Brazil angles to strike new coal-fired power deals

Government plans to allow polluting source to compete with gas in move that bucks regional clean-energy trend

Brazil wants to open the way for coal plants to compete in a national power tender, in another signal that clean-energy and environmental issues are low down the priorities of President Jair Bolsonaro’s government.

Coal will be able to compete with gas to secure deals replacing expiring diesel-fired capacity from 2024 in a tender the Brazilian government plans to hold in early 2020.

Brazil has 1.7GW of coal projects ready for tender but hasn’t contracted any since 2014 when it was already far more expensive than wind – R$201/MWh ($49.97), compared with R$135/MWh – but far cheaper than the R$1,000-plus cost of a diesel-fired megawatt hour.

However, a renewed enthusiasm for coal under the climate-sceptic Bolsonaro administration was on stark display in May, when his energy minister took to the stage of a wind power event to praise the polluting source.

Brazil's energy minister praises coal at wind event

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No renewables would be contracted at the planned tender, but the government will likely hold two other auctions that will include wind and solar in April and September 2020.

Although most of Brazil’s installed power capacity is renewable – including 64% hydro, 9% wind, 8% biomass and 1% solar – the decision comes at a time when other countries in the region are investing in wind and solar to replace fossil generation. Chile, for example, has started a decarbonisation scheme in which it will switch off 5GW of coal-fired plants by 2040.

But Brazil’s government says it is concerned with baseload supply and wants to explore its huge, newly-found natural gas reserves.

Under the country's current long-term energy plan, wind capacity is expected to reach 23GW by 2027 up from 15GW today. Among fossil fuels, only natural gas is expected to rise, while coal capacity should remain unchanged and diesel should decline.

The only contracted coal-fired plant in 2014, was Engie’s 340MW Pampa Sul project, which is expected to start operations this year. Engie, however, has said it will sell all its coal-fired capacity in Brazil, including Pampa Sul.

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