Economy & Energy
Ano XII-No 67
April - Mayr
2008
ISSN 1518-2932

 

No 69 Em Português

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Commodities, Pre-Salt and Development

Brazil - Energy and Competitiveness

Approach to Overcome the Differences between the Remuneration of the MWh Generated by the Sugar-Alcohol Sector and the Guarantee of Reduced Tariffs

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O Crepúsculo do Petróleo
Mauro F. P. Porto

 

 

 

BRAZIL - ENERGY AND COMPETITIVENESS

By João Antonio Moreira Patusco

March/2008

 Abstract:

Comparative analysis of energy consumption matrixes from different country groups complemented by external trade indicators show that Brazil has been loosing international competitiveness.

Brazil presents a physical energy dependence of 21 million toe (ton oil equivalent) – 9.5% of total energy demand – and the energy aggregated to exported goods is over 26 million tons.

            Final Energy Consumpiton matriX

1.1 National Analtsis

According to preliminary information announced by the Ministry of Mines and Energy, final energy consumption (FEC) in 2007 reached 215.1 million tons, an amount 6% higher than that in 2006 and also higher than the Internal Energy Supply (IES) growth in 2007, namely 5.4% (lower thermal generation and a slight decrease in electric energy distribution losses caused a total energy loss of 9.7% relative to the IES, while in 2006 it was 10.3%).

Mineral coal consumption has grown 9.3% - due to 10% growth in the oxygen steelmaking production - and biomass, 8% - mainly because of thermal use of bagasse in the sugar-alcohol industry (496 million tons of crushed cane – 16% growth) – and they are the energy sources that sustained the average growth of 6% in the FEC.

Electricity (5.6%), oil products (4.7%) and natural gas (4%) presented average growth lower than that of the FEC.

In the FEC sectoral composition, the energy sector presented the highest growth rate, 10.4%, levered by the thermal use of bagasse in alcohol production that presented a growth of 27%.

The transport sector also presented a significant growth rate due to the performance of Otto cycle fuels (gasoline, alcohol and natural gas – 8.1% growth)

1.2 International Analysis

The remarkable transfer of the “basic industry – commodities” from the OECD[1] countries to other countries, especially to Brazil, attracts our attention. Indeed, from 1973 to 2005, the OECD industrial energy consumption was reduced in absolute values from 955 to 860 million toe – a 10% reduction. In Brazil, it increased from 23 to 73 (and 81 in 2007 – a 252% increase) million toe. In other countries worldwide, this value increased from 530 to 1.151 million toe – a 117% increase.

The table below presents the changes in the EFC sectoral composition caused by the Brazilian development as well as that of other countries.

(*) Excluding Brazil and OECD countries

One can notice that in the Brazilian structure industry increased its share relative to other sectors, a fact not observed in other countries. It is worthwhile to mention the marked growth in OECD countries of the transport sector share, mainly due to the use of private vehicles.

Though the cold climate might explain the energy consumption in the “other sectors” aggregate, it is important to highlight the low participation of this aggregate in Brazil, 19% in 2007. In other countries, the percentage shares of these sectors were over 31% in 2005, and higher than the 1973 levels – sectors in which energy consumption is quite influenced by the life quality of the population.

The industrial structure analysis shown in the next graphics corroborates the fact that Brazil is a major commodities producer relative to other countries in the world. In Brazil, the “metallurgy, mining, paper and cellulose and sugar” group – sectors that pay low wages, have low employment level, and are capital and energy intensive – accounts for 66% of the industrial energy, whereas in OECD it accounts for 35% and in the “other” countries, 29% (the industrial structure, in 2005 in these “other” countries is more similar to the Brazilian structure in 1973, a fact that might indicate a lower development level – in fact, whereas the Brazilian real GNP per capita in 2005 was 3,700 U$(2000), the average GNP per capita in these countries was 1,400 U$(2000)- source: International Energy Agency).

The issue is to know whether the “other” countries group will follow or not the same Brazilian industrial route. The evolution of trading goods between Brazil and China, the biggest market among the “other” countries, shows a significant loss of competitiveness of our country. In 1990, the average price of one ton of goods imported from China was US$ 215 while in 2007 it was US$ 2,130 (about ten times more expensive). As for the exports from Brazil to China, that value was US$ 98 per ton in 1990 and it has decreased to U$ 89 on the average in 2007.

 

The low participation of the non-metallic sector in OECD reflects the high development level of its member countries - almost all of them have already reached a stage of substituting what exists. In the same development direction, the large share of the chemical industry and of the “others” group [2], reflects the advanced level of technological development – the energy consumption by industry was reduced in absolute values from 1973 to 2005, with increasing participation of high technology sectors.

Brazilian external trade, though in fast expansion, should be assessed from the aggregated value point of view. In the last few years, the exported tons versus imported tons indicators have shown that the country has been loosing competitiveness vis-à-vis the world. While in 1990 the ratio of the average price for exported goods to imported goods was 1 to 1.9, it was 1 to 2.3 in 2003 and 1 to 2.9 in 2007, despite the recent increase of commodities prices. This competitiveness loss is consistent with the changes in the structure of final energy consumption as commented earlier.

Another indicator that reflects this competitiveness loss is connected with the energy aggregated to the products exported by the country. In 1980, the energy aggregated to exported products such as steel, aluminum, iron-alloys, sugar, soybean and cellulose, represented 9% of the industrial energy consumption and, in 2006, the percentage had  already reached 31% - this percentage may exceed 35% when the calculations related to the exports of other products such as pig iron, pellets, alumina and alcohol are included. As for the energy consumed in the transportation of these goods and the respective costs regarding amplification and maintenance of infrastructure (roads, railroads, waterways and ports), it is difficult to envisage that the country can grow in a sustained way following the same route.

Considering the costs of transport and ports, the question would be if the export of one ton of soybean from the Center-West to a port in Paraná is profitable to the country or only to the producer. If the transportation maintenance costs should be paid by the producer would there be any export?

            TRANSPORT ENERGY matriX

2.1 NATIONAL ANALYSIS

The total energy consumption in the country concerning transportation grew 7.8% in 2007, due to the good performance of the economy and to the exports and imports of goods.

From 1973 to 2007, the dominant role of road transportation when compared with other means should be highlighted, considering also the increase of its participation in energy consumption - see next table. The railroad and hydro-way show the biggest participation decrease.

 The road transportation analysis – next table – indicates a strong growth of alcohol consumption in 2007, 34.7%, due to the increase of flex vehicles sales and to the low alcohol market prices, mainly in alcohol production areas. As a consequence gasoline consumption was reduced. Natural gas, though with some supply restrictions at the end of 2007, presented a 10.9% consumption growth.

 Until the end of the 1970s, the car industry has reduced the fabrication of gasoline-fueled trucks and buses, fact that contributed to make of diesel the main fuel of the Otto cycle from 1980s on. So, since then, the road transportation share of diesel has alternated between 50 and 56%. The historical analysis of these percentages indicates that Otto cycle fuels – almost exclusively used in private vehicles – present performances better than those for diesel in the periods of good economic performance (Plano Cruzado in 1986, early years of Plano Real and in the last years).

 2.2 INTERNATIONAL ANALYSIS

Brazil is the country with the wider variety of renewable energy sources in the transportation matrix. In 2007, alcohol reached a 15% share – see next table.

In OECD countries the renewable energy sources were only 0.9% - basically the USA alcohol consumption – and in other countries the participation is insignificant (0.2%). The predominance in these countries is of petroleum products with a share over 92%.

The evidence that OECD countries have reduced their share of natural gas in their transportation matrix may indicate to Brazil that its current price policy of this energy source in comparison to others is mistaken. In fact, since gas is a noble non-renewable, not much pollutant fuel, it is contradictory to promote its use in vehicles having about 30% efficiency while industry reaches over 80% efficiencies. Even electric generation has quite higher efficiencies – in co-generation processes they could reach over 70%, as already checked by UTE Termorio.

The 5.7% share of natural gas in the “other” countries matrix is related, in a large extent, to the Argentine consumption, that not by chance faces critical moments regarding gas supply.


[1] The 30 member countries of the Organization for Economic  Cooperation and Development are: Germany, Australia, Austria, Belgium, Canada, South Korea, Denmark, Spain, United States, Finland, France, Greece, Netherlands, Hungary, Ireland, Iceland, Italy, Japan, Luxembourg, Mexico, Norway, New Zealand, Poland, Portugal, United Kingdom, Slovak Republic, Czech Republic, Switzerland, Sweden and Turkey. Besides these countries, the European Union is also part of OECD.

 

[2] “Others” includes electro-electronics, transport material, equipments, construction, furniture, shoes, textile, leather, food, beverage, pharmaceuticals and others of aggregated value.

 

Graphic Edition/Edição Gráfica:
MAK
Editoração Eletrônic
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Revised/Revisado:
Thursday, 11 August 2011
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