Brazil Renewable Energy Policy Handbook Power

Transcription

1 Brazil Renewable Energy Policy Handbook 2017 Report Code: GDAE1102P

2 1 Table of Contents 1 Table of Contents List of Tables Introduction Renewable Energy Policy GlobalData Report Guidance Renewable Energy Policy, Brazil Overview Renewable Energy Auctions Alternative Energy Auction LFA-2010 and Reserve Energy Auction LER Brazil National Climate Change Plan Luz para Todos Electrification Program International Action Program, Brazil s Hydropower Program Incentives for Small Hydropower Facilities, Law Wind Turbine Component Tax Exemption (Executive Decree 656) Inova Energia Program Solar Auctions National Biodiesel Program Net Metering for Distributed Generation Distributed Generation Regulation and Tax Incentives Energy Expansion Plan National Alcohol Program Federal and State Taxes on Ethanol Social Fuel Stamp Auction System Ethanol Blending Mandate Ethanol Export Tax Credit Special Regime of Reinstatement of Tax Amounts for Exporting Companies Reintegra Spending on Biofuels CT-Petro program CT-TRANSPORTE CT-INFRA CT-ENERG CT-AGRO CT-BIOTEC Green-Yellow Role of the National Development Bank of Brazil

3 3.21 National Energy Efficiency Policy Regulated Investments in Energy Efficiency The Energy Efficiency Law Solar Water Heating Legislation Appendix Market Definitions Installed Capacity Electricity Generation Electricity Consumption Thermal Plant Hydropower Plant Nuclear Renewable Energy Resources Abbreviations Bibliography Methodology Coverage Secondary Research Primary Research Modeling and Forecasting Contact Us Disclaimer List of Tables Table 1: Renewable Energy Auctions, Brazil, Table 2: Biodiesel and Mineral Diesel, Brazil, Federal Taxes...15 Table 3: Abbreviations

4 2 Introduction 2.1 Renewable Energy Policy Renewable energy represents a possible solution to two major global issues: global warming and diminishing fossil fuel reserves. It is sustainable and clean, generally emitting no or very little CO 2, and these factors have led major countries to shift their focus toward the development of renewable energy sources. Renewable energy has the potential to boost the global economy. However, the most important challenge in the deployment of renewable energy is that it is more expensive than conventional fuels. In order to make renewable energy competitive, it is necessary for governments to provide support in the form of favorable policies and incentives. Various governments are establishing regulatory frameworks, policies, and incentives to develop the renewable energy sector, as they increasingly recognize its importance. Renewable portfolio standards, or quota obligations, and Feed-in Tariffs (FiTs) are the two most prominent support mechanisms used to drive the development of the renewable energy market, and most of the countries that recognize this offer one or both of these policy measures. Other incentives, such as capital subsidies, grants, rebates, tax credits, tax exemptions, loans at reduced interest rates, net metering, Renewable Energy Certificates (RECs), and public competitive bidding, are also offered variously by major countries to promote renewable energy capacity building. 2.2 GlobalData Report Guidance The report begins with an introduction to renewable energy policy and its importance in making renewable energy sources competitive with conventional energy sources. It then discusses the major renewable energy policies in Brazil. 4

5 3 Renewable Energy Policy, Brazil 3.1 Overview Brazil is the largest and fastest-growing economy in South America and the seventh-largest economy in the world. The economy is expected to grow at an average of 4.5 5% annually between 2014 and Strong economic growth has led to increased demand for power, and the government has adopted a hybrid approach to meet part of its future demand by allowing both public and private investment in new power generation and distribution projects. Electricity prices in Brazil are among the most expensive in the world, even after the government cut them in September 2012 for homes and businesses in order to boost industry competitiveness. A law to that effect was passed in January It led to a reduction in electricity prices by 18% for domestic consumers and 32% for industry, which was previously $180 per Megawatt hour (MWh). The move brought much-needed relief to the industry, which was negatively affected by slow economic growth between 2011 and Brazil derives the majority of its power requirements from hydropower, making use of its most abundantly available natural resource. However, drought conditions have impacted hydropower generation in the recent past and forced electricity generating companies to compensate the demand with costlier thermal power sources. These conditions caused a strain on the electricity generating price. The Ministerio de Minas e Energia (Ministry of Mines and Energy, MME) plans to diversify the power mix in order to reduce the risk of electricity shortages. The diversification and energy security strategies for the forecast period will increase the share of thermal, nuclear, and alternative energy sources in the power mix. Persistent economic growth has resulted in the need for increased investment in power production. The MME is the primary regulator of the Brazilian electricity sector. The Brazilian Electricity Regulatory Authority (Agência Nacional de Energia Elétrica, ANEEL) is an autonomous federal agency whose main responsibility is to regulate and supervise the electricity sector according to the policy determined by the MME. In 2011, the government announced an investment of $255 billion through the second Accelerated Growth Program in order to increase power generation. This amount was to be invested over the period. Brazil uses capital subsidy and rebate schemes, and some of its states also offer FiTs. Policy measures such as renewable energy acts and financial subsidies have boosted the renewable energy sectors and are expected to continue to drive industry growth. The renewable power sector is expected to grow enormously, especially in the wind, biomass, and solar energy segments, as a result of government initiatives and increased private sector participation. Wind energy development has gained prominence in the power market since the introduction of wind power auctions in Onshore wind capacity is expected to increase at a Compound Annual Growth Rate (CAGR) of around 15% between 2015 and 2025, although no contribution from offshore wind is expected. 5

6 Solar photovoltaic (PV) capacity, which was introduced in 2010, is expected to grow at a CAGR of 47% between 2015 and 2025, while the biomass sector is expected to increase at a much lower CAGR of 4%. Renewable power capacity increased significantly, from 2.1 GW in 2001 to 22.1 GW in 2015, owing to the support of a variety of federal policies and measures. Brazil is aiming at increasing the share of renewable energy sources in its annual generation to 10% by 2020 and 20% by 2030 and is particularly focusing on wind, small hydropower, and biomass. The government introduced the Program of Incentives for Alternative Electricity Sources (Programa de Incentivo a Fontes Alternativas de Energia Elétrica, PROINFA) in 2002, to boost the adoption of renewable energy sources. The first phase of PROINFA, in 2004, awarded auctions for 3,300 Megawatts (MW) of wind, biomass, and small and medium-sized hydropower. PROINFA was succeeded, in 2011, by auction procedures, to encourage the further development of the power generation sector. Hydropower, thermal, nuclear, and renewable energy are the four major sources of power generation. Brazil has the largest capacity for water storage in the world and is heavily dependent on hydropower generation, which accounted for 64.7% of installed capacity in The MME plans to diversify the power mix, in order to reduce the risk of power shortages caused by droughts. Thermal, nuclear, and alternative energy sources will all replace some part of the power supply as part of the diversification and energy security strategy during the forecast period. Brazil is a tropical country with abundant biomass resources. Sugarcane is produced in the country for the production of sugar and alcohol, and the biomass produced from this is used for the generation of power with low carbon emissions. Brazil possesses an estimated 50 Terawatt hour (TWh) per year of potential power generation from solid waste. The management of waste for energy generation purposes will reduce dependence upon fossil fuels, decrease environmental pollution, and generate thousands of jobs for unskilled workers. Brazil has a wind power potential of more than 350 GW. Therefore, wind can be considered a potential supplementary source to the energy generated by hydropower. 3.2 Renewable Energy Auctions The government is able to call an auction to make an agreement regarding renewable capacity, with the resulting agreement functioning as a FiT system. The auction approach is a significant tool in Brazil in terms of driving the use of renewable sources, and the technology-specific approach enables organizations to contract for auctions. ANEEL conducts the auctions to provide contracts to power generation projects for future power demand. The projects contracted in the auctions have either three or five years from the date of the auction to the start of delivery of power to the grid. Auctions where projects are given three years are referred to as A-3 auctions and are generally contracted for wind, solar and small hydropower projects, while auctions that allow five years are referred to as A-5 auctions and are provided for large hydropower and conventional power generation projects. 6

7 The first auction was held in June 2007, and there have been several auctions in which renewable projects were provided with contracts. Wind or biomass power projects contracted in an auction typically secure a 20-year power-supplying contract, while small hydropower projects typically secure a 30-year contract. The following table provides information on the total renewable capacity and the average price at which capacity has been contracted in various auctions. Table 1: Renewable Energy Auctions, Brazil, Auction Date held Technology Awarded capacity (MW) 1st alternative energy auction June 2007 Biomass 97 Small hydro 541 1st capacity auction August 2008 Biomass 1,284 2nd capacity auction December 2009 Wind 1,806 3rd capacity auction August 26, 2010 Small hydro 30 Biomass 648 Wind 528 2nd alternative auction August 27, 2010 Small hydro 101 Biomass 65 Wind 1,520 12th energy auction August 2011 Wind 1,068 Biomass 198 4th capacity auction August 2011 Wind 921 Biomass th energy auction December 2011 Wind 977 Biomass 100 Large hydro th energy auction December 2012 Canceled - 15th energy auction December 2012 Wind 289 Large hydro 294 5th capacity auction August 2013 Wind 1,500 16th energy auction August 2013 Large hydro 400 Small hydro 218 Biomass th energy auction November 2013 Wind th energy auction December 2013 Wind 2,338 Small hydro 308 Biomass 162 Large hydro 700 6th capacity auction October 2014 Solar PV 890 Wind th energy auction November 2014 Wind 926 Biomass 611 Small hydro 43 3rd alternative energy April 2015 Wind 90 7

8 Biomass nd energy auction August 2015 Biomass pending Wind - Natural Gas - Small hydro - 7th capacity auction August 2015 Solar PV pending 8th capacity auction November 2015 Solar PV pending Source: GlobalData; IEA, 2015 Wind and solar power auctions for 2016 were cancelled. The first round of solar power auction that was supposed to have been held in July 2016, was postponed to December 2016, to be held jointly with wind power. Meanwhile, Brazil s economic decline along with its President, Dilma Rousseff s impeachment, led to a decrease in electricity demand, further leading to a situation of oversupply. The government finally decided to cancel auctions for solar and wind power capacity. 3.3 Alternative Energy Auction LFA-2010 and Reserve Energy Auction LER-2010 In August 2010, ANEEL hosted an auction, LFA-2010, for small hydropower, biomass, and wind power, with the aim of delivering power to the national interconnected system by January 1, The average price realized was BRL134 ($75.88) per MWh, which is lower than the 2009 auction tariffs, and 50 wind power projects, worth 1,519 MW, were contracted for 20-year Purchase Agreements (PPA). The developers with the most contracted capacity were Impsa-Energimp (270 MW) and Iberdrola (258 MW), followed by CHESF (180 MW), Contour Global (150 MW), and Energisa (150 MW). The second auction, LER-2010, which took place on the same day, awarded 20 wind power projects, with a combined capacity of 528 MW. The main winning developers were Renova Energia (153 MW), Iberdrola (115 MW), and ENEL (90 MW). ANEEL had approved a cap price for a reserve energy auction held on November 13, The ceiling price for solar projects was BRL381 per MWh ($94.11 per MWh), while the maximum price for wind power projects was BRL213 per MWh ($52.61 per MWh). The Brazilian Energy Agency (EPE) pre-selected 649 solar projects totaling 20.9 GW and wind power projects with a combined a capacity of 17.9 GW for the auction. 3.4 Brazil National Climate Change Plan The government introduced the National Plan on Climate Change in December The plan focuses on the following seven areas: Low-carbon development Renewable power Biofuels 8

9 Deforestation Forest cover Vulnerability and adaptation R&D The plan aims to reduce greenhouse gas (GHG) emissions from deforestation, set targets for the reduction of deforestation, and achieve a national emission reduction of % compared with emission levels in 2000, by The plan established funding mechanisms and financial incentives for the achievement of this target. It also aims to ensure that renewable energy continues to account for a substantial share of the energy market. The following major actions are proposed: Hydropower: 34,460 MW from new hydropower plants to be included in the system in accordance with the program of work of the Ten Year Energy Plan, covering Energy from wind and sugarcane bagasse: increasing the share of these sources in the power mix through specific auctions of RE Solar PV energy: seeking the expansion of the national PV industry and the use of this energy source in systems that are isolated and connected to the grid Increase the share of biofuels in the national transport matrix Ethanol: stimulate industry to achieve an average annual consumption enhancement of 11% over the next 10 years, generated from crops raised in areas defined in the Sugarcane Zoning Program that is currently being implemented the use of ethanol is expected to prevent 508 million tons of CO 2 emissions in the next 10 years Agro-energy: implementation of the National Agro-Energy Plan that is currently being planned, with the aim of carrying out research, development, and innovation 3.5 Luz para Todos Electrification Program In November 2003, the Light for All (Luz para Todos) program was introduced, replacing the Rural Electrification program (Luz No Campo), established in 1999 by Decree 2/12/1999. The program was executed in order to support the development of rural electrification through network expansion, the introduction of distributed generating systems with confined networks or individual plants, and the use of renewable sources for power generation. Initially envisaged until 2008, it has subsequently been extended to 2010 by Decree 6442 of 2008, to 2014 by Decree 7520 of 2011, and then to 2018 by Decree 8387 of

10 The program is co-ordinated by the MME, operated by Eletrobras, and enforced by power concessionaires and rural power co-operatives. Luz para Todos is aimed at the achievement of social inclusion through the provision of power to all Brazilian citizens. Most of the funding for the program comes from the Global Reversion Reserve (Reserva Global de Reversao) and the Energy Development Account (Conta de Desenvolvimento Energetico). A number of pilot projects involving renewable sources were conducted in partnership with universities during the first five years of the program, but no full-scale projects were undertaken. The program had provided power to 3,184,946 households, benefiting about 15.3 million people by November 2014 with investments from the federal government. The program initially concentrated on low income regions. According to Decree 7520, the program has introduced a new phase, whereby the scope of focus has been broadened to include sections of the population that are above the poverty line. In 2015, until February, the Light for All program benefited over 4,895 families in the states of Amazonas, Bahia, Goiás, Maranhão, Mato Grosso do Sul, Mato Grosso, Pará, Pernambuco, Paraná, Rio Grande do Norte, Roraima, Sergipe, São Paulo, and Tocantins. 3.6 International Action Program, Brazil s Hydropower Program The International Action Program (IAP) was the outcome of the International Conference for Renewable Energies that was conducted in Bonn in June The IAP includes 200 concrete actions and assurances for the development of renewable energies, which were carried forward by the government, international organizations and stakeholders from civil society, the private sector, and other stakeholder groups. The Brazilian government announced the Brazil Hydropower Program in March 2004, which aimed to increase the supply of power from hydropower in the country. The implementation of projects is dependent upon a public auction to guarantee both lower tariffs for final consumers and reductions in environmental impact. The projects were expected to add 2,819 MW to the Brazilian interconnected system. According to the program laws, there will be contracts between distribution utilities and project developers and an affirmed PPA covering a period of years. The Electrical Sector Monitoring Committee, along with the MME, introduced a regulatory framework in 2004, aimed at achieving the targets set by the project and taking adequate corrective measures. 3.7 Incentives for Small Hydropower Facilities, Law 9648 This policy offers incentives to small hydropower facilities with less than 30 MW of capacity, exempting them from payment of financial compensation for the use of water resources. These facilities will receive a reduction of 50% on transmission and distribution tariffs and are also permitted to sell energy directly to consumers with more than 500 kilowatts (kw) of capacity. Exemption from the public bidding process is also granted for these facilities, upon authorization by ANEEL. Wherever thermal generation is replaced by hydropower generation, the affected plants can take advantage of the Fuel Consumption Cost Account. 10

11 3.8 Wind Turbine Component Tax Exemption (Executive Decree 656) Executive Decree 656 exempts manufacturers from paying the Social Integration Program and Contribution to Social Security Financing (COFINS) tax on components purchased for wind turbines production. 3.9 Inova Energia Program The goal of the Brazil Inova Energia Program is to boost cooperation and knowledge sharing between companies and technology institutes in the fields of smart grid technology, renewable energy, and hybrid and energyefficient vehicles. Inova provides support in the form of grants and soft loans. Credit lines from Inova can cover up to 90% of accepted project costs. The remaining 10% must be financed by the company. The program is financed by BNDES, Financier of Studies and Design (Financiadora de Estudos e Projetos, FINEP), and ANEEL. In 2013 Inova was open for receiving application from private parties. In February 2014, a selection process was completed selecting 57 companies for the support in all three focus areas of Inova Solar Auctions Three solar power auctions have been held to date, of which two held in October 2014 and August 2015 were solar only auctions, while the one held in November 2015 also included wind auctions. The auctions together totaled BRL12 billion ($3 billion) worth of investments. The breakdown was as follows: October projects aggregating over 1 GW capacity expected to start supplying electricity by October 1, 2017, at an average price of BRL220/MWh ($55/MWh) August projects aggregating 830 MW capacity supposed to expected to start supplying electricity by August 1, 2017, at an average price of BRL301/MWh ($75/MWh) November GW of aggregate capacity from both solar and wind projects of which 33 solar projects were expected to start supplying electricity by November 1, 2018, at an average price of BRL297/MWh ($74/MWh) (Figueiredo and Pascal, 2016) 3.11 National Biodiesel Program The National Biodiesel Program (Programa Nacional de Produção e Uso do Biodiesel, PNPB) came into force on December 6, The program called for a number of different studies, while bills and actions were implemented in the program to include Brazil s fuel-related legal and regulatory environment for biodiesel. Under the PNPB, tax grants and subsidies were provided through social fuel stamps, the establishment of family farms, and measures taken to nurture technological development. Under the program, a biodiesel market was organized around purchase auctions, which is a significant measure for the renewable power industry. 11

12 The government initiative is funded by BNDES, which is offering a 25% extension of the total loan payoff period for the purchase of machinery that uses at least 20% biodiesel fuel. Federal Law 11907, which was passed on January 13, 2005, specified biodiesel as a new fuel in Brazil s energy market. By January 2008, the law called for the blending of a 2% biodiesel, known as B2, with diesel oil. The requirement was modified in March 2008, and on July 1, 2008, the requirement was set at 3% biofuel. The requirement was increased to 5% in May 2015 and 7% in November Within five years of the launch of the PNPB, 90% of biodiesel in Brazil was produced from a combination of soy oil and bovine fat. In July 2009, biodiesel was typically composed of 78.8% soy oil, 14.6% bovine fat, 4.1% cotton seed oil, and 2.5% from other alternative resources. In May 2005, the government passed federal Law 11116, which provides for the abatement of some or all federal excise taxes on biodiesel. This suspension is based on the kind of feedstock utilized to make the biodiesel, the class of the grower-seller, the origin of the raw material, or a combination of these factors Net Metering for Distributed Generation On April 17, 2012, Resolution 482 of ANEEL entered into force introducing net metering policy in Brazil for small scale renewable generators. Renewable generators of up to 1 MW capacity interconnected to low- and medium-voltage grids are allowed to sell a surplus of the electricity back to the national grid in return for the electricity billing credit, to be recuperated within 36 months Distributed Generation Regulation and Tax Incentives ANEEL passed resolution number 687 on November 24, 2015, superseding resolution number 482/2012, to help expand solar power capacity on a greater scale without relying on the national grid. The main points of the new resolution are: It expanded the net metering scheme (Sistema de Compensação de Energia) created by resolution number 482, to include small generators of up to 5 MW, enabling them to offset their energy bills with credits from the electricity they feed into the grid. Participating consumers can distribute net-metering credits among multiple electricity accounts, for example, in a multi-tenant commercial complex or a residential apartment. On the other hand, the concept of shared/community solar power generation has also been introduced where multiple owners can share the benefits of a solar generation facility as a single consumer. 12

13 Credits obtained against production at one site can be used to offset excess energy consumption at another site, provided both sites are serviced by the same distributor, and both sites are owned by the same customer. The credits originating against solar power generation would remain valid only for a period of 60 months. The announcement of the net metering advantages for small solar power generators was followed up by an announcement by the Ministry of Mines and Energy, providing several tax incentives for solar power generators. They are: State value added tax (ICMS) and Social Integration/Social Security Contribution taxes (PIS/COFINS) to be exempted on net electricity that is fed back to the grid in fact, several provinces have already, on their own account, passed resolutions allowing such exemptions Import taxes levied on capital goods used to produce solar PV equipment and related components to be reduced from 14% to 2% until December 31, In addition, the scheme set a competitive price for the electricity that is added to the grid by the generating facility at BRL454/MWh ($113/MWh) and allowed for integration of the net-metering system into the bilateral market (the Free Contracting Environment) (Figueiredo and Pascal, 2016) Energy Expansion Plan In December 2010, the MME approved the new Decennial Plan for Energy Expansion, which implements the phasing out of fossil fuel power plant construction by 2014 and foresees major expansions in the hydro and wind grid-connected power sectors over the next 10 years. Installed capacity targets for renewable energies have been fixed as follows: Hydro: from 83.1 GW in 2010 to GW by 2019 Small hydro: from 4 GW in 2010 to 7 GW by 2019 Biomass: from 5.4 GW in 2010 to 8.5 GW by 2019 Wind: from 1.4 GW in 2010 to 6 GW by 2019 The 10-year plan foresaw an investment package of BRL952 billion ($236 billion) and targeted additional gridconnected electricity generation from renewable sources of 4 GW by the end of 2010, 777 MW by 2011, and 2 GW by Considering the dramatic increase in domestic electricity consumption (52% by 2019), the total share of renewable energy sources will have to increase by 13% annually with wind, biomass, and hydro as front-runners. 13

14 3.15 National Alcohol Program Brazil s PROALCOOL was introduced on November 14, 1974, as Decree The program was the largest fossil fuel replacement program in the world, validating the use of ethanol produced from sugarcane as a fuel for automotive vehicles. The program was adopted following the oil shocks of the 1970s, in order to ensure reliability in terms of the country s energy independence. By the mid-1990s, the program had proved unsuccessful, due to a shortage of ethanol and low gasoline prices, which made consumers revert to the use of gasoline and affected the supply of ethanol-powered cars. The price difference between gasoline mixed with ethanol and hydrated alcohol has currently been set at minus 30% by the government, and the percentage of ethanol mixed with gasoline has been set at 25%. Brazil has seen a resurgence in the use of ethanol as a fuel in recent years due to the private sector taking advantage of its availability. In 2003, flex-fuel cars were launched, allowing consumers to freely choose between gasoline and ethanol. The majority of growth in demand for ethanol has been driven by market forces, although government policy also has a substantial influence. This policy requires close supervision in all sectors, if successful implementation is to be achieved Federal and State Taxes on Ethanol The different tax rates applicable to ethanol in Brazil are outlined below: Contribution of Intervention in the Economic Domain (Contribuiçao de Intervenção no Domínio Econômico, CIDE): the funds raised via fuel tax are, in theory, used to fund construction works and maintain the transportation system. For gasoline, CIDE is fixed at BRL0.10 per liter ($0.03 per liter), and for ethanol the tax rate is currently fixed at zero. Social Integration Program (Programa de Integração Social, PIS) and Contribution for Social Security Financing (Contribuição para o Financiamento da Seguridade Social, COFINS) Social Tax: these two taxes are charged together. For gasoline, a fixed assessment of BRL0.12 per liter ($0.04 per liter) must be paid by the manufacturer upon sale to distributors. For ethanol, a rate of 3.65% is calculated on the basis of a sale by the manufacturer to the distributor, and a further 8.2% is calculated on the sale from the distributor to the retailer. Merchandise Circulation Tax: This is a state tax on ethanol, which varies from 12% to 35%. Most states charge the same ad valorem levy for both gasoline and ethanol. 14

15 3.17 Social Fuel Stamp Auction System In order to guarantee the prior development of production capacity to meet the B2 mandate and to provide an incentive to poorer farmers in underprivileged areas, the government required that as of January 2006 the mixture of all social Fuel Stamp biodiesel was compulsory, up to a limit of 2% of all diesel, with supplies to be sold through a public auction system. Under the purview of MDA, Regulations No. 1 and 2 (2005) required biodiesel suppliers to comply with the following conditions in order to obtain the stamp: Purchase of a minimum amount of raw material from family farmers, with percentages differing according to region Guarantee the purchase of available quantities Agree with farmers to provide technical support and training The Brazilian government has set certain federal tax incentives and exemptions in order to encourage the production of biodiesel in the country. The exemptions and incentives provided will be dependent upon the nature of the raw material in question, the size of the producer, and the geographic region of biodiesel production. The following table provides an overview of the federal taxes that apply to biodiesel in Brazil. Table 2: Biodiesel and Mineral Diesel, Brazil, Federal Taxes Producer type Region Feedstock PIS/PASEP COFINS Biodiesel B100 Diesel Family agriculture (PRONAF) All others All sources North, northeast and semi-arid zones (BRL/m3) All others Any Palm oil or castor oil 0.00 BRL10.39 ($2.76)/m BRL47.85 ($12.73)/m3 Source: GlobalData; USDA, 2015 PASEP: Heritage Training Program for Civil Servants North, northeast and semi-arid zones All others Palm oil or castor oil - Any BRL22.48 ($5.98)/m3 BRL ($27.54)/m3 BRL26.41 ($7.03)/m3 BRL ($32.35)/m3 All regions BRL26.36 ($7.01)/m3 BRL ($32.36)/m Ethanol Blending Mandate The government sets a mandatory ethanol blend in the gasoline. The obligation applies to vehicle manufacturers and fuel producers. The goal of the law is to reduce the pollution emissions of the transport sector. 15

16 The blend percentage can be changed by the Ministry of Agriculture and the Interministerial Council for Sugar and Alcohol (Conselho Interministerial do Açúcar e Álcool, CIMA) but it must be no less than 20% and no more than 27% Ethanol Export Tax Credit Special Regime of Reinstatement of Tax Amounts for Exporting Companies Reintegra Brazilian sugar and ethanol exporters are eligible to receive a tax credit calculated as a percentage of the value of products exported out of Brazil. The tax credit between December 10 and December 31, 2014, is equivalent to 0.3% of exports value. From January 1, 2015, the tax credit was elevated to 3% calculated on the revenue from the export of such goods. Under the Reintegra program, credits can be refunded in cash or offset against federal taxes and contributions (due or coming due) administrated by the Brazilian Federal Revenue (RFB). The credit amount will be tax exempted Spending on Biofuels The Ministry of Science and Technology has 16 sectoral funds, with the aim of transmitting the tax revenue accumulated from companies in particular industries back into R&D for that sector. Of these funds, 14 are related to specific sectors and two are cross-sectoral. A number of these sectoral funds could be utilized to finance R&D into biofuels CT-Petro program In 1999, the Petro Fund was the first fund to be created under the CT-Petro program, with the objective of conducting innovation in the production of oil and natural gas in order to improve production quality in the sector. It was also meant to encourage the development of human resources and contracts between businesses and universities or centers of research CT-TRANSPORTE The transport fund focuses on planning and development in civil engineering, transport engineering, materials, logistics, equipment and software and is aimed at reducing costs and increasing the competitiveness of transport infrastructure. The fund receives 10% of receipts from the National Department of Streets and Roads in contracts with communications and other companies that use transport infrastructure CT-INFRA The Infrastructure Fund was created to modernize infrastructure and education related to the sector of civil engineering, build and renovate laboratories, and buy equipment. The source of the fund is 20% of the resources allocated to each sectoral fund, supporting scientific and technological development. 16

17 CT-ENERG The Energy Fund aims to finance programs and projects in the energy sector, especially in the area of end-use energy efficiency. The fund looks to develop alternative sources of energy at a lower cost, with better quality and fewer emissions, and to increase the competitiveness of national technology related to energy. The fund obtains % of the liquid income of businesses that produce, transfer, and distribute electric energy CT-AGRO The Agro Fund focuses on scientific capacity and technology improvements in agronomy, veterinary science, economics, and social agriculture, increasing investment in biotechnology and the distribution of new technologies. The funding is generated from 17.5% of the Contributions and Intervention in the Economic Domain (Contribuição e Intervenção no Domínio Econômico, CIDE) tax that is imposed on the production and trade of fuels in Brazil CT-BIOTEC The Biotech Fund is targeted toward the development of human resources for the biotechnology sector and the strengthening of the national research infrastructure and related support services. The fund also supports the expansion of the national knowledge base, the screening of advances in the sector, business development in the biotechnology field, and the transmission of technologies to the business sector. The Biotech Fund comprises a 7.5% CIDE contribution Green-Yellow The Green-Yellow fund is part of a program formulated to encourage relationships between universities and businesses and support innovation. The objective of the program is to boost technological co-operation between universities, research centers, and businesses, in order to increase activities in science and technology. The fund is derived from 50% of the associated CIDE tax. The use of ethanol and biodiesel, which account for 20 25% and 2% of gasoline and diesel fuel blends, respectively, has stimulated innovation and increased the quality of oil. The energy fund is looking to develop alternative sources of energy, including biofuels, and to investigate the use of biomass and waste for fuel production Role of the National Development Bank of Brazil From the public sector, a number of development banks at the federal, regional, and state levels are involved in financing both ethanol and biodiesel. While the National Biodiesel Program attracts more attention and offers specific financing lines from a rural economic development perspective, the ethanol industry s concerted effort to increase production is, in terms of profitability, equally creditworthy. 17

18 BNDES, as the development financing arm of the government, via the Ministry of Development, Industry and Foreign Trade, is primarily concerned with local-level economic development and infrastructure-related projects that fulfill that mandate. BNDES seeks to increase the capital of private companies, the growth of the capital markets, the trade of machines and equipment, and the financing of exports. BNDES devotes an entire set of funding programs and financing lines to agriculture. The most relevant financing lines for the ethanol industry are BNDES Automatic Financing to Endeavors (FINEM), the Special Agency for Industrial Financing (Agência Especial de Financiamento Industrial, FINAME), and the Agricultural FINAME. BNDES also has a number of financing lines that focus particularly on Small and Medium Enterprises (SMEs) and grant funds that could support SMEs planning to enter the market for ethanol production. BNDES also offers lines of financing, which could, theoretically, be devoted to large enterprises, but are more likely to be reserved for their small and medium-sized parts. The lines offered are the Export Support program and the Leasing FINAME program National Energy Efficiency Policy The National Energy Efficiency Policy came into existence in December The policy aims to increase energy efficiency across various sectors, with the help of goals and policies to be implemented until Many policies have had a substantial impact on the public and private energy-efficiency investment pattern over the years. The National Program of Energy Conservation, for power, and National Program for the Rational Use of Oil Products and Natural Gas, for gas and oil derivatives, are some of the public initiatives being undertaken for the promotion of energy efficiency. The National Program of Energy Conservation helps to save power by indicating the energy efficiency of various products under each category. The national climate change program is another initiative that provides an institutional framework for energy efficiency Regulated Investments in Energy Efficiency In 1998, ANEEL made it mandatory for all utilities to invest a minimum of 1% of their net annual sale proceeds in energy efficiency and R&D programs. This mandate has boosted energy efficiency investment over the past two decades, and the utilities have the benefit of receiving a 100% subsidy for equipment and energy-related services. In 2000, a national law was passed that altered the allocation of resources as a result of this 1% obligation. A national fund was also created named CT Energy, to ensure that investment in energy efficiency and energy R&D projects is available. 18

19 3.23 The Energy Efficiency Law Law was enforced in Brazil in The main objective of this law is to guarantee the legal mandate for public agencies and methods in order to devise the minimum energy efficiency standards for equipment, vehicles, and buildings. Energy-efficient building standards are currently being implemented on a voluntary basis but will become compulsory Solar Water Heating Legislation A voluntary regulation was passed in 2006 to encourage the use of Solar Water Heating (SWH) systems in residential and commercial sectors. This regulation was initially limited to certain cities but had increased to 30 municipalities by the end of 2009 and is expected to be enforceable in another 50 municipalities across Brazilian cities in the near future. There are currently two pieces of legislation for SWH: incentive regulation and mandatory legislation. The state of Minas Gerais has a goal to install 15,000 heating systems, and, according to the building code in Sao Paulo, water heating systems will meet at least 40% of the water heating demand generated by solar water heaters. Rio de Janeiro also has a mandate in place for the use of SWH systems to meet at least 40% of water heating requirements. 19

20 4 Appendix 4.1 Market Definitions refers to the rate of production, transfer, or energy use, usually related to power. It is measured in Watts (W) and often expressed in kilowatts (kw) or Megawatts (MW). It is also known as real power or active power Installed Capacity Installed capacity refers to the generator s nameplate capacity as stated by the manufacturer, or the maximum rated output of a generator under given conditions. It is given in MW on a nameplate affixed to the generator Electricity Generation Electricity generation refers to the process of generating power from other forms of energy. It also refers to the amount of power produced, expressed in Gigawatt hours (GWh) Electricity Consumption Electricity consumption is the sum of power generated, plus imports, minus exports and Transmission and Distribution (T&D) losses. It is measured in GWh Thermal Plant A thermal power plant is a plant in which turbine generators are driven by burning fossil fuels Hydropower Plant A hydropower plant is a plant in which the turbine generators are driven by falling water Nuclear Nuclear power is the energy released from the fission of nuclear fuel in a reactor Renewable Energy Resources Renewable energy resources are those that provide energy that is naturally replenished but limited in the amount of energy available per unit of time. Biomass, geothermal, solar, small hydropower, and wind are examples of renewable resources. 20

21 4.2 Abbreviations Table 3: Abbreviations ANEEL Agência Nacional de Energia Elétrica (Brazilian Electricity Regulatory Authority) BNDES Banco Nacional de Desenvolvimento Econômico e Social (Brazilian National Development Bank) CAGR Compound Annual Growth Rate CIDE Contribuição e Intervenção no Domínio Econômico (Contributions and Intervention in the Economic Domain) CIMA Conselho Interministerial do Açúcar e Álcool (Inter-ministerial Council for Sugar and Alcohol) COFINS Contribuição para o Financiamento da Seguridade Social (Contribution for Social Security Financing) FINAME Agência Especial de Financiamento Industrial (Special Agency for Industrial Financing) FiT Feed-in Tariff GHG Greenhouse Gas GW Gigawatt IAP International Action Program MME Ministerio De Minas E Energia (Ministry of Mines and Energy) MW Megawatt MWh Megawatt hour PIS Programa de Integração Social (Social Integration Program) PNPB Programa Nacional de Produção e Uso do Biodiesel (National Biodiesel Program) PPA Purchase Agreement PROINFA Programa de Incentivo a Fontes Alternativas de Energia Elétrica (Program of Incentives for Alternative Electricity Sources) REC Renewable Energy Certificate SME Small and Medium Enterprise SWH Solar Water Heating TWh Terawatt hour Source: GlobalData 4.3 Bibliography Figueiredo R. and Pascal L.B. (2016) via Haynes and Boone, LLP. New Developments in Brazil s Solar Sector, RenewableEnergyWorld.com, February 18, Available from: [Accessed on: March 14, 2017]. IEA (2015). Policies and Measures. International Energy Agency, August 26, Available from: [Accessed on March 14, 2017] USDA (2015). Gain Report. USDA Foreign Agricultural Service. Available from: l_ pdf 21

22 4.4 Methodology GlobalData dedicated research and analysis teams consists of experienced professionals in marketing, market research, consulting background in the energy industry and advanced statistical expertise. GlobalData adheres to the Codes of Practice of the Market Research Society ( and the Strategic and Competitive Intelligence Professionals ( All GlobalData databases are continuously updated and revised. The following research methodology is followed for all databases and reports. 4.5 Coverage The objective of updating GlobalData coverage is to ensure that it represents the most up to date vision of the industry. We track hundreds of Alternative energy news sources on a daily basis. Using this news flow and regular interaction with the industry experts, we identify the key trends being witnessed by the industry. These can be market opportunity, industry consolidation, technological break-through, policy updates, etc. Our articles and reports investigate these trends in detail and evaluates the market implication of these trends Secondary Research The research process begins with exhaustive secondary research on internal and external sources being carried out to source qualitative and quantitative information relating to each market. The secondary research sources that are typically referred to include, but are not limited to: Company websites, annual reports, financial reports, broker reports, investor presentations and SEC filings Industry trade journals and other literature Internal and external proprietary databases National government documents, statistical databases and market reports News articles, press releases and web-casts specific to the companies operating in the market Primary Research A primary research effort further substantiates findings and information captured through desk research. This aspect of the research program serves both as a means of obtaining updates regarding issues such as changes in policy frameworks, power sector development, and as a quality control mechanism. GlobalData conducts hundreds of primary interviews a year with industry participants and commentators in order to validate its data and analysis. A typical research interview fulfills the following functions: 22

23 Provides first-hand information on the market size, market trends, growth trends, competitive landscape, future outlook Helps in validating and strengthening the secondary research findings Further develops the analysis team s expertise and market understanding Primary research involves interactions and telephone interviews as well as face-to-face interviews for each market, category, segment and sub-segment across geographies. The participants who typically take part in such a process include, but are not limited to: Industry participants: CEOs, VPs, business development managers, market intelligence managers and national sales managers Outside experts: Investment bankers, valuation experts, research analysts and key opinion leaders specializing in the power industry Modeling and Forecasting In case of data gaps and especially while forecasting the market, we use in-house models to forecast the data. Historic data and the analysis of trends within it form the basis of all forecasting methodology. Various qualitative and quantitative factors are usually taken into account for estimating the future growth. The forecasted data is validated through various industry experts and back-of-envelope check is also done. 4.6 Contact Us If you have any queries about this report or would like further information, please contact at the below given telephone numbers or address. North America: Europe: Asia Pacific: info@globaldata.com 23

24 4.7 Disclaimer All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, GlobalData. The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the findings, conclusions and recommendations that GlobalData delivers will be based on information gathered in good faith from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such GlobalData can accept no liability whatever for actions taken based on any information that may subsequently prove to be incorrect. This report is a licensed product and should not to be reproduced without prior permission. The information in this document has been extracted from etrack by a registered user. GlobalData holds no responsibility for the loss of original context and for any changes made to information following its extraction. All information was current at the time of extraction, although the original content may have been subsequently updated. 24