Brazil’s newly elected government, under Luiz Inácio “Lula” da Silva, will face energy-transition and decentralization issues during critically important years in the fight to curb climate change. Livia Neves reports from Rio de Janeiro.

From pv magazine 12/2022

The re-election of Luiz Inácio Lula da Silva to the Brazilian presidency in October brings the nation back into the fold of global attempts to combat the climate crisis after a four-year hiatus under the divisive reign of Jair Bolsonaro.

Da Silva, of the left wing Workers’ Party, or Partido dos Trabalhadores (PT), beat Bolsonaro in the fiercest presidential race since the fall of a 20-year military dictatorship 34 years ago. A controversial figure himself, “Lula” is entering his second spell as president, having previously served from 2003 to 2010. That period saw state-controlled company Petrobras start drilling for oil and natural gas off Brazil’s coastal “pre-salt layer” and, according to the Operation Car Wash money laundering investigation, award inflated construction contracts in return for bribes.

The federal investigation, which ran from 2014 to 2021, saw Da Silva indicted and jailed. Critics of initial investigating judge Sérgio Moro alleged he provided inside information to Da Silva’s opponents to ensure the PT was defeated in the 2018 election. Da Silva was then released from prison after that election, in November 2019.

Three years on, Lula visited the COP27 climate summit in Sharm El Sheikh, Egypt, as Brazilian president-elect. He said “combining development and the environment is also investing in the opportunities created by the energy transition, with investments in wind, solar, green hydrogen, and biofuels. These are areas in which Brazil has immense potential, particularly in the Brazilian northeast, which has just begun to be explored.”

Before the election, Da Silva committed to zero Amazon deforestation and zero greenhouse gas emissions from electricity generation.

Emissions in context

Renewables already account for almost 84% of Brazil’s electricity generation (157 GW of a 187 GW fleet). Energy, which in the figures collated by Brazilian civilian body The Climate Observatory also includes fossil fuels used for transport, represented almost 18% of the 2.4 billion tons of carbon-equivalent greenhouse gases emitted by Brazil in 2021.

Those numbers show the combined energy and transport emissions are rising as a proportion of the whole. Land use contributed 49% of emissions, chiefly from deforestation. Agriculture and livestock made up 24%.

Brazil was responsible for 3.5% to 4.5% of the world’s emissions in 2021, based on the 51 billion metric tons (MT) to 58 billion MT total in the UN Environment Programme’s “Emissions Gap Report.”

Consistent agenda

The staff appointed by Da Silva to the nation’s Ministry of Mines and Energy have backed the expansion of renewables via competition but, while solar appears to be in line with Da Silva’s agenda, industry-specific challenges remain.

The appointments made to date have been welcomed by Adalberto Maluf, marketing director of the Brazilian operation of Chinese electric-vehicle company BYD, and the president of the Brazilian Association of Electric Vehicles.

The social role clean power can play in Brazil is emphasized by Hewerton Martins, president of pressure group the Free Solar Movement, (Movimento Solar Livre, or MSL).

“Our main cause is the generation of jobs in five thousand municipalities in the country,” he says. “In addition to jobs, the money that is saved by consumers will circulate in the municipalities, which is good for the local economy. What we see is that the government is equally sensitive to this agenda. Keeping job generation at the forefront is important in any ideological spectrum.”

Solar energy generation and water heating, for example, will be mandated as part of Da Silva’s resumption and expansion of the Minha Casa, Minha Vida housing program for low-income families.

Solar is the third-largest component of Brazil’s energy mix and makes up 10.5%, with more than 21 GW of photovoltaic generation capacity. Government body the Energy Research Company (the Empresa de Pesquisa Energética, or EPE) expects 45 GW of solar this decade, including small, distributed-generation arrays.

Brazilian PV industry body ABSOLAR estimates the sector has attracted more than BRL 108 billion ($20.2 billion) in investment since 2012, generating BRL 28 billion in tax income, creating more than 630,000 jobs, and avoiding 29.9 million tons of electricity-related carbon emissions.

Energy market reform

Despite those numbers, Law 14,182, which privatized Petrobras, committed to eight thermal gas plants which are due to start generating by 2029. Clean energy proponents say solar, wind, and batteries could perform the same function – of balancing hydro generation with power dispatchable in fractions of a second. The gas deposits found in the deepwater pre-salt layer, however, inspired the Petrobras move, with the plan to construct pipelines to open up new Brazilian gas markets.

At the same time, the volume of PV plants commissioned via national auctions is falling, with 94% of the 25.5 GW of solar projects set to start generating between this year and 2026 instead taking shape on the back of private power purchase agreements, according to national electricity regulator ANEEL.

With such free-market arrangements accounting for 38% of national electricity consumption, the Ministry of Mines and Energy is consulting on plans to liberalize the whole sector, such that low-voltage, small-business energy users will be able to choose their supplier from 2026, and households from 2028.

Any liberalization program out to 2031 will coincide with the expiry of 20 electricity distribution contracts which affect 60% of the nation’s non-free market, “captive” energy users, according to research organization the Getúlio Vargas Foundation. That would allow the government to redefine the role of electricity distribution companies, amid suggestions they could become smart grid managers contributing to the energy transition. Power supply quality and interruptions will also feature in the debate over energy market reform.

“Now consumers have learned that they can generate their own energy and have started to look for more information about their energy bills and price composition but they are not satisfied,” says Martins. Referring to figures from PROCON, the government agency for consumer protection, he says, “the main complaints are from the electricity sector, along with telecoms. We will continue to seek political allies, whether in the [newly] elected government or among those already in government.”

Our oil?

The energy issue is sensitive for PT governments. Dilma Roussef, head of state from 2011 to 2016, is remembered for using her presidential power in 2012 to offer extensions to hydroelectric generation contracts ahead of their expiry dates, in return for reduced terms. That attempt to reduce electricity bills backfired after a severe drought in 2013 and 2014 meant thermal power plants had to be fired up, raising costs.

The discovery of an estimated 12 billion barrels of deepwater oil in the pre-salt layer off the south and southeastern coasts of Brazil in 2006 offered the nation the prospect of independence from fossil fuel imports. “O petróleo é nosso” (oil is ours) became a national slogan as Da Silva was pictured, hands covered in oil, at one of the first drilling sites. Since 2016, Brazil has had a trade surplus in oil, with the figure standing at BRL 14.9 billion last year, thanks to BRL 40.3 billion of exports.

On the significant influence of fossil fuel on the Brazilian economy, Da Silva has said Petrobras “will have its strategic and investment plan oriented towards energy security, national self-sufficiency in oil and derivatives, [and] the guarantee of fuel supply in the country. Therefore, it will return to being an integrated energy company, investing in exploration, production, refining, and distribution, but also operating in segments that connect to the ecological and energy transition, such as gas, fertilizers, biofuels, and renewable energy.” The government’s ability to influence that strategy is more limited as Petrobras appointments must now be in line with state-owned company law.

Ministerial hopefuls

Former Ministry of Mines and Energy executive secretary Maurício Tolmasquim will form part of the new administration. The Federal University of Rio de Janeiro professor, and former president of advisory body the EPE, drew up the current energy regime under which new generation projects are awarded through competitive auctions and based on long-term concessions.

Jean Paul Prates, whose senatorial mandate ends next month, has also been named as having a role to play. Prates was president of the Center for Strategies in Natural Resources and Energy thinktank and, although his background is in oil and gas, recently oversaw a bill regulating offshore wind power in the northeast of the country.

“One of the greatest technical leaders in wind and solar energy, he dominates the subjects in depth,” says BYD’s Maluf. “He was the creator of the parliamentary front in defense of electric mobility. He is someone who understands the transformations of the global industry, the necessary industrial policies that need to be made for Brazil to be a leader of the green economy agenda.”

Maluf himself was a candidate in the recent election, standing for the Green Party (Partido Verde). While Tolmasquim and Prates are close to Da Silva, another candidate for head of the Ministry of Mines and Energy is Senator Eduardo Braga, of the Brazilian Democratic Movement (Movimento Democrático Brasileiro, MDB), who previously held the role under Rousseff in 2015 and 2016. The MDB forms part of the broader coalition that helped the PT to power.

Battles in Congress

As deals are made over who gets which cabinet post, solar associations have branched out with regional representation, reflecting the fact arrays with a generation capacity of no more than 75 kW make up 12.8 GW of Brazil’s solar capacity, with businesses in more than 5,000 municipalities considering going solar.

Parliament and the Senate negotiated for more than a year before deciding to gradually phase out the net metering program for small scale energy systems which has driven 15 GW of distributed generation capacity in the country. Law 14,300, to enact that decision, is due to come into effect on Jan. 1, but parliamentary deputy Celso Russomano – of the Republicanos party – wants to force a vote on his PL 2703/22 bill this year, which would postpone Law 14,300 for 12 months.

ABSOLAR, the Brazilian Association of Distributed Generation, MSL, the Brazilian Cotton Growers Association, the Brazilian Micro and Small Business Support Service, and the Brazilian Federation of Accommodation and Food have mobilized supporters to demonstrate in support of Russomano’s vote. In an open letter, the industry bodies claim energy distributors make it difficult for users to access the grid, and say a six-month period of grace between publication and Law 14,300 coming in to effect has not been observed.

Opposition was roused by an ANEEL consultation proposal based solely on the costs of providing distributed generation, without considering grid benefits. The regulator has suggested distributed-generation tariff discounts will cost the taxpayer BRL 1.4 billion next year. ANEEL figures also indicate, however, payments to diesel power plants will hit BRL 11.9 billion this year, with a BRL 1 billion bill for coal subsidies.

Small-scale PV arrays have already proven their worth, according to ABSOLAR, which estimated they saved the taxpayer BRL 13.6 billion in fossil fuel power plant payments during last year’s drought.

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