The energy transition and its role in the migration to a low-carbon economy was the theme of one of the panels at the CEBDS 2019 Seminar, held on the 5th in São Paulo. The debate was attended by Solange Ribeiro, deputy CEO of Neoenergia; André Araujo, CEO of Shell in Brazil; and Otávio Carvalheira, president of Alcoa Brasil; and Marina Grossi, president of the Brazilian Business Council for Sustainable Development (CEBDS), who also acted as a mediator.
The transition to a low-carbon economy is already a reality even for the most traditional fossil fuel companies, which are already investing in renewable energy. The need for Brazil's resumption of sustained economic growth in the coming years will require more energy, since GDP expansion and energy consumption are correlated.
The fundamental issue for the future, therefore, is the consolidation of investments in clean energy sources, reducing the share of fossil fuels, in order to meet the urgent demand for growth, especially if it is higher than current projections.
“One way to decarbonize the economy is through electrification. Brazil has a competitive advantage in having renewable energy sources and potential for growth. Renewables are breaking new ground in auctions. It is also necessary to invest in energy efficiency. Neoenergia has already invested R$500 million, mainly in low-income consumers and education projects,” said Solange Ribeiro, from NeoenergiaBR.
Proposals for the energy transition
The government has a fundamental role to play in carrying out the infrastructure projects that the country needs, ensuring the sustainability of Brazil's new energy matrix in the coming years. Based on this premise, CEBDS launched the CEBDS Agenda for a Sustainable Country, which contains proposals for the next four years aimed at various sectors, including energy.
The document advocates the inclusion of climate variables in energy planning as a fundamental factor to ensure that economic growth does not increase greenhouse gas (GHG) emissions. For this to happen, the federal government's involvement in the process will be crucial.
To ensure greater participation of renewable sources in the energy matrix, business leaders associated with CEBDS propose an Energy Transition Law for Growth as an instrument to achieve the defined objectives.
This law would cover the electrical matrix and the entire energy system, as well as the energy generated and consumed in industry, the transport sector and buildings.
The increase in the share of fossil fuels is one of the main factors responsible for the increase in GHG emissions in the Brazilian energy sector, especially in the transportation segment, the largest source of pressure and responsible for 48.2% of emissions in 2017.
This is due to the concentration of road transport, with intense use of diesel. To give an idea of the scale of this impact, truck transport accounted for 84.5 million tons of CO2, a volume greater than that of all fossil-based thermoelectric plants operating in the country, which was 54.2 million tons.
Electrification replacing fossil fuels
To reverse the current scenario, investments are proposed in the transition of this type of transport to electric modes. The benefits are clear and measurable. The electrification of vehicles, especially those used for freight transport, can reduce fossil fuel consumption by 20% by 2040.
Furthermore, changes in the mode will allow a reduction of 83% in the total GHG emissions from freight transport, projected by 2050. Only with the electrification of the railway mode and the development of hybrid propulsion systems in vessels, it is possible to reduce the energy consumption of these modes by up to 33%. The most rational and sustainable transport process also involves the use of waterways with the use of renewable sources.
For this reason, the Agenda reinforces the relevance of the role of programs and policies that recognize and restructure the value chain of bioproducts and low carbon footprint products, in order to promote small and medium producers.
Proposals for Energy Transition in the CEBDS Agenda
The Brazilian energy matrix has a significant share of renewable energy sources, 43.2% in 2017, with emphasis on generation from sugarcane (17.4%) and hydroelectricity (11.9%). Although this value is high compared to the world average (around 15%), a downward trend has been observed recently. In 2010, the share of renewable energy in the country's matrix reached 47.5%.
The drop in recent years can be considered small, but it goes against the proposal of the Brazilian Nationally Determined Contribution (NDC), which defined a share of 45% from renewable sources in 2030. In 2016, energy consumption and production in the country were responsible for the emission of 423.5 million tons of carbon dioxide equivalent (CO2e), accounting for 19% of the national total.
“To talk about energy transition, we also need to talk about economic growth. We need to invest in new technologies to reduce emissions. Alcoa has innovation projects to reduce its emissions and the impact of its activities on the environment. This is our concern and a path to revolutionize the industry,” said Otávio Carvalheira, from Alcoa.
Of the total Brazilian emissions, the transport sector represents 48% (204 million tCO2e); the industrial sector 17% (71 million tCO2e); the fuel production sector 9% (37 million tCO2e) and the electricity sector 10% (43 million tCO2e).
One of the proposals contained in the CEBDS Agenda for a Sustainable Country for the sector is the improvement of the renewable and clean profile of the energy system, surpassing the target of 45% of renewable sources in 2030 proposed by the Brazilian NDC.
Another proposal is the adoption of a defined and functional governance system that aims to carry out structural changes that will redirect the development of the sector in order to meet the growing demand for energy with low Greenhouse Gas (GHG) emissions.
“Pricing carbon through a global market is an opportunity to finance this energy transition. It is good for business and the environment. We have to spread the word that sustainability is a factor of competitiveness, not of backwardness,” said Marina Grossi, president of CEBDS, during the panel.
Business leaders associated with CEBDS also advocate the promotion of biofuels, not only in the transport matrix but also in the electricity matrix, and financing for renewable sources in terms of biomass and solar.
Companies have been looking for new ways to minimize their environmental impact
All over the world, the Companies have increasingly sought new ways to minimize their environmental impact of your energy consumption and reduce your energy costs. One of them is the Power Purchase Agreement (PPA). With the aim of providing a broader view of how PPAs work, CEBDS launched the publication this year Why Corporate Purchasing of Renewable Energy is Good Business.
The PPA is an electricity contract, similar to a regular contract in the free market. These agreements are signed between the buyer, also called off-taker, and the project developer and contain all the negotiated conditions (prices, volume, energy delivery period, payment term, guarantees/insurance, etc.).
PPAs with corporate buyers are typically related to new or expanded renewable energy projects, i.e., projects that will be financed based on the revenue stream of the contract. Given the requirements for financing large infrastructure projects, PPAs typically have a term of 8 to 20 years, as a way to enable financing by developers.
In addition to reducing energy use through energy efficiency initiatives, corporate purchasing of renewable energy plays an important role in achieving this goal. Electricity from clean sources is a good option, as it is an affordable solution for Commerce and Industry (C&I), and is the method chosen by many companies to reduce energy costs, reduce their carbon footprint and help achieve their sustainability goals.
There are a number of possibilities for consuming renewable energy, ranging from investing in power generation assets, directly purchasing contracts from developers through renewable energy PPAs, or even purchasing renewable energy certificates. Corporate purchasing of renewable energy provides greater security for developers and project financiers, as well as price predictability for consumers.
In Brazil, large consumers of electricity, with contracted demand equal to or greater than 500 kW, can negotiate renewable energy on the Free Market. These contracts generally have a term of 1 to 5 years.
“The social impact that renewables have had on the Northeast backlands is exceptional. People are returning because of the movement that wind farms have brought to the Northeast,” said Solange Ribeiro, from Neoenergia.
