Economy & Energy
Ano XII-No 76
January - March
ISSN 1518-2932


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Ecological-Economic Zoning and Optimal Land Use Design of Hydrographic Basins Territories

Planning of the Brazilian Electricity Sector and the World Context of Climate Change

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O Crepúsculo do Petróleo
Mauro F. P. Porto

 Planning of the Brazilian Electricity Sector and

 the World Context of Climate Change

Nivalde José de Castro[i]

Guilherme de A. Dantas[ii]


Alternative and renewable sources for electric generation can contribute to na energy matrix with low carbon intensity.  Therefore, the insertion of these sources in the Brazilian energy matrix in detriment to fóssil fuels should be guaranteed. The authors propose specific auctions for each one of these sources.

Palavra-chave: Brasil, matriz energética, fontes renováveis, combustíveis fósseis.


The reduction of greenhouse effect gases (GHG) emissions to the atmosphere and consequently limitation to global warming is the fundamental condition to guarantee the sustainability of life in the biosphere in the medium and long terms. It is a global order question where responsibilities are common but differentiated because the increase of GHG concentration from the start of the Industrial Revolution on was caused by the now more developed countries.

However, and this is a question that is gaining relevance, the responsibility of this set of countries regarding the increase of greenhouse effect does not exclude the remaining countries from developing based on environmental sustainable technological alternatives. In this process it should be considered that these countries should adopt leap frog strategies regarding environmental terms. This development path should be different from that followed by the Northern countries concerning environmental and energy consumption terms. This differentiation might become a considerable economical opportunity, specially for countries that already have a significant development level like Brazil.

The energy sector, that has the highest responsibility relative to the concentration of GHG, has a small share in the total Brazilian emissions due to the relevant participation of renewable energy in the Brazilian energy matrix, mainly hydroelectricity and ethanol consumption in the transport sector. However, Brazil is a country with the highest GHG emission in the world essentially from deforesting. In this sense, in a context of response to climate change, Brazil – due to its growing international importance and the magnitude of its emissions – needs to have a pro-active position in the discussions concerning mitigation of global warming and above all to take actions and adopt strategies that should reduce these emissions.[iii].

The central argument of the present article is the following: even though the Brazilian problem concerning GHG emissions is related to changes in the use of land, the energy sector, specially the electric sector that has approximately 90% of its generation from renewable sources, may not be excluded from the discussion and the measures to be adopted. This is based on the fact that the Brazilian energy matrix needs to reduce carbon intensity and can remain with it reduced and therefore prevent the Brazilian emission to reach unsustainable levels. It is assumed that the perspectives of energy demand growth in the next years tend to remain high due to the economical growth and development but there is a reference scenario, derived from the last new energy auctions that occurred in 2007 and 2008, in which most of this generation will come from fossil energy.

Brazil has a huge potential regarding alternative and renewable sources of electric energy to be exploited. Bio-electricity from sugarcane biomass energy plants and wind energy should be highlighted and they could produce carbon-free energy at costs considerably more competitive than those using renewable energy in other countries. Therefore, exploitation of this potential could become an opportunity to maintain the clean characteristic of the Brazilian electrical matrix. On the other hand, this concrete possibility has a competitive advantage derived from the lower generation cost and it could guarantee as well external market for several goods that would need environmental sustainability certificates in order to be commercialized in the richer countries.

The central question is how to guarantee the insertion of these energy sources in the Brazilian electricity matrix in detriment to fossil fuels thermal plants. The argument of the authors is that goals should be created for each component of the matrix and specific auctions should be made for each one of them so that the contracting and structuring of the matrix, as defined by the planning as the ideal one for the Brazilian electrical sector, could be viable.

Aiming at analyzing this set of questions, the article is divided into four parts, besides this introductory section. The first one is a brief revision of the relevance of adopting measures that allow the stabilization of GHG concentration in a sustainable plateau. Furthermore, in this section it will be analyzed the contribution of developed countries and of the developing ones to increase the greenhouse effect and what is the role of each one of these groups in its mitigation. The second section examines the perspective of the Brazilian electrical matrix and the potential and viability of inserting bioelectricity and wind energy in this matrix. The third part will discuss the need of integrating the climate and energy policies that should incorporate the environmental variable as a decisive parameter for determining undertakings that will be part of the Brazilian electric matrix expansion. Finally, conclusive remarks on the article will be made.

1 – The Need of Mitigating Global Warming

The biosphere is a set that includes all the terrestrial ecosystems[iv]. The environmental impacts from anthropic actions can cause relevant unbalance in the ecosystems. Among these impacts, climate changes are the more relevant due to their global amplitude that is a menace to biodiversity, to the exploitation of natural resources and consequently to human development on Earth, generating on the limit doubts about the survival of humanity.

In the analysis of global warming it is initially necessary to have in mind that the greenhouse effect is a natural phenomenon. It permits the average temperature on the Earth to be 15º C. Without this phenomenon, the average temperature on the Earth would be 30º C lower. The greenhouse effect consists basically of water vapor, carbon dioxide, methane, nitrous oxide, among other gases, that absorb part of the solar radiation on Earth. Among these gases, water vapor is the most relevant greenhouse effect gas. But it is not affected by anthropic activities and therefore the social and economical development stimulated by the Industrial Revolution in the 18th century did not change its concentration in the atmosphere. The organic compounds more susceptible to anthropic actions have significantly increased their concentration in the last 250 years and have caused the intensification of the greenhouse effect. In order to better understand this process it is necessary to know the biogeochemical cycle of carbon.

According to RICKLEFS (1996), the soil, the rocks, the fossil fuels, the atmosphere, the oceans, the biota and the organic matter are the main reservoirs of carbon. The methods of transferring substances from one deposit to another are called processes and they are basically three:

i. Reaction, that is a short term process represented by respiration and photosynthesis;

ii. Dissolution, that consists of carbon exchange between the atmosphere and the ocean; and,

iii. Deposition, a temporal process relative to million years that consists of soluble carbon transformation into insoluble carbon, for example, petroleum and mineral coal.

While the carbon cycle processes were restricted to the above ones, the system was in equilibrium. However, from the First Industrial Revolution on, the combustion process, until then of irrelevant magnitude, became environmentally very important resulting in the unbalance of the carbon cycle and the consequent increase of organic compounds concentration in the atmosphere.

In order to have an idea of the magnitude of the increase of organic compounds concentration in the atmosphere, we quote the IPCC (2007) study that estimates that the CO2 concentration increased from 280 ppm[v] in the Pre-Industrial period to 379 ppm in 2005. Concurrently, methane concentration increased from715 ppb[vi] to 1774 ppb in the same period.

Due to the growing need of limiting global warming, the beginning of the 1990s registers the creation of a world institutional structure to establish goals and create mechanisms that permit the reduction of GHG emissions. One of the basic principles of this structure is the principle of common but differentiated responsibilities. The basic guideline of this principle is that the developed countries are historically the highest emitters of GHG. In this sense, these countries have the obligation of giving a larger contribution regarding global warming reduction.

The first commitment for reducing GHG in the ambit of the Conference of the Parties was the Kyoto Protocol that established a reduction goal of 5.2% for the Annex B[vii] countries in the 2008 / 2012 period. A relevant question that should be considered now, specially after the Copenhagen Conference (COP-15) is the need of signing a Pos-Kyoto agreement and on what basis.

The consolidation and the advance of scientific certainty relative to the anthropic influence on global warming as well as the damages to the biosphere are a result of the need of adopting more aggressive and consistent goals to reduce GHG emissions. In order to limit the global warming to 2º C until the end of this century and therefore minimize the negative impacts of climate change, it is necessary to stabilize the concentration of GHG at 450 ppm.  A drastic reduction of GHG emissions will be necessary in order to reach these levels. But the term, the magnitude of these goals and which countries will have the highest goals are controversial, as the COP-15 has shown.  

It should be highlighted, according to NOBRE (2009), that reducing GHG emissions to 50% until 2050 will not limit the global warming to 2º C.  According to the author, this global warming scenario would result in an interval of 2.6º C and 2.8º C until the end of the century. A point of dispute regarding the format of a new climate agreement is the establishment of goals for the developing countries. This question is incompatible with the principle of common but differentiated responsibilities. The controversy is due to the fact that these countries need to adopt an economical development path different from that of the Northern countries. Without those structural changes, the environmental impacts will be unsustainable. In this perspective, the question is that the developed countries have been historically the largest contributors to global warming and they should concretely help the developing ones regarding the search and configuration of sustainable development, basically through transfer of financial resources and technology.

However, developing countries like Brazil, China and India have economies and GHG emissions of such magnitude that make developed countries to demand commitments from these countries regarding emissions reduction. In this discussion it is undeniable that these countries have conditions to reduce their respective emissions and respond to the needs regarding climate change in a way different from poor countries like the African and Island ones. In this sense the argument that transfer of financial and technological resources should be restricted to mitigation of climate change and adaptation to it in the latter is consistent.

Independent of the mandatory emissions reductions in emerging countries, the international trade will make compulsory the transition to the green economy[viii] in these countries. This question can be explained in the following way: investments in technologies of reduced carbon intensity necessarily represent higher production costs and this will reduce the competitive advantage of developed countries’ economy. In this way, as compensation there will be a series of commercial barriers to be established based on environmental criteria. These restrictions will only be overcome through certificates guaranteeing that the offered product(s) from developing countries are environmentally sustainable. This is a strong and consistent trend to be adopted by the Northern countries in order to make their products more competitive.

From the Brazilian point of view, the perspective of a transition to the green economy indicates a clearly favorable and competitive position. Brazil has an energy matrix with a share of 45% of renewable sources as opposed the world matrix where the share of renewable sources is about 12%. The Brazilian rank as one of the five largest GHG emissions with an annual emission of 2.2 Gt of COis due essentially to change in soil use where deforesting is responsible for 60% of the Brazilian emissions (MCT, 2009).   Table 1 presents data about the Brazilian emissions profile as compared to those of other countries and of the world average value.

Table 1 - Comparison of GHG Emissions by Group of Countries and Type of Activity.(*) (in %)







Change in soil use











Annex I








Non-Annex I
































South Korea
























South Africa








 Source: SOUZA (2006).

(*) Brazilian data are those from the inventory published in 2004 relative to the 1990/1994 period

 Examining the Brazilian emissions profiles it is evident that the GHG emissions reduction policy should be focused on restraining deforesting. The Brazilian Climate Change Law is coherent with this objective. Nevertheless it is necessary an integration of the Brazilian energy policy and the strategies for reducing climate change. The accommodation of both policies is necessary so that Brazil can maintain and even improve the energy matrix with reduced carbon intensity aiming at changing to a green economy, a change less painful and expensive than that of other countries. Such strategy would permit Brazil to take economical advantage of an environmental sustainable production and amplify the economical-energetic Brazilian competition chances.

In this sense, Brazil has an extremely favorable condition to implement the green economy. Brazil already exploits renewable sources in large scale and it has a large potential to be explored in extremely competitive bases such as wind energy, bioelectricity as well as ethanol as fuel for light vehicles.

 II – Perspectives for the Brazilian Electrical Matrix

The Brazilian electrical matrix has an unusual composition vis-à-vis that of the rest of the world with a 90% share of hydroelectricity. This share is very important for a market of the Brazilian dimensions and scale. This matrix is based on hydroelectric plants with large reservoirs that accumulate water in the humid period of the year which permits its conversion into electricity in the dry period. These reservoirs allow for a regular offer of electrical energy along the year even with an irregular hydrological regime.

However, even though there are more than 150 GW of hydrological resources to be exploited, most of this potential is located in the Northern Region of the country that is geographically flat. This physical characteristic will limit the construction of large reservoirs and as a result reduction of the capacity of regulating electrical energy offer. This reduction associated with growing electricity demand calls for the diversification of the Brazilian energy matrix through the insertion of other sources, specially those that can operate in the base in the dry period of the year (CASTRO et al, 2010). One of the crucial questions regarding planning of the Brazilian electrical sector is to determine an energy policy that is complementary to hydrological sources and convergent with the global GHG reduction policy.

In order to analyze alternatives regarding this energy policy one should consider that this is a transition of the Brazilian energy matrix from a hydraulic structure to a hydro-thermal composition.

The 2008-2017 Decennial Plan formulated by EPE already indicates this evolution: fossil sources will increase their share in the Brazilian electric energy supply from 11% in 2008 to 17% in 2017. The estimates for 2017 are due to an increase of the thermo-electric undertakings fueled by fossil fuels resulting from the last auctions for new energy to be delivered in 3 and 5 years (A-3 e A-5) carried out in 2007 and 2008. However, this transition direction is contrary to the environmental policy. The results of these auctions are incompatible with the rationale and potential concerning the Brazilian electrical sector expansion that considers bioelectricity and wind energy besides the hydrological potential. These two renewable sources have concrete possibilities to increase their share in the matrix.

Even with this possible amplification of thermal undertakings insertion in the Brazilian park and the consequent increase of thermoelectric generation, the share of renewable sources in the Brazilian supply will be significantly above the average value of the developed countries with implementation of ambitious goals for promoting renewable energy sources as it is the case of the European Union[ix]. However, even with the present Brazilian status relative to electrical energy, it would not be prudent to accept the scenario of the last new energy auctions, namely the massive contracting of fossil-fueled thermoelectric plants. Adjustments should be made aiming at maintaining and even accentuating the clean characteristics of the Brazilian matrix. This seems to be one of the strategies to effectively establish a green economy.

Table 2 clearly illustrates the negative impact of oil-fueled thermal plants regarding GHG emissions if the 2008-2017 Decennial Plan is adopted.

Table 2 - CO2 Emissions from Different Sources

(Kg per MWh)

 Energy Source

                  CO2 Emissions

Natural Gas (open cycle)


Natural Gas (combined cycle)








Wind energy


Source: European Union (2006).

A justification for polluting undertakings would be the higher cost of less carbon-intensive sources, therefore inducing the contracting of projects with high carbon content and lower tariffs.  Recent studies carried out by the Electrical Sector Group of UFRJ’s (GESEL) have demonstrated that the apparent competitive aspects of thermal projects in the new energy auctions have basic methodology failures in the cost-benefit index (ICB) which assigns higher competitive values in detriment to renewable sources, notably bioelectricity and wind energy. Therefore energy cost could not justify the profile of the Brazilian supply expansion that occurred in the last auctions[x].

Even in the case that fossil-fueled thermal undertakings should have lower costs than the undertakings based on renewable sources, the promotion of the latter is obligatory because it is necessary to guide the economical development on sustainable basis and it should be emphasized that the green economy itself has economical advantages that in the medium term will compensate the higher costs of alternative sources of energy.

When the promotion of the Brazilian renewable sources of energy is analyzed, it is a plausible premise that these sources tend to be more competitive relative to those of other countries. This premise permits to consider that the adoption of the green economy in the energy ambit will have lower costs and it will happen faster as compared to other countries. Therefore, it is necessary to analyze the insertion potential, the costs and the environmental benefits of bioelectricity from sugarcane products and of wind energy, both alternative and renewable energy sources that can be inserted in the Brazilian energy matrix in the short term.

2.1 – Bioelectricity from Sugarcane Products  

Energy from sugar cane is the second energy source in the Brazilian energy matrix essentially due to the Brazilian Alcohol Program started in 1975. The results of this program have guaranteed and have permitted the use of ethanol in large scale in light vehicles and in electric energy generation for their plants and more recently for use in the Brazilian electric sector. However there still is a gap between the energy potential from sugar cane and the actual exploited energy. According to KITAYAMA (2008), one ton of sugar cane is equivalent to 1.2 barrels of oil. From this energy one third is contained in the sucrose and is fully used to produce ethanol. The remaining two thirds are contained in the bagasse and straw but only a reduced part is presently used for thermal and electrical energy production used for auto-supply and for sale to the restricted and free markets.

The economical alternative now viable for exploiting the energy potential of bagasse and straw is connected with biomass burning for commercialized electric energy generation. The new greenfield projects already contemplate in their business plans the commercialization of electric energy together with the main focus on ethanol and/or sugar production. The new projects have as standard technology the extra-condensation that generates the surplus of 80 KWh per ton of processed sugarcane using only bagasse. However, the plants built in the 70s and 80s – retrofit – use old technologies and are much less efficient since they produce modest 12 KWh per ton of processed sugarcane supplying basically their own needs and with no capacity to sell to the electrical market. It should be emphasized that the rupture technology will be biomass gasification using the synthesis gas for producing electricity. This technology will permit to produce around 270KWh per ton of processed sugarcane through the combined cycle (CORRÊA NETO e RAMÓN, 2002).

As most of the sugarcane crops are processed in old plants which can still operate for some decades, the full exploitation of the sugarcane energy potential requires modernization of these plants through the implementation of co-generation plants that will be able to generate electric energy surplus to be “exported” to the Brazilian electrical sector.

It is important to notice that the surplus of 80 KWh per ton of processed sugarcane based on extra-condensation turbines refers only to bagasse. Until recently this was the only residual biomass that was technologically viable to be used in sugarcane plants as fuel. However, the gradual end of clearance by burning imposed by environmental legislation will make available a large quantity of straw to be used in the plants. The use of straw for bioelectricity production will permit an estimated production of 200 KWh per ton of processed sugarcane or of electricity production in the off-harvest period.

 According to SOUSA (2009), in the 2008/09 harvest 562 million tons of sugarcane were processed and it is projected that in the 2010/11 harvest 1,038 million tons of sugarcane will be processed. A simple exercise: assuming the adoption of the extra-condensation technology in all plants and the use of 75% of the bagasse and 50% of the straw available, it will be possible to generate 13,158 MW[xi] of average electrical energy. In order to know the relevance of this figure, the firm energy of the largest hydroelectric plant of the world – Itaipú - is 9,699 MWave.

 Therefore, regarding this significant electrical energy potential from residues of ethanol and sugar production and the compatibility of this generation with the objective of promoting renewable energy sources and the use of processes that have considerable energy efficiency as a way to reduce GHG emissions in the energy sector, the insertion of bioelectricity in a scale compatible with its potentiality is undisputable an important mechanism to maintain the clean feature of the Brazilian matrix[xii] in line with the transition to the green economy.

Na important question to be discussed is the bioelectricity cost vis-à-vis conventional generation sources costs. The Reserve Energy Auction carried out in 2008, specific for contracting bioelectricity, has commercialized energy at an average cost of R$ 155.70 per MWh. As a comparison, the new energy generic auction A-5 of 2008 had an average price of R$ 145.23. According to a study published in 2008 (see CASTRO et al.), sugarcane co-generation greenfield projects would be viable at the time at a tariff of R$ 155.00 without the need of commercializing carbon credits. Therefore, based on these monetary parameters, it is noticed that the bioelectricity projects are close to the threshold of competition with conventional thermal projects. The authors report that for retrofits projects the balance tariff would be about R$ 180.00 at the time. These different values define and indicate the need of a specific economical and energy policy focused on the cost reduction of this type of project through the adoption, for example, of instruments such as detaxation.

2.2 – Wind energy

Among the renewable and alternative electrical energy sources that are being promoted in the world, wind energy has a growing and prominent relevance. This trend is due to the fact that wind is an abundant resource distributed all over the world. Furthermore, it is gradually becoming more competitive relative to other renewable energy sources such as, for example, solar energy. In this sense, considering the increasing demand for electrical energy and the need to increase the share of renewable sources in the world electric matrix,

consistent programs for promoting wind energy have been created in the last years. These programs act on the demand side through, for example, establishment of feed-in systems as well as policies regarding supply, such as detaxation. These policies have permitted the installed capacity of wind turbines around the world to grow from 6,100 MW in 1996 to 120,791 MW at the end of 2008.

The Brazilian wind energy resources have a superior quality as compared to the world average value measured by regularity and intensity. The Brazilian wind energy potential estimated in 2001 was 143,000 MW.[xiii]  Besides this potential, the Brazilian electrical system characteristics are extremely propitious to the insertion of wind energy so that they will be more competitive than those of other countries. From the technical point of view the intermittent character of wind energy demands the presence of idle installed capacity. The installed generation park must be diversified and higher than the peak electrical demand of the system in order to stand eventual abrupt reductions of wind energy generation due to its unpredictable character, even in the short term. For example, countries with high share of wind energy in the matrix like Portugal are having problems because they have to build thermal plants as back-up and therefore stand interruption of wind energy generation.

Brazil does not confront this type of problem and does not need to make supplementary investments because the Brazilian generation park based on hydroelectricity already has a significant idle capacity. Its total installed capacity is higher than 100,000 MW to satisfy an average demand of 64,000 MW. In spite of the high potential of wind energy and the fact that it has an electrical system propitious for the insertion of wind energy, its present installed capacity in Brazil is insignificant, namely slightly over 600 MW. The forecast is that it will reach the plateau of 1,427 MW at the end of 2010. These values are well below the installed power of countries such as USA, Germany and China that had at the end of 2008 installed power of 25,170 MW, 23,903 MW and 12,210 MW, respectively.

The more plausible justification regarding the lack of investments in wind energy undertakings is that the share of renewable sources in the Brazilian electrical matrix is already significant and therefore investments in alternative sources are secondary. Furthermore, the incipient development of the national wind generators industry increases the investments in equipment which is the more important item in the cost structure of a wind energy undertaking. 

The specific Reserve Energy Auction for wind energy conducted in December 2009 should be considered as an initial milestone of the new phase of wind energy. Its result proved the success of a general energy policy that has been adapting to promote the amplification of renewable sources in the matrix.

In this auction about 753 MWave, that represents the addition of 1,806 MW to the generation park, were contracted. The average price in the auction, namely R$ 148.39 per MWh, was a surprise and shows a flagrant contrast with an equilibrium tariff for wind energy of about R$ 180.00. These results reflect the efficiency of cost reduction policy that included:

i. Detaxing;

ii. Tax exemption;

iii. Discount in the “cable tariff”; and

iv. Special financing conditions via BDNES.

The indication given by this consistent police regarding wind energy contracting attracted groups willing to invest in the fabrication of wind energy turbines in Brazil that permitted the reduction of investment costs for this auction and mainly for the next ones.

 The Brazilian policy for reducing wind energy costs followed the same guidelines adopted in other countries and they were able to drive the development of this energy source. Therefore, the Reserve Energy Auction of 2009 should be analyzed as the start of a police consistent with the contracting of this energy source rather than an isolated event. The adoption of a systematic policy for wind energy contracting, besides contributing to the safety of the Brazilian electrical system, is coherent with the goal of making the transition to the green economy.

III – Brazilian Electrical Sector Planning

The present Electrical Sector model established in 2004 has as main tool holding auctions for increasing offer. The main objective of the auctions is to guarantee that the offer will expand in such a way as to satisfy the growth of demand with the lowest possible generation cost in line with the need of guaranteeing low tariff, one of the regulatory pillars of the Brazilian electrical sector.

Among the types of auction used one should highlight the generic auction that permits competition in the same occasion of projects that use different energy sources. This energy contracting format of generic auction is incoherent with the electrical sector planning. Since the auction is generic and one does not know a priori which type of undertaking will win then the result maybe inconsistent with the electric planning that is defined and formulated ex ante. For example, planning defines for 10, 15 and 30 years the share of hydroelectricity in the matrix. Because of the difficulty of offering hydroelectric undertakings in the auctions due to the slow-moving environmental licensing process and the inexistence of inventories in the 1990s, the generic auctions do not contract energy from this source. Since there are other sources participating in the auction, they balance the offer with the future demand but create a paradox regarding ex-post planning at each generic auction.

In this sense, the Brazilian electric sector planning gains the format of a ex-post planning vis-à-vis the generic auctions which define the future structure of the matrix. This seems to contradict the planning concept that is by definition something ex-ante.

The definition of the methodology adopted in a generic auction is by itself rather complex and difficult reflecting the difficulty of creating a methodology and calculation instruments that permit the correct comparison among undertakings with absolutely distinct characteristics. The Cost Benefit Index – CBI – that is the base of this methodology is the one adopted in the new energy auctions. It has deficiencies in its methodology according to CASTRO et al. (2009). In summary, this index is an undertaking cost provision that favors contracting of flexible thermal plants with elevated variable costs. In a hydrological system where thermal plants with elevated variable cost are dispatched in a reduced number of hours per year, the contracting by availability of this type of undertaking is justifiable because these thermal plants play efficiently the back-up role of the system. However, in a system that will need generation that are complementary to the hydrological park in a continuous form during the dry season of the year, these undertakings are inadequate because they cannot operate at the base and they will significantly increase the electrical sector generation cost whenever they will be dispatched in a number of hours higher than that estimated by the CBI calculation. Therefore, it can be noticed how difficult it is  for bioelectricity and wind energy as well as non-flexible natural gas thermal plants to be competitive in the generic auctions and this is mainly associated with the rules of the event.

Nevertheless, since the objective of the present article is to discuss the economic benefits of renewable sources investments and the best electrical energy alternatives in the context of the transition to the green economy, for analytical and comparative purposes it will be adopted the hypothesis that the CBI value is in fact the energy cost of the thermal undertakings contracted in the new energy auctions. They will be considered as the price of the conventional energy to be compared with the energy prices of renewable and alternative sources.  

Based on the harvest perspective of 902 million tons of sugarcane in the 2017/2018 crop and the technical assumptions presented in the previous section it is possible to estimate a potential of about 10,000 MWav in the sugarcane plants at the end of 2017. This capacity represents an estimated generation of 89 TWh. By comparing this figure with the equivalent generation from oil-fired thermal plants, it is estimated that 49 million tons of CO2 will be avoided. By comparing the average price of R$ 145.23 per MWh of the A-5 auction with the average price of biomass, namely R$ 155.70 per MWh, one may conclude that the cost of carbon avoided was R$ 19.03, well below the abatement cost in other countries. Even for a retrofit plant with an equilibrium tariff around R$ 180.00, the abatement cost would be around R$ 63.22 per ton of CO2, a value still very competitive relative to those of a series of countries, specially in a scenario with more ambitious reduction goals.

A similar analysis can be made regarding wind energy undertakings. Assuming as a hypothesis that with the development of the national wind turbines industry the price that will make wind energy viable, not considering incentives policies, is R$ 160.00 per MWh, this cost represents an abatement cost of R$ 26.85 per ton of CO2.  

Therefore, regardless of the fact that Brazil may assume commitments regarding emissions reduction, the concrete fact is that the abatement cost of greenhouse effect gases in the Brazilian electrical sector is extremely competitive. In this way, this qualifies Brazil and gives the country comparative advantages in the transition to the green economy in comparison to other countries both for commercialization of carbon credits and for lower production costs of sustainable goods in environmental terms.

The Brazilian electrical sector planning should pay attention to the importance and need of promoting sustainable development. In this sense, the environmental variable must be taken into account in the analysis concerning which undertakings should be inserted in the Brazilian electrical matrix. The format of an instrument based on a consistent methodology that permits comparison among undertakings of distinct generation sources in a predominantly hydrous generation standard is extremely difficult even more so when the environmental variable is incorporated.

Therefore, and for these reasons, the generic auctions should be substituted by specific ones. Planning must determine and indicate parameters for the participation of each energy source, searching for and converging to an ideal matrix.

The competitiviness of bioelectricity greenfield projects and the success of the policy for reducing wind energy costs indicate the possibility and pertinence of holding specific auctions that, according to the results already obtained, do not risk achieving low tariffs.

Final Considerations

The decision makers at the world level are facing a challenge: ensure the biosphere balance such as it presently is, confronted with the threats related with climate changes that are already in progress The only possible answer to this challenge is to promote policies that make viable the drastic reduction of greenhouse effect gases aiming at stabilizing the concentration of these gases in the atmosphere at levels that do not cause excessive damage to the terrestrial ecosystem and consequently to all inhabitants of the planet Earth. Due to their larger historical contribution to greenhouse effect gases emission, most of the efforts should be made by the developed countries. Two are the main strategies: establishment of internal goals concerning greenhouse effect gases reduction and transfer of financial and technological resources to developing countries.

However, it is a plausible hypothesis that a country with the economical magnitude such as that of Brazil should be included in the new climate agreement regarding both reducing goals and voluntary commitments with its own resources. Even though most of the Brazilian emissions are related with deforesting and therefore its elimination should be the focus of the Brazilian climate change policy, the energy sector must keep its characteristic of reduced carbon intensity. And so the energy policy must be aligned with the climate change policy.

The arguments of the authors is that Brazil should consider the promotion of renewable sources, specially in the electrical sector, as an opportunity because this promotion is coherent with the objective of establishing the green economy and Brazil has exceptional conditions to make this transition with lower costs than those of other countries. In the electrical sector the potential of bioelectricity and wind energy permits to maintain the sustainable character of the Brazilian matrix without divergence from generation costs as long as there is a consistent insertion of these sources in the Brazilian electrical energy offer.

The effective exploitation of the opportunities described in the previous paragraph requires the planning of the sector to be effectively executed and this has been hindered by the generic energy auctions. In this sense, it is necessary the segmentation of the energy auctions by type of source in order to permit the contracting of the planned matrix that satisfies the established safety, economic and environmental sustainability requirements.

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[i] Professor at UFRJ and Coordinator of GESEL – Electric Sector Studies Group of the Economy  Institute.

[ii] Ph D student at COPPE/UFRJ Energy Planning Program and Senior Researcher of GESEL/IE/UFRJ.

[iii] This point of view has been considered by the Brazilian government as can be observed by the Brazilian participation in COP-15 and the Climate Change Law.

[iv] An ecosystem is defined as a set of relationships among biotic and abiotic factors in a determined space-site.

[v] ppm (parts per million) denotes one part per 1.000.000 parts.

[vi] ppb (parts per billion) denotes one part per parts.

[vii] Annex I countries committed with emissions reduction. It should emphasized that in the ambit of the United Nation Framework Convention on Climate Change, Annex I includes developed countries and countries that are changing to market economy. 

[viii] Green Economy is a development proposition that contemplates environmental sustainability as one of its vectors.

[ix] Estimates indicate that the share of electric energy renewable sources in the European Union will be about 34% in 2020 with the implementation of the “three twenties” goal.

[x] The only justification for contracting thermal plants would be the need of the electrical system to have plants in the back-up position due to the characteristics of the matrix and the inherent hydrological risk.

[xi] This potential is theoretical.

[xii] Besides the environmental bias, there is a reason restricted to the electrical sector that makes mandatory and efficient the promotion of bioelectricity: its perfect complementariness regarding the hydroelectric park. Therefore, it is an adequate energy source to operate at the base of the system during the dry season of the year.

[xiii] Data obtained in 2001 at 50 meters of height. Preliminary estimates at 100 meters indicate a potential above 300.000 MW.

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