OPINION: Brazil's new goals
The World Cup is over, but the Brazilian decade is not. Events on the football pitch meant that although the tournament was considered one of the best ever by foreigners, it will not be remembered so fondly by Brazilians.
The coming weeks are likely to see further turbulence as October’s presidential election approaches. There could be a resurgence of the pent-up dissatisfaction that came to the surface in June 2013, while the current political leadership is in for a rough ride at the polls.
But none of this will derail Brazil’s rise to prominence on the world stage, or the steady economic growth underlying this ascent. Indeed, the protests mark the arrival of an assertive, confident middle class that expects better services in exchange for its relatively high taxes. The process won’t always be pretty, but better governance and a fairer country will eventually emerge.
Brazil’s growth story is also the story of a clean-energy powerhouse.
As Maurício Tolmasquim, president of the government- owned company that sets energy targets and decides the amount of power contracted through competitive auctions, points out in the special August edition of Recharge, the Brazilian electricity mix is one of the most renewables-based in the world. Green energy — led by hydropower — accounted for more than 80% of generation last year. Limits to the expansion of hydropower have led to explosive growth in the wind sector, which is set to expand from 2.2GW at the end of last year to 13.6GW in 2018.
Energy demand is expected to grow by about 50% over the next decade, and wind will play a significant role in meeting that challenge. Brazil will need 71GW of new generation by 2023, of which non-hydro renewables are expected to contribute 30GW. In practice there are likely to be big discrepancies between planners’ scenarios and outcomes.
Several factors could throw a spanner into the works. As well as the basic matter of the rate of demand growth, foremost is the question of whether Brazil can add 31GW of hydropower, and whether existing hydro plants will continue to produce at today’s levels — Brazil is one of the most vulnerable countries to climate change in this respect. This situation could create even stronger demand for wind power.
Secondly, there is the danger that large flows of natural gas from Brazil’s “pre-salt” hydrocarbon reservoirs could lead to pressure from Petrobras and short-sighted politicians to increase the amount of thermal generation.
Then there is the question of solar, which today has a negligible installed capacity in a country with excellent levels of irradiation. The government foresees 3.5GW by 2017, but, given solar’s record of disrupting power markets elsewhere and Brazilians’ willingness to adopt new technologies, growth could be far more explosive.
For now, levels of confidence in Brazil’s wind sector are running high among domestic and foreign companies, which are prepared to take risks rather than be excluded from such a significant market.
Vestas, the world’s biggest turbine maker, is unrolling a major investment programme to meet the second-phase local-content requirements, joining other international manufacturers like GE-Alstom, Gamesa, Impsa and Acciona. Suzlon, which had largely wound down its operations in Brazil, now wants to stay and build a new factory, and local company WEG has made a decent entrance into the turbine market.
Competition at auctions between aggressive local companies is intense, making Brazil one of the most cost-competitive wind-power producers in the world. And in the medium term there is probably room for only three or four big turbine manufacturers in the market, compared with the current eight or nine.
One thing is certain: watching the development of the Brazilian renewables scene in the coming years is going to be as exciting as the World Cup and the 2016 Rio Olympics. Well, almost.