Q&A: Investments can replace H2 subsidies in Brazil

  • Market: Electricity, Hydrogen
  • 19/02/24

Brazil's power market is at a pivotal moment, amid modernizing discussions, extreme weather and the promise of green hydrogen. Argus spoke to Jerson Kelman, former director at regulator Annel and current federal university of Rio de Janeiro state professor, about the challenges.

Is it viable for green hydrogen to rely on incentivized renewable sources?

It is possible strong global investment will produce opportunities for [Brazilian green hydrogen] in the coming years, but [the world] still needs technological advances to produce economically competitive green hydrogen. Of the various routes in development and suited to Brazil, the following stand out: electrolysis; the high percentage of renewable electricity available in the Brazilian power grid; converting ethanol possibly in the importing country, which could make ethanol a hydrogen carrier; and renewable natural gas, with biomethane produced from our abundant biomass.

What are the most urgent challenges to power sector growth, modernization?

The main electricity sector rules were designed 20 years ago, shortly after the 2001 power rationing. Since then, much has changed. New technologies, mainly wind and solar, which were only viable when boosted by subsidies, became competitive sources.

But the sector's rules were not adapted to the new situation to minimize power costs. On the contrary, large consumers were authorized to buy power directly from cheaper sources, boosted by subsidies paid by the bulk of the population. Currently, lobbies operate in congress advocating new laws that preserve or create unnecessary subsidies that privatize benefits and socialize costs.

To counter this, in 2017, mines and energy ministry MME carried out a broad public consultation with the electricity sector — the CP33, as it became known. The result of the effort was a bill that, unfortunately, is paralyzed in congress.

Therefore, the main challenge is to reestablish the technical and economic governance of the power sector, updating and approving the bill resulting from CP33.

Is Brazil's power grid prepared for extreme weather, such as record temperatures or rains?

As extreme weather events appear to be occurring with greater intensity and frequency, the whole power grid requires review. In other words, distributors and transmission companies are not prepared. If they were it would mean excessive investment in the past and higher tariffs than would have been necessary. More investment in utilities means higher tariffs, so caution is needed to avoid demanding absurd investments that far exceed consumers' ability to pay.


Sharelinkedin-sharetwitter-sharefacebook-shareemail-share

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News

La deuda de Pemex sobresale en el panorama electoral


15/04/24
News
15/04/24

La deuda de Pemex sobresale en el panorama electoral

Mexico City, 15 April (Argus) — La campaña presidencial de México termina en menos de dos meses, pero aunque ambas candidatas proponen una revolución verde en el sector de la energía, ninguna de ellas ha propuesto un plan viable para evitar la implosión financiera de la empresa estatal Pemex. Claudia Sheinbaum, candidata de continuidad para la política energética nacionalista del Presidente Andrés Manuel López Obrador, anunció el mes pasado su estrategia energética, comprometiéndose a aumentar la producción de petróleo y gas de Pemex, aumentar el rendimiento de las refinerías y la producción petroquímica, desarrollar una industria nacional de litio y buscar un nuevo enfoque en la generación de energía renovable. La antigua jefa de gobierno de la Ciudad de México no ha proporcionado detalles sobre ninguna de estas políticas, pero es difícil conciliar su compromiso con una ampliación de las energías renovables con un límite en la inversión del sector privado sin depender en gran medida del aumento de la financiación de la estatal de electricidad CFE. La política de Sheinbaum en materia de energías renovables es la única desviación de la agenda energética de López Obrador, aunque las agencias de calificación, los inversores y los analistas coinciden en que es probable que Pemex incurra en impago sin una amplia reforma estructural. Pemex tenía una deuda total de $106,100 millones a finales de 2023 y se enfrenta a $10,000 millones en vencimientos de deuda este año. El impulso del gobierno para aumentar el rendimiento de las refinerías ha generado pérdidas de miles de millones de dólares para Pemex. Solo en 2023, la división de refinación de Pemex reportó una pérdida de $4,400 millones, una mejora con respecto a una pérdida de $11,000 millones el año anterior. De 2019 a 2023, la división de refinación de la empresa registró más de $46,000 millones en pérdidas. López Obrador puso el rescate de Pemex y sus refinerías en el centro de su administración. Pero a pesar de no detener la espiral de deuda de la empresa, la disminución de la producción de crudo, el empeoramiento del récord de seguridad y el aumento de las emisiones de gases de efecto invernadero, sus políticas han tenido un coste que Sheinbaum no ha querido refutar públicamente. En su lugar, se compromete a lanzar el proyecto de la refinería Olmeca de 340,000 b/d de la empresa, que ya tiene dos años de retraso y ha costado al menos el doble del presupuesto original de $8,000 millones, dinero que las agencias de calificación afirman que debería haberse dirigido al negocio principal de Pemex en la exploración y producción. El apoyo gubernamental a Pemex, por un total de más de $52,000 millones entre 2019 y 2023, ha sido incapaz de mover la aguja en sus métricas financieras u operativas, y ahora amenaza la calificación crediticia soberana de México. Sheinbaum ha evitado abordar públicamente la carga de la enorme deuda de Pemex, proponiendo únicamente "niveles de deuda aceptables en el sector de la energía". Pero dada la importancia de Pemex para el proyecto político del partido Morena, además los cientos de miles de puestos de trabajo que dependen de Pemex, no se puede permitir que la empresa incumpla. Por otro lado, la candidata de oposición Xóchitl Gálvez pide poner fin al "caos financiero" en Pemex, diversificar su negocio hacia iniciativas de bajas emisiones de carbono, políticas rigurosas de emisiones, el cierre de sus refinerías más contaminantes, un nuevo enfoque en renovables y una reapertura de la industria energética a la inversión del sector privado. Sin embargo, a pesar de su perspectiva más favorable para la inversión privada, Gálvez aún no ha ofrecido una solución detallada para la situación financiera de Pemex. Sus planes para Pemex pueden ser demasiado radicales para los votantes, especialmente dentro del importante sindicato de trabajadores del petróleo, que repudió rápidamente sus llamados el mes pasado para cerrar dos refinerías. Incluso si ganara, la oposición que representa podría tener dificultades para acordar un camino a seguir para Pemex. Si la próxima administración vuelve a abrir la puerta a la inversión del sector privado, el nuevo gobierno se enfrentará a un esfuerzo lento para reconstruir los reguladores de la energía que han sufrido de baja inversión en los últimos seis años. Pero será el tamaño de la posible victoria de Sheinbaum lo que determinará el futuro del sector de la energía mexicano. Una mayoría convincente podría permitirle aprobar las grandes reformas energéticas que eludieron a López Obrador y seguir limitando la participación del sector privado en el sector energético, justo cuando la inversión directa extranjera en México está en auge en otras industrias. Por Rebecca Conan Producción de crudo en México Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

German power spot index to deliver above expectations


15/04/24
News
15/04/24

German power spot index to deliver above expectations

London, 15 April (Argus) — The German power spot index has delivered below over-the-counter (OTC) expectations in April as wind and solar output have averaged above seasonal norms. But forward prices suggest that the spot index is on track to deliver above OTC expectations on declining wind generation in the second half of the month. The German spot index averaged €50.49/MWh over 1-16 April, below the April OTC contract's expiry of €54.90/MWh. But the index is on track to deliver at around €58.46/MWh across the month, based on the weighted-average of the expiry of week 16 at €65.70/MWh and the latest assessments of weeks 17 and 18 at €71.20/MWh and €59.50/MWh, respectively, and the spot index in April. Combined onshore and offshore wind generation has climbed to 19.65GW this month, well above the 13.4GW average for April 2019-23. And solar output has averaged above 8.6GW, a new high for April. Rising renewable output has weighed on thermal generation, with combined gas, coal and lignite-fired output down to 10.5GW, the lowest of any month in over seven years. Working day-ahead clean dark spreads for 40pc-efficient plants have averaged minus €28.46/MWh for delivery on 1-15 April from minus €13.88/MWh in March. Clean spark spreads for plants with 55pc efficiency have fallen by €14.68/MWh on the month and into negative territory at minus €11.17/MWh. And clean lignite spreads for 36pc-efficient plants have averaged minus €13.51/MWh from €0.29/MWh last month. The seasonal rise in temperatures has also lowered demand by 1.6GW on the month to 50.35GW in April, outpacing the month-on-month decline in generation by over 300MW. And Germany has been a net exporter on six days this month, compared with seven days in all of March . But wind output is forecast to remain below the 2019-23 average on most days in the second half of the month, data from analytics platform Kpler show, while peak-load solar output is expected to remain below a load factor of 30pc — or 16GW — over 16-21 April, which could support the spot index and imports. And the May contract rose to its highest in almost three months on its latest assessment on 12 April at €64.60/MWh, up from under €50/MWh on its first assessment as the front month. Thermal generating margins for base and peak-load delivery in May have averaged well below zero in April, with even higher-efficiency coal, lignite and gas-fired plants priced out of the mix. Germany is likely to continue importing from its Swiss and French neighbours in May. Swiss hydropower stocks widened their surplus to the long-term average in week 14, while precipitation in Sion is forecast well above seasonal norms next month and Alpine snowpack is well above average, which could boost inflows when snowmelt picks up in May. And French nuclear unavailability is forecast to drop by 4GW on the month to 15.6GW in May, well below the 25.4GW in May last year. By Adrien Seewald German April power generation GW Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Singapore, Rotterdam advance 'green' shipping corridor


15/04/24
News
15/04/24

Singapore, Rotterdam advance 'green' shipping corridor

Singapore, 15 April (Argus) — The Singapore-Rotterdam Green and Digital Shipping Corridor (GDSC) is accelerating its decarbonisation efforts with new partners, and is advancing initiatives to encourage the uptake of sustainable marine fuels. The world's two largest marine fuel hubs established the Singapore-Rotterdam GDSC in August 2022, in a push for maritime decarbonisation and digitalisation between the ports. There are 26 global value-chain partners in the GDSC initiative including fuel suppliers, shipping lines, knowledge partners and financial entities. German container shipping line Hapag-Lloyd is the latest partner in the Singapore-Rotterdam trade lane, committing to operate large container vessels on zero and near-zero carbon emission fuels. Hapag-Lloyd is the world's fifth-largest liner shipping firm with at least 260 ocean-going vessels, according to the Maritime and Port Authority of Singapore (MPA). GDSC working groups will also pilot the uptake of sustainable marine fuels — like bio-methane, methanol, ammonia, and hydrogen — and test out commercial structures to reduce cost barriers in switching to alternative fuels. This includes a bio-methane working group that is studying regulations and standards to support adopting the fuel for marine bunkering on a commercial scale. GDSC partners also plan to carry out bio-LNG bunkering pilots over 2024-25, based on a mass balancing chain of custody principle. A methanol working group is working on fuel standards and knowledge exchange, in addition to addressing common challenges to carry out commercial methanol bunkering at Singapore and Rotterdam. And an ammonia working group is developing a framework to assess the lifecycle greenhouse gas intensity of green ammonia for bunkering, to be completed by 2025. Improvements to digitalisation have also been made as part of the GDSC initiative, with Singapore and Rotterdam successfully piloting an exchange of port-to-port data. Both ports will be able to exchange vessel arrival and departure times for port planning, and ships travelling between Singapore and Rotterdam can also optimise their port call voyage. The maritime sector is pushing towards a more resilient and efficient energy transition, and participants have pointed out that collaboration between countries and stakeholders would be key to green shipping corridors . The GDSC is a "very valuable collaboration in accelerating the twin transition: the integration of digital innovation in energy transition efforts," said chief executive officer of Port of Rotterdam Authority (PoR), Boudewijn Siemons. "Not only are we seeing the first results in standardization and data sharing for Port Call Optimization but also the first steps in moving towards operationalization of zero and low carbon fuels on this trade lane." Progress on the GDSC development also reflects that "public-private collaboration across global value chains can be achieved," said MPA chief executive Teo Eng Dih. By Cassia Teo Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Australia’s Origin buys 1.5GW wind, battery project


15/04/24
News
15/04/24

Australia’s Origin buys 1.5GW wind, battery project

Sydney, 15 April (Argus) — Australian upstream and utility firm Origin Energy has entered an agreement with renewables developer Virya Energy to acquire the 1.5GW wind, 800MWh battery Yanco Delta project in New South Wales (NSW). Origin will pay up to A$300mn ($194mn) for the project, starting with an upfront payment of A$125mn and an additional payment of up to A$175mn dependent on Yanco Delta achieving some development milestones. Yanco Delta — one of the largest and most advanced wind and energy storage projects in NSW — will allow Origin to bring a "material volume of renewable energy supply into the market relatively quickly", chief executive officer Frank Calabria said. Yanco Delta received development approval from the NSW government last December and federal approval under the Environment Protection and Biodiversity Conservation (EPBC) Act in February, with grid connection rights expected to be the next major milestone for the project. "Securing transmission access rights is a key near term priority for the project, which subject to the timing of the access rights tender process, we anticipate occurring before the end of the 2024," an Origin spokesperson told Argus on 15 April. "Timing for development will ultimately be confirmed once we have all aspects of the project finalised, EPC contractors engaged, and a final investment decision is taken." The Australian Energy Market Operator (Aemo) manages access rights via a competitive tender process. Virya Energy previously said it expected the final investment decision and the start of construction for 2025-26, with completion between 2027-29. Yanco Delta will be located some 10km northwest of Jerilderie in the Riverina district, in NSW's South West Renewable Energy Zone (REZ). It could be one of the biggest renewable plants helping to replace ageing coal-fired plants in NSW, with three of the four remaining facilities in the state — Origin's 2,880MW Eraring, utility AGL's 2,640MW Bayswater and utility Delta Electricity's 1,320MW Vales Point — expected to close over the next decade. Virya Energy estimates Yanco Delta could avoid between 3.3mn-4.5mn t/yr of greenhouse gas (GHG) emissions. Origin was the fourth largest GHG emitter in the 2022-23 fiscal year to 30 June, according to the Clean Energy Regulator (CER). The utility has been in talks with the NSW government to extend Eraring's operations beyond its planned August 2025 closure , while stepping up renewable investments in recent months. It in February acquired developer Walcha Energy, which is developing the Ruby Hills wind and Salisbury solar projects with more than 1.3GW of combined capacity. By Juan Weik Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more