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ENERGY SECURITY & SOVEREIGNTY IN A WARMING PLANET:
WHAT ROLE CAN SOLAR POWER PLAY IN BRAZIL'S ENERGY
TRANSITION?
Gabrielle Sousa e Silva Hiltmann
1
ABSTRACT
In the context of the Anthropocene, particularly regarding climate change due to greenhouse gas
emissions, the power sector plays a critical role. Considering the abundance of solar energy, broad
employment of solar photovoltaics (PV) can be seen as a way toward enhancing energy safety &
sovereignty through renewables deployment. However, in 2021's Brazilian power sector, dominated by
hydropower (57%), PV power still plays a minor role (7%) despite Brazil's high PV potential. Solar PV
has less penetration than natural gas-powered plants (10%), which relies on the imported commodity to
bridge drier seasons. As electricity demand is expected to keep rising, within a holistic energy policy
approach, the expansion of Brazilian's power sector shall strive for a more balanced low-carbon mix.
Additionally, by widening the free market, the system risks are better shared with the productive sector,
costs are potentially reduced, and access to affordable clean electricity for the population can be secured.
Solar PV can be an essential lever for the Brazilian energy transition given its relatively low levelized
cost of electricity and the ability to be integrated into urban areas, decentralising generation. Solar PV
also improves complementarity to address seasonality and cope with severe hydrological events. By
striving for a more diverse and balanced power mix, with deeper solar penetration, a more adapted &
resilient system is built to mitigate disruptions and the impacts of climate change.
KEY-WORDS: Solar Photovoltaics. Energy Law. Policy. Regulation. Climate Change.
1. INTRODUCTION
The Anthropocene is proposed as the new geological epoch (Crutzen P. J., 2002), which has
taken the Earth out of its former trajectory in which human societies first developed. The
Anthropocene era is grounded on solid evidence that human impacts on terrestrial pathways
have become so profound that it has contravened previous Holocene conditions in numerous
aspects of the Earth System (Steffen, W; et al, 2015). One widely known impact of the
Anthropocene is climate change due to global warming as a consequence of the increase in
greenhouse gas emissions into the atmosphere (IPCC, 2018), which has taken off in the most
1
Civil Engineer graduated from UFPE (Brazil) with a 5-year engineering degree. MBA in Management (FGV,
Brazil). MBA in Business Law (FGV, Brazil) with research on EPC Contracts (Engineering Procurement and
Construction) and risk allocation within Public-private Partnerships (PPPs). MSc in Global Production
Engineering for New Energy Technologies (TU Berlin, Germany), with research on semiconductor photovoltaic
(PV) performance. LLM in Energy Law (CEDIN, Brazil). Work experience spans from Infrastructure to
Renewable Energy deployment. Researches Renewables & Decarbonisation, Energy Law and Policy. European
Engineer (EUR ING), Certified Project Management Professional (PMP)® and Certified Scrum Master (CSM)®.
E-mail: contact@gabriellesousa.com
2
dramatic trend of upsurge post-1950, marking the Great Acceleration and an intense energy
mobilisation (Steffen, W; et al, 2015) (Bonneuil, C; Fressoz, J, 2016). Consequently, and at
least since 1995, when the first UN
2
Climate Conference was held in Berlin, climate change
has been increasingly taking part in political & social discussions due to the intricacies of its
causes within the global economic system.
Certainly, the acknowledgement that human activities are affecting the planet has important
implications for decision-making in society (Steffen, W; et al, 2018), which would ideally tend
to prioritise actions that either reduce carbon emissions or act as negative feedback to climate
disturbance. In this context, new approaches to cope with a warming planet's challenges, such
as developing and deploying solutions that reduce carbon emissions from human activities,
have become crucial for slowing down further climate disruptions.
Figure 1.1 - The rising trend of atmospheric CO2 concentration. (NOAA/ESRL's Global
Monitoring Division, 2021)
However, as shown in Figure 1.1, each passing year, new records of carbon dioxide (CO2)
concentration in the atmosphere are measured (NOAA/ESRL's Global Monitoring Division,
2021), with over 70% of global emissions being energy-related (Ritchie, H; Roser, M, 2016).
Additionally, energy-related CO2 emissions in 2018 increased by 1.7% in the given year, with
the power sector alone accounting for nearly two-thirds of the growth (IEA, 2019). Hence, the
2
The United Nations (UN) is the “world’s universal global organization”, which strives to be “the foremost forum
to address issues that transcend national boundaries”. Source: www.un.org/en/
3
power sector plays a significant role in climate change on a global scale. This role becomes
even more critical given the continuous increase in energy demand worldwide (IEA, 2019)
(Bruckner T.; et. al, 2014), the still lack of access to electricity in several communities around
the world and the trend towards electrification of other energy sectors such as transportation
and space heating (IRENA, 2022). Thus, as a basic need, electricity demand shall keep rising,
and the deep decarbonisation of the industry becomes crucial.
Although energy production and consumption have international environmental consequences,
in the field of international energy law, including the UN frameworks, little progress has been
made to promote sustainable energy development worldwide. This is rooted in the fact that,
historically, energy law and policy have been strongly related to national sovereignty. As a
result, there are conflicting perspectives between energy‑exporting countries, namely in the
form of fossil fuels and their commodification in the capitalist world economy, and related
energy‑importing nations. The fossil fuels-rich nations tend to dismiss moves toward renewable
energies as a threat to their sovereign prosperity, acting as global climate delay actors since the
consequences of climate change see no borders or sovereignty. Additionally, one shall not
overlook the role of energy in causing international instability. As there is no international
mechanism allowing a country to intervene, e.g. militarily, to acquire energy from another,
nations are unlikely to disclose their concerns over energy security & dependency openly.
Although international law has much to offer to address those points, as national sovereignty
should not supersede environmental law and human rights, lack of political will and economic
interest in environmental protection often hinder global progress. On the other hand, more
energy-dependent countries have seen the deployment of renewable energy as an opportunity
to reduce their international reliance on fuel and a chance to build up energy independence and
security. (Bradbrook, A, 2016) (Bonneuil, C; Fressoz, J, 2016)
In this context, the broad deployment of renewable energy sources, such as solar energy, would
be indispensable for contributing to the alleviation of climate change impacts while reducing
fuel dependence. Hence, as elucidated in Figure 1.2, solar energy's yearly potential represents
more than 150 times the other renewables altogether and more than 1,000 times the global
energy demand (Perez, M; Perez, R, 2009). Curiously, from this abundant source, only a tiny
part, i.e.less than 0.05% of the incoming radiant energy, is converted through photosynthesis
into chemical energy in plants, the backbone for most life forms (Smil, V., 2017).
4
In this respect, although the potential for deployment of solar power, and consequently its costs,
varies across the globe, Brazil holds an advantaged position to leverage the solar energy
potential to address climate mitigation & adaptation while enhancing energy security.
Therefore, this work aims to showcase the potential benefits of broad solar photovoltaic (PV)
deployment within the Brazilian electricity mix.
Figure 1.2. Yearly solar energy potential in comparison with other renewable sources
3
.
2. BACKGROUND:
2.1. Socio-economic overview of Brazil
Brazil is a South American country with 213.3 million inhabitants (Governo do Brasil, 2021)
and an upper-middle-income country, according to the World Bank (The World Bank, 2020).
Brazil has a historical background of colonialism and a wide socio-economic gap, with the
highest GINI
4
index in South America, as of 2019, and its GINI index is below only South
Africa among OECD countries (The World Bank, 2022) (OECD Data, 2022). The country is
currently the 12th economy globally and has lost positions in the last decade due to a severe
recession (The World Bank, 2020). Brazil's industry contributed, in the year 2020, with around
20% of its GDP, while services and agriculture are responsible for 73% and 7%, respectively
3
OTEC stands for Ocean Thermal Energy Conversion.
4
The GINI index measures the distribution of income across a population. A higher GINI index indicates greater
inequality.
5
(Sebrae, 2020). Brazil is amongst the countries with vast natural resources, with its primary
commodities being gold, uranium, iron, timber & oil deposits.
Despite Brazil's continental size, the country is mainly tropical, humid equatorial. However, the
very south presents a temperate climate. The country is the 5th largest in the world, being 59%
of its area being the so-called 'Legal Amazon'
5
(IPEA, 2008) (Amazônia 2030, 2021).
Furthermore, the country faces social challenges due to urban concentration, particularly in the
coastal line, and the emergence of megacities. There are 17 cities with more than 1 million
inhabitants, with 14 of those cities being state capitals. This group of 17 municipalities
concentrates 21,9% of Brazil's population. Additionally, there is extensive land use for
agriculture, particularly in the central region.
2.2. Brazilian Power Sector
It can be said that the Brazilian electrical system relies on what can be seen as a natural
monopoly once the primary source of electricity comes from the water, an inalienable asset.
The hydropower expansion occurred due to the vast potential within the country, which had its
first power plant erected in 1883 (Mauad, F; Ferreira, L; Trindade, T, 2017), and since then, the
hydropower installed capacity has been the driving force for further electrical developments.
Moreover, laws introduced in the late 20th century, attempting to incentivise other renewable
sources other than big hydropower plants, have benefited small power plant projects resulting
in more regional hydropower generation closer to the demand (Mauad, F; Ferreira, L; Trindade,
T, 2017).
Following the broad denationalisation program in Brazil in the '90s (Lorenzo, H, 2002), also
aiming to incentivise competition in the power market, in the year 1998, the first regulatory
framework to put in place a free electricity market for energy-intensive industrial consumers
was rolled out
6
.
5
The concept of the Legal Amazon was established in 1953 and its definition is a result of the recognition of the
necessity for planning the economic development of this particular region, which goes beyond the Amazon rain
forest itself. The Legal Amazon area encompasses around 13% of the total Brazilian population and 63% of its
area is covered by rain forests, permanently threatened by deforestation. Furthermore, the Legal Amazon is home
to 56% of the total Brazilian indigenous population.
6
ANEEL resolution 265/1998, revoked later by the REN 678/2015.
6
Figure 2.1 – Sketch of Brazil's interconnected power system (SIN) and isolated generators
(particularly in the state of Roraima, with less than 1% of the energy demand in 2020).
Adapted from (Théry, H; Théry, N, 2016).
Coping with integration and regionalism at the same time has been a permanent dilemma in the
Brazilian electricity sector and among policymakers. The unique feature of the power sector is
the ability to manage itself as a whole, that is to say, as nearly an enormous single national
reservoir due to its integrated system, as depicted in Figure 2.1. As a result, it can be said that
the electrical mindset in the country is highly hydro-driven, relying heavily on storage in the
form of hydropower plant reservoirs to bridge drier seasons, guaranteeing system reliability and
sovereignty. However, integration came with a cost as generation is further away from the mass
demand in a country with continental dimensions and low population density outside of the big
cities, concentrated in the coastal line. It is also important to highlight that 99.8% of Brazilian
homes have access to electricity, which is impressive coverage and has also come with a price
tag from the perspective of policy.
7
Furthermore, between 2001 and 2004, Brazil suffered from harsh droughts, which led to an
energy crisis and shortages. In those occurrences, the consumption needed to be reduced by up
to 25% (Mauad, F; Ferreira, L; Trindade, T, 2017). As a consequence of an unprecedented
energy crisis, the most effective program to increase alternative energies entered into force in
2004 (PROINFA), after the respective legal instrument was sanctioned in 2002, which has
aimed to further the implementation of bagasse power plants, wind farms and small hydropower
plants (BRASIL, 2002). The PROINFA was supported by, for example, subsidised interest rates
by the BNDES
7
, auctions for capacity, provision for revised tariffs paid by the final consumers
following the feed-in tariffs (FiT) concept implemented elsewhere and 20-year contracts
(Mauad, F; Ferreira, L; Trindade, T, 2017). However, such a framework is not meant to create
a genuinely competitive electricity market as the system risks are mainly passed onto the so-
called "captive" consumers as policy costs, e.g. subsidies funded by the regulated tariffs.
In the context of the PROINFA program, solar energy was set aside as it was not the intent of
the legislator to include a still not widely established technology; hence there was an intrinsic
solar scepticism within the power sector. As a result, only in 2012 the connection of private
photovoltaic (PV) systems to the distribution networks was regulated, the so-called distributed
PV (Agência Nacional de Energia Elétrica (ANEEL), 2012), and only in 2014, the first
dedicated photovoltaic power auction was launched (Camara de Comercialização de Energia
Elétrica (CCEE), 2014).
On the market structure, as per Figure 2.2. the distribution network operators (DNOs), as part
of a regulated monopoly, each covering determined regions of the federation by concession
contracts, are responsible for supplying power to the so-called "captive" consumers, i.e. the
regulated market, consumers who have no option but to buy electricity from the designated
DNO in their region. In this sense, the DNOs are responsible for calling for auctions to fulfil
their consumers' demands, with those auctions regulated by the ANEEL (National Agency for
Electricity), the Regulatory body. The tariff payment from the consumers is the revenue stream
of the DNOs. The tariffs are also regulated with adjustment mechanisms as part of the respective
concession contracts. The regulator is ultimately responsible for guaranteeing fair tariffs within
7
Brazilian Development Bank (Banco Nacional de Desenvolvimento Econômico e Social)
8
the regulated market. On the other hand, in the so-called free electricity market, electricity is
freely negotiated between generation and free-market consumers and energy traders.
Figure 2.2 – Brazilian Power Market overview.
In terms of governance, as in Figure 2.3, the government's bodies, led by the Mining & Energy
Ministry, are responsible for driving policy and are, therefore, politically driven to a great
extent. The regulator (ANEEL) supervises concessions, permissions, and power services. The
regulator also defines tariffs and launch auctions for powers services. The ONS is the system
operator, and the CCEE regulates and controls the energy trade market, as all power purchase
agreements within the free electricity market are to be closed through the CCEE.
Figure 2.3 – Institutions in the Power Sector Governance.
9
3. THE ELECTRICITY MIX
The total electricity generated in Brazil in 2021 was 679 TWh, where 78.1.8% was from
renewable sources, 72.7.2% of it from hydropower, 13.6.% from wind power, 6.5% from sugar
cane bagasse and 3.2% from solar. The total installed capacity in 2021 was 190 GW, where
109.3 GW are from hydropower and 50 GW from bagasse, wind, and solar power altogether.
However, solar power is under the smallest share within renewable sources with 13.4 GW
installed capacity. From the non-renewables side, the primary energy source is natural gas, an
imported commodity whose power plants were responsible for more than 58% of the 31 GW
non-renewable installed capacity. Shares of total installed capacity per source are shown in
Figure 3.1. (Ministério de Minas e Energia (MME), 2022).
8
Figure 3.1 – Shares of the Brazilian installed capacity for electricity generation in 2020, per
source: solid reliance on hydropower.
With an electricity mix highly reliant on renewables (159 GW), Brazil has not only a carbon
footprint per kWh among the smallest around the world but is also the 3rd country in renewable
power capacity, behind only China and the US (REN21, 2020), countries with a much higher
overall power demand. However, the massive reliance on hydropower, i.e. low level of balance
8
W (watt) is the unit of power whereas Wh (watt-hour) is a unity for energy, commonly used for electrical energy
i.e. power sustained for one hour. The kilowatt (kW) is equal to one thousand watts (103 W), the megawatt (MW)
is one million watts (106 W), the gigawatt (GW) is one billion watts (109 W) while terawatt (TW) is one trillion
watts (1012 W).
10
regarding power sources, can be seen as a drawback from the point of view of energy security
as it leaves the Brazilian power sector too exposed to the risks of extreme hydrological events.
Within the solar installed capacity of 13.4 GW, 65% are from small residential & commercial
installations, the so-called distributed PV, feeding into the distribution network at low voltages
(microgenerators, up to 75kW) or medium voltages (mini generators, up to 5 MW), benefiting
from the net-metering scheme in place. However, the distributed PV scheme, regulated in 2012
by an ANEEL normative (Agência Nacional de Energia Elétrica (ANEEL), 2012), had its legal
framework only sanctioned in 2022 (BRASIL, 2022).
Although the solar power installed capacity has increased by 78% from 2016 to 2020, utility-
scale solar power plants still play a marginal role in the Brazilian electrical mix, i.e. 2.4% of
the total installed capacity in 2021. On the other hand, distributed PV accounts for 4.6%,
presenting a remarkable 189,2% increase between 2020 and 2022. (Ministério de Minas e
Energia (MME), 2022). Moreover, the late introduction and ramp-up of solar energy in Brazil
can be seen as an expected initial mistrust in this means of energy conversion, probably due to
the hydro mindset dominating the power sector.
Despite the energy crises in the 2000s and strong penetration of Wind and Biomass power (i.e.
from bagasse, an otherwise waste from the sugar cane industry) in the following years, Brazil
remains with a solid hydropower-reliant electrical sector. Moreover, Brazil still has a little less
than 40% of its hydropower potential unexploited (estimated at 172 GW). However, further
developments would be mostly embedded into the amazon region (Empresa de Pesquisa
Energética (EPE), 2022), making this move highly controversial due to environmental & social
impacts caused by projects of this magnitude. Although the most recent hydro developments
have been using the run-of-the-river concepts, which means they are supposed to have a lesser
overall environmental impact, hydropower plants still demand considerable investments,
considerable social & environmental risks, long construction times, and are much more
susceptible to extreme and frequent droughts, as a consequence of climate change. That is
particularly the case of hydropower plants without the implementation of large reservoirs. That
is to say, hydropower developments have been facing some stagnation, and expansion seems to
be counterproductive not only because of the high environmental & social costs.
Furthermore, as an example of the severe droughts hitting Brazil in 2021, the most stringent
seen in 90 years (Operador Nacional do Sistema Elétrico (ONS), 2022), maintaining high
dependence on hydropower requires hedging against those events as a means of energy security,
11
burdening the public administration and potentially the tariffs further (BRASIL, 2022).
Unfortunately, severe climate events such as drought may become even more frequent in the
context of climate change (IPCC, 2012), and therefore a more balanced power mix is mandatory
to enhance energy security and climate change adaptation. Hence, hydropower projects do not
seem to build system resilience, as they no longer improve system reliability considering severe
climate events nor, in the particular case of Brazil, reduce the misbalance of the electricity mix.
Similarly, attempts to better balance the mix by increasing the participation of fuel-reliant
capacity, namely natural gas, would not only work in disagreement with current global climate
goals but also weaken Brazilian's power mix's main features, which are its sovereignty and
renewable predominance. Moreover, in 2022, as ongoing military conflicts unfold in Eastern
Europe, it also exposes the high dependence of the European energy sector on Russian gas,
Germany in particular (Spiegel, 2022), exacerbating the importance of energy sovereignty in
the context of world politics & governance. The wide deployment of renewable energy sources
as fuel-free solutions builds system safety by reducing fuel dependency and price swings in
case of shortages or conflicts.
4. POTENTIAL FOR PHOTOVOLTAIC POWER
Brazil holds strong potential, still to be developed, for solar power deployment, as shown in
Figure 4.1. Regions with higher horizontal irradiation, i.e. kWh/m2, tend to benefit better from
solar deployment as the costs for deployment would be amortised by a greater amount of energy
harvested. That is to say, regions with higher horizontal irradiation tend to profit from a lower
Levelized Cost of Electricity (LCOE, $/kWh). That is particularly the case in the central &
northeast regions of Brazil, as shown in Figure 4.2, the Brazilian potential in kWh/kWp, i.e.
electricity harvested by each kWp deployed.
For comparison, Brazil currently has way less PV capacity installed than smaller countries like
Germany or Vietnam. As of 2021, Germany had 58.6 GW of PV installed capacity and PV
systems have generated 48.4 TWh of electricity (Fraunhofer Institute, 2022). This represents
over seven times more PV installed capacity and four and a half times more PV generation than
Brazil in 2020. Considering Germany's lower PV potential, i.e. lower irradiation and
consequently lower overall capacity factors and higher LCOE, it can be seen how far behind
Brazil lags in benefiting from its PV potential. Furthermore, in 2020 alone, Vietnam, a country
12
with less than half of the Brazilian population and almost 26 times smaller, has deployed three
times more PV capacity than Brazil ( IEA PVPS, 2021).
Figure 4.1 – Global Horizontal Irradiation, where higher numbers of kWh/m2 represent a
higher potential for solar power deployment. (Solargis, 2022)
Figure 4.2 – Brazil Photovoltaic Power Potential (kWh/kWp) (Solargis, 2022)
Moreover, a significant part of Brazil's highest solar power potential in the northeast region
overlaps with the Brazilian semi-arid region, where the biome caatinga (from the Tupi
language, meaning White Forest, caa = forest, vegetation, tinga = white) is the predominant.
The caatinga is the single exclusively Brazilian biome, meaning that a large part of its
biological diversity cannot be found anywhere else on Earth (Leal, I; et. al, 2003). However, a
13
high share of the population in those regions live in poverty, as many rely on the extraction of
natural resources in a semi-arid region with few drinkable water sources and irregular rainfall.
Unfortunately, inadequate land use in this region has worsened the desertification and further
threatened the caatinga biome & its communities. For example, overgrazing and irrigation in
this region, which has promised to bring agricultural prosperity, also threaten to salinise the soil
amplifying desertification. In this sense, and following proper Environmental Impact
Assessments in place, solar power could be potentially deployed in this region with minimal
environmental impact and deforestation, particularly when compared with hydropower &
irrigation projects widely deployed in the past. This could provide economic possibilities lesser
reliant on agriculture to the region while improving adaptation to facing climate change and the
possible harsher & more often droughts.
Furthermore, as in Figure 4.3, regarding interannual variation, the Northeast region presents the
higher absolute averages of irradiation (kWh/m2) throughout the year, with a small spread
showing the PV potential across seasons, i.e. less season dependent. The Northeast region is
then followed by the Central-West and Southeast regions, with the second-highest potential.
On the other hand, the Northern and Southern regions have the lowest irradiation averages.
Figure 4.3 – Daily global horizontal irradiation spread throughout the year (kWh/m2):
Interannual/seasonal variation in the Brazilian regions. (Pereira, E; et al, 2017)
5. ELECTRICITY PRICES, POLICY AND REGULATION
Despite the independence of the agencies regulating the energy market, electricity pricing can
still be seen as a governmental tool, as regulated consumers are ultimately paying the policy &
14
subsidy costs to guarantee the security of the system. As of 2020, 64.5% of the electricity sold
within the National Integrated System (SIN) was consumed by regulated 'captive' consumers,
while free consumers negotiated 35.5% (Empresa de Pesquisa Energética (EPE), 2021). On the
other hand, captive consumers in 2020 paid, on average, 88% more per MWh than free
consumers (i.e. R$ 502.98 vs R$ 267.49 per MWh).
Figure 5.1 – Electricity Price/Tariff composition. Only free-market consumers can negotiate
directly with generators. Transmission & Distribution as a regulated monopoly shall be fairly
shared by all using the system. Taxes & Surcharges: policy and regulation.
The price discrepancies have reasons beyond the advantages of direct negotiation between
generators and off-takers in the free market, as tariffs have three main components, as shown
in Figure 5.1. For example, to incentivise alternative energies (i.e. renewables, including small
hydropower plants), consumers of those energies in the free market receive discounts of up to
100% on the due fee for the use of the distribution network, which eventually ends up being
paid by the regulated tariffs as the system costs are fixed costs, ideally shared by all users.
Although fostering renewable deployment, such policy mechanisms also increase system
disparities and inequalities as residential consumers cannot access the competitive free market,
which is allowed only for industrial & commercial consumers with more than 1 MW power, a
requirement in 2022. However, to achieve a more significant number of potentially free
consumers, this limit is to be reduced further, reaching 0.5MW in January 2023 (Ministério de
Minas e Energia (MME), 2019); these consumers, though, shall also connect at high voltage,
which means the current framework to access the free market reaches mainly large and medium-
sized companies. Nevertheless, to further access the unregulated market, the regulator has been
engaged in due research, aiming to modernise the Brazilian power sector in the following years
inspired by international experiences, such as the European model.
15
Additionally, the electricity prices in Brazil are relatively high among the IEA
9
members. When
compared with selected countries using USD PPP (USD purchasing power parity) numbers,
Brazil lies behind only Germany (IEA, 2018) in electricity prices, as shown in Figure 5.2. This
is particularly surprising given the Brazilian reliability of renewable power sources, i.e. no fuel
costs are incurred, and their high capacity factors. Unfortunately, the already amortised
hydropower plants, for example, do not reflect price reductions once such gains are instead
consumed for supporting new policy costs.
Figure 5.2 - Residential electricity prices in selected economies, 2018. Light blue:
USD/MWh. Dark blue: USD (PPP)/MWh.
It is fair to say Brazil's electricity network is a gigantic infrastructure to give electricity access
to over 215 inhabitants in a country of continental size, and this has a price tag. However, in
2019 the consolidated tax burden and industry charges of 70% of Brazil's electricity market
(generation, transmission & distribution companies) represented 47.3% of the total gross
operating revenue of the companies in the sample (PWC, 2019). That is to say, taxes & charges
play a majority role in the electricity bills burdening it as nearly a half. Such a high burden on
taxes, charges & fees is seen only in countries such as Denmark and Germany, which also have
the highest electricity prices in the European Union (Eurostat, 2021).
9
The International Energy Agency “works with countries around the world to shape energy policies for a secure
and sustainable future”. Source: www.iea.org
16
In the particular case of Germany, a critical surcharge contributing to the German highest
electricity price in the EU is the EEG levy (also known as the green power surcharge, introduced
in 2000) (Deutschland, 2000). However, the subsidy meant to secure renewable electricity
suppliers a guaranteed price for 20 years and funded by consumers is finally set to be abolished
from electricity bills in July 2022 (Die Bundesregierung, 2022), following a long-lasting
criticism and as a relief for consumers amid soaring electricity prices in the European wholesale
market (DW, 2021). A similar surcharge and no less controversial (TCU, 2019) than the EEG
levy in Brazil is the regulated CDE
10
(account for energy development) established in 2002
(BRASIL, 2002). However, unlike the EEG levy, the annually reviewed CDE aims to support
the energy system as a whole, including universalising electricity access but also sponsoring
natural gas deployment. In this sense, reducing the dependence on natural gas to bridge the drier
seasons and severe droughts can be beneficial from a sovereignty standpoint while also
reducing exposure to price swings coming from conflicts, for example. Electricity from natural
gas is the most expensive when compared with renewable sources.
While the tax burden is a vital topic in discussing the Brazilian power sector, a disparity that
has been in place, either for free consumers of renewables or PV home-system owners, is the
benefits of discounted fees related to the use of the system. Policymakers argue that such
incentives are necessary to foster further deployment of renewables, but the mechanics are
clearly not sustainable. It is undeniable the benefits that new energy deployment brings to
energy security, making the system less reliant on government-led auctions. However, the use
of the integrated system shall be fairly shared by its users to keep tariffs fair while avoiding
burdening, even more, those without access to home PV systems or the free energy market.
Thus, the policy has a vital role in enhancing system safety and reliability while keeping system
fairness, not overburdening regulated consumers. Moreover, with more participation of the
productive sector in the capacity expansion and sharing the system's inherent risks, the policy
can partially shift focus from simply guaranteeing capacity to building more system safety and
resilience, undertaking a more holistic approach in light of climate change.
Furthermore, solar power is now the cheapest electricity in history, according to the
International Energy Agency (IEA, 2020), as renewables-based electricity, in general, is the
10
The “Conta de Desenvolvimento Energético” (CDE) is a fund to support and subsidise public policy in the
energy sector sponsored by electricity consumers. However the use its resources beyond the power sector legal &
regulatory frameworks has brought criticism and litigation, as its use to support other than the power system should
not be sponsored by the electricity consumers.
17
cheapest power option in most regions (IRENA, 2022). Given a sharp decrease in capital costs,
as depicted in Figure 5.3, shorter payback times and increased capacity (Ritchie, H; Roser, M,
2021), PV deployment can be seen as a great leverage mechanism to further deploy clean &
renewable electricity without the heavy dependence on subsidies funded by consumers, which
work against the concept of a just energy transition. To strive for an efficient and modern Power
Sector less reliant on subsidies, transparency on the system costs and surcharges is essential
and a way forward to guarantee that the population has access to clean & affordable electricity.
Figure 5.3 – a) The evolution of PV module prices ($ per Wp): intense deployment has
decreased modules price by 99.6% since 1976. From (Ritchie, H; Roser, M, 2021). b) Global
weighted average LCOE from utility-scale solar PV fell by 85% between 2010 and 2020.
From (IRENA, 2022).
While photovoltaic home systems, i.e. distributed PV, have ramped up quite rapidly in Brazil,
representing most of the current PV installed capacity, there is still much room for further
expansion in utility-scale facilities to strengthen the power system via private investments and
Power Purchase Agreements (PPA). Additional investments in the grid infrastructure are
mandatory to expand the PV penetration while reinforcing frameworks and streamlining
procedures to use Brazil's PV potential while accelerating further decarbonisation, particularly
in the industrial sector more reliant on thermal power plants. The role of policy and the regulator
is, needless to say, key. This is essential to pivot the productive sector into a primary leverage
tool for the energy transition and capacity expansion, less dependent on public policy schemes.
This is happening in many European countries following a virtuous circle depicted in Figure
18
5.4: fewer barriers leading to more deployment, fewer feed-in tariff schemes and increased
private PPA opportunities.
Moreover, the industry has a proven appetite for cheap & clean power as the number of
celebrated renewable energy PPAs keeps increasing (Valor Economico, 2022), showing
lenders' readiness to invest in clean private energy contracts. Allowing the market to sort their
demand in the free market also means reduced need for public auctions to guarantee capacity
to support economic activity while also steadily decreasing the dependence on hydropower.
Figure 5.3 – The virtuous circle of fewer barriers and more deployment.
Further development of the distributed PV shall also be incentivised as a means of urban
integration and decentralisation of generation on a small scale. The current framework in place
in Brazil is the net-metering system in contrast to the feed-in tariff system applied previously
in countries such as Germany
11
. Net-metering can be seen as advantageous from the point of
policy and long-term planning as it does not burden future tariffs to pay off DNOs obligations
set by the feed-in tariff long-term contracts (Poullikkas, A, 2013), which are usually well above
the retail price of electricity to become attractive for the system owners. Additionally, urban
integration is a particular advantage of PV systems compared to other renewables, which
demand extensive land use for deployment. For example, incentives to the so-called 'prosumers'
(producers and consumers) can be in the form of facilitating affordable credit lines and reducing
the tax burden for energy materials for roof-top PV systems.
11
Feed-in tariff (FiT) and net metering are mechanisms to compensate a producer for the energy fed into the grid.
The single meter goes “backwards” in net metering when the solar panels produce more electricity than consume,
sending the excess into the grid. In contrast, FiT requires two meters, one for consumption, the other for generation,
as producers are awarded by the energy they produce. Net metering is simpler, as the utility pays at the same
market price for production & consumption. In contrast, in FiT the price the utility pays for the excess electricity
is typically higher following a 20-year agreements. While FiT offers security to the producer, it is often subsidised
& non-competitive as utilities are tied by higher-than-the-market payments for long periods. The difference
between market price and FiT is usually funded by other electricity consumers in the form of system surcharges.
19
Mini-grid & off-grid solutions can also be seen as additional opportunities for further use of PV
systems, particularly for remote areas without a nearby grid connection. Similarly, facilitating
credit lines can increase livelihood and access to affordable electricity in remote areas.
6. INTERMITTENCY, COMPLEMENTARITY & SEASONALITY
Renewable sources' intermittency, particularly solar PV, is one of the main drawbacks from the
point of view of the stability of the power system and grid disturbance. Indeed, to cope with
deeper penetration of non-hydro renewables requires investments in the grid infrastructure.
While storage systems can help bridge the times when the sun is not shining without disturbing
the grid, they can be expensive and jeopardise certain projects' business cases. The deployment
of storage can also be optimised by using hybridised systems, enhancing competitiveness and
reducing overall energy costs. Similarly, a more diverse power mix, i.e. relying on different
energy sources, can improve system stability and safety. Nevertheless, the scope of ancillary
grid services
12
, coupled with more PV penetration and less hydro, has the potential to become
more relevant, providing the system flexibility while coping with renewables' intermittency.
(Campos, R; Nascimento, L; Rüther, R, 2020)
Figure 6.1 - Monthly Availability of solar, wind and hydropower resources compared to the
electrical load in Brazil Northeast. (Jurasz, J; et. al, 2019)
For example, hydro, solar PV, and wind can be complementary energy sources in important
Brazilian regions, bridging the dryer seasons when hydropower reservoirs reach minimum
12
Ancillary services intend to guarantee reliability & security of the grid, as operators have to work continuously
to keep the frequency, voltage, and load within permitted tolerance limits.
20
levels, as shown in Figure 6.1. That is to say, the significant availability of solar and wind
generation from July to October could reduce the demand for draining hydropower reservoirs.
Similarly, solar power could complement wind generation in January and February, sparing
hydro storage. Therefore, the further deployment of solar to accompany wind deployment is an
asset for a more balanced complementary power mix and increases system reliability and
stability. (Pianezzola, G; et al, 2017) (Rosa, C; et al, 2017) (de Jong, P; et. al, 2013).
On the other hand, intra-day intermittency can also be dealt with by demand-side management,
which means shifting demand when there is higher electricity production. For example, in the
case of solar PV, the mid of the day. Demand management can be done at the industrial level
while shifting energy-intensive processes but also on a smaller scale through "smart" tariffs and
appliances to foster consumption when production is at a peak. (Dena, 2016)
Figure 6.1 – Sum-up of the Brazilian Power Sector and proposed approaches to improve
energy safety in light of climate change, supported by broader penetration of Solar PV power.
The new renewables (non-hydro) era brings about a new paradigm: accepting intermittence as
a system component rather than something to be avoided at any cost. Modern societies shall no
longer rely so heavily upon fossil fuels to guarantee baseload, as the climate emergency calls
for urgent action to reduce emissions. This new power & grid mindset requires re-skilling and
21
re-design and has been proven possible with all the necessary tools at disposal. In this sense,
adaptive modelling and planning methods are essential to determine robust scenarios with high
shares of variable renewables. Continuous investment, research, and constant monitoring are
paramount for system operators and regulators to make the best use of renewable sources, with
adequate deployment, aiming for energy safety & sovereignty, fair tariffs and the population's
best interest & well-being.
7. CONCLUSIONS
The Brazilian power sector has a natural vocation for deploying renewable energy, given its
continental size, climate, and hydro potential. Brazil is the 3rd country in renewable power
capacity, behind China and the US. The carbon footprint of Brazilian electricity is amongst the
lowest globally, given the vast majority of renewables in its mix. However, the massive reliance
on hydropower exposes the Brazilian power sector to a great extent to the risks of extreme
hydrological events, particularly in light of climate change. Similarly, the increasing energy
demand will require further system expansions, and building resilience within the system is
critical. Hence, a more balanced mix is necessary to increase energy security, resilience &
adaptation capacity to face the consequences of climate change events.
On the other hand, solar power plays still a minor role in installed capacity and generation,
despite Brazil's high PV potential and need for a more balanced mix. The expansion of the
power sector shall rely on a broader free electricity market to reduce costs and on low-carbon
technologies, such as solar PV, to diversify the power mix while aiming at energy safety &
sovereignty on a warming planet. Solar PV deployment can contribute to Brazil's Energy
transition by:
• Presenting relatively low LCOE
• Presenting a low carbon footprint per kWh
• Presenting relatively low environmental impacts, particularly when compared with
hydropower
• Decentralising generation
• Being able to be integrated into urban areas
22
• Improving complementarity to address seasonality in the power system
• Helping in widening the free electricity market
• Enhancing competitiveness within the generation players
• Be a driver for more independent power producers and private PPAs (more new capacity
taken by private players)
• Potentially fostering demand-side management approaches in the industrial sector
• Potentially reducing reliance on subsidies and public auctions, supporting fair tariffs
• Improving diversity in the power mix: increased energy security
However, to allow wider penetration of intermittent renewables in the system, such as solar,
investment in grid infrastructure will be needed. Policymakers, regulators and operators shall
be prepared for a system much less predictable as a new paradigm. To address the level of
investment required and how to fund it was not the aim of this paper, but it is an essential topic
for further research within the energy transition agenda.
Furthermore, developments reliant on fossil fuels shall not be seen as a long-term solution as it
weakens Brazil's energy sovereignty in a world with shifting power structures while also
jeopardising meaningful climate action & adaptation. In this context, the power sector actors,
namely operators and regulators, have a key role in paving the way to guarantee the power
system reliability in the context of climate change and internalising renewables intermittence
as a permanent constraint within a resilient power system.
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