Brazil Has Water Power And Ethanol
But Can They Meet Rising Needs?
Brazil has the greenest energy system in the world, according
to Professor Jose Goldemberg of the University of Sao Paolo, with
renewables accounting for 60 percent of all energy consumed in
the country, a fact which has been true for many years. Energy
consumption has been growing at the rate of four to five percent
a year, and will probably double in about 15 years. Can the share
of renewables remain at high levels for the next decade? Goldemberg
answers this question with a cautious "Yes."
Brazil has poor reserves in coal and oil, but 90 percent of its
electricity generation comes from hydropower. There are still
good prospects for hydro in the Southeast, although the government
expanded its water power sites too fast, Goldemberg said, and
they are very controversial. Many of the potential sites in Amazonia
are far from consumers, and building new dams leads to environmental
problems. (Jeff Seabright later elaborated that inundation of
hundreds of square kilometers of rain forest and extremely high
transmission costs would result.)
The country also produces 200,000 barrels of ethanol a day (12
billion liters a year), replacing one half of daily gasoline consumption.
It is the largest modern program for renewable energy production
in the world. The program has involved government subsidies, with
some initial help from the World Bank. Originally it was hoped
the production costs would decline with economies of scale as
output grew and technology progressed. When gasoline prices fell
in the 1980s and the cost of alcohol after 1990 flattened, this
did not happen. Nevertheless, ethanol production has led to a
significant decrease in carbon dioxide emissions, lowering them
by 15 percent. Brazil emits one percent of world energy-related
CO2 emissions.
The use of biomass - fuelwood and charcoal - while declining,
is still an important resource, accounting for 12 percent of all
energy used in the country. In a modern form, gassified wood,
while not as good as natural gas, is also useful. A $30 million
prototype facility under a Global Environment Facility grant,
is being implemented, with General Electric turbines, and the
first plant should be operating in a few years. There is a good
chance the cost will decrease with economies of scale in time.
It should be noted, Goldemberg concluded, that except for hydroelectricity
the renewables in Brazil have required Government intervention
(with World Bank assistance) either through subsidies and/or administered
prices. "The motivation for the programs has not been environmental
protection but the generation of jobs and other market considerations.
Market mechanisms would not have done it alone."
Ambassador Richard Benedick, Senior Fellow, World Wildlife Fund,
commenting on Professor Goldemberg's remarks, pointed out that
Brazil's rapidly growing population, typical of most developing
countries in the South and continuing despite lowered birth rates,
faces greater numbers of people in the future and rising aspirations.
Mounting demand for energy lies ahead. Goldemberg rightly places
emphasis on biomass, Benedick continued, because that is where
Brazil's comparative advantage lies.
While the "resource geography" for other countries
may be different, the long-term portents are similar. Although
fossil fuel prices are currently low, it is difficult to imagine
they will remain so as reserves are depleted. It is therefore
of real benefit to nations to promote the rapid commercialization
of renewables and energy-efficient technologies. For countries
like Brazil, there are particular advantages and opportunities:
-
markets are growing rapidly
-
dependency can be avoided
-
energy security is enhanced
-
new technologies will enable countries to leap-frog over
interim phases and improve long-term competitiveness
-
less intensive existing power grids and entrenched utility
interests will ease adoption of renewable systems
-
renewables provide a profitable use of agricultural waste
Jeff Seabright, Director of the Office of Energy, Environment
and Technology at US AID, questioned whether Brazil will have
the resources to continue to subsidize hydropower and alcohol.
Industries in the more industrialized South and elsewhere are
becoming increasingly concerned about potential blackouts, But
there is an enormous potential market, he pointed out, with increased
demand for energy throughout the country as a result of
expected considerable economic growth. .
Small-scale renewables and utility-scale wind and biomass projects
could be options for the more than 20 million people in remote
communities not served by electric utility lines. One third of
the nation's people have no access to energy, he noted. the Northeast,
wind power generation could supply a significant portion of this
demand, followed by solar, biomass, cogeneration and diesel power.
Renewable energy potential represents investment opportunities
totaling billions of dollars. There is also a huge opportunity
for replacing diesel systems with photovoltaics and wind.
According to Seabright, Brazil will need to invest more than
$4.5 billion per year in new energy generation, and an equivalent
amount in transmission and distribution. The enormous technical
potential can be translated into market incentives; the financial
windows are open. A $600 billion energy efficiency market will
grow fivefold in the next 20 years, Seabright said, as power needs
grow.
For years, companies and individuals deferred investments in
energy efficiency because they were uneconomic or too risky in
Brazil's inflationary economy. With inflation down, businesses
and individuals will address a backlog of investments that includes
energy-efficient equipment. But "many potential funding mechanisms
remain largely untapped due to the lack of knowledge on the part
of local producers, the project executors, and the rural extension
agencies of the specific opportunities. Furthermore, the local
credit agencies lack the technical capability to evaluate renewable
energy project proposals," a need which could be fulfilled
by consultants or through training.
US AID has a major energy program in Brazil, concentrating on:
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Energy efficiency, including working with the World Bank
on a project which is the single largest World Bank grant
for this activity
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Renewables, with pre-investment cost-sharing
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Private power
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Training
Despite the large market potential and favorable market conditions,
it is difficult to gauge the size of Brazil's green energy financing
market. It is a Catch-22 situation: those willing to finance a
project need a demonstration of the demand for renewable energy
and energy efficiency before they make a commitment; but a demonstration
requires an already financed project.
