Brazil mulls plan to promote biomass to front ranks of power

Brazil mulls plan to promote biomass to front ranks of power

London (Platts)--1Jun2005


The world's biggest producer of sugar cane biomass is considering a scheme
that could galvanize markets for biomass used to generate electricity.

In a landmark announcement, Brazil's Ministry of Mining and Energy said it is
considering a proposal that would have the effect of promoting biomass energy
into a priority electricity source above other renewable energy sources. 

Energy Minister Dilma Rousseff said the aim of the proposal is to award
precedence to biomass power generation in the national electricity grid.
Rousseff stressed, though, that the proposal would not diminish the roles of
Brazil's other renewable sources.

Biomass energy currently accounts for 29.1% of the total energy consumed in
Brazil, with large hydropower plants contributing an additional 14.5%,
Rousseff said during a May 3 presentation at the American Chamber of Commerce
in S?o Paulo. Hydropower dominates the Brazilian electricity sector with an
84% share, he noted, while other renewable sources, including biomass, account
for a paltry 4% of the nation's power generation. 

The scheme under consideration would include electricity produced by sugar
cane bagasse-fired thermal plants in ongoing auctions of new energy in
Brazil's energy pool as a way to stimulate biomass investments. This model is
being developed to provide support for biomass plants that were not selected
in the first stage of the nationwide Proinfa renewable energy program. The
biomass plants would be fitted into a category dubbed the botox energy niche,
along with a number of conventional hydroelectric plants. 

Botox, a special power category that has been integrated in the new Brazilian
energy model, serves to recycle part of the so-called old energy that has been
amortized in the country as new energy in the market. "Botox energy is energy
with double personality: it is old energy that was given 'botox' and is now
treated as new in the transition period. In short, it is non-contracted energy
from after 2000," Rousseff explained. 

In a bid to sell the idea to the largest Brazilian stakeholder in biomass
electricity generation, Minister Rousseff met in early May with
representatives of the Sugar Cane Agroindustry Union of S?o Paulo, known by
the acronym UNICA. News of a possible breakthrough for biomass energy was
confirmed by UNICA co-generation advisor On?rio Kitayama, who said a new
classification of biomass power might be created because many potential
biomass projects have already obtained environmental licenses and
authorizations.

According to UNICA estimates, Brazil has a 12,000MW cogeneration potential
that would require up to US$7.2 billion in investments for development. But
the picture actually is less rosy because of administrative obstacles.

"The deadline for plants to apply for botox status has expired. If biomass is
to be included, the Ministry needs to change the deadlines so that thermal
cogeneration projects can be incorporated," Kitayama noted.

Another key proposal would revise the existing 30MW capacity ceiling to
receive discounts on transmission and distribution tariffs. "The law looks
exclusively at installed capacity. If a plant has 34MW there is no discount,"
said Kitayama.

Brazil is the world's largest sugar cane producer with an area of 5.4 million
hectares in 2005 and alcohol production totaling 14.6 million cubic meters.
Until recently, much of the government's biomass policy has focused on
alternative-fuels production, particularly for export.

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