Brazil's mines and energy ministry MME's upcoming Amazon decarbonization plan could reduce the power surcharge that subsidizes electricity costs for isolated northern power grids, but more action is necessary to make the measure effective.
MME minister Alexandre Silveira first announced the plan during a video address at the Enase conference in Rio de Janeiro on 21 June, raising expectations that this would help reduce the subsidies paid by all of Brazil's power consumers. Silveira has revealed other details since.
He said the project will substitute diesel- and fuel oil-fired power plants for solar- and biodiesel-fueled ones, aiming to cut fossil-fueled power generation in the Amazon to only 40pc by 2026 and to 20pc by 2030. Brazil's energy research agency Epe expects almost 80pc of the power generated in the isolated systems to come from fossil sources in 2024.
The government will also increase public awareness of the construction of the transmission line connecting Manaus state to Roraima state's capital Boa Vista, which will bring more isolated regions to the grid, Silveira said.
The surcharge, known as CCC, totaled R3.78bn in June, making up almost 28pc of the CDE energy development fund that is funded by tariffs paid by all electricity consumers.
The funds for the new MME program come from the law that privatized utility firm Eletrobras, which directs some of the revenue from the utility's sale to power efficiency projects in the Amazon. This should reduce the amount of money directed to the CCC, according to Victor Iocca, director of electricity sector programs at energy consumer association Abrace. But that would have limited impact, since a large portion of the CCC is not directed at fuel costs but at subsidizing power consumption in the region, he said.
It would be necessary to have more projects led by MME and coordinated by power regulator Aneel to address the subsidies to end the CCC's burden for power consumers, according to Iocca.
There needs to be a fine comb through the power subsidies, including the CCC, according to power consultancy PSR's project manager Mateus Cavaliere. In the last power tender for the isolated systems in 2021, PSR showed that solar projects with batteries would be able to compete with diesel projects. But there was a political issue of diesel projects paying the state-level, VAT-like ICMS tax, which means displacing them would lead to less tax collection in the affected states, Cavaliere said.
The key issue for discussions related to decreasing the CCC is to not create new surcharges or cross-subsidies in the process, leaving the fund to address the issues it was created to address, he said.
