The cogeneration industry is helping to increase efficiency and decarbonization in Brazil, but a lack of pricing for those attributes still weighs on market growth.
Cogenerating companies using natural gas and biomass to generate electricity on site, both for self-supply and to sell surplus power to the grid, are nothing new in Brazil. Nevertheless participants at the VII Co-generation Association Cogen Forum last week in Sao Paulo pointed to the lack of pricing for attributes like a smaller carbon footprint for some power sources or an ability to respond to rising demand quickly as a roadblock to the expansion. Many are asking for improvements in power pricing and infrastructure investments in natural gas to support cogen growth.
Brazil's spot power price is calculated through a computational model largely based on hydroelectric-related data. It does not take into account any other factors, but as solar and wind power expand in Brazil, there is a consensus across the market that pricing these attributes correctly would help ensure safer growth of the power grid.
The national spot power price will remain at its regulatory minimum value until 2026, according to trading firm Thymos Energia's projections. The forecast expects the price to start climbing from 2027-2030, only reaching a higher threshold of R137-139/MWh from 2031-2034.
Participants at the forum expect prices to remain subdued until 2030, with excess power on offer in the market and no considerable growth in load. In this context, cogeneration's benefit would be to add reliability to the grid as a ready-to-dispatch source amidst the growth of intermittent sources and decreasing transmission costs at a time when there is a lack of available transmission capacity — since cogeneration allows industries to generate their own power locally without relying on transmission infrastructure.
Competitive natural gas prices could also boost cogeneration, but a lack of gas infrastructure and a solid regulatory system are challenges to national transmission.
Cogeneration offers an opportunity to connect the natural gas sector to the power sector and to add reliability to the grid, according to Santa Catarina state distributor SCGas technical commercial director Tiago Cabral.
Brazil's cogeneration capacity uses a wide range of fuels, according to data from Cogen. There is 17.1GW of biomass power capacity, which includes 12.35GW using sugarcane bagasse; 32GW of natural gas-fired power, 376MW of biogas, 33.6GW from solar plants.
