How The Energy System Is Structured
Brazil is the 10th largest energy consumer in the world and the largest in South America. At the same time, it is an important oil and gas producer in the region and the world’s second largest ethanol fuel producer. The governmental agencies responsible for energy policy are the Ministry of Mines and Energy (MME), the National Council for Energy Policy (CNPE, in the Portuguese-language acronym), the National Agency of Petroleum, Natural Gas and Biofuels (ANP) and the National Agency of Electricity (ANEEL). The state-owned companies Petrobras and Eletrobrás are the major players in Brazil’s energy sector, as well as Latin America’s.
At the end of the 1990s and the beginning of the 2000s, Brazil’s energy sector underwent market liberalization. In 1997, the Petroleum Investment Law was adopted, establishing a legal and regulatory framework, and liberalizing oil production. The key objectives of the law were the creation of the CNPE and the ANP, increased use of natural gas, increased competition in the energy market, and investments in power generation. The state monopoly of oil and gas exploration was ended, and energy subsidies were reduced. However, the government retained monopoly control of key energy complexes and administered the price of certain energy products.
The national energy system underwent a restructuring process during the end of the 20th century with the goals of establishing a regulated yet efficient structure for energy generation, transmission, and distribution. One of the main results of this reform was the establishment of the Sistema Interligado Nacional, or NIS, Portuguese for National Interconnected System, which is the name of the interlinked power grid that serves all Brazilian states and encompasses over 98% of all the energy produced in the country. Although the regulatory changes allowed for the private sector to take part in multiple aspects of the SIN, such as taking part in concession contracts to operate in multiple parts of the system, the new model still retained a number of crucial roles for government agencies, most of which are associated with the Brazilian Ministry of Mines and Energy.
Some of the main entities in charge of regulating and operating the national energy system include:
- National Electrical System Operator, or ONS: the organization responsible for operating and coordinating the energy generation and transmission systems of SIN
- Brazilian Electricity Regulatory Agency, or ANEEL: the government agency responsible for regulating the national energy matrix and related markets
- Chamber of Commercialization of Electrical Energy, or CCEE: the main operator of the electricity market in Brazil, responsible for monitoring the prices for energy distribution, advising on the activities of national power plants, and launching auctions for generation and distribution contractsIn general terms, the energy sector in Brazil can be considered highly centralized and firmly regulated by the state. Some examples of the state control include the requirement for private players to take part in auctions and concession agreements to enter the national market and price-fixing for the segments of transmission and distribution.
In 2014, the Swedish Agency for Growth Policy Analysis produced an overview of Brazil’s energy sector. The Report notes that Brazil is endowed with abundant energy resources and is well-known for its unusually clean energy matrix. But with recent discoveries of large oil reserves offshore in the pre-salt layer, the long-term demand for oil is expected to increase. Other challenges to the current development model include growing internal energy demands, aging infrastructure, and the emerging impacts of climate change.
The renewable sector is expected to continue to grow and play a vital role in the county’s energy mix. Currently, hydropower is well-developed, but faces challenges regarding its expansion regarding the environmental and social impacts of new dams in the Amazon. Onshore wind power capacity is expanding rapidly, particularly in the Northeast, and the plants are operating at high capacity levels. Bioenergy is already used extensively in the transport (ethanol and biodiesel) and industrial (sugarcane bagasse) sectors, and the country has developed advanced technologies and policies to incentivize the use of bioenergy—ethanol policies are not as prioritized in the energy sector agenda as they used to be. In addition, an increase in the use of biofuels for electricity generation (thermo power) could be expected for the mid- to long-term, but investment in R&D for second generation biofuels is lagging behind, even though there are recent government and industry efforts to reverse this trend.
Large investment in the oil and gas sector is planned, as Brazil seeks to become one of the largest oil producers in the world by 2021. Demand for fossil fuels is also expected to increase, not least because historically, part of the profit margin of the state-controlled company Petrobras (the national oil company) has been used to keep petrol prices in the domestic market low. Demand is then fuelled by the price incentive. The importance of natural gas in the country’s overall energy mix is also growing, and there are signs of renewed interest in exploring Brazil’s gas potential, including its unconventional gas resources—fracking is a possibility. Besides the use in industry, and because of shortages in rainfall, gas has increasingly been used to fire thermoelectric power plants. This trend is expected to continue.
The Brazilian energy sector faces a strategic moment, with a number of challenges and opportunities being presented to policy and decision makers. In the long run, a critical issue relates to the implementation of policies and strategies. Brazil has a well-developed regulatory and policy framework in place; however, increased political interference to achieve short-term goals, lack of strong implementation mechanisms, and other structural problems may hamper the implementation of such plans.
Leading Sources of Energy
What are Brazil’s major sources of energy? The totality of Brazilian power consumption in 2015 show a wide variety of sources contribute to the nation’s powerhouse:
Sugarcane biomass (16.9%)
Hydraulic (11.3%)
Firewood (8.2%)
Lixivium and other renewable (4.7%)
Oil and oil products (37.3%)
Natural gas (13.7%)
Coal (5.9%)
Uranium (1.3%)
Other non renewable (0.6%)
Brazil is the world’s 12th largest oil producer in the world. At the end of 2005, the proven reserves of Brazil’s natural gas were 306 x 109 m³, with possible reserves expected to be 15 times higher. The main reserves in use are located in Campos and Santos Basins. Brazil has total coal reserves of about 30 billion tons, but the deposits vary by the quality and quantity. Almost all of Brazil’s coal output is steam coal, of which about 85% is fired in power stations.
Brazil has the world’s second-largest known oil shale resources (the Irati shale and lacustrine deposits) and is the second largest shale oil producer after Estonia. Oil shale resources lie in São Mateus do Sul, Paraná, and in Vale do Paraíba. Brazil has developed the world’s largest surface oil shale pyrolysis retort: Petrosix, operated by Petrobras. In 1999, it produced about 200,000 tons.
Brazil is the third largest hydroelectricity producer in the world after China and Canada. In 2007, hydropower accounted for 83% of Brazilian electricity production. The gross theoretical capability exceeds 3,000 TWh per annum, of which 800 TWh per annum is economically exploitable. In 2004, Brazil produced 321TWh of hydropower.
Brazil’s gross wind resource potential is estimated to be about 140 GW, of which 30 GW could be effectively transformed into wind power projects.
The total installed photovoltaic power capacity in Brazil is estimated to be between 12 and 15 MWp, of which 50% is for telecommunications systems and 50% for rural energy systems. It is less than 0.01% of the energy in Brazil.
Due to its ethanol fuel production, Brazil has sometimes been described as a bio-energy superpower. Ethanol fuel in Brazil is produced from sugarcane. Brazil has the largest sugarcane crop in the world, and is the largest exporter of ethanol in the world.
Profiles of Leading Energy Production Companies
Petrobas
Petrobras is a semi-public Brazilian multinational corporation in the petroleum industry headquartered in Rio de Janeiro, Brazil. The company was ranked #58 in the most recent Fortune Global 500 list.
The Brazilian government directly owns 54% of Petrobras’ common shares with voting rights, while the Brazilian Development Bank and Brazil’s Sovereign Wealth Fund (Fundo Soberano) each control 5%, bringing the State’s direct and indirect ownership to 64%.
The company’s website tells us that Petrobas operates in 6 business areas, listed in order of revenues:
- Refining, Transportation & Marketing – refining, logistics, transportation, trading operations, oil products, crude oil exports and imports, and petrochemical investments in Brazil
- Exploration and Production – crude oil, NGL and natural gas exploration, development, and production in Brazil
- Distribution – distribution of oil products, ethanol, biodiesel, and natural gas to wholesalers and through the Petrobras Distribuidora S.A. retail network in Brazil
- Gas & Power – transportation and trading of natural gas and LNG, the generation and trading of electric power, and the fertilizer business
- International – exploration and production of oil and gas, refining, transportation, marketing, distribution, and gas and power operations outside of Brazil
- Biofuels – production of biodiesel and its co-products and ethanol-related activities such as equity investments, production and trading of ethanol, sugar, and the excess electricity generated from sugarcane bagasse
Petrobras controls significant oil and energy assets in 16 countries in Africa, North America, South America, Europe, and Asia. However, Brazil represented 92% of Petrobras’ worldwide production in 2014 and accounted for 97% of Petrobras’ worldwide reserves on 31 December 2014.
As of 31 December 2014, the company had 8,112.8 million barrels of oil equivalent (4.9633×1010 GJ) of proved developed reserves and 4,599.7 million barrels of oil equivalent (2.8140×1010 GJ) of proved undeveloped reserves in Brazil. Of these reserves, 62.7% were located in the offshore Campos Basin. The largest growth prospect for the company is the Lula oil field in the Santos Basin.
In 2015, the company produced 2.284 million barrels of oil equivalent (13,970,000 GJ) per day, of which 89% was petroleum and 11% was natural gas.
Electrobas
Eletrobras is a major Brazilian electric utilities company and Latin America’s biggest power utility company, as well as the tenth largest in the world. It’s also the fourth largest clean energy company in the world. The company website tells us that Eletrobras holds stakes in a number of Brazilian electric companies, generating about 40% and transmitting 69% of Brazil’s electric supply. The company’s generating capacity is about 43,000 MW, mostly in hydroelectric plants. The Brazilian federal government owns 52% stake in Eletrobras; the rest of the shares are traded on BM&F Bovespa. The stock is part of the Ibovespa index. It is also traded on the New York Stock Exchange and on the Madrid Stock Exchange. The company’s headquarters are located in Brasília, but its main offices are located in Rio de Janeiro.
Eletrobras is an electric power holding company. It is the largest generation and transmission company in Brazil. Through its subsidiaries it owns about 40% of Brazil’s generation capacities and controls 69% of the National Interconnected System. Eletrobras also is the biggest company of the electric power sector in Latin America.
Submitted by Climate Scorecard Staff Member