Brazil is one of the largest energy producing countries in the world and the third–largest producer in the Western Hemisphere. In regards to the UN’s 7th Sustainable Development Goal (Ensure access to affordable, reliable, sustainable and modern energy for all), Brazil’s energy policies actually have been very effective in meeting world’s most urgent energy challenges.
First, access to electricity across the country is almost universal. The electricity sector in Brazil is in fact the largest in South America. Together with Chile, Brazil is the country with the highest electricity access rate in Latin America. The power sector in Brazil serves more than 50 million customers, granting 97% of the country’s households’ reliable electricity.
Renewables compose almost 45% of Brazil’s primary energy demand, which makes their energy sector one of the least carbon-intensive in the world. Brazil’s national grid is made up of almost 80% from renewable sources. When looking at Brazil’s energy profile in the last decades, it is clear that a huge part of its renewable resources come from biofuels and hydro.
Total energy supply (TES) by source, Brazil 1990-2019 (source)
Brazil is the third largest hydroelectricity producer in the world after China and Canada. However, experts state that Brazil’s hydroelectric potential has not yet been fully explored given that the country has the capacity to build several more hydroelectricity plants in its territory. Still, the current dependence on hydropower makes Brazil very vulnerable to power supply shortages in drought years, as was demonstrated during 2001-2002 when a drought triggered an energy crisis.
Currently, about 77% of total electricity demand is supplied by hydropower in Brazil. Apart from biomass—which accounts for about 3.5% of total generated capacity—no other renewable energy source besides hydroelectricity plays a relevant role in the energy mix. As illustrated in the table below, it is evident that total energy supply by source favors renewable resources. It should be noted that this table makes it seem as if only 11.8% of Brazil’s energy comes from hydropower which is not the case; as stated earlier, 77% of the country’s electricity demand is provided by hydro.
|Coal||Natural gas||Nuclear||Hydro||Biofuels and waste||Oil||Wind, solar, etc.|
The good news regarding Brazil’s climate is that the percentage of wind, solar, and other renewables has been increasing while the percentage of non-renewable sources such as coal and oil is decreasing. This suggests a shift away from a dependency upon fossil fuels.
It is worth mentioning that in 2019, solar power represented only 1.27% of the energy generated in the country. That is a very low figure considering the country has high incidences of direct sunlight in most of its states. Similarly, in 2019, wind energy represented only 9% of the energy generated in the country despite their gross wind resource potential estimated to be about 522 GW (onshore); this is enough energy to meet three times the country’s current demand.
The main obstacle to developing further wind, biomass, and solar energy is the extremely high cost of power plants. Most major centers of energy consumption are located far away from the regions that produce it, resulting in very high transmission and integration costs. Moreover, it is important to note that as of today 66% of distribution and 28% of power generation is owned by private companies. This makes it harder for governments to take action and create new policies in this sector.
PROINFA—the Programme to Foster Electric Power Alternative Sources provided under Decree No 5,025 in 2004—was created to increase the participation of wind, biomass, and small hydroelectric plants (PCH) in Brazil’s national interconnected transmission system. This led to certain tax benefits for renewables including a general regime for infrastructure development and exemptions from import tax and ICMS (state VAT).
In regards to the wind and solar energy market, ICMS Agreement No 101 from 1997 applies, exempting certain equipment for wind and solar energy projects from state VAT. The regulation is currently valid until 2021.
There is also a federal government program called the Special Regime of Tax Exemption for Infrastructure Development, which suspends federal taxes (such as social security contributions) levied on the import and sale of equipment, machines and services for infrastructure projects, including energy projects.
As a mechanism to stimulate the use of distributed generation, the National Electric Energy Agency (ANEEL) established the Electric Power System Compensation for Micro Generation, which states that end users can produce and supply energy to the network to which they are connected if they comply with certain technical procedures. This enables end users to deduct the energy injected into the network from their own consumption, meaning they only pay distributors the difference between their consumption and the power that distributors provide.
The Brazilian National Bank for Economic and Social Development (BNDES) periodically announces financial programs to support the development and implementation of wind and solar energy projects. These programs are implemented by facilitating financing (directly or through loans) to companies headquartered in Brazil (controlled by local companies or foreign companies) that intend to develop wind and solar projects. For example, in late 2018 BNDES created a 2.2-billion-dollar (BRL) credit line designed for the purchase of wind and solar equipment. In December 2017, BNDES approved the financing for the largest photovoltaic power plant in Latin America, representing an investment of 529 million dollars (BRL). In February of the same year, BNDES financed a wind power plant in Bahia State representing an investment of 824 million dollars (BRL).
Auctions for feed-in tariffs promoted by the Brazilian government usually grant benefits to renewable sources—especially wind and solar. Some auctions are specifically targeted at alternative sources, such as wind and biomass. Projects based on solar, wind, or biomass energy are entitled to a reduction of at least 50% when using the transmission or distribution systems provided that:
- The power supplied to the transmission or distribution systems exceeds 30,000 kW and is equal to or less than 300,000 kW.
- The project results from auctions held before 1 January 2016.
- ANEEL (Brazil’s national agency of energy) has approved a further discount of 80% for solar plants that begin operations by 31 December 2017—with a reduction to 50% after the tenth year of operation.
ANEEL also encourages using co-generation to improve energetic efficiency. For example, thermoelectric power plants are characterized as “qualified co-generators” and are therefore entitled to receive economic benefits.
All of those policies definitely contributed to the observed increase in the percentage of renewables in Brazil’s total energy consumption. More information about them can be found in this overview of Electricity regulation in Brazil. However, it is clear that there is potential for Brazil to promote even more the role of renewables as part of the country’s electricity matrix.
Interestingly, Brazil signed an international commitment during COP 21 in 2015 to expand its share of non-hydropower renewables to between 28% and 33% as well as expand its domestic use of non-fossil energy sources to at least 23% by 2030. Concrete steps towards the implementation of such policy have yet to be put forward. As an international commitment, this target is politically binding or sanctions will be imposed
Most of the above policies were developed prior to the Bolsonaro government. It is important to point out that the current Bolsonaro administration has not created substantial energy policy changes so far. This administration has only made additional uncertainties regarding Brazil’s commitment to long-term decarbonization, consequently diminishing Brazil’s diplomatic stature in international climate negotiations.
Reducing the dependency on hydro-power and increasing the role of solar, wind, and other renewables is key for Brazil to achieve low carbon sustainable use of its electric power.
Ministry of Mines and Energy (responsible for formulating and implementing national policies on the energy sector)
Telephone: +55 61 2032-5555
ANEEL (has technical and political autonomy to regulate, supervise and monitor activities related to the energy sector)
- Managing and supervising concession and permission contracts for electric power public services;
- Deciding on disputes between concessionaires, permit holders, and power producers as well as disputes between agents and their consumers;
- analyzing negotiations and transactions between concessionaires, permit holders, and authorized companies;
- imposing fines and penalties on agents for non-compliance with regulatory obligations;
- calculating rates for providing electric power services (especially the electricity supply from distributors);
- approving rules and procedures for the electric power trade;
- organizing and promoting energy auctions.
This Post was submitted by Climate Scorecard Country Manager Luiza Martins Karpavicius
 The recent energy crisis with the week-long blackout in the Amapá state in Brazil has sparked discussions about privatizations in Brazil’s electric power sector, with many growing extremely critical to the current system. More information can be found at: https://www.bnamericas.com/en/analysis/whos-to-blame-for-amapas-energy-crisis