In Sao Paulo, Experts Eye the Future for Brazil’s Energy Mix

Brazil is a vast country of abundant natural resources, and Brazilians are anxious both to preserve irreplaceable habitats and fulfill their potential to contribute significantly to global energy and food supply. Finding the right balance is crucial, not just to Brazil but to the world, and much rests on determining the right energy mix.

In Sao Paulo last week, some of Brazil’s foremost thought leaders on energy engaged in a candid and passionate debate revolving around Brazil’s unique situation, discussing the opportunities and challenges of powering the country’s future.

Participants acknowledged the need to learn from past mistakes and push through current complications. Suggested solutions focused on Brazil’s ability to establish an especially diverse energy mix that could place a range of renewable energy sources at the heart of a global energy economy. This would require radical changes in policy, process and popular opinion, as well as the need to urgently address widespread inefficiencies across the energy sector. But there was unanimous hope and determination in the group for in getting it right.

The experts were invited by National Geographic and Shell, partners in the Great Energy Challenge, which has been sponsoring gatherings around the world to consider big energy questions. In Sao Paulo, the discussion focused on the central Big Energy Question: What Does the Future Hold for Brazil’s Energy Picture? What follows is an edited transcript of highlights of the discussion, which was moderated by Paulo Sotero of the Woodrow Wilson International Center for Scholars.

David Braun, National Geographic: Brazil is home to 190 million people, the largest country in South America, and fifth-largest in the world by area. For 90 years, National Geographic has been covering the many wonders of Brazil: the world’s largest rainforest, this incredible biodiversity, and indigenous people. But of course Brazil is also known for its incredible cities and truly impressive urban achievements. Most of the world’s people now live in cities and cities are in fact seen as one of the biggest solutions to solving the problems of the planet. Sao Paulo is the world’s third-largest city. So, it gets to the burning question … what is Brazil’s ideal energy mix? —Jon Heggie

What are the biggest challenges and opportunities for energy in Brazil?

José Goldemberg, University of São Paulo: The main issue in Brazil is that we had an energy mix that was very simple. Two components… oil represented 40 percent of all the energy used in Brazil and the rest was basically hydroelectricity. Brazil is a country that has large hydroelectric potential and only one relatively small part has been used until now. So, it’s not a complex grid like in the United States or in Europe. This energy mix of course has revealed issues, because if electricity is mainly produced in hydroelectric power plants, you depend on climate. Any form of renewable energy depends on natural conditions that are completely out of our control, rainfall being more or less abundant. Of course, all those that build hydroelectric power plants in the past knew this and they built these hydroelectric power plants with reservoirs to overcome periods in which we would not have enough water.

Now, this system worked very well for about 40 to 50 years. Now it no longer works well, because the best places have already been used, which is the south or southeast of Brazil. Now we are moving in the direction of the Amazon region, which has very specific issues. So, there was a combination of natural issues and with what I call deficient planning in which it was popular to make hydroelectric power plants without reservoirs so as to avoid social and economic issues. But these social and environmental issues have to be faced. This is the main problem.

The only new thing that is important that happened when we speak about the energy mix is the use of sugarcane, which is renewable to produce electricity and a replacement for oil or for gasoline… this program was sort of strangled by the macroeconomic policy of the federal government.

Zilmar José de Souza, Brazilian Sugarcane Industry Association: The government estimates that bioelectricity from sugarcane bagasse can account for up to 18% of consumption in Brazil. That’s the technical potential for biomass by 2022. Today we account for about 3% of national consumption of electricity, so we still have a long way to go. To be at 18% by 2022, many things have to change. We have to go back to concentrating on biomass. That’s the major challenge for the sugar and ethanol industries in Brazil and given their representativeness… it’s the second main source as of 2007, just behind… oil and its byproducts. As of 2007 we’re above the hydroelectricity. So, we have to either maintain or expand sugar-related product roles and this is the number-one challenge in my view.

Elena Landau, Sergio Bermudes Advogados: The number-one problem is planning. Number-two is planning. Number-three is planning. We completely lack planning. Our energy mix is ex post. So, costs are ex post facto as well. We make short-term decisions across the board and you just find out about the problems when they appear. You can no longer afford to go on that way. Costs are just unbearable. Environmental costs, economic costs, etc… so, the challenge is to go back to planning efforts. Brazil or the energy industry deals with environmentalists as enemies. They should be included to come up with propositions.

[Our main opportunity is] the quality of our energy mix, its diversity… we have every conceivable source. No other country has that many. I was in a cab the other day talking about the water shortages and the taxi driver said, “Everything you have plenty of you end up wasting.” We haven’t heard energy efficiency being effectively used in Brazil; quite the opposite. In the past three years despite all the supply problems, the government encourages energy consumption be it through artificial prices or providing credit lines and even urban transportation credit lines. There are no incentives not to consume. So, we have this wonderful opportunity ahead of us and we’re missing out [by] just looking short-term – be it biomass, ethanol, or fuel prices. Our great opportunity is to maximize our energy mix effectively… but we must face the problems of overusing electricity.

André Araujo, Shell Brasil: We see the scarcity of water in the state of Sao Paulo and that clearly brings the next challenge [to] energy. So, we talk a lot about water, but we have to [hope] for rain. Otherwise we’ll really face an energy challenge. So, security of energy supply is one of the key challenges that we face and as a company, Shell, we openly suggest that the interdependency on energy, water, and food is probably one of the key challenges the world faces. And we in Brazil are [part of] that discussion and we have to be quite open in how to address these challenges all together. We cannot fix just one part of the equation.

When we think about the energy security challenge, it usually comes to an idea on how to generate more energy. But there is a huge space that we have to work with: that is energy efficiency and there are a lot of actions that we need to take. I support and agree with what has been said here. We see that there is a key challenge for us to keep planning, but at the same time I believe that government, civil society, and companies like ours… we also have to find ways to encourage the consumer to challenge themselves on how the energy is used and consumed. I also think that there is a lot in place today that we can take as good examples and we have to [apply] those to a much larger scale.

What is the right energy mix for Brazil?

Philip Yang, Institute of Urbanism and Studies for the Metropolis : I believe that natural gas is a natural stepping stone to a low-carbon economy moving away from oil and coal and resorting to less aggressive sources. We have one example of geological surprise and economic surprise; one single intervention exploration in the Parnaíba area in the state of Maranhão in northern Brazil. It’s now responsible for 40% of all the natural gas; one single discovery. If we could explore more, we could diversify our energy mix even more.

Marina Grossi, Brazilian Business Council for Sustainable Development: I agree with what Philip said. I would like to draw your attention to my background of climate negotiating. I think there’s a missing link about the seriousness of climate change and what the implications are. If the entire country takes the carbon issue head-on, the energy mix diversity should be included in the planning. But it’s limited in certain ghettos. The government, the foreign relations ministry… but it’s not a consensus in society. The energy mix was taken for granted. So, a perception of the seriousness on climate change, just like the US and China, is key and should be a consensus in society.

Altino Ventura Filho, Ministry of Mining and Energy: As to the Brazilian energy mix, up until the year 2000 or so our energy mix was based on hydro and oil. There is a [more] diversified mix today. 39% is oil. The second source is energy byproducts of sugarcane at 16% and then hydro and gas at 12%; give or take. So, this is the energy mix. It’s a very diverse energy mix. An important issue is that we have 41% of renewable sources in 2013 and 57% of fossil fuels. These percentages will improve; fossil fuels at 55% and renewable sources at 42%. This has been influenced by the [fact that in] 2013 we had to resort to thermal energy quite a lot. The Mines and Energy Ministry adopted a policy based on planning studies defining users of energy; something we have introduced at the energy auctions. So, our intention was to move the mix in that direction. The expansion of the electricity generation in the next ten years will be 85% based on four sources that are renewable: hydro, wind, biomass, and solar. Hydro of course is the most important one.

As to energy efficiency, I agree that energy efficiency hasn’t received the necessary attention. We have to invest more resources. We have included energy efficiency in the planning programs, with a 10% savings of electricity in the long-term plan. We are abolishing incandescent lights. We have reduced the index of efficiency of motors. We are not doing everything we should. We should prioritize energy efficiency even more… but we are doing something whenever possible.

Roberto Zilles, University of São Paulo: For the economic plan for 2023, renewable sources like wind and solar, at 2% [are] gaining importance… so, that’s already a change. Let me address the challenges. Energy efficiency has been associated with end users. We have an example from 2001 when we had the outage. Consumers reduced their consumption by 20%, and we could do that in urban areas through regulation and we have regulation in place already. This is what we call the energy offset, not only for solar energy but other qualified sources approved in 2012. We have about three megawatts of micro and mini-generation sources. It’s an urban center that demands energy from that perspective.

Glaucia Souza, University of São Paulo: One of the greatest lost opportunities of Brazil is being such a productive agricultural country and not deploying bioenergy on the scale that it could be. Our ethanol program was launched mostly because of energy security issues, but we have recently seen that there are many other drivers such as climate security, environmental security, food security, and sustainable development. When you are opting for an energy option, bioenergy is the one whose benefits are most spread across all sectors of society. There are sufficient technological advances over the last few years to deploy bioenergy on a large scale, and not only in Brazil and not only sugarcane. We can use agricultural residues, we can use urban waste, we can use wood, we can produce bioelectricity, we can produce biogas. In the face of climate change we have an opportunity, and a duty, to use what we can in our energy matrix, and bioenergy could contribute.

Élbia Melo, Brazilian Wind Energy Association: Wind energy is the source that proves that Brazil, as well as having many renewable resources, has the capacity to develop these resources at competitive prices, respecting nature and the market moment of each source. We have a cleaner renewable mix. This was not due to a strategic, or long term decision, it just happened because we have the resources.

Guillherme Susteras, Renova Energia: I would like to talk about the mix regarding the consumer. What is the ideal mix for the consumer? I would say we have to talk about the triad of energy. We want clean, cheap and safe. In the past we had all this with the big reservoirs with our dams, but we can no longer do this. So the question that society must think about is, of these three elements what is the weight of each? Do we want clean at any cost, and safe at any cost, and cheap at any cost? This is what the consumer has to understand.

Jorge Delmonte, Brazilian Institute of Oil and Gas : Another challenge to mention is that if you have a more renewable matrix coming from different sources, funding is necessary to make this energy arrive at the consumers. The area that I know is natural gas, it’s very capital intensive and it’s more through private initiative. And in the past it was always the government building the infrastructure, so I think infrastructure is extremely relevant to making renewable energy feasible in this country.

Raul Ramos Timponi, IHS: The country is sort of addicted to [hydroelectricity], and we are in an important transition where not only new technologies and the mix is going to change, but the market structure has to change. We have the inclusion of auctions in the new model which is very important, but if you look carefully the auctions have not changed very much. The index to compare these technologies and bring together the energy price with clean energy and the desires of the energy buyers, this has not evolved. There are several examples [from other markets] that could be used here. For example, auctions of energy efficiency and more specific goals for the regulated market.

Philip Yang: Let me introduce the issue of consumption mix, because we talked about the supply mix. What is the current consumption mix today in larger cities in the world? What are the consumption standards of more mature cities, and lessons that can be learned? Transportation has been declining in more mature economies due to better mass transit solutions. Mexico, for example, 53% of its consumption mix is transportation. Singapore, a more advanced city, is about 15%. Sao Paulo is about 30%. So, we still have a lot to improve.

How can Brazil balance the energy it needs for growing its economy while protecting its rich biodiversity and indigenous population and minimizing climate impact?

Ciro Campos, Socio Environmental Institute: I work in execution rather than planning. The number one question is how are we going to meet all these demands and not lose some of those environmental services? The last ten year plan indicates that the hydroelectric expansion is concentrated mostly in the Amazon region where we have most Indian reservations. On hydro, [as well as] the lack of planning I think there’s also an execution problem. We plan out our infrastructure works, we fund them, and when we execute them we find that we do not have control. Everything rests on the shoulders of companies. The government should have foreseen indirect impacts of hydroelectric problems. I’m not even talking about dams we are talking about a known impact which is deforestation in the surroundings caused by the major inflow of people.

Tiaqo de Barras Correia, ANEEL: The teams that are implementing the infrastructure works are always concerned with the environment. There’s nothing worse than planning a project for five years, and then realizing it’s not feasible. We have very modern legislation in place to consider these impacts. We not only consider environmental assets, but we also take into account the scenic view, the social impacts. You are not going to build an SHP (small hydro plant) in a city that lives off tourism. So the touristic attraction is enough to block a project.

Fabio Scarano, Conservation International: Vital environmental services are water, stable climate, food, culture. There are two gardens for these services. One is biodiversity, and the other is indigenous people. Even if you don’t have ethical concerns that we’re losing 10,000 more species, we should be concerned about the fact that these environmental services are what keep us alive.

If we lose biodiversity, you see what’s happening with the weather, with the water. My take is that we have a hard time defining policies that can truly understand the value of biodiversity.

José Goldemberg: I have written extensively about this subject with other university colleagues. The problems are in the numbers. I’m sorry for being honest. What is deforesting the Amazon is agriculture. These hydro power plants inundate very small areas. Let’s take Belo Monte, for example, at most 500 square kilometers in total. We lose 5,000km every year, it has nothing to do with energy. Of course we want to protect the environment, the Indians, no question about that. But we have to put these numbers in perspective. But some developments will affect people. In a hydroelectric project you end up affecting 10 to 20,000 people, maybe more in a few cases. But millions of people benefit from that electricity produced there.

In the case of Belo Monte I don’t think it’s a great power plant, it produces four to five million kilowatts on average, [but] it will benefit at least ten million people that live in the slums of Sao Paulo. Will it hurt those people that live there? Yes. But it’s up to society to decide. The discussion we’re having here has to be put in perspective. You have to quantify the issue. We can produce more food in the same area. The driver of deforestation is cattle. Our cattle is the most comfortable – one hectare per head. In other places there are five head in the same hectare. Again it’s efficiency, just like energy efficiency.

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Caio Magri, Instituto Ethos: What is important is opportunities generated for a new balance of our energy mix. Guilherme was correct [in an earlier comment] about generation of jobs and income in the expansion of wind energy in the North East of the country. This will give opportunities to go into a structure of employment and green jobs based on biomass intensive work, and I think the social conditions of the activity have to be solved. Although there’s a lot of effort in this direction it has not been maximized.

Weber A. Neves do Amaral, University of São Paulo: I just want to give one solution. Brazil’s going to begin exporting densified biomass energy to Japan. If you think of our route, is it going to depend more on the resources that we have in the pre-salt oil deposits, or are we going to go into something more renewable? Brazil is exporting pellets of bagasse. But the two thermal auctions that the forest activity won is not residue, it’s what we call dedicated biomass. This is planted and can be shipped, it’s not waste which is different. We’re going to export bagasse in pellets to Japan to replace charcoal in their thermal electric. So this is an example of a concrete solution.

Márcia Leal, National Bank for Economic and Social Development (BNDES): I think that there’s mapping that has to be done, and let us not blame one or the other source, because all human activities have their impacts, and their [positive] generations as well. The hydroelectric has this social impact which is more important even than the environmental impact. With power plants in the Amazon people think only of the environment. But the fact is that there are social impacts. A lot of people go there to work on the project.

As Brazil looks to the future, what should be its most important energy priorities?

Pedro Mizutani, Raízen: Well my big idea is to foster renewable energy, and we have plenty of space for agriculture, but it has to be more modern. Using ethanol of second generation we can produce 50% more in the same area. So my answer is innovation.

Paulo Sotero, Woodrow Wilson International Center for Scholars: The U.S. Secretary of Energy Ernest Moniz  told us last week, at a symposium on  threats to the Amazon hydrological equilibrium hosted by the Wilson Center Brazil Institute, that in the United States the big idea right now is gains in efficiency in the production and distribution of electricity. He said that thanks to innovation such gains are very significant and are helping the US to reduce carbon emissions and pursue its policies to contain climate change.

Participants in the Big Energy Question Discussion, Sao Paulo, November 12, 2014

André Araujo, Country Chair, Shell Brasil

Tiago de Barros Correia, Director, National Electric Energy Agency (ANEEL)

David Braun, Director of Digital Outreach, National Geographic

Ciro Campos, Senior Environmental Associate, Technical Development and Research, Instituto Socioambiental (ISA)

Jorge Delmonte, Executive Gas Manager, Brazilian Institute of Oil and Gas (IBP)

Altino Ventura Filho, Secretary of Energy Planning and Development, Ministry of Mining and Energy (MME)

José Goldemberg, Professor Emeritus, University of São Paulo

Marina Grossi, President, Brazilian Business Council for Sustainable Development (BCSD Brazil)

Elena Landau, Partner, Sergio Bermudes Advogados and Director-President, Elandau Consultoria Econômica Ltda.

Márcia Leal, Head, Electric Energy Department, National Bank for Economic and Social Development (BNDES)

Caio Magri, Executive Director, Operations, Business Practices and Public Policies, Instituto Ethos

Élbia Melo, CEO, Brazilian Wind Energy Association (ABEEólica)

Pedro Mizutani, Vice President of Ethanol, Sugar and Bioenergy, Raízen

Weber A. Neves do Amaral, Professor, University of São Paulo, ESALQ

Fabio Scarano, Senior Vice-President, Americas Division, Conservation International

Paulo Sotero, Director, Brazil Institute, Woodrow Wilson International Center for Scholars

Guilherme Susteras, Head of Strategy, Performance and Internal Audit, Renova Energia

Glaucia Souza, President, FAPESP Bioenergy Research Program BIOEN and Professor, Institute of Chemistry, University of São Paulo

Zilmar José de Souza, Bioeletricity Manager, Brazilian Sugarcane Industry Association (UNICA)

Raul Timponi, Senior Analyst, Latin America Gas & Power, IHS

Philip Yang, Founder, Institute of Urbanism and Studies for the Metropolis (URBEM)

Roberto Zilles, Associate Professor, Institute of Energy and Environment, University of São Paulo