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CERAWeek: Cleantech, power reliability focus minds in Brazil, Mexico

05 March 2021 Kevin Adler

Brazil and Mexico present different challenges for renewable power, but executives from companies operating in each country told fellow CERAWeek by IHS Markit attendees they see growth in the future.

For Latin America as a region, renewables are a growth industry, said Emanuel Simon, IHS Markit associate director, energy, who moderated a discussion on 4 March.

In the last decade, Latin American nations added more than 160 gigawatts (GW) of power capacity, and two-thirds of that was renewable power, Simon said. One prominent impact - seen in Brazil, Chile, Colombia, and elsewhere in the last year - is that low-cost renewable energy production has driven down the winning bids in power auctions to record-low prices.

Brazil

Brazil is already very familiar with renewable energy, as it's one of the world's leading generators of hydropower. Electrobras, the state-owned power company, obtains 96% of its generation from renewables, mostly hydropower, said Pedro Jatobá, chief generation officer.

But that mix is starting to change for the company that provides 30% of the nation's total power generation. "We believe we will see a boom in wind and solar in coming years," he said.

From a total of about 19 GW of wind and solar capacity now, Electrobras projects the nation will reach 26 GW by 2026. Lower capital costs than hydro are one reason, he explained. "Solar and wind are modular, so we can control [the pace of installation] to meet growing demand," Jatobá said.

And while solar and wind power production is intermittent, Jatobá said he agreed with Simon that they can actually provide reliability to power grids that are finding hydro more difficult to predict. Increasingly volatile weather patterns, due to global warming, have changed water flows that support hydropower, he said. "There is a relationship … between water [availability] and energy," he said.

Neoenergia, a private company in Brazil that generates and distributes power, faces different challenges, said Solange Maria Pinto Ribeiro, deputy chief executive officer. For Neoenergia, the government's plans to liberalize power markets could affect the revenue model it has used to support investment in new generation and distribution, she said.

If the types of long-term power purchase agreements (PPAs) it relied on in the past are not available, "… how do we price the attributes [of] reliability and environment?" she asked. "In the short term, price volatility [also will lead] … to a need for price stabilization for the revenue of the companies that would not be fully backed up by PPAs, especially hydro and [gas-fired] thermal plants."

The other issue Neoenergia is grappling with is that distributed power - such as companies or even individuals who own solar panels - is putting a strain on the grid that is currently not compensated for in rate structures, she said. Approximately 5 GW of distributed power is online today in Brazil, but she said it's becoming "quite a hot topic … [due to] exponential growth … [that] creates distortion in pricing."

A utility-scale renewable or fossil fuel power unit that's paying for grid access is at a disadvantage to a distributed operation that isn't facing those charges, she explained.

Mexico

Mexico is "going through a profound change … a very deep debate as to where Mexico's energy industry should go," said Tania Ortiz, CEO of IEnova, an international energy company that operates power generation, power transmission, and natural gas pipelines in Mexico.

"[The] key should be to focus on the long term," she said. "The country … needs to figure out its energy security in terms of the type of transmission."

The big issue for Mexico is energy reliability, with a special focus on manufacturers' needs, she said. Mexico's economy is dependent on manufacturing, with almost 90% of Mexico's exports manufactured goods, and less than 5% is oil.

The country's current installed power capacity is 50 GW, and the country has forecast its needs will rise to 75 GW by 2040, as well as commensurate expansion of the transmission grid. This will require CFE, the national power company, to expand its work with private investors, Ortiz said.

Posted 05 March 2021 by Kevin Adler, Editor, Climate & Sustainability Group, IHS Markit

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