World Cup Energy Demand Favoring Gas Over Wind in Brazil

May 8, 2013 by  
Filed under Green Energy News

Brazil, the second-biggest producer of
hydroelectricity, is seeking to increase the use of fossil fuels
after the worst drought in 50 years depleted reservoirs,
underscoring a limit to renewable energy.

The country’s energy ministry revised rules for power
auctions last week in an effort to accelerate development of
natural gas and coal-fired thermal power plants. The policies
may boost the sale of contracts for energy made from fossil
fuels by 50 percent this year to 1,500 megawatts mostly at the
expense of wind energy, according to Erik Rego, director of
research company Excelencia Energetica Consultoria Empresarial
Ltda.

Brazil gets 81 percent of its power from hydro plants
mostly owned by the state and has the world’s cheapest wind
energy. Efforts by President Dilma Rousseff and her predecessors
to promote renewables have been so successful that regulators
are now concerned the power grid has become too dependent on the
weather, said Romeu Donizete Rufino, director of power regulator
Aneel.

“Brazil is proud of having a renewable-energy focus,”
Deputy Energy Minister Marcio Zimmermann said in an interview in
Brasilia. “We always want to do hydro plants, but it isn’t
always possible, so we have to use thermal plants to assure
power supply.”

The increased focus on energy security comes amid the
nation’s preparations to host some of the world’s most
prestigious sporting spectacles, Rego said. Brazil is the site
of the 2014 World Cup and the Olympic Games in 2016.

‘Stable Grid’

The threat of a lack of power became more clear during last
year’s drought. The receding water level in reservoirs sparked
concern that hydro plants wouldn’t be able meet the demand for
power, prompting regulators to recall the 2001 and 2002 blackout
crisis that helped drive the Brazilian Social Democracy Party
from office, said Adriano Pires, head of the Brazilian Center
for Infrastructure.

Those concerns are exacerbated by a new generation of
environmentally friendly hydropower plants with smaller dams.

“Smaller reservoirs mean you can’t store as much energy so
you need other back-up plants to generate power when demand is
high,” Pires said. “Wind farms can’t fulfill this role.”

The new policies will also let developers propose Brazil’s
first new coal plants in auctions since they were barred from
the government-organized events in 2009 over concerns of
greenhouse-gas emissions.

Given Brazil’s recent natural gas discoveries, Zimmermann
said it makes sense to build plants right next to the reserves
that could connect to the power grid, without the need to build
pipelines.

“We could have a big thermal revolution,” he said.

Steady Wind

Some wind developers concede the point. “Brazil needs a
stable grid and thermal power will need to play an important
role,” said Luiz Gustavo Sant’Anna, director of Porto Alegre,
Brazil-based Renobrax Energias Renovaveis Ltda., a wind-farm
developer.

Turbines in Brazil are powered by the same strong, steady
breezes that brought Portuguese and Spanish sailors to the
continent in the 1500s and drive down the cost of electricity
today. Developers including Renova Energia SA (RNEW11) estimate that
turbines there spin at full speed about half the time, compared
with an average of 25 percent for wind farms in Europe,

Wind power has made it difficult for developers to sell
energy from new gas and coal plants that need to compete on
price. Under Brazil’s auction format, developers that offer the
lowest rate wins. Wind farms, competing against other types of
power plants, won 55 percent of the contracts to sell power in
2011 and 2012.

New Rules

Under the new rules, wind farms won’t bid for the same
contracts as gas and coal. The policies may reduce the amount of
wind capacity sold this year by two thirds from 2011, to less
than 1,000 megawatts, Rego said.

The new auction format will threaten turbine suppliers
including General Electric Co., Vestas Wind Systems A/S (VWS) and
Gamesa Corp. Tecnologica SA that have invested in Brazilian
factories, Rego said.

A GE press official in Sao Paulo who asked not to be named
citing company policy, said wind energy is still competitive in
Brazil. Gamesa, based in Zamudio, Spain, is fully committed to
Brazil, according to a press official who asked not to be
identified because of company policy. Aarhus, Denmark-based
Vestas declined to comment.

Complementary Power

The country isn’t turning away from renewable power because
the low cost of wind helps Rousseff fulfill a pledge to reduce
power prices by as much as 32 percent, said Elbia Melo,
president of Brazil’s wind-power trade group Associacao
Brasileira de Energia Eolica.

“Wind farms complement hydro in Brazil because dry periods
are normally windy and the contrary is true,” so energy is
produced the all year round, Melo said.

Zimmermann, the Brazilian deputy energy minister, said
Brazil isn’t abandoning wind energy projects. He said the new
auction rules separating different energy sources make sense
given that wind farms can be built faster than thermal plants.

The shift to favor fossil fuels highlights the country’s
position in international climate-change negotiations. Brazil,
along with China, India and South Africa, four of the biggest
developing nations, argue that it’s up to developed nations to
cut carbon emissions first.

Climate Negotiations

At the last round of United Nations climate negotiations in
Doha last year, Brazilian Environment Minister Izabella Teixeira
said industrial nations are “shifting the burden” of fighting
climate change to poorer countries by demanding they curb
emissions.

Gas advocates welcome the new policies.

“More space is being created for thermal power in
Brazil,” said Winston Fritsch, president of Petra Energia SA,
which is developing Brazil’s biggest gas-fired power plant in
Parnaiba with MPX Energia SA (MPXE3) and OGX Maranhao. “Gas is the big
solution for the country and this is what the government is
signaling.”

Coal producers also are eager to get back into Brazil’s
power auctions.

“There’s no reason why coal shouldn’t participate,” said
Fernando Zancan, President of the Brazilian Coal Association.

Emissions from new coal-power plants “won’t threaten
Brazil’s climate change obligations,” he said, and they offer
reliability that wind and hydro can’t. “If there’s a drought
and no wind you’ve got a problem.”

To contact the reporters on this story:
Stephan Nielsen in Sao Paulo at
snielsen8@bloomberg.net;
Mario Sergio Lima in Brasilia Newsroom at
mlima11@bloomberg.net

To contact the editor responsible for this story:
Reed Landberg at
landberg@bloomberg.net


Enlarge image
World Cup Energy Demand Favoring Gas Over Wind

World Cup Energy Demand Favoring Gas Over Wind

World Cup Energy Demand Favoring Gas Over Wind

Adriano Machado/Bloomberg

Wind farms, competing against other types of power plants, won 55 percent of the contracts to sell power in 2011 and 2012.

Wind farms, competing against other types of power plants, won 55 percent of the contracts to sell power in 2011 and 2012. Photographer: Adriano Machado/Bloomberg


Enlarge image
World Cup Energy Demand Favoring Gas Over Wind

World Cup Energy Demand Favoring Gas Over Wind

World Cup Energy Demand Favoring Gas Over Wind

Dado Galdieri/Bloomberg

Brazil gets 81 percent of its power from hydro plants mostly owned by the state and has the world’s cheapest wind energy.

Brazil gets 81 percent of its power from hydro plants mostly owned by the state and has the world’s cheapest wind energy. Photographer: Dado Galdieri/Bloomberg

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