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Paying the Price
Brazil’s Tanking Economy Is Crushing its Green Dreams

Brazil’s economy contracted 3.8 percent last year, rounding out its dismal 2015 by shrinking 5.9 percent in the fourth quarter as compared to the previous year. The years of the BRICS hype seem a distant memory now as the South American country struggles with rating downgrades, scarcer capital, and falling tax revenue. This contraction is tightening Brazil’s federal budget and in the process is threatening to halt recent progress made in expanding renewable energy production. Bloomberg reports:

“I am concerned,” said [Bloomberg New Energy Finance analyst Helena Chung]. “Brazil’s government has denied giving more incentives for renewable energy in the same way it has been denying it for other industries. That has a lot to do with the economic crisis, and a slowdown in the energy sector can give a bad signal to the market.” […]

“The problem now is declining demand for power as the economy contracts,” said Mauricio Tolmasquim, the head of EPE, said by phone from Rio de Janeiro. “Distributors that buy energy in many auctions already have the capacity they need. In the next couple of auctions we will certainly see a low demand for power.”

As is so often the case, Brazil’s recent renewables progress is ready to crumble at the first sign of economic troubles. A tighter federal budget means less cash available for the kinds of incentives necessary to get wind and solar farms up and running, and producers’ problems are being compounded by the fact that it’s becoming more difficult to secure funding from capital markets. And if that wasn’t enough, those renewable producers who have managed to eke out a foothold in the Brazilian power market are having trouble transmitting their supplies to the grid, as Bloomberg details:

Another challenge is new transmission, which is needed to connect clean power projects to the grid. About 220 power-line projects were behind schedule as of December, about 60 percent of the total capacity under development, according to a document from Brazil’s energy regulator Aneel. Difficulties getting environmental licenses caused the most delays, according to the document. “There is no way to grow power generation without transmission lines on time,” [said Itau BBA’s head of energy project finance Marcelo Girao].

This will, of course, affect Brazil’s ability to meet the promises it made at the Paris climate summit three months ago. Like the treaty’s other signatories, Brazil submitted a national plan to reduce emissions and agreed to review those commitments in the coming years. If its economy continues on the track on which it’s currently traveling, those climate pledges are going to quickly fall by the wayside. At least Brazilian president Dilma Rousseff can take solace in the fact that the Paris treaty lacked any meaningful enforcement mechanisms, so her country won’t face reprisals for any future green backsliding.

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  • White Knight Leo

    It’s almost as if “renewables” was a white elephant rather than a good idea.

  • nervous122

    Countries across the globe are about to realize that climate change wasn’t their most pressing threat.

  • Pait

    One of the reasons why Brazil’s economy is in recession is that the government pushed unwarranted investments in the the oil industries. The main reason, actually. Investments in renewable energy have been tiny; even the old-school hydropower hasn’t received much attention. The white elephant in Brazil’s case is Petrobras, the state oil company. Oil, is that clear? OIL.

    I have the impression that the author of this article does not know much, if anything, about Brazil.

    • Dale Fayda

      Ah, at the feet of the master again…

      Oil is what has kept the Brazilian economy afloat all these years – it’s by far their largest export item. All those “renewable energy” feed troughs for the well-connected only exist because there’re real, profitable commodities like oil to underwrite them. Less revenues for the thoroughly, ridiculously criminal STATE oil company – no subsidies for “renewables”. See the connection?

      What kicking Brazil’s behind is combination of good, old-fashioned leftist corruption: http://www.independent.co.uk/news/business/analysis-and-features/brazils-petrobras-scandal-shakes-up-the-system-a6759756.html and a good dose of crony capitalism, along with a huge, bloated public sector and a crime-ridden, dysfunctional culture.

      Brazil – “country of the future” forever.

      • White Knight Leo

        Well, oil is hurting them now because it’s such a big part of their economy that the collapsing price is really, really bad. But corruption is one of the primary causes of having a one-note economy after all.

        • Dale Fayda

          You’re right, putting most of your eggs into a single basket is a risky bet. However, in comparison to so-called “renewables”, the oil industry is real – it’s valuable product with a worldwide demand, used for a myriad of industrial purposes beside energy generation. “Renewable energy” is oil’s worthless, gold digging, ungrateful trophy wife, too venal and stupid to understand that if its “sugar oil daddy” goes, it will go too.

          Commodity prices have been zooming up and down since the beginning of the Industrial Revolution – it’s to be expected. How different countries react to the price fluctuations is reflected in their cultural and political make up. Example: Australia, greatly dependent on the mineral boom of the last decade, has been much more successful in dealing with the fall in prices, largely because its political and economic system is generally free of endemic socialist dysfunction and general hostility to business. On the other hand, repressive, corrupt petro states like Russia, Venezuela, Brazil, Saudi Arabia, Iran, et al, live and die by the price of crude because they’re intrinsically incapable of developing much of anything else.

          • Pait

            You have your facts wrong about Brazil. Most of them at least.

          • Dale Fayda

            Oh, sure… If they just “invested” (read – lined the pockets of the politically connected) a few more hundreds of millions into renewables, they would be sitting pretty right now, immune from the collapse in the price of crude.

        • Pait

          You seem to have gotten your facts from Dale above, His facts are wrong, as usual.

          • White Knight Leo

            Well mining output and oil together make up about 21% of Brazilian exports, according to Wiki. So his numbers weren’t exactly perfect. 8% of your exports is actually a pretty big chunk of the economy, though; it beat out every other single thing except for iron ore. They certainly aren’t as bad off as, say, Venezuela, but it’s not helping them either.

          • Pait

            Mining as an enterprise is completely unrelated to oil. And oil exports are smaller than imports. The price of oil doesn’t make much difference for the Brazilian economy in total. So the chain of “facts” is completely wrong, starting with “Oil is what has kept the Brazilian economy afloat all these years – it’s by far their largest export item.” Now Dale is a known troll. It was silly of me to get into an argument with trolls, my apologies.

            The point of my comment is that the original article shows a lack of knowledge about Brazil. It is sort of trying to pin down Brazil’s crisis on renewables, which is arrant nonsense. One might say that it started from its desired conclusions, which are related to an ideology concerning renewable energy and the US, and tried to fit Brazilian invented facts to support the conclusion.

      • Pait

        You are incorrect on the facts. Brasil imports more oil and oil products than it exports. I picked a news item in Portuguese, probably it’s almost as easy to find the data in English. The largest exports items are iron minerals and steel, agricultural products, and cars, car parts, and airplanes.

        It is true that the current government mismanaged the economy with a combination of state controls and crony capitalism.

        Without further information I hesitate to ascribe your ignorant and prejudiced opinion of a people’s culture altogether to a history of family incest.

        http://economia.uol.com.br/noticias/reuters/2015/03/02/exportacoes-de-petroleo-do-brasil-superam-importacoes-no-1o-bimestre.htm

        • Dale Fayda

          Ouch, that one hurt… Ha, ha, ha, ha!

          Well, let me put it in terms that you will understand. Regardless of the exact percentage which Brazilian oil exports constitute vs. imports, one thing is crystal clear – Social Democracy is in economic collapse all over the world. Venezuela, Brazil, Greece, Spain, Italy, Portugal, Puerto Rico, Chicago, Detroit and on and on and on… And it ain’t the price of oil that doing them in.

          Also, if as you state, Brazilian oil industry is a relatively small part of its overall economy, why do you claim that: “One of the reasons why Brazil’s economy is in recession is that the government pushed unwarranted investments in the the oil industries”? And how would increased “investment” in economically unfeasible “renewables”, which can’t even break ground without a major infusion of government (in Brazil’s case – oil) cash keep their economy from cratering?

          • Pait

            Let’s start with the facts. Brazil imports and exports oil and oil products; the total size of the industry is large, but the export balance is negative – the country imports more than it exports. You drew a number of conclusions based on false facts that you pulled out of your ass.

            As I stated, the Brazilian left leaning government ran state controlled and influenced businesses very poorly. This caused a major crisis. The country has a president who cannot run a dollar store, and several rather dishonest ministers and politicians in high places – they’ve been running the country on falsehoods, ideology, and invective.

            Imagine yourself with your lies, incompetence, rigid thought, and anger at your own shadow in a position of responsibility, and you’d see how badly a nation would do. Sometimes, such bastards get elected. Dialog is futile. One just has to ignore them and wait until they go away.

  • CaliforniaStark

    This article misses two major facts regarding renewable energy in Brazil:

    1.) Over 70% of Brazil’s electricity normally comes from hydroelectricity. Currently, Brazil is in a major drought, which has substantially reduced power from this source, and has resulted in shortages;

    2.) Brazil has one of the most advanced biofuels industries in the world. Almost all private vehicles in Brazil are flex fuel. It has a massive sugarcane ethanol industry that produces about 20% of its transportation fuel.

    Brazil has ample oil and gas resources, which could be exploited and exported; it has not happened because of the rampant corruption at Petrobas, the state owned oil company, which involves President Rousseff’s political party.

    The solace that President Rousseff can take is that few major countries in the world, with the exception of France, produce anywhere near the amount of renewable energy as Brazil; lack of wind and solar farms not withstanding. Perhaps the U.S. and Europe will catch up with Brazil in this regard when they overcome their fetish with wind and solar, and move on to developing more effective renewable energy sources.

    • josephtoomey

      You haven’t been paying attention. You’re repeating urban legend, not up-to-date factual information. In 2009, Brazil derived 5.7% of its energy needs from biofuels, the highest consumption it has ever achieved. That proportion has dropped off to 5.1% today and has gone as low as 4.2% in 2012. Meanwhile, gasoline and diesel have steadily advanced. See the actual numbers here, straight from the Ministry of Mines and Energy:

      http://tinyurl.com/h4n5kau

    • josephtoomey

      Since 2010, renewable energy consumption in Brazil is unchanged. Hydro energy only accounts for about 2% of the reduction, barely changed. The reason why renewables energy has declined as a proportion of overall energy consumption is because non-renewables have advanced sharply. Look it up in Table 1.2a:

      https://ben.epe.gov.br/downloads/Relatorio_Final_BEN_2015.pdf
      So it looks like you were the one who missed the major facts.

  • josephtoomey

    The same grid access has slowed German wind energy penetration. In some cases, turbines were deployed before grid connections had been installed. In other cases, grid connections and build out occurred long before wind towers and turbines were initiated.

    Think about how poorly a green energy grid network is utilized. The $6 billion wind farm project in Carbon County, Wyoming has a nameplate capacity rating of 3,000 mW. But it will only generate about 29% of that due to wind intermittency. It requires a 725 mile grid tower network that costs $3 billion to deliver 7.6 million mWh each year to Southern California. Meanwhile, the Palo Verde Nuclear Generating Station, the nation’s largest nuclear power complex, has 3,987 mW capacity with 90% availability rating, generating 31.2 million mWh per year. It only requires about 55 miles of grid to connect it to Phoenix. Thus, the energy density per mile of the Palo Verde plant grid is about 54 times greater than the Carbon County grid. (Never mind the imponderably ironic aspect of economically infeasible wind power being generated in a place called CARBON County.)

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