DEVELOPING THE ENERGY-RELATED BRAZILIAN NATIONALLY DETERMINED CONTRIBUTION (NDC)

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DEVELOPING THE ENERGY-RELATED BRAZILIAN NATIONALLY DETERMINED CONTRIBUTION (NDC) Workshop em modelagem e simulação de cenários de longo prazo no setor de

1 DEVELOPING THE ENERGY-RELATED BRAZILIAN NATIONALLY DETERMINED CONTRIBUTION (NDC) Workshop em modelagem e simulação de cenários de longo prazo no setor de energia e emissões de gases de efeito estufa associadas no Brasil São Paulo, January 30 th 2017 Jeferson Borghetti Soares Head Energy and Economic Department

2 SUMMARY BRAZILIAN NDC AND DOMESTIC ENERGY SECTOR SOCIO-ECONOMIC SCENARIO ELETRICITY CONSUMPTION & GENERATION FUEL CONSUMPTION ENERGY MATRIX, GHG EMISSIONS & INDICATORS CURRENT DEVELOPMENT ACTIONS

3 BRAZILIAN NDC AND DOMESTIC ENERGY SECTOR

4 BRAZILIAN NATIONALLY DETERMINED CONTRIBUTION (NDC) CONTRIBUTION Reduce greenhouse gas emissions by 37% below 2005 levels in 2025 SUBSEQUENT INDICATIVE CONTRIBUTION Reduce greenhouse gas emissions by 43% below 2005 levels in 2030 TYPE COVERAGE REFERENCE TIMEFRAME METRIC Absolute target in relation to a base year 100% of the territory, economy-wide, including CO 2, CH 4, N 2 O, perfluorocarbons, hydrofluorocarbons and SF Single-year target for 2025; indicative values for 2030 for reference purposes only 100 year Global Warming Potential, using IPCC AR5 values Brazil s NDC is economy wide and therefore is based on flexible pathways to achieve the 2025 and the 2030 objectives. In that sense, this presentation is meant to be for clarification purposes only.

5 BRAZILIAN NDC Energy Sector What is the level of effort for the Energy sector? The economic scenario and the commitment The role of energy efficiency New path for distributed generation Hydropower: the importance for the commitment

6 SOCIO-ECONOMIC SCENARIO

7 POPULATION Until 2030, Brazilian population increase - near 20 million, equivalent to current Australia population. GROWTH RATE (% p.y.) ASSUMPTIONS MILLION INHAB. 1.20% FORECAST Growth rate (% p.y.) % Source: EPE

GDP SCENARIO ASSUMPTIONS Brazilian economy will be 1,7 times of 2014, growth rate of ~3,5% p.y. between 2014-2030.

8 GDP SCENARIO ASSUMPTIONS Brazilian economy will be 1,7 times of 2014, growth rate of ~3,5% p.y. between Growth Rate (% p.y.) 8.7% ~3.0% ~3.5% 6.2% 1.7% 2.5% 3.6% 2.2% 4.1% Source: EPE

11.5 15.0 16.6 17.0 21.1 21.5 23.7 30.5 31.4 31.6 36.0 38.5 49.6 GDP PER CAPITA Average growth rate - Brazilian GDP: 3.4% p.y.

9 GDP PER CAPITA Average growth rate - Brazilian GDP: 3.4% p.y., current levels of Chile and Spain ASSUMPTIONS 10³ US$ [PPP 2005] Level of Welfare Source: Brazil Data: EPE; International Data: IEA * International data of GDP per capita for 2014.

10 02/01/ /01/ /01/ /02/ /03/ /03/ /03/ /04/ /04/ /05/ /05/ /06/ /06/ /07/ /07/ /08/ /08/ /09/ /09/ /10/ /10/ /11/ /11/ /12/ /12/ /01/ /01/ /02/ /02/ /03/ /03/ /04/ /04/ /05/ /05/ /06/ /06/ /07/ /07/ /08/2016 GDP GROWTH 2016 MARKET FORECASTS - Uncertainty 3,00 2,00 1,00 0,00-1,00-2,00-3,00-4,00-5,00 Evolução da projeção do crescimento do PIB de 2016 Fonte: Bacen, Boletim FOCUS

11 ELETRICITY CONSUMPTION & GENERATION

12 TOTAL ELECTRICITY CONSUMPTION FORECAST Electricity consumption in Brazil will be twice until 2030 (compared to 2014). Energy efficiency and distributed generation will have fundamental role TWh , , The new paradigm , Electricity load Self-production (DG included) Energy Efficiency Source: EPE Note: Electricity load includes electricity consumption and losses

13 kwh/capita PER CAPITA CONSUMPTION OF ELECTRICITY FORECAST INTERNATIONAL COMPARISION Despite the increase of electricity per capita consumption, Brazil still remains far from current levels of OECD countries Canada USA South Korea South Africa China Brazil 2014 Brazil 2005 Russia Greece Spain Chile Portugal Italy Brazil 2030 Brazil 2025 Argentina Mexico Japan Germany France United Kingdom 0 India Indonesia Source: Brazil Data: EPE; International data: IEA, 2015 US$ [2005] PPP/inhabitant/year (*)

14 ELECTRICAL EFFICIENCY For the NDC: Achieving 10% efficiency gains in the electricity sector by TWh FORECAST Note: Electricity load includes electricity consumption and losses 8% % Interconnected System consumption Self-production (DG included) Energy Efficiency Source: EPE Note 1: Refers to total electricity consumption. Losses are not accounted for energy efficiency estimates. Note2: 2013 is the base-year.

DISTRIBUTED GENERATION FORECAST Distributed Generation contributes for about 10% of future electricity needs in Brazil 1500 TWh 1,253 1200 1,019

15 DISTRIBUTED GENERATION FORECAST Distributed Generation contributes for about 10% of future electricity needs in Brazil 1500 TWh 1, , , Source: EPE Electricity load Distributed Generation Energy Efficiency

16 RENEWABLES IN ELECTRICITY SUPPLY For the NDC: Increasing the share of renewables (other than hydropower) in the power supply to at least 23% by 2030 (share of wind, biomass and solar) % 12% FORECAST 23% 24% 86% 64% 13% 60% 16% Other renewables Non-renewables Hydropower Share of renewables (other than hydropower) in 2030 BIOMASS 12% WIND 9% Source: EPE SOLAR 3%

17 RENEWABLES IN ELECTRICITY SUPPLY (% EXCLUDING HYDROPOWER) FORECAST 24.0% 23.0% 13.4% 9.0% 8.5% 5.7% 4.8% 3.8% 3.1% 2.1% 2.0% Brazil Brazil Germany Brazil United (2030) (2025) (2013) (2014) Kingdom Source: EPE (Brazil data); IEA (International data) (2013) World (2013) USA (2013) France (2013) India (2013) Japan (2013 Brazil (2005)

18 HYDROPOWER IN ELECTRICITY SUPPLY (TWh) FORECAST Electricity Generation TWh % TWh % Hydropower Natural Gas Coal Nuclear Biomass Wind Solar (power plants) Others ,4 Biogas (distributed gen.) 0 0 3,1 0,3 Solar (distributed gen.) 0 0 9,4 1 Total Source: EPE

19 FUEL CONSUMPTION

20 ETHANOL & GASOLINE CONSUMPTION FORECAST Equivalent gasoline consumption (Mtoe) % % % % % % Gasoline Anydrous Alcohol Hydrated Alcohol Source: EPE

21 BIODIESEL CONSUMPTION FORECAST Million m³ B B B Source: EPE Diesel Oil Biodiesel

22 SHARE OF BIOFUELS IN TRANSPORTATION ENERGY CONSUMPTION FORECAST 23.7% 21.2% 18.4% 13.2% 10.0% 6.2% 5.0% 4.7% 2.7% 0.2% Brazil (2030) Brazil (2025) Brazil (2014) Brazil (2005) Source: EPE (Brazil data); IEA (International data) Note1: For Brazil, includes ethanol and biodiesel. Note2: Corresponds to biofuels and waste data. EU (2020 Target) France (2013) Germany (2013) USA (2013) United Kingdom (2013) India (2013)

23 ENERGY MATRIX, GHG EMISSIONS & INDICATORS

SHARE OF RENEWABLES ON ENERGY MATRIX FORECAST For the NDC: Achieving 45% of renewables in the energy mix by 2030.

24 SHARE OF RENEWABLES ON ENERGY MATRIX FORECAST For the NDC: Achieving 45% of renewables in the energy mix by OECD (2012) 9 World (2014) 13.6 Brazil (2005) 44 Brazil (2014) 39 Brazil (2025) 45 Brazil (2030) 45 Source: EPE; IEA

25 SHARE OF RENEWABLES IN TOTAL PRIMARY ENERGY SUPPLY (TPES) EXCLUDING HYDROPOWER/ELECTRICITY For the NDC: Expanding the use of renewable energy sources other than hydropower in the total energy mix to between 28% and 33% by FORECAST 32.6% 31.9% 29.2% 28.0% 24.8% 11.2% 7.3% 7.2% 5.6% 5.5% 3.4% Brazil (2030) Brazil (2025) Brazil (2005) Brazil (2014) India (2013) Source: EPE (Brazil data); IEA (International data) Note: For Brazil, includes ethanol and biodiesel. For other countries corresponds to biofuels and waste Germany (2013) France (2013) World (2013) USA (2013) United Kingdom (2013) Japan (2013)

26 CURRENT DEVELOPMENT ACTIONS Energy Energy Research Research Office Office

27 EPE S CONTRIBUTION FOR BRAZILIAN NDC MAIN FOCUS CURRENT ACTIONS Renewable Power Generation Strenght the role of Hydropower Intermitent Sources (solar, wind) hydropower matrix in electricity Energy Efficiency Biofuels Studies for supporting Energy Efficiency Plan Biodiesel share increasing Biofuture Platform

28 DISTRIBUTED GENERATION Energy Energy Research Research Office Office

REGULATORY FRAMEWORK FOR DISTRIBUTED GENERATION IN BRAZIL REGULATRY FRAMEWORK FOR DISTRIBUTED GENERATION IN BRAZIL Net Metering Model was approved in Brazil in 2012; In 2015 there was a review of the

29 REGULATORY FRAMEWORK FOR DISTRIBUTED GENERATION IN BRAZIL REGULATRY FRAMEWORK FOR DISTRIBUTED GENERATION IN BRAZIL Net Metering Model was approved in Brazil in 2012; In 2015 there was a review of the regulation, which brought several improvements, as: higher power limit; new business models; reduced deadlines; standardization of procedures. Valid for any renewable and cogeneration source; Up to 5 MW (3 MW for hydropower).

30 ProDG Federal Program to foster renewable distributed power generation and cogeneration; Under the umbrella of the ProDG initiative, a working group (WG) has been created to identify means to meet the program objectives; It was divided into five specific working groups: Management Working Group WG Financing and Taxes WG Public Buildings WG Impact Assessment WG Commercialization WG Certification and Laborers Training Several recommendations were made by the working groups on track to be implemented.

31 VRES (Specif Value for DG) Set specific acquisition tariffs for electricity generated from some sources as solar photovoltaics and natural gas-based CHP Utilities can buy at higher prices than they buy from electricity auctions Electricity companies can contract through voluntary auctions and include all values in final consumer tariff Up to 10% of this total market

32 ENERGY EFFICIENCY Energy Energy Research Research Office Office

33 ENERGY EFFICIENCY 2030: ELECTRICITY CONSUMPTION Contribution the overall electrical efficiency by sector Agriculture 1% Transport 0% But considers also... Residential 30% Services 25% Contribution of each sector to the overall energy efficiency Industry 43% Some Residential 0% Agriculture 2% Possible mechanisms: Labelling programs Demand response Energy Efficient Buildings Energy Auditing Programs Autonomous actions Industry 45% Services 1% Transport 52%

34 MAIN ACTIONS IN ENERGY EFFICIENCY IN BRAZIL LABELLING PROGRAM NATIONAL PROGRAMS OF ENERGY CONSERVATION (ELETRICITY AND FUELS) UTILITIES ENERGY EFFICIENCY PROGRAM MINIMUM EFFICIENCY STANDARDS Standards 34

35 GENERAL APPROACH FOR ENERGY EFFICIENCY ENERGY EFFICIENCY PLANNING COST EFFECTIVE POTENTIAL CURVES PORTOLIO OF POLICIES AND MECHANISMS MONITORING AND ASSESSMENT OF RESULTS DATABASE 35 35

36 COST POTENTIAL CURVES FOR ENERGY EFFICIENCY ESTRATÉGIA DE INSERÇÃO DA EFICIÊNCIA ENERGÉTICA Econmic Feasibility Cost of Saved Energy (R$/MWh eq.) Incremental Incremental = CAPEX + OPEX - Energy price Energy Saving (MWh eq./year) Saved Energy

37 COST POTENTIAL CURVES FOR ENERGY EFFICIENCY ESTRATÉGIA DE INSERÇÃO DA EFICIÊNCIA ENERGÉTICA Developed Studies Iron & Steel Chemicals Ferro-alloys Pulp & Paper Ceramics Alumina Food & Beverages Cement Mining Commercial Buildings 37

38 MONITORING PROGRESS OF ENERGY EFFICIENCY ESTRATÉGIA DE INSERÇÃO DA EFICIÊNCIA ENERGÉTICA Evaluate impact of mechanisms and policies for Energy Efficiency in Brasil Subsidize Energy Plans (short and long term) Identify prioritizing areas to act Allow international comparison Assess current stage of energy efficiency in Brazil Energy Efficiency Indicators Database Monitor progress of energy efficiency

39 MONITORING PROGRESS OF ENERGY EFFICIENCY BANCO DE INDICADORES DE EFICIÊNCIA ENERGÉTICA HOUSEHOLD SECTOR AIR CONDITIONING FOOD CONSERVATION WASHING MACHINE Fonte: EPE (2014). Energy consumption in Brazil. Sectoral Analysis

MONITORING PROGRESS OF ENERGY EFFICIENCY BANCO DE INDICADORES DE EFICIÊNCIA ENERGÉTICA CONCLUDED RESULTS Stablishment of Energy Efficiency Indicators

40 MONITORING PROGRESS OF ENERGY EFFICIENCY BANCO DE INDICADORES DE EFICIÊNCIA ENERGÉTICA CONCLUDED RESULTS Stablishment of Energy Efficiency Indicators Database according to best practices (ODYSSSE) Publishing bi-anual reports on Energy Efficiency Indicators for Brazil Monitoramento e avaliação de resultados

POLICIES/MECHANISMS PORTFOLIO FOR ENERGY

efficiency action plan Define feasible goal

POLICIES/ MECHANISMS Identify stakeholders

41 POLICIES/MECHANISMS PORTFOLIO FOR ENERGY EFFICIENCY ESTRATÉGIA DE INSERÇÃO DA EFICIÊNCIA ENERGÉTICA Energy policies customization in order to help energy efficiency action plan Define feasible goal and scope of policy Survey on Best Practices POLICIES/ MECHANISMS Identify stakeholders and support strategy Define ex-ante and ex-post assessment of impact

42 COMMUNICATION STRATEGY: PORTAL BANCO DE INDICADORES DE EFICIÊNCIA ENERGÉTICA SCOPE Intends to be a bi-diretional chanell on energy efficiency information (data, studies etc.) Communication tool Partnership to collect data from stakeholders IN PROGRESS Conceptual project of website (concluded) Next steps: Programming development

43 THANK YOU FOR YOUR ATTENTION! Jeferson Borghetti Soares Head - Energy and Economic Department jeferson.soares@epe.gov.br Phone number: + 55 (21) (21) Avenida Rio Branco, 1-11 o andar Centro - Rio de Janeiro Facebook: EPE.Brasil

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