Brazil Policies and Scenarios

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					Brazil: Policies and Scenarios

     Summary: Rafael Kaliski
      Critique: Tom Wright
                   Introduction

 Brazil is the 5th most populous country
 GDP US $3,300 as of 2000.
 Energy use has increased 250% between 1975
  and 2000.
 Hydropower accounts for 90% of all electricity /
  39% of total energy use.
 Petroleum 2nd-largest energy source 34% of total
  energy use.
 Bio-Energy 16% of energy consumed.
 Renewable energy sources 56%.
                           Objectives

 Similar to U.S.
   – Diversify energy sources
   – Reduce import dependence
   – cut inefficiency
 Ensure Adequate energy supply
   – Hydropower
       A Drought resulted in a power shortage (2001)
 Reduce Energy Sector Investments
   – Privatize
   – For Profit state-owned companies
 Reduce Adverse Environmental Impacts
 Contribute to Social Development
                Acronyms

 PROCEL – The National Electricity
  Conservation Program.
 ANEEL – The federal Regulatory agency for
  the Electricity Sector.
 NTSA – The National Testing and
  Standards Agency.
Policy 1: Adopt Minimum Efficiency Standards
for Appliances, Motors and Lighting Products
 If adopted, consumers would automatically
  purchase relatively efficient products.
 PROCEL and NTSA have already established
  energy efficient test procedures and an efficiency
  labeling program.
 Efficiency standards might provide 20 to 30
  percent energy savings for new refrigerators /
  freezers, AC, and lighting products.
 For motors efficiency standards might provide 2 to
  8%, depending on size.
      Policy 2: Expand Utility Investments in
            End-Use Energy Efficiency
 In 1998, ANEEL began requiring distribution utilities to invest at least
  1% of their revenues in energy efficiency programs. But only ¼ of 1%
  must be spent on efforts that help consumers use electricity more
  efficiently. This later changed to ½ of % to be invested in R&D.
 This policy would expand funding for energy efficiency programs to
  about 2% of utility revenues.
 Part of the money would be spent by utilities and part would be
  directed to state and federal energy efficiency programs.
 The additional cost of these energy efficiency programs could be
  recovered by utility rates.
 A 10-20% Bonus could be given to utilities based on the net societal
  benefit, evaluated by ANEEL.
 PROCEL could assist the utilities to design effective programs and
  implement coordinated market transformation initiatives regionally or
  nationally.
     Policy 3: Adopt Energy Codes for New
              Commercial Buildings
 No city or state has adopted energy efficiency
  requirements for new commercial buildings.
 This policy would convene a group of experts to develop
  and publish a national model energy code, including
  requirements for different climate zones.
 A key part would be to train builders, architects, building
  inspectors, and code enforcement officials from
  municipalities. PROCEL could carry out this effort with
  experts from educational institutions.
 Energy demand grew nearly 8% per year from 1995 to
  2000. The Electricity demand is projected to increase 6%
  per year in the future.
 This policy could eliminate 10 to 15% of the future growth
  in electricity demand.
 Policy 4: Expand Use of Combined Heat and
   Power Systems Fueled by Natural Gas
 CHP systems have cost-effective cogeneration potential
  estimated to be between 9 and 17 GW.
 The recent increase in Natural Gas supply opens up new
  opportunities for CHP systems.
 The below policies should be implemented in support of
  CHP.
   – Require utilities to purchase surplus power via long term contracts.
   – Require utilities to interconnect CHP systems to the power grid.
   – Give priority to CHP projects as new gas supplies become
     available.
   – Provide financial incentives for CHP systems.
   – Reduce import duties on CHP equipment.
Policy 5: Adopt Minimum Efficiency Standards
        for New Thermal Power Plants
 The increased supply of natural gas has sparked interest in
  the construction of natural gas-fired power plants.
 The majority of Thermal Power plants being constructed
  are simple cycle plants, 30 to 35% efficiency.
 If minimum efficiency standards were adopted, 55%
  efficiency, all new thermal power plants would have to be
  combined-cycle plants, 50 to 60% efficiency.
 Also current simple cycle plants, which are used more than
  a nominal amount would be required to add extra
  generators and operate as a combined-cycle power plant,
  so they would meet the minimum efficiency level.
 This requirement would also narrow the difference in
  capital cost between electricity only and CHP plants.
   Policy 6: Adopt Industrial Energy Intensity
               Reduction Targets
 It is feasible to reduce energy use by 30+% in a wide range of energy-
  intensive industries.
 This policy would establish energy intensity reduction targets for major
  industries through voluntary agreements between the government and
  industry.
 PROCEL and the government could provide technical and financial
  assistance in the form of energy audits of industrial facilities, training,
  and tax incentives for investments in energy-efficient equipment.
 Companies that enter into these agreements to improve energy
  efficiency by 2% per year, could be protected from any raises in fuel
  taxes. Also these companies could be given preferential access to
  power should electricity shortages recur.
 This policy would yield a 12% reduction in overall industrial energy use
  by 2010. 80% of the savings would come from reduced fuel
  consumption. 20% from improving the efficiency of electricity use.
   Policy 7: Adopt Minimum Fuel Economy
    or CO2 Emissions Standards for New
              Passenger Vehicles
 There are no fuel efficiency standards for new cars or light trucks.
 Vehicle manufactures receive some tax incentives for producing
  engines with 1 liter or less in volumetric capacity. 60-70% of all new
  passenger vehicles sold in Brazil have 1-litre engines.
 In 1998 the Fuel Economy was 10 km/l while the fuel economy, in
  2000, was about 11km/l.
 Most of the 1-litre engines, are derived from 1.6-litre engines, from
  older models.
 The policy would require adopting fuel efficiency standards.
 These standards could be expressed in terms of either an increase
  of fuel efficiency or a reduction in CO2 efficiency.
 If a CO2 emissions standard were adopted, manufacturers most
  likely would comply through some combination of efficiency
  improvement and fuel shifting.
 This policy would require a 40% reduction in CO2 emissions, by
  2010, 75% would be from fuel efficiency improvement and 25% from
  through increased sales of ethanol vehicles.
 The average fuel economy would be 16km/l, by 2010.
 Policy 8: Expand the Production and Use of
                Ethanol Fuel
 Increase demand and supply for ethanol fuel
 Low interest loans to stimulate construction of
  distilleries.
 Strategic Ethanol Reserve
 New price or tax incentives to stimulate
  purchase of neat ethanol cars again.
 Ethanol could be blended with diesel, up to
  12%.
   Policy 9: Stimulate CHP Systems Using
   Bagasse and Other Sugarcane products.
 Potential to generate excess electricity using more
  efficient power generation technologies.
 Some Policies would be similar to Policy 4 (CHP
  with natural gas).
 Adopting this policy could result in 2,400MW of
  bagasse CHP Capacity by 2005 and 6,300 MW by
  2010.
 The shift from manual to mechanized harvesting
  would be gradual.
   Policy 10: Stimulate Grid-Connected Wind
                     Power
 Substantial potential (i.e. state of Ceara has 25,000 MW
  potential).
 ANEEL established buyback rates
   – originally 48$/MWh
   – increased to $57/MWh(for approved projects by the end of 2001,
     $52/MWh(for approved projects by the end of 2002)
 Law enacted requiring 80%, of average retail electricity price,
  over a 15-year period (2002).
 Many new wind farms were proposed or under construction
  as of mid-2002.
 Possible to implement 7,000+MW of wind power capacity by
  2010, if this policy could be extended.
Policy 11: Stimulate Renewable Energy Use
           in Off-Grid Applications
 PRODEEM installed approximately 5,700 solar
  photovoltaic (PV) systems in off-grid areas, for
  no cost.
 Many of these systems were not maintained.
 Develop a private sector PV supply which will
  provide micro-financing and subsidies to
  households (subsidies would be reduced as
  technology improves).
 Could lead to as many as half of rural
  households obtaining solar PV systems by 2010.
 Could foster social and economic development
  in poorer regions.
  Policy 12: Improve the Efficiency of Freight
                  Transport
 R&D and demonstration programs
 Tax incentives to encourage production and purchase of
  higher-efficiency trucks and locomotives.
 This policy could yield fuel economy improvements of 16%
  for freight trucks and 12% for rail transport by 2010.
 Shift cargo among modes.
 Possible to increase/decrease fraction of freight shipped
  by:
   – Rail 21%->29%.
   – Water 14%->18%.
   – Truck 60%->48%.
   From 2000 to 2010.
         Energy and Other Impacts

 IMEP – Integrated Model for Energy
  Planning
              Conclusions
 The Policies proposed may be difficult to
  implement by 2010.
 If the some or all of the Policies are
  Implemented Social and Economic
  Development can occur faster.
  Brazil is highly urbanized

 80% Brazilians live in urban areas (Geller, 2000)
 31% urban in low income countries (WB, 2001)
 Geller does not emphasize rural energy issues
Energy in Brazil: Critique




           Tom Wright
      Brazil: poor country or rich?
 The 9th largest economy in the world
 Per capita income in 2000 was $3300
 73 of 208 countries under $1000 in 2002
  Brazil is highly urbanized

 80% Brazilians live in urban areas (Geller, 2000)
 31% urban in low income countries (WB, 2001)
 Geller does not emphasize rural energy issues
     Author knows Brazil well




 He worked there extensively as a consultant
 Hesitates in presenting full historical and political
  context so as not to offend future clients?
   What Brazil shares with other
     developing countries…




 High inflation makes the “long term” short
 Economic transition means unemployment too
 Weak institutions mean no stable regulations
 Donations: “Nobody has ever washed a rental car”
 “Could, could, could…would, would, would”




 Scenario analysis can isolate the analyst
 Need historical and cultural context or else…
 Policies meant for elsewhere miss the mark
 Privatization: cure-all or (!) conspiracy?

 Geller seems to accept privatization as a given
 World Bank and IMF have imposed privatization
  as a condition for granting loans…
 But government sector is often the only domestic
  employer for the educated elite in poor countries
         Role of us engineers




 We need to tell the policy wonks, “No that’ll never
  work!” And then show them a better way
 Go work overseas! And not for two weeks!
 Stay long enough to learn the local scene
 Bring their better ideas back to the US