Brazil launches coal power program with 2050 end date

Spanish Market: Electricity, Emissions
09/08/21

The Brazilian government launched a program to encourage the continued use of coal-fired power in the face of a drought-induced power shortage.

The ordinance launched today, which runs counter to most global efforts to penalize coal fired power and other higher carbon fuels, has three objectives: preserving the existing coal power industry — which is concentrated in Brazil's southern region and provides a capacity of 1,572MW; lessening the coal industry's environmental impact; and encouraging contracting of installed coal power capacity.

Coal has became less competitive than other fuels in recent years from an efficiency perspective — with only 32pc efficiency against natural gas' 60pc, for example — while its higher emissions made it less attractive. This led to it losing governmental financing and space in Brazil's power auctions.

The Brazilian coal mining industry has tried to keep the sector alive, as a subsidy being paid by all regulated power consumers is set to expire in 2027.

The proposal calls for unspecified financial incentives for Brazil's coal-fired thermal plants to be put under contract through auctions for the regulated power market. Currently, most of the country's energy is already contracted in this kind of auction, in which the government follows its energy policy to determine which kinds of plants should be considered. The last time a coal-powered thermal plant was hired in an auction was in 2014.

The program also proposes that the government should invest in the modernization of Brazil's coal-fired plants, making them more sustainable, while also making them more attractive during auctions. It also proposes government help in searching for new powerplant financing or retrofitting of existing ones, including using public funding.

The proposal also suggests auction contracts with due dates that extend until 2050, Brazil's current deadline for the decarbonization of its energy grid. The ordinance argues that this is a cheaper alternative to Brazil's risk of an electrical blackout, as coal is an "indigenousfuel, not dollar-denominated."

By Rebecca Gompertz

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02/04/25

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02/04/25

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