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EPE produces a number of specific studies in generation and transmission planning
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COVID-19 OUTLOOK BRAZIL - Impacts on energy markets in Brazil: January – June
On Monday, August 26, President Luiz Inácio Lula da Silva launched the National Energy Transition Policy (Política Nacional de Transição Energética/PNTE), approved at a meeting of the National Energy Policy Council (Conselho Nacional de Política Energética /CNPE) which he led, alongside the Minister of Mines and Energy, Alexandre Silveira, who is Council chair. Brazil could receive an estimated BRL 2 trillion in investments towards the green economy over ten years.
"We are not going to throw away the meaning of the energy transition. This country has already thrown away too many opportunities. We cannot throw away opportunities. We need to bear in mind that we have everything. We have everything that nature has given us. We have skilled labor — we still need more. We have technically qualified people. In the energy sector, we have hundreds of excellent people in this country. We can do whatever we want," said the president.
Lula said that Brazil is already a world leader in clean energy adoption, but there is room for progress. "People respect us, because we can go anywhere and say: 80% of our electricity is renewable and 51% of our total energy matrix is already renewable and we can reach 100%. Who would have thought, 30 years ago, that we''d be talking about biomass, biodiesel, ethanol, that we are going to make the energy transition, that we are going to have wind, solar and green biodiesel?"
NEW ECONOMY — The PNTE will articulate and coordinate the energy transition in Brazil, creating synergy between government policies — such as the National Climate Change Policy and the Ecological Transformation Plan (Política Nacional de Mudança do Clima) and the Ecological Transformation Plan (Plano de Transformação Ecológica) — to strengthen the new global economy with job and income generation in the country, promoting a just and inclusive transition.
"Brazil is going to lead the world in the new economy, the green economy. Wind, solar, hydro, nuclear, biomass, biodiesel, ethanol, green diesel, carbon capture and storage, sustainable aviation fuel, green hydrogen. It is the rebirth of Brazil''s industry on a sustainable basis. It is adding value to Brazilian products produced with clean, renewable energy, an opportunity to boost the use of our local content." emphasized Alexandre Silveira.
Silveira informed that the New PAC already has BRL 700 billion in planned investments in energy transition and recalled that President Lula sanctioned the legal framework for green hydrogen this month. "We already have 27 gigawatts of hydrogen projects registered with the Ministry of Mines and Energy, which will bring in BRL 200 billion in investment. With the projects that we are making feasible and that are not in the PAC, we will increase this number even more and present it to Brazil," he said.
Finance Minister Fernando Haddad stressed the potential of the energy transition to boost national development. "The Ministry of Mines and Energy, together with the Ministry of the Environment and Climate Change, the Staff Office House, and the MCTI, is taking care of the heart that will pump blood to the new Brazil. A new Brazil that will be born from a process of ecological transformation, based on the energy transition, and that will radiate a new energy that will allow the countryside to do better, industry to do better, and in a business environment favored by the reforms that are underway in the National Congress. One of them, the most essential of all, is tax reform, which will change the quality of Brazil''s economic growth," he affirmed.
TRADING — On Monday, the CNPE deliberated another six proposals aimed at creating new opportunities for sustainable economic development, mainly in the oil and gas sectors. A resolution was approved that establishes additional guidelines for the Union''s oil and natural gas trading policy. The rule creates conditions for the Union''s natural gas to reach consumer agents more closely, defining that PPSA, a state-owned company linked to the MME, will now be able to contract the flow and processing of the volume of natural gas that falls to the Union in production sharing contracts.
The aim of this resolution is to optimize the use of inputs from production sharing contracts, boosting industrialization and strengthening security in the national supply of energy, oil inputs, nitrogen fertilizers and other chemical products.
"What we have approved today is the effective result of the efforts of the Gas to Employ Program. We are balancing the national gas market, offering increased availability and moderate prices to the end consumer," said Alexandre Silveira.
DECARBONIZATION — Another measure authorized by the CNPE is the resolution that establishes guidelines aimed at decarbonizing activities of oil and natural gas exploration and production in Brazil. The rules include fostering technological development, minimizing natural gas flaring, maintaining routine zero flaring and promoting the sharing of installed infrastructure, among other points.
FUELS — E In another decision, the CNPE approved a resolution aimed at updating the strategic guidelines for the development of the fuel, biofuel and oil derivatives market in Brazil. The document provides for the strengthening of national processing capacity, which currently faces challenges with significant imports of derivatives. Among the strategic guidelines listed in the resolution are the search for an increase in biofuel production, the expansion and modernization of the refining park and the promotion of the energy transition.
It was also decided to set up a Working Group (WG) to carry out specialized studies on the waterway fuel, aviation fuel and liquefied petroleum gas (LPG) markets. The WG, coordinated by the MME, will be made up of 17 institutions and should establish guidelines of interest to the National Energy Policy on the subject.
PRODUCTION — The CNPE also approved two resolutions on oil and natural gas exploration in new blocks. The first defines Petrobras'' expression of interest in the Jaspe block, which will be tendered under the production sharing regime in the next Permanent Offer Cycle. The resolution also establishes that the company must be the mandatory operator of the block, with a minimum stake of 40%. It is estimated that revenues from signature bonuses will generate BRL 401 million.
The second resolution approved the technical and economic parameters of the Rubi and Granada blocks for bidding under the production sharing regime, in the Permanent Offer system. The measure reaffirms the importance of the exploration and production of oil and natural gas in the Pre-Salt Polygon, which is responsible for most of Brazil''s production. The parameters for the bidding process estimate signature bonuses that could generate revenue of BRL 118 million. More than BRL 60 billion is expected to be invested, which could generate more than 280,000 direct and indirect jobs, as well as government revenues of around BRL 119 billion over the lifetime of the projects.
Source: IMF, tradingview , S&P Global, ETN, Energy Institute
Source: Energy Institute: Statistical Review of World Energy
Despite significant investments, Brazil’s transmission infrastructure lags behind the addition of renewable energy capacity, with an expected average of 3-5GW annually over the next decade (BNAmericas, 2023). As transmission capacities catch up, energy storage solutions will become a vital component of network management as the share of intermittent renewable energy rises. Even with abundant hydro power resources, the case for battery-based storage strengthens each day due to its multiple functionalities in grid management.
For a long time, Brazil’s energy storage segment was not given priority in its policy and regulatory structure. This may have been due in part to the country’s predominantly hydropower-based power system. However, with the significant increase in renewable energy, there has been a shift in the scenario. Despite this, the response in terms of policy and regulations has been slow. Nevertheless, the growing adoption of renewables-based generation is leading to a reassessment of utility-scale storage’s role in managing the grid.
The Brazilian government announced in September 2023 that it is considering the feasibility of including energy storage in the upcoming power reserve auction scheduled to take place in the first half of 2024 (Reuters, 2023). Various options are being considered, including hybrid renewable energy projects with collocated storage capacity and standalone battery storage projects. In addition, battery storage is being considered as a replacement capacity for remote communities in the Amazon region, which were previously reliant on diesel generators. However, the development of the energy storage market is unlikely to occur significantly until regulatory changes are made public.
The regulator’s recent guidelines for the distributed generation segment could indirectly benefit battery storage. In January 2022, updated norms on distributed generation were introduced that require all capacities to be included under the net metering regime from 2023 onwards. This move will make it easier for solar PV-based prosumers, who inject net surplus generation back to the grid, to use battery storage. Under the previous regime (without net metering), such capacities would have had to pay fees to inject excess energy into the grid.
Development of the utility-scale energy storage market has been primarily driven by the regulator ANEEL through a 3-year R&D programme that started in 2016. There are 30 such projects, which include various storage technologies besides Lithium-Ion, to establish feasibility (BNAmericas, 2023). The first of these projects, a 30 MW/60 MWh BESS operated by the transmission system operator (TSO) ISA CTEEP, became operational in December 2022 (PV Magazine, 2022). The results from these projects as more become operational in the coming months and years will likely shape the regulations for grid-scale storage.
Although the adoption of utility-scale storage projects has been slow, they are gradually gaining traction. TSO ISA CTEEP’s 30MW/60MWh project went online in December 2022 after receiving approval from the regulator ANEEL in 2021. The project was developed with an investment of $27 million and is allowed, under regulations, to generate annual income of up to $5 million by operating as a backup power source during peak electricity demand. This project is an example of “storage-as-a-transmission asset” and provides a less expensive alternative to traditional transmission lines (Energy Storage News, 2023). Another example is Vale''s 5MW/10MWh lithium-ion BESS project at a large port facility in Rio de Janeiro, launched in September 2020 (BNEF, 2020).
The pipeline of utility-scale solar PV projects in the country can be a significant driver of demand for grid-scale energy storage. This is because hybrid projects that combine solar and storage configurations are becoming more prevalent. The lack of timely grid connectivity can reinforce the need for linked-storage systems.
There are pilot projects underway to assess the feasibility of new storage technologies. A recent example is a 1MWh thermal energy storage project by an Israel-based company, Brenmiller Energy, in partnership with Fortlev, the largest provider of water storage solutions in Brazil. The project became operational in August 2022 and is a pioneering initiative in the region to use renewable-based (biomass in this case) thermal energy stored in crushed rocks for subsequent use in manufacturing processes as a process-heat application. The system can also discharge electricity based on a steam turbine.
Off-grid energy storage in Brazil presents more significant opportunities in the near term than the utility-scale segment. Battery-based energy is a competitive option in several Brazilian states due to the substantial difference between peak and off-peak tariffs. A study by consulting entity Greener (as of July 2022) found that for a typical commercial/industrial consumer, the difference between peak and off-peak tariffs in the state of Rio Grande do Norte stood at $R3.004/MWh. The study also found that battery storage translated to 36% savings on the tariff.
The energy storage market in Brazil is new and underdeveloped due to the lack of supportive regulations and high import tariffs on battery modules. However, despite the slow growth, there is a high potential for growth in the future. The utility-scale segment is expected to experience the most growth and investment as the focus shifts towards using energy storage as a transmission asset to support the expansion of the electricity transmission network. ANEEL has authorized the development of a pipeline for 100GW of solar PV and 20-30GW of wind energy, which may worsen the existing grid congestion issues (BNAmericas, 2023). This is expected to trigger regulatory changes that allow for a greater role for energy storage in Brazil''s energy mix.
As the capacity of renewable energy sources in utility-scale rises, it will become crucial to balance the grid through activities available in ancillary services. Capacity markets will also play an equally important role to ensure network reliability. The network operator may need to provide timely battery storage to avoid incurring high opportunity costs of preventing generation or deterring prospective investments.
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