THE INSTITUTE OF BRAZILIAN BUSINESS AND PUBLIC MANAGEMENT ISSUES The Minerva Program – Fall 2010 Wind Power as an Opportunity to Diversify the Brazil’s Electricity System By Carol Sampaio Diogo de Siqueira [email protected] Advisor: Prof.John Forrer2 TABLE OF CONTENTS Introduction ______________________________________________________ 3 1. Global Scenario__________________________________________________ 5 1.1. World’s Wind Resources_________________________________________ 5 1.2. International Overview___________________________________________ 7 2. National Overview________________________________________________12 2.1. The characteristics of Brazilian Electricity Industry __________________12 3. Brasil’s Wind Power Development_________________________________ 15 3.1. Government Support____________________________________________15 3.1.1. The Alternative Energy Sources Incentive Program-PROINFA________ 15 3.1.2. Energy Auctions______________________________________________ 18 4. Wind Power as an opportunity to diversify the Brazil’s electrical matrix___ 21 4.1. Advantages of using Wind Energy in Brazil_________________________ 21 4.1.1. Wind’s Potential______________________________________________ 21 4.1.2. Complementary to Hydrological Sources_________________________ 22 4.1.3. Emissions reduction of Greenhouse Gas__________________________24 4.1.4. Additional Benefits____________________________________________ 26 5. Future Perspectives______________________________________________ 28 5.1. Increasing Wind Power's participation in the Brazilian energy matrix___ 28 5.2. Economic and Social Development________________________________28 5.3. Cost Reduction_________________________________________________30 Conclusions_______________________________________________________323 INTRODUCTION The two oil shocks that occurred in the 70s were a watershed in relation to the concepts of developing nations that are now questioning the way the energy matrix was predominant in the majority of the countries. Given the high successive oil price increases, the world economy begins to prioritize the replacement of oil by other energy sources and having as main objective the energy security. This time permitted the resumption of investment in alternative energy which was strengthened by environmental pressures directed to the sector of power generation that were stronger after the accident in the reactors at Three Mile Island in 1979, in the United States, and later in 1986 in the city of Chernobyl ,former Soviet Union. These accidents forced the world community to seek safe and reliable sources that have less environmental risk in the supply of electricity. Within the new paradigms for sources with lower environmental risk, prevalent in the eighties and nineties, a favorable and highly promising environment was created for the development of renewable energy sources. In parallel, the global scientific community presented to the planet very serious indicators on environmental catastrophes, caused by the emission of greenhouse gases, which were released into the atmosphere by the current thermal energy matrix based on fossil fuels such as oil and coal. These emissions were as well considered responsible for the gradual warming of planet earth that gave start to the melting of the north and south poles. This configuration corroborated in global warming, responsible for many disasters that are occurring on regular and growing bases. With these alarming results, at the end of the 90s (1997), United Nations created the Kyoto Protocol, imposing regulations on developed countries that should take the lead in fighting the global warming, and return, around the year 2000, to their anthropogenic emissions of greenhouse gases to levels prior 1990. Faced with this whole issue arises, more specifically in Europe, a movement towards alternative sources of renewable energy, seeking sustainable development, a concept that combines the expansion of supply, consumer awareness, environmental preservation and improvement of life quality . It is the development4 able to meet the needs of the present generation without compromising the ability to meet the needs of future generations. It is the development that does not exhaust the resources for the future. In other words, the challenge is to reduce the environmental impact and at the same time be able to support economic growth. Thus, through the development of many scientific researches, ways to obtain energy in a sustainable and clean way as from wind power and biomass were implanted. But despite the growth seen, these sources have little participation in the global energy matrix. Due to the high cost of production while the technology is not yet consolidated, the group's expansion of renewable energies is due in large part to government support through public programs that include variables such as compulsory acquisition by the local electric power companies, subsidies, special rates, tax relief or direct input of resources. The main focus of the current research project will be the presentation of using wind power to diversify the Brazilian electricity industry. Besides the introduction, this paper is structured in six chapters. Chapter 1 briefly shows the world’s wind potencial and the international trends in the use of wind energy. This chapter also presents the numbers of the evolution of this renewable energy around the world. Chapter two presents characteristics of the Electricity Industry in Brazil. It will show that Brazil’ electricity matrix is dominated by hydroelectric plants but this share tends to be reduced due to environmental and geographical issues. Chapter 3 shows the development in using alternatives energy sources in Brazil and the contribuition of the Brazilian Government in this journey. Chapter 4 shows the wind’s potential and the main advantages of its use in Brazil. Chapter 5 shows the favorable forecasts for expansion of the wind energy in Brazil and, finally, the conclusion summarizes the main issues discussed throughout this paper.5 GLOBAL SCENARIO 1.1. WORLD’S WIND RESOURCES According to researches, as of 19931 , usable world’s wind power potencial was estimated at aproximately 48,500 TWh/year and it’s well distributed around the globe2 as presented in the table below. Considering the technological standarts of 1993, the mentioned research takes