Market Assessment for Promoting Energy Efficiency and Renewable Energy through Local Financial Institutions in Brazil Executive Summary

Market Assessment for Promoting Energy Efficiency and Renewable Energy through Local Financial Institutions in Brazil Executive Summary IFC Advisory Services in Latin America and the Caribbean

IFC Advisory Services in Latin America and the Caribbean This report was prepared by Econoler as part of an IFC commissioned study in 2010, utilizing resources from the Environmental Business Finance Program (EBFP), financed by the Global Environment Facility (GEF). The contents of this report are protected by copyright. IFC encourages the dissemination of the content for educational purposes. Content from this publication may be used freely without prior permission, provided that clear attribution is given to IFC and that content is not used for commercial purposes. This report is not a collection of technical, financial or economic recommendations. The materials contained in this report are presented as an overview of the results of a study that was conducted in Brazil. The information in this report is presented in good faith for general information purposes. The findings, interpretations, views, and conclusions expressed herein are those of the authors and do not necessarily reflect the views of the Executive Directors of the International Finance Corporation or of the International Bank for Reconstruction and Development (the World Bank) or the governments that they represent. The report does not claim to serve as an exhaustive presentation of the issues discussed herein. This report should not be used as a basis for the commercial decision-making process. Companies should always consult with accountants, auditors and other financial experts on all financial issues and problems. Please approach independent technical specialists for their expert recommendations on all technical issues. IFC office in Lima, Peru Av. Miguel Dasso 104, Piso 5 San Isidro, Lima, Peru Tel: +51 1 611 2500 Web: www.ifc.org/lac 2

Market Assessment for Promoting Energy Efficiency and Renewable Energy through Local Financial Institutions in Brazil Executive Summary Introduction Over the last several years, the International Finance Corporation (IFC), member of the World Bank Group, has adopted climate change as a strategic priority. Emerging markets, including the Latin America and Caribbean (LAC) region, represent more than half of the opportunities available for greenhouse gas emission reduction globally. Companies in LAC could play a critical role in achieving these reductions, through the use of sustainable energy, including renewable energy, energy efficiency and cleaner production. However, the availability of sustainable energy finance is limited; local banks traditionally have not recognized investments in sustainable energy as a business opportunity that can be provided systematically. To address the lack of available financing and interest from financial institutions, IFC developed the Sustainable Energy Finance program that aims to work with financial institutions to build a pipeline of sustainable energy projects for financing and supporting the necessary market relationships to enable them to generate their own pipeline of sustainable energy deals. In mid-2010, and as part of the Sustainable Energy Finance (SEF) program, IFC commissioned a market assessment for sustainable energy finance in Brazil, focused on EE and RE opportunities for local financial institutions. The objective of this market assessment is to provide information on: (i) sector segmentation; (ii) electricity generation potential for RE; (iii) energy and cost savings potential for EE; and (iv) concrete ideas and recommendations for possible sustainable energy finance projects that merit consideration. Furthermore, this report focuses on the necessary financing for each segment, financial indicators on cost-effectiveness and a brief analysis of benefits. The main stakeholders in each sector, as well as typical barriers and risks that may be encountered by financial institutions are also included. Energy in Brazil In 2008, Brazil s total energy supply totaled 248 million tons of oil equivalent (Mtoe). Brazil is the third largest hydroelectric producer in the world, after China and Canada. The breakdown of primary energy supply is as follows: 39.1% from petroleum, 32.1% from combined renewable and waste, 13% from hydro power, 8.7% from gas, 5.6% from coal and peat, 1.5% from nuclear and 0.1% from geothermal/solar/wind. Of the 248 Mtoe in energy supply, final energy consumption in Brazil in 2008 amounted to 226 Mtoe. The main sources of energy consumption were petroleum products (41%), sugarcane bagasse (18%), electricity (16%), firewood (10%) and natural gas (7.5%). The country s energy consumption is driven by the industrial sector, with almost 39% of the final energy consumed, followed by transportation (mainly oil products, biodiesel and ethanol produced from sugarcane), energy and residential sectors with a share of 29%, 12% and 11%, respectively. According to estimates in the 2007 National Energy Plan of Brazil, energy demand is to increase by approximately 3.6% per year over a 25-year horizon. Energy efficiency and renewable energy in Brazil Several programs and policies have been established by the government to promote RE and EE in Brazil. PROCEL (National Program for Efficiency in Electricity Use) and CONPET (National Program for Efficiency in the Use of Natural Gas and Petroleum Products) are two of the main programs promoting improved energy use. The risk sharing credit line of the Brazilian Development Bank (BNDES) for energy service companies (ESCOs), called PROESCO, was created to offer financing alternatives for EE projects. PROINFA (Incentive Program for Alternative Energy Sources) is focused on RE initiatives and has successfully promoted commercial financing for small hydro, biomass and wind energy for sale to the national grid. 3

IFC Advisory Services in Latin America and the Caribbean As part of PROINFA, auctions for RE generation have been conducted over the last several years. While the auction of June 2007 for small hydro and biomass projects had lower than expected results, the auction of December 2009 for wind power was a tremendous success. In that case, 1,806 MW was contracted with a surprisingly low average price, indicating that wind energy is becoming cost competitive in Brazil. Brazil has established policy mechanisms and other regulations to strengthen the EE market. For instance, the national EE policy presents a set of goals and policy instruments to be achieved by 2030. It also outlines several measures and guidelines for governmental agencies to follow to promote market transformation. In addition, the creation of the national fund, CTEnerg, which is financed through wire charges on utilities, is another mechanism created to foster EE development. While government initiatives to promote investments in the RE market can generally be viewed as successful, the same conclusion cannot be drawn for EE. The main lessons learned and recommendations to improve the likelihood of success for EE initiatives are as follows: PROCEL remains the main reference for EE in Brazil, hosting the PROCEL Info portal. Financial institutions could work in close cooperation with PROCEL in order to access the network built over the last 25 years. CONPET is the only governmental organization focused on fuel savings. Even though it has a different structure and scope than that of PROCEL, some level of interaction between CONPET and financial institutions could be maintained to gather information and monitor the market. BNDES PROESCO program cannot be regarded as a success yet. In fact, few EE projects have been financed through this mechanism since excessive bureaucratic procedures seem to be slowing the use and growth of this program. Therefore, private financial institutions could position themselves as an alternative to PROESCO. A guarantee facility is being developed by IDB/UNDP/GEF, which financial institutions may be able to utilize to minimize any perceived risks associated with EE financing for improvements in buildings. Investment Opportunities in RE For this market study, five RE market segments were assessed: (a) small hydro; (b) sugarcane; (c) urban solid waste; (d) wind power; and (e) biodiesel. Moreover, a preliminary survey of isolated off-grid systems in the Amazon region was undertaken and is briefly described. During the last years, many RE market segments have benefited from the attention of domestic banks. There are established lines of credit from domestic development banks (mainly BNDES) for small hydro, sugarcane and wind projects. Small hydro (defined as plants with less than 30 MW of capacity) is the renewable energy technology with the longest history of development in Brazil. Capacity has been growing strong since specific measures to promote alternatives were launched under PROINFA back in 2004. However, the sector began to encounter problems as costs have risen and delays in authorization and environmental licensing have increased. Many projects are underperforming, which has heightened a sense of the technical risks associated with hydro projects. The increase in costs is due largely to the exploitation of sites with longer heads (distance from which the water falls to move the turbine). These problems have caused a decrease in the number of planned projects over the next 5-10 years. Whereas older small hydro plants tended to be quite small (less than 5 MW), the average capacity of plants under currently construction is 14 MW. Relatively large fixed costs for project development decrease the viability of smaller projects (i.e., less than 5 MW). The investment cost per kw installed varies substantially depending on the characteristics of the site. Projects recently developed or under construction tend to cost between Brazilian reais 4,000-6,200 per kw ($ 2,200-3,400). The cost of electricity generated tends to range from Brazilian reais 160-170/MWh ($ 90-100). 4

Market Assessment for Promoting Energy Efficiency and Renewable Energy through Local Financial Institutions in Brazil Executive Summary Table 1: Summary of investment potential for small hydro 1 Energy Generation Potential Increase in installed capacity (MW) 1,400 Energy production (GWh/yr) a 4,900-5,500 Greenhouse Gas Emissions Reduction Annual CO 2 emissions reduction (million ton CO 2) b 0.90-1.01 Average unit cost ($/kw) g $2,800 Typical size range of potential projects (MW) 1 30 Average size of projects implemented (MW) c 14.3 for average project implemented ($ million) h $40 Number of transactions over period 98 Total investment requirements over 5 year period ($ million) $3,920 Share of projects below 5 MW (based on number of projects) d 30% projects below 5 MW over period ($ million) $230 290 Cost of energy ($/MWh) e $90-100 Annual energy sales at end of period ($ million) $436-535 Annual carbon revenues in $ million (at $12/tCO 2) b $11-12 Carbon revenues: % revenue from energy sales 2.2-2.5% Expected equity - total ($ million) f $1,175 Expected equity - projects < 5 MW ($ million) $70-90 Financing need - total ($ million) f $2,745 Financing need - projects < 5 MW ($ million) $160-205 The sugarcane sector has been growing rapidly since 2003. The financial crisis of 2008/2009 and the fall of commodity prices have slowed expansion and stimulated a wave of consolidation in the sector. However, with the increase in commodity prices, the sector is recovering. Aside from the traditional sugar market, the sugarcane sector covers two major and distinct energy markets: ethanol for fuel, and electricity generated from residues. The main driver for ethanol is the domestic flex-fuel automotive fleet which continues to expand. Ethanol exports are also growing, but this segment is subject to political uncertainty. Sugarcane mill revenue from the sale of electricity resulting from cogeneration operations is expected to grow faster than the sale of ethanol. Nowadays, less than a quarter of sugarcane mills sell power to the grid. Electricity is attractive because of long-term contracts which assure fairly stable revenues compared to the more volatile ethanol and sugar markets. On average, sugarcane mills process approximately two million tons of cane per year and cost around Brazilian Reais 350 million ($ 195 million), not considering agricultural investments. If half the cane is used to produce ethanol, output would be 500 m 3 per day. The installed capacity for a mill of that size is about 50 MW and would likely require an investment of around $ 70 million. The cost of electricity sold is about Brazilian Reais 150/MWh ($ 83/MWh). See Table 2 for a summary of investment potential in this sector. 1 a Range of capacity factor considered is 40 45%. b Value at end of the period. c Based on average size of projects authorized by ANEEL at end of 2009. d Based on estimated average size of 3.5 MW for PCH projects with < 5 MW of capacity. e Estimate of CERPCH f Assumes 30% equity and 70% financing. g Average range of Brazilian Reais 4,000 6,000 per kw ($ 2,200 3,300 per kw). h Could be ±20% depending on the site and the scale. 5

IFC Advisory Services in Latin America and the Caribbean Table 2: Summary of investment potential for sugarcane cogeneration 2 Energy Generation Potential Sugarcane cogeneration Increase in installed capacity for sale to the grid (MW) 1,300 Energy production (GWh/y) a 2,940 Greenhouse Gas Emissions Reduction Annual CO 2 emissions reduction (million ton CO 2) b 0.54 Average unit cost ($/kw) c $1,420 Typical size range of potential projects - installed capacity (MW) Average size of projects implemented - installed capacity (MW) c Average size of projects implemented - "export" capacity (MW) 40-70 MW 52 MW 30 MW for average project implemented ($ Million) $74 Number of transactions over period 43 Total investment requirements over 5 year period ($ Million) $1,850 Share of projects below 5 MW (based on number of projects) 0 for projects below 5 MW over period ($ Million) 0 Cost of energy sold to grid ($/MWh) d $83 Annual energy sales at end of period ($ million) $245 Annual carbon revenues in $ million (at $12/tCO 2) b $6 Carbon revenues: % revenue from energy sales ~2.5% Expected equity - total ($ million) e $555 Expected equity - projects < 5 MW ($ million) 0 Financing need - total ($ million) e $1,300 Financing need - projects < 5 MW ($ million) 0 Urban Solid Waste (USW) is relevant in two ways from an energy viewpoint. First, it is possible to recover energy from USW in the form of heat, fuel or electricity due to the large share of organic materials in it. Secondly, the separation and recycling of energy-intensive materials such as glass, metal, plastic and paper is possible. The emphasis in this report is on energy recovery. About 43% of USW is disposed of in open air dumps or simple landfills (another 7% is not collected at all). The immediate challenge in Brazil, as in most developing countries, is to achieve reasonably adequate disposal of USW, which usually means sanitary landfills. Landfills produce gas with roughly 50% methane, which is a potent GHG. While projects to collect this gas are common, energy recovery projects are scarce, as they involve more investment and higher risk. Carbon credits can be obtained just by flaring. Few energy recovery projects are likely to be implemented unless there is a substantial change in policies and market signals (see Table 3). However, it must be emphasized that this scenario depends on certain policy changes (i.e., required use of methane to generate energy, rather than for flaring), which may not occur for some time, if ever. 2 a Does not include use of field residues which could increase output by 60-70%. b Value at end of period (2015). Excludes credits for ethanol. c Assumes mills processing 2,000,000 tc/year - 90% at 65 bar and 10% at 100 bar. d Average result of recent auctions. e Assumes 30% equity and 70% debt. 6

Market Assessment for Promoting Energy Efficiency and Renewable Energy through Local Financial Institutions in Brazil Executive Summary Table 3: Summary of investment potential and GHG reduction 3 Current Policy Favorable Policies Energy Generation Potential Potential net installed capacity (MW) 375-605 375-605 Market penetration rate over a 5-year period (%) 10% 80% Market potential over a 5-year period (MW) 38-60 300-485 Market potential energy production at end of 5-year period (GWh/y) 230-370 1,840-2,975 Greenhouse Gas Emissions Reduction Annual CO 2 emissions reduction (million ton CO 2) 1.1-1.8 9.0-14.6 Average unit cost ($/kw) $1,700 - $2,000 $1,700 - $2,000 Typical size range of potential projects (MW) 1.3-25 1.3-25 Average size of projects implemented (MW) a 9.5-15 6-10 for average project implemented ($ million) $16-30 $10-19 Number of transactions over period 4 50 Total investment requirements over 5-year period ($ million) $64 - $120 $510 - $970 Share of projects below 5 MW (based on number of projects) 25% 70% for projects below 5 MW over period ($ million) $7 - $13 $140 - $270 Cost of energy ($/MWh) b $92 $92 Annual energy sales at end of period ($ million) $21 - $34 $170 - $275 Annual carbon revenues in $ million (at $12/tCO 2) $14 - $22 $110 - $175 Carbon revenues: % revenue from energy sales (a) Due to credits from converting landfill gas from CH 4 to CO 2 60-65% 60-65% (b) Due to credits from sale of electricity ~2% ~2% Expected equity - total ($ million) c $13 - $24 $100 - $195 Expected equity - projects < 5 MW ($ million) $1.5 - $2.5 $28 - $53 Financing need - total ($ million) c $50 - $95 $410 - $ 780 Financing need - projects < 5 MW ($ million) $5 - $10 $110 - $215 Wind power is the most recent renewable resource to make a significant contribution to energy supply in Brazil. Growth is now exponential, by 2012 as much as 3,400 MW could be installed (up from only 29 MW in 2005). The auction in December 2009 was a landmark, as the average price was lower than in other recent auctions for conventional thermal power plants (about Brazilian Reais 148 per MWh or $ 85 per MWh). The average capacity of wind farm projects approved in the last auction was 25 MW (projects larger than 30 MW are ineligible for the discount on transmission costs). However, in many cases, such projects are geographically contiguous and will actually be operated as part of larger wind farms (up to 150 MW). Capacity factors tend to be quite high compared to international standards (44% in the last auction). Many new investors are entering the sector. There is also a strong secondary market where developers sell projects which have entered into long-term power purchase contracts. However, buyers should confirm the claimed performance of these plants. While there are internationally recognized technical certification procedures, the recent phase of rapid growth has resulted in many projects being approved outside this certification framework. Table 4 summarizes investment needs for plants entering into operation between 2012 and 2015. There are established lines of credit from domestic development banks including BNDES and the Banco do Nordeste do Brasil BNB (Bank of Northeast Brazil). There does not appear to be any financing gaps for wind projects. However, transmission capacity to connect to the grid is an acute problem and may require financing. 3 a Range of values in each scenario based on low and high capacity estimates per 100,000 t/year of USW (1.3 2.1 MW). b Excludes carbon credits and includes $ 6/MWh for landfill gas. Based on a plant with a cost of $ 1,700/MW. c Assumes 20% equity and 80% financing. 7

IFC Advisory Services in Latin America and the Caribbean Table 4: Summary of investment opportunities in wind power 4 Energy Generation Potential Increase in installed capacity (MW) 3,150 Energy production (GWh/y) a 11,600 Greenhouse Gas Emissions Reduction Annual CO 2 emissions reduction (million ton CO 2) b 2.14 Average unit cost ($/kw) c $2,200 Typical size range of potential projects (MW) 6-50 Average size of projects implemented (MW) 25 for average project implemented ($ Million) $56 Number of transactions over period 126 Total investment requirements over 5-year period ($ Million) $6,930 Share of projects below 5 MW (based on number of projects) <3% for projects below 5 MW over period ($ Million) $35 Cost of energy ($/MWh) c $83 Annual energy sales at end of period ($ million) $960 Annual carbon revenues in $ million (at $12/tCO 2) $26 Carbon revenues: % revenue from energy sales ~2.5% Foreseen equity - total ($ Million) d $2,080 Foreseen equity - projects < 5 MW ($ Million) $11 Financing need - total ($ Million) d $4,850 Financing need - projects < 5 MW ($ Million) $25 The program to mix biodiesel with conventional diesel was established in 2005 and has been a priority of the government. By 2009, production had reached 1.6 million m 3 and a 5% mix became obligatory as of January 2010. Biodiesel is purchased by Petrobras in quarterly auctions and subsequently allocated to distributors. In the first two auctions of 2010, the average price varied between Brazilian Reais 2,218 and Brazilian Reais 2,329 ($ 1,230-1,290) per m 3. The cost of biodiesel depends on feedstock, which is mainly soybean oil (around 80% of the market) followed by animal fat (around 12%). The biodiesel program has a strong social component and a significant share of feedstock must be certified as produced by small farmers in order to be eligible for biodiesel auction and to receive certain tax exemptions. At the same time, there are economies of scale to be achieved and most biodiesel is produced by large groups in large processing plants. The average plant size is 248 m 3 /day. As an example, the total amount of investment needed for a plant of 185 m 3 /day is approximately Brazilian Reais 27 million ($ 15 million). Current production capacity is substantially larger than the volume of biodiesel commercialized. More than half the capacity is owned by groups with at least 600 m 3 /day. There are established lines of credit from domestic development and public sector banks (e.g., BNDES, BNB and Banco do Brasil), though private bank participation is very limited. There does not appear to be any financing gap for biodiesel projects. In addition to the assessment of specific renewable energy technologies, a survey was undertaken on isolated offgrid systems in northern Brazil, which covers most of the Amazon region. It appears that there is strong potential for the use of sawmill residues to generate power in these isolated systems. 4 a Assumes capacity factor of 42% (average of December 2009 auction was 43.8%). b Value at end of period (2015). c Average result of December auction. d Assumes 30% equity and 70% debt. 8

Market Assessment for Promoting Energy Efficiency and Renewable Energy through Local Financial Institutions in Brazil Executive Summary Investment Opportunities in EE The Energy Research Company, EPE, published the National Energy Plan (PNE) 2007-2030, which estimates savings potential across economic sectors in Brazil. For all energy sources combined, the PNE indicated an estimated energy saving potential of 8.7% by 2030. In terms of electricity alone, this study stated that the market saving potential could reach 6% in the industrial sector and 4% in the commercial and public building segments. This present study estimated the potential financing opportunities in EE, for three segments, public sector buildings, commercial buildings and the industrial sector. In commercial buildings, the total energy consumption was estimated at 18 TWh in 2008, including 84% for electricity, 8% for petroleum products, 5% for natural gas and 3% for other sources. Public sector buildings consumed an equivalent of 40 TWh of all energy sources in 2006, predominantly from electricity (82%). Due to the similarities in these two segments (at least from an energy end-use viewpoint), commercial buildings and public sector buildings were assessed together, but the EE financing potential has been described separately for each. Table 5 provides the share of electricity usage in commercial and public buildings. Table 5: Energy Consumption per Usage in Public and Commercial Buildings End Usage Commercial Buildings Public Buildings Driving force (motors) 14.6% 27.9% Air conditioning and refrigeration systems 33.3% 18.0% Lighting 41.8% 49.6% Heating 8.4% 2.5% Other 1.9% 2.0% Based on the end-uses in these sectors, the EE measures to be implemented are: retrofit of lighting, air conditioning, refrigeration and motor-driven systems with more efficient ones, and installation of solar water heating. There is also a strong savings potential in retrofitting and fine-tuning building control and energy management systems. These EE measures could generate as much as $ 326 million per year in energy cost savings in commercial buildings and $ 120 million per year in public sector buildings. In order to implement these projects, the financing needed would be more than $ 500 million for commercial buildings and almost $ 160 million for public sector buildings over a five-year period. Moreover, the planned IDB/UNDP/GEF guarantee facility for EE in buildings may help to overcome some of the perceived technical risks associated with EE financing for improvements in buildings. Table 6 presents more details on the EE finance potential of those market segments. Table 6: Summary of EE Finance and GHG Reduction Potential in Commercial and Public Buildings Commercial Buildings Public Buildings Energy and CO2 Emission Saving Potential Energy consumption (GWh/yr) 63,800 40,200 104,000 Technical-economical saving potential - 5 years (GWh/yr) 4,000 1,490 5,490 CO 2 emission reduction (in tco 2) 745,800 273,800 1,019,600 ($ million) $650 $200 $850 Typical size of potential project ($ million) $0.05 - $5 $0.05 - $3 - Number of transactions over period 325 200 525 Energy cost savings ($ million/yr) $326 $120 $446 Payback (years) 2.0 1.6 - Carbon revenues in $ million per year (at $ 12/tCO 2) $9 $3 $12 Equity finance needed ($ million) $130 $40 $170 Debt financing needed ($ million) $520 $160 $680 Total 9

IFC Advisory Services in Latin America and the Caribbean In 2008, the industrial sector accounted for 25% of Brazilian GDP, corresponding to almost $ 400 billion. Industry in Brazil represents almost 40% of total energy consumption; and industry consumes approximately 45% of the total amount of electricity used in the country. The analysis conducted on the Brazilian industrial market identified four key sectors for EE: (i) food and beverage; (ii) pulp and paper; (iii) chemicals; and (iv) ceramics. Total energy consumption for these four industries accounts for more than 50% of the total energy consumption of the Brazilian industrial sector. This includes almost 35% of the overall industrial electricity consumption and nearly 45% of the industrial fossil fuel and natural gas consumption. The main use of the energy is heating, including the use of furnaces, boilers and dryers. In terms of electricity only, the energy balance of the four sectors identified consists mostly of handling and processing related equipment (25%), pumps (20%), compressed air systems (12%) and fans (11%). Consequently, the principal EE opportunities are: EE improvements for furnaces, boilers and steam network; Retrofitting of existing motors and driving systems with more efficient ones and/or with the installation of variable-speed drives; EE improvements for compressed air systems; and Various EE initiatives for existing energy management and process control systems. The implementation of the abovementioned EE measures, combined with other smaller EE actions, could generate energy savings of approximately 6 TWh per year over a five-year period, which amounts to more than $ 320 million in cost savings yearly. The financing needed to implement those EE projects would be close to $ 740 million. Table 7 summarizes the EE investment potential in the four key industrial subsectors. Table 7: Summary of Industrial Energy Efficiency and Cogeneration Finance Potential EE in Industry Industrial Cogeneration Total Energy and CO 2 Emission Saving Potential Potential for installed capacity < 15MW - 115 115 Energy consumption (GWh/yr) 207,600-207,600 Technical-economical saving potential - 5 years (GWh/yr) 6,000 700 6,700 CO 2 emission reduction (in tco 2 ) 1,100,000 270,000 1,370,000 ($ million) $930 $340 1,270 Typical size of potential project ($ million) $0.5 - $5 $2.5 - $38 - Number of transactions over period 370 18 388 Energy cost savings ($ million/yr) $320 $46 $366 Payback (years) 2.9 7.4 - Carbon revenues in $ million per year (at $ 12/tCO 2 ) $13 $3 $16 Equity finance needed ($ million) $190 $70 $260 Debt financing needed ($ million) $740 $270 $1,010 The industrial cogeneration development, combined heat and power generation, is growing at a rapid pace in Brazil. Biomass, oil, natural gas and coal are the main fuel sources and represent almost 80% of total energy consumption in the industrial sector. The implementation of a cogeneration plant could be an attractive opportunity to retrofit existing aged boilers and thus reduce operation costs thanks to the generation of low-cost electricity in addition to heat (steam). Regulations have recently been revised so the operators of cogeneration plants can sell their surplus power to the grid. There is currently a movement by utilities to invest in distributed power generation including cogeneration. (Cogeneration projects using sugarcane bagasse have been considered as part of the RE 10

Market Assessment for Promoting Energy Efficiency and Renewable Energy through Local Financial Institutions in Brazil Executive Summary section of this study, whereas only cogeneration projects that use waste as fuel and with capacity less than 15 MW have been considered as EE measures for the purposes of this report.) Eighteen different cogeneration projects were identified and assessed as part of this study, representing a total generation capacity of nearly 115 MW, which could generate 720 GWh of electricity annually. The annual energy cost-savings is roughly $ 46 million and the financing needed is around $ 270 million, with a payback period of approximately 7.5 years. More details can be found in Table 7. There are many other market segments where EE financing makes sense. For instance, the use of Green Building standards for new construction projects, improved street lighting and water pumping systems, as well as the installation of residential solar water heaters, could all be considered interesting opportunities. Nevertheless, it is suggested that the market segments previously mentioned be the focus of the first efforts for increasing EE in Brazil. References ABRELPE, 2009. Panorama dos resíduos sólidos do Brasil 2009. Limpeza Pública e Resíduos Especiais. Associação Brasileira de Empresas de Agência Nacional de Energia Elétrica (ANEEL), 2008. Manual para Elaboração do Programa de Eficiência Energética MPEE - Versão 2008. BNDES, 2008. O Perfil de Apoio do BNDES ao Setor Sucroalcooleiro. Rio de Janeiro, 34 p. Confederação Nacional da Indústria (CNI). 2009. Eficiência energética na indústria: o que foi feito no Brasil, oportunidades de redução de custos e experiência internacional. Electrobras PROCEL Industry. Empresa de Pesquisa Energetica (EPE), 2007. Plano Nacional de Energia 2030 Eficiencia Energetica. EPE, 2010. Plano Decenal de Expansão de Energia 2019. IEA Brazil Energy Statistics, 2010. http://www.iea.org/statist/index.htm Inter-American Development Bank (IDB), 2009. Energy Efficiency Guarantee Mechanism for Brazil. http://www.iadb.org/projects/searchdocs.cfm?lang=en Lamberts, R. and Westphal, F., 1998. Energy Efficiency in Buildings in Brazil. Energy Efficiency in Buildings Laboratory - Federal University of Santa Catarina. Ministério de Minas e Energia (MME), 2008. Plano Nacional de Energia, Secretaria de Planejamento e Desenvolvimento Energético, Brazil, 2008, [ONLINE] As seen on December 14, 2009 URL: http://www.epe.gov.br/pne/20080512_11.pdf Ministry of Mines and Energy (MME), 2009. Balanço Energético Nacional. MMA, 2009. Gestão Integrada de Resíduos Sólidos. (Série "Mecanismo de Desenvolvimento; Brasil) Programa Nacional de Conservação de Energia Elétrica (PROCEL), 2009. Introdução, PROCEL WEBSITE, Brazil, 2009, [ONLINE] As seen on December 14, 2009 URL: http://www.eletrobras.com/elb/procel/main.asp?viewid={974cf275-82fe-4483-8551-855f9a98a370} 11