more than a nominal amount would be required to add extra a nominal amount would be required to add extra generators and operate as a combined-cycle power plant, generators and operate as a combined-cycle power plant, so they would meet the minimum efficiency level.so they would meet the minimum efficiency level.

This requirement would also narrow the difference in This requirement would also narrow the difference in capital cost between electricity only and CHP plants.capital cost between electricity only and CHP plants.

Policy 6: Adopt Industrial Energy Intensity Policy 6: Adopt Industrial Energy Intensity Reduction TargetsReduction Targets

It is feasible to reduce energy use by 30+% in a wide range of energy-It is feasible to reduce energy use by 30+% in a wide range of energy-intensive industries.intensive industries.

This policy would establish energy intensity reduction targets for major This policy would establish energy intensity reduction targets for major industries through voluntary agreements between the government and industries through voluntary agreements between the government and industry.industry.

PROCEL and the government could provide technical and financial PROCEL and the government could provide technical and financial assistance in the form of energy audits of industrial facilities, training, assistance in the form of energy audits of industrial facilities, training, and tax incentives for investments in energy-efficient equipment.and tax incentives for investments in energy-efficient equipment.

Companies that enter into these agreements to improve energy Companies that enter into these agreements to improve energy efficiency by 2% per year, could be protected from any raises in fuel efficiency by 2% per year, could be protected from any raises in fuel taxes. Also these companies could be given preferential access to taxes. Also these companies could be given preferential access to power should electricity shortages recur.power should electricity shortages recur.

This policy would yield a 12% reduction in overall industrial energy use This policy would yield a 12% reduction in overall industrial energy use by 2010. 80% of the savings would come from reduced fuel by 2010. 80% of the savings would come from reduced fuel consumption. 20% from improving the efficiency of electricity use.consumption. 20% from improving the efficiency of electricity use.

Policy 7: Adopt Minimum Fuel Economy Policy 7: Adopt Minimum Fuel Economy or COor CO22 Emissions Standards for New Emissions Standards for New

Passenger VehiclesPassenger Vehicles There are no fuel efficiency standards for new cars or light trucks.There are no fuel efficiency standards for new cars or light trucks. Vehicle manufactures receive some tax incentives for producing Vehicle manufactures receive some tax incentives for producing

engines with 1 liter or less in volumetric capacity. 60-70% of all new engines with 1 liter or less in volumetric capacity. 60-70% of all new passenger vehicles sold in Brazil have 1-litre engines.passenger vehicles sold in Brazil have 1-litre engines.

In 1998 the Fuel Economy was 10 km/l while the fuel economy, in In 1998 the Fuel Economy was 10 km/l while the fuel economy, in 2000, was about 11km/l.2000, was about 11km/l.

Most of the 1-litre engines, are derived from 1.6-litre engines, from Most of the 1-litre engines, are derived from 1.6-litre engines, from older models.older models.

The policy would require adopting fuel efficiency standards.The policy would require adopting fuel efficiency standards. These standards could be expressed in terms of either an increase These standards could be expressed in terms of either an increase

of fuel efficiency or a reduction in COof fuel efficiency or a reduction in CO22 efficiency. efficiency. If a COIf a CO22 emissions standard were adopted, manufacturers most emissions standard were adopted, manufacturers most

likely would comply through some combination of efficiency likely would comply through some combination of efficiency improvement and fuel shifting.improvement and fuel shifting.

This policy would require a 40% reduction in COThis policy would require a 40% reduction in CO22 emissions, by emissions, by 2010, 75% would be from fuel efficiency improvement and 25% from 2010, 75% would be from fuel efficiency improvement and 25% from through increased sales of ethanol vehicles. through increased sales of ethanol vehicles.

The average fuel economy would be 16km/l, by 2010.The average fuel economy would be 16km/l, by 2010.

Policy 8: Expand the Production and Use of Policy 8: Expand the Production and Use of Ethanol FuelEthanol Fuel

Increase demand and supply for ethanol fuelIncrease demand and supply for ethanol fuel Low interest loans to stimulate construction of Low interest loans to stimulate construction of

distilleries.distilleries. Strategic Ethanol ReserveStrategic Ethanol Reserve New price or tax incentives to stimulate New price or tax incentives to stimulate

purchase of neat ethanol cars again.purchase of neat ethanol cars again. Ethanol could be blended with diesel, up to Ethanol could be blended with diesel, up to

12%.12%.

Policy 9: Stimulate CHP Systems Using Policy 9: Stimulate CHP Systems Using Bagasse and Other Sugarcane products.Bagasse and Other Sugarcane products.

Potential to generate excess electricity using more Potential to generate excess electricity using more efficient power generation technologies.efficient power generation technologies.

Some Policies would be similar to Policy 4 (CHP Some Policies would be similar to Policy 4 (CHP with natural gas).with natural gas).

Adopting this policy could result in 2,400MW of Adopting this policy could result in 2,400MW of bagasse CHP Capacity by 2005 and 6,300 MW by bagasse CHP Capacity by 2005 and 6,300 MW by 2010. 2010.

The shift from manual to mechanized harvesting The shift from manual to mechanized harvesting would be gradual.would be gradual.

Policy 10: Stimulate Grid-Connected Wind Policy 10: Stimulate Grid-Connected Wind PowerPower

Substantial potential (i.e. state of Ceara has 25,000 MW Substantial potential (i.e. state of Ceara has 25,000 MW potential).potential).

ANEEL established buyback ratesANEEL established buyback rates– originally 48$/MWhoriginally 48$/MWh– increased to $57/MWh(for approved projects by the end of 2001, increased to $57/MWh(for approved projects by the end of 2001,

$52/MWh(for approved projects by the end of 2002)$52/MWh(for approved projects by the end of 2002) Law enacted requiring 80%, of average retail electricity price, Law enacted requiring 80%, of average retail electricity price,

over a 15-year period (2002).over a 15-year period (2002). Many new wind farms were proposed or under construction Many new wind farms were proposed or under construction

as of mid-2002.as of mid-2002. Possible to implement 7,000+MW of wind power capacity by Possible to implement 7,000+MW of wind power capacity by

2010, if this policy could be extended.2010, if this policy could be extended.

Policy 11: Stimulate Renewable Energy Use Policy 11: Stimulate Renewable Energy Use in Off-Grid Applicationsin Off-Grid Applications

PRODEEM installed approximately 5,700 solar PRODEEM installed approximately 5,700 solar photovoltaic (PV) systems in off-grid areas, for photovoltaic (PV) systems in off-grid areas, for no cost.no cost.

Many of these systems were not maintained.Many of these systems were not maintained. Develop a private sector PV supply which will Develop a private sector PV supply which will

provide micro-financing and subsidies to provide micro-financing and subsidies to households (subsidies would be reduced as households (subsidies would be reduced as technology improves).technology improves).

Could lead to as many as half of rural Could lead to as many as half of rural households obtaining solar PV systems by 2010.households obtaining solar PV systems by 2010.

Could foster social and economic development Could foster social and economic development in poorer regions.in poorer regions.

Policy 12: Improve the Efficiency of Freight Policy 12: Improve the Efficiency of Freight TransportTransport

R&D and demonstration programsR&D and demonstration programs Tax incentives to encourage production and purchase of Tax incentives to encourage production and purchase of

higher-efficiency trucks and locomotives.higher-efficiency trucks and locomotives. This policy could yield fuel economy improvements of 16% This policy could yield fuel economy improvements of 16%

for freight trucks and 12% for rail transport by 2010.for freight trucks and 12% for rail transport by 2010. Shift cargo among modes.Shift cargo among modes. Possible to increase/decrease fraction of freight shipped Possible to increase/decrease fraction of freight shipped

by:by:– Rail 21%->29%.Rail 21%->29%.– Water 14%->18%.Water 14%->18%.– Truck 60%->48%.Truck 60%->48%.From 2000 to 2010.From 2000 to 2010.

Energy and Other ImpactsEnergy and Other Impacts

IMEP – Integrated Model for Energy IMEP – Integrated Model for Energy PlanningPlanning

ConclusionsConclusions

The Policies proposed may be difficult to The Policies proposed may be difficult to implement by 2010.implement by 2010.

If the some or all of the Policies are If the some or all of the Policies are Implemented Social and Economic Implemented Social and Economic Development can occur faster.Development can occur faster.

Brazil is highly urbanizedBrazil is highly urbanized

80% Brazilians live in urban areas (Geller, 2000)80% Brazilians live in urban areas (Geller, 2000) 31% urban in low income countries (WB, 2001)31% urban in low income countries (WB, 2001)

Geller does not emphasize rural energy issuesGeller does not emphasize rural energy issues

Energy in Brazil: CritiqueEnergy in Brazil: Critique

Tom WrightTom Wright

Brazil: poor country or rich?Brazil: poor country or rich?

The 9The 9thth largest economy in the world largest economy in the world Per capita income in 2000 was $3300Per capita income in 2000 was $3300 73 of 208 countries under $1000 in 200273 of 208 countries under $1000 in 2002

Brazil is highly urbanizedBrazil is highly urbanized

80% Brazilians live in urban areas (Geller, 2000)80% Brazilians live in urban areas (Geller, 2000) 31% urban in low income countries (WB, 2001)31% urban in low income countries (WB, 2001)

Geller does not emphasize rural energy issuesGeller does not emphasize rural energy issues

Author knows Brazil wellAuthor knows Brazil well

He worked there extensively as a consultantHe worked there extensively as a consultant Hesitates in presenting full historical and political Hesitates in presenting full historical and political

context so as not to offend future clients?context so as not to offend future clients?

What Brazil shares with other What Brazil shares with other developing countries…developing countries…

High inflation makes the “long term” shortHigh inflation makes the “long term” short Economic transition means Economic transition means ununemployment tooemployment too Weak institutions mean no stable regulationsWeak institutions mean no stable regulations Donations: “Nobody has ever washed a rental car”Donations: “Nobody has ever washed a rental car”

““Could, could, could…would, would, would”Could, could, could…would, would, would”

Scenario analysis can isolate the analystScenario analysis can isolate the analyst Need historical and cultural context or else…Need historical and cultural context or else… Policies meant for elsewhere miss the markPolicies meant for elsewhere miss the mark

Privatization: cure-all or (!) conspiracy?Privatization: cure-all or (!) conspiracy?

Geller seems to accept privatization as a givenGeller seems to accept privatization as a given World Bank and IMF have imposed privatization World Bank and IMF have imposed privatization

as a condition for granting loans…as a condition for granting loans… But government sector is often the only But government sector is often the only domesticdomestic

employer for the educated elite in poor countriesemployer for the educated elite in poor countries

Role of us engineersRole of us engineers

We need to tell the policy wonks, “No that’ll never We need to tell the policy wonks, “No that’ll never work!” And then show them a better waywork!” And then show them a better way

Go work overseas! And Go work overseas! And notnot for two weeks! for two weeks! Stay long enough to Stay long enough to learnlearn the local scene the local scene Bring Bring theirtheir better ideas back to the US better ideas back to the US