Renewable Energy as a Tool to Assure Continuity of Low Emissions in the Brazilian Electric Power Sector

Abstract

In the Brazilian Electric Sector more than 80% of its installed capacity is based on hydro and biomass energy. A new legal framework has imposed roles for renewable sources of energy, establishing that 10% of electric power must come from these sources over the next twenty years. Historically, hydro power has been the key source of electricity in Brazil. In spite of this, due to restructuring of the sector during the nineties, both natural gas and nuclear energy have become increasingly significant sources. Coal is still widely utilized in the southern part of the country. However, due to its predominately hydro nature, the system's operation is centralized and its dispatching optimized, with hydro and nuclear energy as low-costlmust-run sources, and natural gas and coal, which because of some local electrical inflexibilities and being more expensive fall into second place behind the must run sources. In April 2002, Brazilian Congress approved a law which created a stick and carrot policy to put the development of renewable energy (wind, biomass and small hydro) on the national agenda. The established policy was to be carried out in two phases, with the compulsory purchase by Eletrobras of 3,300 MW of these sources up to 2006, and another additional 15% of the market annual expansion, with the goal of reaching 10% of the market supplied by those three sources in 20 years. At the same time, a levy on tariffs was also created with the same law, to allow Eletrobras to cover the difference between the generation costs of competitive sources and the costs of these new sources During 2004 and 2005 the law was regulated by electricity regulatory agency and the federal government established different cap prices for each technology. Several regulations were passed and an auction in two phases was implemented in order to reach the designated goal of 3,300 MW. Mandatory dispatching of energy from these sources was included in the contracts, assuring it to be dispatched whenever it is available, so displacing thermal plants with higher operating marginal costs. Following the auction, 144 projects were contracted and the estimated energy was around 13,500 GWh. Projects were proportionately distributed among geographical regions. The bulk of the projects were able to avoid the emission of 2.8 million tonnes C02 per year, since due to technical characteristics and legal definitions, all of them are must run sources, avoiding the necessity to dispatch any thermal energy. These preliminary estimates of C02 reduction, based on Approved Consolidated Methodology 002 (UNFCCC), can produce, in terms of carbon credits, between 10 to 15% in the volume of the required subsidy introduced by the previously mentioned law.