Exclusive Interview with Bento Albuquerque, Brazil’s Minister of Mines and Energy

(Brasília - DF, 01/01/2019) Cerimônia de Nomeação dos Ministros de Estado. Foto: Marcos Corrêa/PR

Brazil’s hydro power is struggling; how will your ministry boost wind and solar?

Brazil has a natural capacity for generating electricity from renewable sources. The country has had such success in using renewable resources that it has one of the lowest levels of greenhouse gas emissions on the planet.

For many years now, hydroelectric power plants have supplied most of the country’s electricity. Over time, and with the decrease in the amount of available and affordable hydro power, this has gradually given way to other sources. Thus, biomass, wind power and later photovoltaic solar sources were on the increase, so that Brazil’s electricity grid remained with high levels of renewable energy.

Over the past ten years, apart from 2020, the year of the pandemic, the Ministry has held many auctions to purchase new energy to meet Brazilian demand and has always encouraged new renewable energy technology. This policy has attracted the interest of entrepreneurs, and some of these energy sources, especially wind and photovoltaic solar power, are increasingly popular at auctions, commanding high prices.

Statistics from 2019 indicate that 83% of domestic electricity comes from renewable sources. If we look at the power grid as a whole, 46.1% of domestic supply comes from renewable sources. If we look at energy sector planning, we can see that this trend for renewable energy is increasing. Information from the ten-year plan indicates that Brazil will maintain its lead in renewable energy electricity generation over the next ten years.

[quote]Brazil’s energy profile has changed over the past decades, with a huge growth in renewables …[/quote]

This can be seen clearly in the expansion of installed capacity. The total estimated expansion for the period 2026 to 2030 is approximately 37 GW, with an average of 7.5 GW/year of new installed capacity to be incorporated into the Sistema Interligado Nacional [the National Interconnected System, or SIN]. Although the estimated expansion includes a lot of thermoelectric power stations, the SIN continues to come down strongly on the side of renewable energy sources, which are set to make up over 85% of installed capacity in the system.

Finally, it is important to note how Brazil’s energy profile has changed over the past decades, with a huge growth in renewables and a reduction in hydroelectric power. The estimates are that between 2005 to 2030 the share of hydroelectric plants in centrally generated installed capacity will decrease from 75% to 54%. Other renewables will grow from 5% to 33% and thermal will go from 19% to 13%.

How will your Ministry help the Brazilian biofuel energy industry grow?

The Ministry of Mines and Energy, the MME, oversees Brazil’s biofuels policy, known as the RenovaBio, established by Law no. 13.576/2017. RenovaBio aims to contribute to meeting the country’s commitments under the Paris Agreement and to ensure a healthy balance between energy efficiency and the reduction of greenhouse gases, trade and use of biofuels, using life cycle assessment programmes. It also seeks to promote healthy expansion in the production and use of biofuels in the national power grid and to promote predictability so that the various biofuels can be competitive in the national fuel market.

Through the RenovaBio policy, the government annually sets decarbonisation targets over a ten-year period. Producers and importers of biofuels voluntarily certify their production, which allows them to obtain decarbonisation credits (known as CBIOs). These credits are a stock-exchange traded asset that must be purchased by fuel distributors, as a compulsory part of the programme. The share of biofuels is expected to grow until 2030, from 21.5% in 2020 to almost 30% in 2030. Note too that the MME is leading a study, in which various Ministries are taking part, to assess the insertion of new fuels into the diesel cycle, particularly green diesel and co-processed diesel.

It is also worth mentioning that, based on a proposal from the MME, the Conselho Nacional de Política Energética [the National Energy Policy Council, or CNPE], has just launched the “Fuels of the Future” programme to stimulate the advancement of sustainable fuels in the Brazilian transport matrix, with a particular emphasis on biofuels. The main aim of the programme is to propose measures that will integrate relevant public policies (such as the RenovaBio, the Proconve (Programa de Controle da Poluição do Ar por Veículos Automotores [Control Programme of Air Pollution by Motor Vehicles], the Programa Nacional de Produção e Uso do Biodiesel [National Programme for the Production and Use of Biodiesel] and the Rota 2030 [Route 2030]) with the full life cycle evaluation methodology of the various different types of transport emissions. The programme will also propose studies to increase the use of sustainable fuels in different modes of transport, including ethanol fuel cells, high-octane gasoline, the introduction of aviation bio-kerosene into the national power grid, the use of sustainable fuels in maritime transport, carbon capture and carbon storage associated with biofuel production.

Could Brazil’s costly and time-consuming ‘pre-salt’ oil investment be wasted?  

Despite the delays caused by the nearly five years without bids for oil and natural gas exploration and production, between December 2008 and May 2013, when the pre-salt deposits were discovered, there have been huge efforts to develop these deposits.

Brazil has been very competitive in recent years with regard to attracting investments for oil and gas exploration and production (E&P). Auctions have brought in billions and raised expectations of huge investment and returns for Brazil. I believe that in the oil and gas sector, pre-salt areas that have already been contracted will be key. Many commitments have already been made and many projects have been approved or are already underway. These will require a lot of investment over the next few years and will bring equally consistent returns for the country, both nationally and at state and local levels.

[quote]oil is set to continue to play a key role in the global energy sector for many decades to come…[/quote]

The Tupi field, for example, is already fully developed and nearing peak production. We guaranteed the full development of the Buzios and Itapu fields by bidding for surplus volumes of the Onerous Assignment Agreement at the end of 2019. We will guarantee the same for the fields of Sepia and Atapu at the end of this year, with the second bid of the surplus of the Onerous Assignment. Big players in the oil industry are still showing a lot of interest in pre-salt, which shows that they are optimistic of a return on investment in this sector in Brazil. We believe that although energy transition is happening, oil is set to continue to play a key role in the global energy sector for many decades to come.

Does Petrobras suffer from too much political interference?

Petrobras is a publicly traded Brazilian company, linked to the Ministry of Mines and Energy, with the State owning 50.5% of shares with voting rights. Its organisational structure consists of a general assembly of shareholders, fiscal council, administrative council and their committees, audits, general ombudsman, executive board, and its committees. Business strategy is managed by the administrative council, whilst price policies and basic product price structures are managed by the executive board. There is no external involvement in this governance model.

Good practice in corporate governance and compliance are fundamental to Petrobras, and the company works on the principles of ethics, integrity, and transparency, seeking to ensure the conformity of its processes and to continually improve its mechanisms of prevention, detection and correction of anything which might lead to ethical deviations. The company’s decisions are totally independent and are set out in the directives and strategic aims defined by its governing bodies. There is no political interference because a solid model of management and governance operates, based on best practice.

What is Brazil’s government doing to turn the country into a clean energy leader?

One of the big challenges faced by Brazil in leading clean energy is encouraging the diversification of its power grid. Many financial and technological barriers must be overcome in the bid to insert disruptive renewable sources into the national interconnected system, the SIN. Amongst the various technologies available, wind power and photovoltaic solar power have proved to be more competitive than other technologies when it comes to expanding the grid. One avenue we are exploring is the use of hybrid photovoltaic solar and wind power projects, which would mean connecting power plants so that they use the same network.

Another technology with great potential is offshore wind power. There are many challenges – technological, industrial, the ports and others – to be overcome before we can minimise the risks and insert this solution into Brazil’s grid. However, it is worth noting that many factors – the global development of this technology, the wealth of technical, financial, and socio-environmental studies, legal and regulatory advances in Brazil and the fact that there are already investors interested in this source in the country – could change this scenario and allow this technology to become a viable competitor in Brazil.

Floating photovoltaic solar technology was considered for the first time in the current planning cycle, with different costs and energy contributions compared to conventional projects. The simulation results indicate that, at least for the data used, this method is still less competitive than traditional projects. However, various commercial and R&D projects are underway which should help us better understand this solution, its contribution and the technology involved.

Bioelectricity, especially that generated from sugar cane bagasse, continues to be a competitive alternative for SIN electricity. Although projections for increased production of sugar and ethanol suggest the growing use of bagasse for energy, historical data shows that the processes are increasingly more efficient, which mean there is an annual decrease in demand for this resource per product unit and therefore there is a gradual surplus of bagasse that can be used in the electrical sector.

[quote]Jair Bolsonaro brought forward the date for Brazil’s carbon neutrality from 2060 to 2050…[/quote]

As well as bagasse, another resource that shows great potential is biogas. This energy resource is rich in methane, whose calorific value is close to that of natural gas. Several substrates from the agro-industrial sector, particularly sugarcane but also animal and urban waste, have the greatest potential to be used to produce biogas on a national level. Another specific technology that could complement the system is storage technology, such as reversible hydroelectric plants and batteries, and these have already been openly discussed in planning cycles. Although a fairly simplified model has been used, it has allowed us to identify potential future trends in operations, in which the existence of these resources in the system could reduce operating costs at times of peak demand.

We must also remember President Jair Bolsonaro’s message to the Leaders’ Summit on Climate on 22 April, where he brought forward the date for Brazil’s carbon neutrality from 2060 to 2050. This means that in 2050 all CO2 emissions in Brazil will have to have been replaced with alternative power sources. This message ties up with what we have observed regarding the growing participation of wind and solar power in the electricity grid. Wind power reached almost 10% of the electricity grid at the beginning of the year, with 17 GW of installed power. Solar power currently makes up 5% of our grid, having grown 63% over the past 12 months.

The establishment of systematic planning for energy supply expansion in the medium and long term, together with the ten-yearly expansion plans and national plans, has also guided the use of auctions to contract the expansion of energy infrastructure which will require, over the next ten years, the investment of around R$2.7 trillion into the energy sector.

The Brazilian government is concerned about the country’s energy future and is therefore actively exploring numerous alternatives for energy generation, supports studies that look at the long-term and has brought in the National Energy Plan, or PNE-2050 to improve the decision-making process. These numerous alternatives favour, whenever possible, the use of renewable resources to build a sustainable grid with high levels of clean energy. Thus, Brazil will continue to be a leader in clean energy.

One long-term option, which is gaining ground globally in the energy sector as a viable option for reducing harmful emissions is considered to be a disruptive technology – hydrogen. Brazil’s potential for using hydrogen is very high, not just green hydrogen, which is generated from renewable sources, but other types of hydrogen, such as that generated from natural gas, biomass or any other energy source used in the grid.

To increase the use of green hydrogen in Brazil, improvement and development is required in areas such as regulation, energy planning and professional training, and there must be increased support for research and development projects. Implementation of the first commercial projects in the area could also be supported and facilitated by developing innovative financing instruments, thus helping to promote Brazilian resources.

To stimulate Brazil’s hydrogen market, the National Energy Policy Council has passed resolutions to ensure Brazil’s consistent participation as an exporter and consumer of hydrogen. One of the main resolutions made to this end is the creation of the National Hydrogen Programme, the directives of which are to be published within the next few months.