Market Assessment For Promoting Energy Efficiency and Renewable Energy Investment in Brazil Through Local Financial Institutions

Market Assessment for Promoting Energy
Efficiency and Renewable Energy Investment in

Brazil through Local Financial Institutions
Contract 7153994
FINAL REPORT
- October 2010 -
International Finance Corporation
Market Assessment for Promoting EE&RE in Brazil through Local Financial Institutions
Final Report
ABBREVIATIONS AND ACRONYMS

ABADI Associação Brasileira de Administradores de Imóveis
ABIA Associação Brasileira da Indútria de Alimentos
ABIH Associação Brasileira da Indústria de Hotéis
ABIQUIM Associação Brasileira da Indústria Química
ABIT Associação Brasileira da Indústria Têxtil
ABRABE Associação Brasileira de Bebidas
ABRAS Associação Brasileira de Supermercados
ABRASCE Associação Brasileira de Shopping Centers
ADENE Agência de Desenvolvimento do Nordeste
ANEEL Agência Nacional de Energia Elétrica (Brazilian Power Sector Regulator)
ANFACER Brazilian Association of Ceramic Tile Manufacturers
ANP National Agency for Petroleum, Gas and Biofuels
BASA Banco da Amazônia SA
BNB Banco do Nordeste do Brasil
Banco Nacional de Desenvolvimento Economico e Social (Brazilian
BNDES
Development Bank)
BP British Petroleum
BRACELPA Brazilian Pulp and Paper Association
BREES Brazil Energy Efficiency Study
BRL Brazilian real
CDM Clean Development Mechanism
CEF Caixa Econômica Federal
CEMIG Electricity distribution utility in Minas Gerais State
CGH Small hydro plants with less than 1,000 kW of capacity
CNI National Confederation of Industry (Confederacão Nacional da Industria)
COGEN Accociação da Indústria de Cogeração de Energia
COPEL Electricity distribution utility in Paraná State
CPFL Electricity distribution utility in São Paulo State
DISCO Distribution Company (Electricity)
EE Energy Efficiency
EEGM Energy Efficiency Guarantee Mechanism
ESCO Energy Service Company
ESMAP Energy Sector Management Assistance Program
ESPC Energy Services Performance Contract
EPE Energy Research Company (planning agency for energy sector)
EUR Euro, official currency of the Eurozone
FDA Fundo de Desenvolvimento da Amazonia” of the BASA
GDP Gross domestic product
GEF Global Environment Facility
GHG Greenhouse Gases
HVAC Heating, Ventilation and Air-Conditioning
IBGE Instituto Brasileiro de Geografia e Estatística
IDB Inter-American Development Bank
IFC International Finance Corporation
INMETRO Federal Agency Responsible for Physical Standards in General
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IRR Internal rate of return

kWh Kilowatt hour
MEEP Manual for the Energy Efficiency Program
MME Ministry of Mines and Energy
MRE Market for Reallocating Energy (Mercado de Realocação de Energia)
M&V Measurement and Verification
MWh Megawatt hour
NGO Non-Governmental Organization
OECD Organization for Economic Co-operation and Development
O&M Operation and Maintenance
PNE Plano Nacional de Energia
PROCEL National Program for efficiency in electricity use
PROESCO Credit line of the BNDES to finance energy efficiency projects
R&D Research and Development
RE Renewable Energy
RELUZ Program to promote energy efficiency in public lighting
RT Refrigeration ton
SAG Shared General Administration Costs (cost item allowed in the EE program)
Superintendência de Pesquisa e Eficiência Energética (Department of ANEEL
SPE
responsible for regulating the EE program)
tCO2 Ton of carbon dioxide
TRANSCO Transmission Company (electricity)
toe Ton of oil equivalent
UNDP United Nations Development Programme
UNEP United Nations Environment Programme
UNICA União da Indústria de Cana de Açúcar
USD Unites States dollar
USW Urban solid waste
VSD Variable speed drive
WBG World Bank Group
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TABLE OF CONTENTS
EXECUTIVE SUMMARY .......................................................................................................................X

INTRODUCTION ................................................................................................................................... 1
1 EXISTING EE&RE BUSINESSES IN BRAZIL............................................................................. 3
1.1 Overview of Energy Sector.................................................................................................. 3
1.2 Institutional, Policy and Legal Framework ........................................................................ 6
1.2.1 Institutional Framework of the Energy Sector................................................................. 6
1.2.2 Policy and Regulatory Framework in Renewable Energy .............................................. 8
1.2.3 Policy and Regulatory Framework in Energy Efficiency ................................................. 9
1.3 Past and Ongoing Initiatives in EE&RE Financing Mechanisms in Brazil.................... 10
1.3.1 Government Programs for Promoting EE and RE Projects.......................................... 10
1.3.2 Impact of the general and specialized auctions for contracting new RE capacity ........ 12
1.3.3 Existing Renewable Energy Financing ......................................................................... 13
1.3.4 Existing Energy Efficiency Financing Instruments........................................................ 14
1.3.5 Lessons Learned from Past Activities in EE................................................................. 17
2 INVESTMENT OPPORTUNITIES RENEWABLE ENERGY...................................................... 19
2.1 Investment Opportunities in Small hydro ........................................................................ 20
2.1.1 Recent trends in the market and potential.................................................................... 20
2.1.2 Regional aspects of the market .................................................................................... 21
2.1.3 Characteristics of typical projects ................................................................................. 21
2.1.4 Brief overview of key players in the market .................................................................. 22
2.1.5 Overall investment needs and current financing .......................................................... 22
2.1.6 Summary of risks and attractions ................................................................................. 23
2.2 Investment Opportunities in Sugarcane Biomass .......................................................... 24
2.2.1 Recent trends in the market and potential for expansion ............................................. 24
2.2.2 Regional aspects of the market .................................................................................... 26
2.3 Investment Opportunities in Urban Solid Waste............................................................. 30
2.3.1 Recent trends and regional aspects of the market ....................................................... 31
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2.4 Investment Opportunities in Windpower ......................................................................... 37
2.4.1 Recent trends, potential and regional aspects of the market ....................................... 37
2.5 Investment Opportunities in Biodiesel............................................................................. 42
2.5.1 Recent trends in the market and potential.................................................................... 42
2.6 Overview of smaller isolated off-grid systems in Amazônia.......................................... 45
3 INVESTMENT OPPORTUNITIES IN ENERGY EFFICIENCY ................................................... 53
3.1 Overview of Existing Studies on EE potential in Brazil.................................................. 54
3.2 Investment Opportunities in Commercial and Public Buildings ................................... 57
3.2.1 Energy Consumption Profile in Public and Commercial Buildings ............................... 57
3.2.2 Energy Savings Opportunities and Characteristics of Typical Projects........................ 59
3.2.3 EE Investment Potential in Public and Commercial Buildings...................................... 61
3.2.4 Stakeholders Analysis .................................................................................................. 65
3.2.5 Barriers and Risks ........................................................................................................ 68
3.3 Investment Opportunities in Industrial Sector ................................................................ 70
3.3.1 Energy Consumption Profile in Industries .................................................................... 70
3.3.3 EE Investment Potential in Industries........................................................................... 79
3.4 Investment Opportunities in Industrial Cogeneration .................................................... 84
3.4.1 Energy Consumption Profile for Cogeneration in Industries......................................... 84
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3.4.3 EE Investment Potential in Industries........................................................................... 85
3.5 Investment Opportunities in other Market Segments..................................................... 88
3.5.1 Green Buildings ............................................................................................................ 88
3.5.2 Street Lighting .............................................................................................................. 89
3.5.3 Water Pumping and Sewage Treatment ...................................................................... 89
3.5.4 Residential Solar Water Heating .................................................................................. 90
4 CONCLUSIONS AND RECOMMENDATIONS.......................................................................... 91
APPENDIXES...................................................................................................................................... 94
APPENDIX 1 SERVICE PROVIDERS AND SUPPLIERS IN AIR CONDITIONING AND
REFRIGERATION SECTOR ............................................................................................................... 95
APPENDIX 2 SOLAR WATER HEATING SYSTEM SUPPLIERS ................................................ 97
APPENDIX 3 TYPICAL COGENERATION PROJECTS ............................................................... 98
APPENDIX 4 SUPPLIERS IN COGENERATION MARKET SECTOR ........................................ 102
APPENDIX 5 SMALL HYDRO MARKET SECTOR..................................................................... 104
APPENDIX 6 SUGARCANE BIOMASS MARKET SECTOR ...................................................... 116
APPENDIX 7 URBAN SOLIDE WASTE MARKET SECTOR...................................................... 136
APPENDIX 8 WIND POWER MARKET SECTOR ....................................................................... 150
APPENDIX 9 BIODIESEL MARKET SECTOR............................................................................ 161
APPENDIX 10 INFORMATION ON ISOLATED OFF-GRID SYSTEMS IN AMAZÔNIA ............... 171
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LIST OF TABLES
Table 1: Summary of Investment Potential and GHG Reduction in RE ...............................................xvii
Table 2: Summary of Investment Potential and GHG Reduction in EE ..............................................xviii
Table 3: Final consumption by sector in 2008 (thousand toe) ................................................................4
Table 4: Electricity Prices by Sector and Region (November, 2009) ......................................................5
Table 5: BNDES approved operations in the electricity sector - 2003 to 2009 .....................................13
Table 6: Average size and investment/kW of generation projects approved by the BNDES during 2003
– 2009 ...................................................................................................................................................14
Table 7: Evolution of installed PCH and CGH capacity in 2008-200913 ................................................20
Table 8: Summary of investment potential for small hydro ...................................................................23
Table 9: Evolution of sugarcane, sugar and ethanol production from 2003 to 200814 ..........................25
Table 10: Projected expansion of the sugarcane sector in Brazil until the harvest of 2020/202115 ......26
Table 11: Production of sugarcane in Brazil and by regions (thousand metric tons)16 .........................26
Table 12: Effect of scale on approximate investments in new sugarcane plants17 ...............................27
Table 13: Summary of investment potential for sugarcane cogeneration.............................................29
Table 14: Destination of urban solid waste, by macro-region19.............................................................31
Table 15: Waste generated per capita, by size of municipality20 ..........................................................32
Table 16: Approximate potential for electricity generation from landfill gas recovery ...........................33
Table 17: CDM projects by sector22 ......................................................................................................34
Table 18: Summary of investment potential and GHG reduction..........................................................36
Table 19: Summary of investment opportunities in wind power............................................................40
Table 20: Comparison of the credit terms of the BNDES and the Banco do Nordeste.........................40
Table 21: Evolution of the required blend of biodiesel in diesel from fossil fuel25 .................................42
Table 22: Evolution of the production of pure biodiesel (B100, in m3)26 ................................................42
Table 23: Prices of oil & fat feedstocks for biodiesel (USD/ton)28 .........................................................43
Table 24: Number of generating plants by resource.............................................................................46
Table 25: Profile of installed capacities of thermal plants in isolated systems......................................47
Table 26: Energy savings by sector (base year: 2005), reference scenario .........................................54
Table 27: Energy efficiency potential, by level and sector35..................................................................55
Table 28: Savings in electricity consumption (TWh) by sector36 ...........................................................55
Table 29: Savings potential by sector and end-use (1,000 toe)37 .........................................................56
Table 30: Energy Breakdown per End Usage in Commercial and Public Buildings .............................58
Table 31: Energy Consumption per Usage in Public and Commercial Buildings .................................59
Table 32: EE Investments Estimate in Commercial Buildings ..............................................................62
Table 33: EE Investments Estimate in Public Buildings........................................................................64
Table 34: Key Market Players in Building Sector..................................................................................65
Table 35: Breakdown per energy source in Brazilian industries55.........................................................75
Table 36: Energy balance per end usage in four Brazilian industries...................................................75
Table 37: Best Available Technologies savings potential for Brazilian industry (2007)60......................78
Table 38: Investments Estimate in Industrial Market Sector.................................................................79
Table 39: Key Market Players in Industrial Sector ................................................................................81
Table 40: Potential for Cogeneration Projects in Industrial Sector - Rio de Janeiro62...........................85
Table 41: Energy generation and investment potential for cogeneration projects in industries ............86
Table 42: Key Players for Cogeneration Projects in Industrial Sector ..................................................87
Table 43: Ventures with Qualified Cogeneration in Brazil...................................................................100
Table 44: Values Data - 2008 .............................................................................................................101
Table 45: Evolution of installed PCH and CGH capacity in 2008-2009 ..............................................105
Table 46: Evolution of small hydro potential in 2008-2009 .................................................................106
Table 47: Number of Executive Projects and Inventory Studies by Region........................................106
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Table 48: Small hydro plants in operation...........................................................................................106

Table 49: Hydromechanical equipment for small hydro projects ........................................................112
Table 50: Tubine suppliers for small hydro projects ...........................................................................112
Table 51: Generator and electrical equipment supplier for small hydro projects ................................113
Table 52: BNDES financing for PCH projects.....................................................................................114
Table 53: Estimate of the GDP of the sugarcane sector by product and market (millions of USD)g ...116
Table 54: Evolution of sugarcane, sugar and ethanol production from 2003 to 2008.........................117
Table 55: Scenario of expansion of the sugarcane sector in Brazil until the harvest of 2020/2021....118
Table 56: Projected change in the revenue profile of sugarcane mills ...............................................118
Table 57: Effect of scale on approximate investments in new sugarcane plants................................121
Table 58: Typical parameters of sugarcane mill with a capacity of 2 million tc/harvest a ....................122
Table 59: Broad alternatives for generating surplus electricity for sale ..............................................122
Table 60: Surplus electricity for sale with alternative energy configurations.......................................123
Table 61: Boiler pressures in proposals for financing submitted to the BNDES .................................124
Table 62: Impact of plant pressure and scale on investment..............................................................124
Table 63: Estimated phase out schedule for sugarcane burning........................................................125
Table 64: Production of sugarcane in Brazil and by regions (thousand metric tons)..........................126
Table 65: Profile of loans by the BNDES to the sugarcane sector, by state, from 2004-2008 (%) .....126
Table 66: Summary of biomass projects in auctions since 2005 ........................................................129
Table 67: Comparison of product mix of different economic groups in the sector ..............................132
Table 68: Total BNDES loans disbursed by sugarcane sub-sectores (BRL milhões).........................134
Table 69: Outstanding loans and loan applications of the sugarcane sector, BNDES .......................134
Table 70: Destination of urban solid waste, by macro-region .............................................................136
Table 71: Average composition of Urban Solid Waste .......................................................................138
Table 72: Approximate potential for electricity generation from landfill gas recovery .........................141
Table 73: Profile of the amount of USW collected in municipalities ....................................................141
Table 74: CDM projects by sector.......................................................................................................142
Table 75: Approximate potential for electricity generation from high temperature treatment of USW 143
Table 76: Total investment potential for USW projects on a five-year period .....................................147
Table 77: Winning projects in the December 2009 Auction, by State .................................................150
Table 78: Largest owners of winning projects in the December 2009 Auction ...................................150
Table 79: Classes of wind potential by wind speed ............................................................................151
Table 80: Areas of Land in Different Wind Speed Classes Brazil .......................................................152
Table 81: Approximate Capacity Factor Associated with Wind Speed Class .....................................153
Table 82: Gross Brazilian wind energy potential – Brazil Atlas and modified parameters ..................154
Table 83: Comparison of credit terms between those of BNDES and of Banco do Nordeste ............159
Table 84: Evolution of the required blend of biodiesel in diesel from fossil fuel..................................161
Table 85: Evolution of the production in m3 of pure biodiesel (B100), 2005-2009 ..............................161
Table 86: Current regional shares of biodiesel production capacity and projected shares in the near
term.....................................................................................................................................................162
Table 87: Advantages and disadvantages of different feedstocks for biodiesel .................................164
Table 88: Prices of oil & fat feedstocks for biodiesel (USD/ton) .........................................................165
Table 89: Volumes and prices in the 16th and 17th auctions of biodiesel ............................................166
Table 90: Minimum required share of raw material input from small family farms ..............................166
Table 91: Key biodiesel producers in Brazil........................................................................................168
Table 92: BNDES biodiesel support program interest rate for direct operations ................................169
Table 93: Thermal Power Plants in Isolated Systems ........................................................................171
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LIST OF FIGURES
Figure 1: Total Primary Energy Supply (IEA 2009).................................................................................3
Figure 2: Energy prices (USD/barrel oil equivalent)................................................................................5
Figure 3: Financial Scheme of Petrobrás EE Program .........................................................................15
Figure 4: Isolated power plants in the Amazon region..........................................................................46
Figure 5: Capacity Factor vs Installed Capacity....................................................................................48
Figure 6: Sawmill clusters in Pará (Baixo Amazonas Region not shown) ............................................50
Figure 7: Energy Share in the Commercial Sector ...............................................................................58
Figure 8: Energy balance per industrial sector (2006)47 .......................................................................71
Figure 9: Breakdown of paper production in Brazil ...............................................................................73
Figure 10: Main segments in Brazilian chemical industry .....................................................................74
Figure 11: Energy source balance in industrial sector ..........................................................................84
Figure 12: Comparison and Solution for Cogeneration.........................................................................98
Figure 13: Basic project designs for small hydro approved by ANEEL, 1998-2009 ...........................104
Figure 14: Small hydro projects authorized by ANEEL, 1998-2009....................................................105
Figure 15: Small hydro costs/MW as a function of the “power ratio” ..................................................107
Figure 16: Complementation of the natural flow hydropower by seasonal sugarcane mill generation119
Figure 17: Biofuels consumption and land use in a global scenario to reduce greenhouse gases by
50%.....................................................................................................................................................120
Figure 18: Variation of the price of hydrated ethanol in 2009 .............................................................130
Figure 19: Relation of city population and per capita solid waste, Southeast Region ........................137
Figure 20: Relation of city population and per capita solid waste, Northeast Region .........................137
Figure 21: Illustrations of landfill gas output and recovery over time, case (A)...................................140
Figure 22: Illustrations of landfill gas output and recovery over time, case (B)...................................140
Figure 23: Map of average annual wind speeds at 50 m ....................................................................152
Figure 24: Map of biodiesel nominal production capacity versus actual output, 2008 ........................163
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EXECUTIVE SUMMARY
In the last decade, the International Finance Corporation (IFC), part of the World Bank Group (WBG),
has adopted climate change as a strategic priority for sustainable development in developing
countries. Thus, IFC fosters initiatives aiming to enhance commercial financing in Renewable Energy
(RE) and Energy Efficiency (EE).
The ongoing market assessment of potential investments in EE and RE in Brazil is part of IFC’s
broader strategy to mitigate climate change. This market assessment aims to provide potential
investors with information on sector segmentation, typical RE projects and EE measures, electricity
generation potential for RE or energy and cost savings in EE. Furthermore, this market assessment
focuses on investments required for each segment, the number of transactions, financial indicators on
cost-effectiveness and benefits analysis. The main stakeholders in each sector as well as typical
barriers and risks that may be encountered by investors are also part of the analysis.
Existing EE and RE Businesses in Brazil
In 2008, Brazil’s total primary energy supply amounted to 226 million tons of oil equivalent (Mtoe). The
main sources used as energy as well as for non-energy usages were petroleum products (41%),
sugarcane bagasse (18%), electricity (16%), firewood (10%) and natural gas (7.5%). Brazil is the third
largest producer of hydroelectricity in the world, after China and Canada. Overall, the industrial sector
consumed almost 39% of the country’s final energy, followed by the transportation (mainly oil
products, biodiesel and ethanol produced from sugarcane), energy and residential sectors with a
share of 29%, 12% and 11% respectively. Even though the public and commercial sectors consumed
about 23% of the total electricity, their proportion represents only about 5% in terms of total energy.
Finally, the “Plano Nacional de Energia” (PNE), which was published in 2007, forecasted the final
energy consumption growth of the country to be approximately 3.6% per year for a 25-year horizon.
With regard to RE, auctions for RE supply have been conducted over the last years. While the auction
of June 2007 for small hydro and biomass projects had lower results than expected, the auction of
December 2009 for wind power projects was a tremendous success. On that occasion, 1,806 MW
were contracted with a surprisingly low average price. It encouraged the organization of a new auction
for “alternative renewables,” to be held in August 2010.
As for the EE policy and regulatory framework, Brazil has established policy mechanisms that have
had impacts on private and public investments in this sector of activity. Public initiatives such as the
creation of the national energy efficiency programs PROCEL (for electricity) and CONPET (for gas &
oil derivatives) as well as the National Climate Change Program provide an institutional framework for
energy efficiency. Other regulations for EE promotion also helped provide guidelines and mechanisms
to strengthen the EE market. For instance, the national energy efficiency policy presents a set of goals
and policy instruments to be achieved by 2030. It also states very broadly several measures and
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guidelines for governmental agencies to promote market transformation. In addition, the creation of
the national fund CTEnerg, which is financed by wire charges on utilities, is another mechanism
implemented to foster EE development.
Moreover, several programs were set up by the government through public entities to promote RE and
EE in Brazil. Among others, the Electrobras Programa Nacional de Conservacao de Energia Elétrica
(PROCEL) and the Petrobras Programa Nacional de Racionalização do Uso dos Derivados do
Petroleo e do Gas Natural (CONPET) are two of the main programs promoting rational energy use.
The Programa de Incentivos às Fontes Alternativas de Energia Elétrica (PROINFA) is more focused
on RE initiatives and was the first major program to promote commercial financing for small hydro,
biomass and wind energy for sale to the national grid. As for EE, the BNDES risk sharing credit line for
ESCOs (PROESCO) was designed and implemented to offer a financing alternative to EE projects.
While main government initiatives to promote investments in the RE market can be viewed as
successful, the same conclusion cannot be drawn for EE financing. In fact, the main lessons learned
are as follows:
• PROCEL remains the main reference for energy efficiency in Brazil, hosting the “PROCEL Info”
portal. Financial institutions could work in close cooperation with PROCEL in order to be aligned
with a federal program and access the network built with more than 25 years of experience.
• CONPET is the only governmental organization focused on fuel savings. Even though it does
not have a structure and scope that is similar to that of PROCEL, some level of interaction
between CONPET and financial institutions should be maintained to gather information and
monitor the market.
• The BNDES PROESCO cannot be regarded as successful yet. In fact, few EE projects have
been financed through this mechanism and it seems that excessive bureaucratic procedures
slow the scaling-up of this initiative. Therefore, the private banking sector should position itself
as an alternative to PROESCO and collaborate with the new IDB/UNDP/GEF guarantee facility
to gather more investments in the EE market.
Investment Opportunities in RE
Five renewable energy market segments were assessed: (a) small hydro; (b) sugarcane; (c) urban
solid waste; (d) wind power; and (e) biodiesel. These are reviewed below. Moreoever, a preliminary
survey of isolated off-grid systems in Amazônia was undertaken and is briefly described.
Small hydro (defined as plants of less than 30 MW) is the renewable resource technology with the
longest history of development in Brazil. Capacity has been growing rapidly since specific measures to
promote alternatives were launched with the PROINFA program, which was established in 2004.
Intense development activities have resulted in a substantial increase in inventoried potential projects.
However, the sector began to encounter problems as costs have risen and delays in authorization and
environmental licensing have increased. A large share of projects has also been underperforming,
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which has heightened a sense of technical risk. These problems have led to a significant decrease in
projected expansion for the coming 5-10 years. The main reason for the increase in costs is that sites
with larger heads (the distance at which the water falls when moving the turbine) have already been
exploited.
Whereas older small hydro plants tended to be quite small (less than 5 MW), the recent tendency has
been for plants to be larger. The average capacity of plants currently under construction and
authorized is 14 MW. Relatively large fixed costs for project development diminish the viability of small
projects (below around 5 MW). The investment cost per kW installed varies substantially depending on
the characteristics of the site. Projects recently developed or currently under construction tend to cost
between BRL 4,000-6,200 per kW (USD 2,200-3,400). The cost of electricity generated tends to range
from BRL 160-170/MWh (USD 89-97).
Table 1 summarizes investment needs taking the latest expansion plan for the power sector as a
reference (PDEE – 2019).There are established lines of credit from domestic development banks
(principally the BNDES). There does not appear to be any financing gap for projects.
The sugarcane sector has been growing quickly since about 2003. The financial crisis of 2008/2009
and the fall in commodity prices slowed expansion and stimulated a major wave of consolidation in the
sector. With the increase in commodity prices the sector is recovering its capacity to invest.
The sugarcane sector covers two major and largely distinct energy markets (besides the traditional
sugar market): ethanol for fuel and electricity generated from residues. The main driver for ethanol is
the domestic flex-fuel automotive fleet which is rapidly expanding. Ethanol exports are also growing,
but this segment is subject to major political uncertainty.
Revenue from electricity sales is expected to grow faster than ethanol. Nowadays, less than a quarter
of sugarcane mills sell power to the grid. Electricity is attractive because of long-term contracts which
assure fairly stable revenues compared to the more volatile ethanol and sugar markets.
Sugarcane mills typically process 2 million tons of cane per year and cost BRL 350 million (around
USD 195 million) excluding agricultural investments, although a significant number of mills are larger.
If half the cane goes for ethanol, output will be 500 m3 per day. Most mills use 65 bar steam in back-
pressure turbines for power generation. The installed capacity for a mill of that size will be about
50 MW and will require an investment of around USD 70 million. The cost of electricity sold is about
BRL 150/MWh (USD 83).
Table 1 summarizes investment needs taking the latest expansion plan for the power sector as a
reference (PDEE – 2019).There are established lines of credit from domestic development banks
(principally the BNDES). There does not appear to be any financing gap for projects now that the
sector is recovering from the financial crisis (and low commodity prices) of 2008/2009.
Urban Solid Waste (USW) is relevant in two ways from an energy viewpoint. First, it is possible to
recover energy from USW in the form of heat, fuel or electricity due to the large share of organic
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materials in it. Secondly, the separation and recycling of energy-intensive materials such as glass,
metal, plastic and paper is possible. The emphasis here is on energy recovery.
More broadly, the rational processing and disposal of USW fits with RE and EE into a more expansive
strategy of sustainable development.
About 43% of USW is disposed of in open air dumps or simple landfills (another 7% is not collected at
all). The immediate challenge in Brazil, as in most developing countries, is to achieve reasonably
adequate disposal of USW – which usually means sanitary landfills. Landfills produce gas with roughly
50% methane, which is a strong greenhouse gas. Projects to collect and flare this gas are common.
However, energy recovery projects have been rare. All carbon credits can be obtained without energy
recovery – which involves much more investment, risk and lower returns. Few energy recovery
projects will be implemented unless there is a substantial change in market signals. Table 1
summarizes investment needs in a favorable policy scenario. A considerable number of smaller
projects may be feasible. However, it must be emphasized that this scenario depends on policy
changes which may not occur for some time.
Wind power is the most recent renewable resource to make a significant contribution to energy
supply in Brazil. Growth is now very fast, by 2012 as much as 3,400 MW could be installed – up from
only 29 MW in 2005. The auction of December 2009 was a landmark. The big surprise was that the
average price – about BRL 148 per MWh – was lower than in other recent auctions for conventional
thermal power plants. The auction scheduled for later this year will add substantially more capacity.
The average capacity of the wind farm projects approved in the last auction was 25 MW. The large
majority of projects are between 20 and 30 MW, only 5 were below 10 MW. Projects larger than
30 MW are ineligible for the discount on transmission. However, in many cases projects are
geographically contiguous and will in fact be operated as a unit in wind farms of as much as 150 MW.
The average investment per kW in the December 2009 auction was BRL 4,000 (USD 2,200) and is
likely to be slightly lower in the next auction. Capacity factors are quite high by international standards
– 43.8% in the last auction.
Many new investors are entering the sector and large economic groups of diverse origins are
establishing stakes. There is also a strong “secondary market” where developers sell on projects
which have won long-term contracts. However, buyers should take care to confirm the claimed
performance of these plants. While there are internationally recognized technical certification
procedures, the recent phase of rapid growth has seen many projects approved outside this
certification framework. Table 1 summarizes investment needs for plants entering into operation
between 2012 and 2015. There are established lines of credit from domestic development banks
(BNDES & BNB). There does not appear to be any financing gap for projects as such. However,
transmission capacity to connect to the grid is an acute problem.
The program to mix biodiesel with conventional diesel was established in 2005 and has been a high
priority of the government. By 2009, production had reached 1.6 million m3 and a 5% mix became
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obligatory in January 2010. Biodiesel is purchased by Petrobrás in quarterly auctions and

subsequently allocated to distributors. In the first two auctions of 2010, the average price varied
between BRL 2,218 and BRL 2,329 (USD 1,230-1,290) per m3. The cost of biodiesel is dominated by
feedstock – which is mainly soybean oil (around 80%) followed by animal fat (around 12%).
The biodiesel program has a strong social component and a significant share of feedstock must be
certified to have been produced by small farmers for a producer to participate in the auction for the
larger part of the biodiesel to be commercialized and to receive certain tax exemptions. At the same
time, there are economies of scale to be achieved and most biodiesel is produced by large groups in
large processing plants. The average plant size is 248 m3/day. The investment in a somewhat smaller
plant of 185 m3/day is BRL 27 million (USD 15 million).
Current production capacity is substantially larger than the volume of biodiesel commercialized. More
than half the capacity is owned by groups with at least 600 m3/day. There are established lines of
credit from domestic development and public sector banks (BNDES, BNB & Banco do Brasil). Private
bank participation is very limited. There does not appear to be any financing gap for projects.
In addition to the assessment of specific renewable energy technologies, a survey was undertaken on
isolated off-grid systems in the North region, which covers most of Amazônia. It seemed that there is
particular interest in the use of sawmill residues to generate power in isolated systems.
Investment Opportunities in EE
As the national planning company, the EPE published the National Energy Plan 2007-2030 which
provides a savings potential estimate for the overall economic sectors of Brazil. For all energy
sources, the PNE estimated the energy saving potential at 8.7% by 2030. In terms of electricity only,
one of the first and probably most important electricity savings potential studies was published by EPE
and defined the basis of the National Energy Plan for 2007-2030 (PNE). This study stated that market
saving potentials would be of 6% in the industrial sector and 4% in the commercial and public building
sectors. No comprehensive investment analysis in the EE field was found during the present IFC
market assessment study.
The present study attempted to estimate the potential investment opportunities in the EE sector, for
three main market sectors, namely the public, commercial building and industrial sectors. Moreover,
EE investment opportunities in industrial sectors have been separated in two sections, typical EE
projects in industries and industrial cogeneration projects that require enough investment per
transaction to be considered as standing alone. Other industrial EE measures have to be bundled
together to be considered as attractive for financial institutions.
In the commercial sector, the total energy consumption was estimated at 18 TWh in 2008, including
84% for electricity and 8% for petroleum products. On the other hand, public buildings consumed an
equivalent of 40 TWh of all energy sources in 2006, with a predominant use of electricity (82%). Due
to the high similarities between both sectors (at least from energy end-use view point), commercial
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and public building assessments were conducted together, but the EE investment potential has been
determined separately for each market segment.
In both commercial and public buildings, the main end-uses of electricity are lighting, with more than
40% of the total electricity consumption, air conditioning and refrigeration (33% in commercial
buildings and 18% in public ones) as well as electric motors (28% in public buildings and almost 15%
in commercial ones). Finally, heating systems (hot water, laundry, space heating) represent 8.4% of
the electricity consumption in commercial buildings, which is not to be neglected.
Based on the above main end-uses, the EE measures to be implemented in the commercial and
public sectors are to retrofit lighting, air conditioning, refrigeration and driving systems with more
efficient ones and to install solar water heating. There is also an interesting saving potential in
retrofitting and fine-tuning building control and energy management systems.
Those EE measures could be part of typical EE projects, which would generate USD 326 million per
year in energy cost savings in commercial sectors and USD 120 million per year in public buildings. In
order to implement all those projects, the financing requirements would be more than USD 500 million
in the commercial sector and almost USD 160 million in public buildings, accounting for respectively
325 and nearly 200 financial transactions in the commercial and public sectors over a 5-year period.
Table 2 presents more details on the EE investment potential of those market sectors.
In 2008, the value added by the industrial sector accounted for 25% of Brazilian total, corresponding
to almost USD 400 billion. In energy terms, the industry in Brazil represents 40% of total final
consumption and electricity for this participation is approximately 45%. The analysis conducted on the
Brazilian industrial market allows identifying four key sectors to invest for EE projects, namely 1) food
and beverage, 2) pulp and paper, 3) chemicals and 4) ceramics.
Total energy consumption for these four industries accounts for more than 50% of the total energy
consumption of the Brazilian industrial sector. This includes almost 35% of the overall industrial
electricity consumption and nearly 45% of the industrial fossil fuel and natural gas consumption. The
main energy end-use is process heating, including the use of furnaces, boilers and dryers. In terms of
electricity only, the energy balance of the four sectors identified consists mostly of handling and
process equipment (25%), pumps (20%), compressed air systems (12%) and fans (11%).
Consequently, the main EE opportunities are as follows:
• EE measures on furnaces, boilers and steam network;

• Retrofitting of existing motors and driving systems with more efficient ones and/or with the
installation of variable-speed drives;
• EE measures on compressed air systems;
• Various EE initiatives on existing energy management and process control systems.
The implementation of the abovementioned EE measures, combined with other smaller EE actions,
would generate energy savings of approximately 6.0 TWh per year over a 5-year period, which
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amounts to more than USD 320 million in cost savings yearly. The financing needed to implement
those EE projects would be nearly USD 750 million, accounting for a number of financial transactions
estimated at 373 projects. Table 2 summarizes the EE investment potential in the four key industrial
segments.
Whereas biomass, fossil fuels, natural gas and coal amount for almost 80% of total energy
consumption in the industrial sector, other EE measures, such as industrial cogeneration, have a
great energy cost and saving potential in this market sector. In fact, cogeneration development in the
industrial sector is growing at a rapid pace in Brazil, as shown in the 2006 PNE study. But while
cogeneration projects using sugarcane bagasse have been evaluated as part of the RE study, only
cogeneration projects using other than waste as fuel and whose potential capacity was lower than
15 MW have been considered as EE measures.
Eighteen different cogeneration projects, compliant with the above specificities, were found and
assessed. They represent a total generation capacity of nearly 115 MW, which could generate
720 GWh of electricity on a yearly basis. The annual energy cost savings would be of USD 46 million
and the financing needed would be almost USD 275 million with a payback period of approximately
7.5 years. More details on this EE initiative are provided in Table 2.
There are many other market segments where EE investments can be oriented. For instance, the
Green Building standard for new construction, the retrofitting of street lighting and water pumping
systems, as well as the installation of residential solar water heaters, could be considered as
interesting commercial financing opportunities. Nevertheless, the authors suggested focusing first on
the market segments previously discussed.
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Table 1: Summary of Investment Potential and GHG Reduction in RE
Small Hydro Sugarcane Wind Power Urban Solid

Cogeneration Waste
Energy Generation Potential (Favorable Policies)
Potential net installed capacity (MW) 1,400 1,300 3,150 375-605
Market penetration rate for 5-year period (%) --- --- --- 80%
Market potential over 5-year period (MW) --- --- --- 300-485
Market potential energy production at end of 5-year period (GWh/y) 4,900 - 5,500 2,938 11,600 1,840 - 2,975
Greenhouse Gas Emissions Reduction
Annual CO2 emission reduction (million ton CO2) 0.90 - 1.01 0.54 2.14 9.0 - 14.6
Investment Requirements
Average unit cost ($/kW) $2,800 $1,420 $2,200 $1,700 - $2,000
Typical size range of potential projects (MW) 1-30 MW 40-70 MW 6-50 MW 1.3-25 MW
Average size of projects implemented (MW) 14.3 52 MW 25 MW 6-10 MW
Average size of projects implemented - "export" capacity (MW) --- 30 MW --- ---
Investment requirements for average project implemented (USD million) $40 $74 $56 $10-19
Number of transactions over period 98 43 126 50
Total investment requirements over 5-year period (USD million) $3,920 $1,846 $6,930 $510 - $970
Share of projects below 5 MW (based on number of projects) 30% 0 <3% 70%
Investment requirements projects below 5 MW over 5-year period (USD
$230 - $290 0 $35 $140 - $266
million)
Financial Aspects
Cost of energy (USD/MWh) $89 - $97 $83 $83 $92
Annual energy sales at end of period (USD million) $436 - $535 $244 $963 $169 - $274
Annual carbon revenues in million USD (at USD 12/tCO2) $11 - $12 $6 $26 $109 - $176
Carbon revenues: % revenue from energy sales
(a) Due to credits from converting landfill gas from CH4 to CO2 --- --- --- 60%-65%
(b) Due to credits from sale of electricity 2.2%-2.5% ~2.5% ~2.5% ~2%
Foreseen equity - total (USD million) $1,176 $554 $2,079 $102 - $194
Foreseen equity - projects < 5 MW (USD million) $69 - $87 0 $11 $28 - $53
Financing need - total (USD million) $2,744 $1,292 $4,851 $408 - $776
Financing need - projects < 5 MW (USD million) $160 - $205 0 $25 $112 - $213
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Table 2: Summary of Investment Potential and GHG Reduction in EE
Industrial Commercial Public Industrial

Total
Sector Buildings Buildings Cogeneration
Energy and CO2 Emission Saving Potential
Potential for installed capacity < 15MW - - - 114
Energy consumption (GWh/year) 207,566 63,816 40,186 - 311,569
Technico-economical saving potential - 5 years (GWh/y) 5,974 4,049 1,486 722 12,231
CO2 emission reduction in tCO2 (@ 0.1842 tCO2e/MWh) 1,100,412 745,867 273,808 269,683 2,120,087
Investment requirements
Investment requirements (USD million) $933 $647 $193 $342 $2,116
Typical size of potential project (USD million) $0.5 - $5 $0.05 - $5 $0.05 - $3 $2.5 - $38 -
Number of transactions over period 373 324 193 18 908
Financial Aspects
Energy cost savings (USD million/year) $322 $326 $120 $46 $814
Payback (years) 2.9 2.0 1.6 7.4 -
Carbon revenues in USD million per year (at USD 12/tCO2) $13 $9 $3 $3 $29
Foreseen equity (USD million) $187 $129 $39 $68 $423
Financing need (USD million) $747 $518 $155 $274 $1,693
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INTRODUCTION
At the end of 2008, Brazil had a population of 190 million inhabitants and a GDP of USD 1,573 billion.
The economy is dominated by the services sector which has increased its share of GDP to about 68%
by 2009, at the expense of the industrial and agriculture/primary sectors with about 25% and 7%
respectively in 2009. For many years a feature of Brazil’s economy was high inflation, which had a
profound effect on economic behavior and financial institutions. The reforms begun in 1994 brought
inflation down and also initiated a process of economic liberalization. In 2009 GDP dropped by almost
2% as a consequence of the global financial crisis (which severely affected the industrial sector), this
recession was mild by world standards and growth has resumed.
The energy consumption of the economy has been increasing year after year. From 2006 to 2008, the
total energy consumption increased from 188.6 million tons of oil equivalent (toe) (2006) to 201.2
million toe (2007) and 211.7 million toe in 2008. The industrial and transportation sectors are the
largest energy consuming sectors. In 2008, the industrial sector consumed about 39% of the country’s
final energy followed by the transportation (mainly oil products, biodiesel and ethanol produced from
sugarcane), energy sector, and residential sector with a share of 29%, 12% and 11% respectively.
The public and commercial consumption represented about 5% of all energy sources, but 23% of the
total electricity consumption.
Despite its hydro based electricity generation system, the country’s energy supply relies heavily on
fossil fuels (oil, natural gas and coal) which represented 53.4% of the total primary energy supply in
2007 (oil alone contributed 39.9% of the total energy supply).
In order to progressively shift from a petroleum dependent economy and take advantage of the
immense renewable energy potential the country is endowed with, the government has initiated a
program (PROINFA) to promote the commercial deployment of projects generating electricity from
small hydro, biomass and wind energy for sale to the national grid. A line of credit of BRL 5.6 billion
was created in 2004 by the BNDES to finance the projects to be selected. Other official banks and
financial agents also became significantly involved, including: Banco do Brasil, Banco do Nordeste do
Brasil (BNB), Caixa Econômica Federal (CEF), Banco da Amazônia SA (BASA/FDA) and the Fundo
de Desenvolvimento do Nordeste of the Agência de Desenvolvimento do Nordeste (ADENE/FDNE),
the latter two bringing up to BRL 570 million of bonds convertible into equity.
In the energy efficiency field, many studies including government projections concluded that there is
huge potential for energy savings in all sectors of the economy in Brazil and despite nearly two
decade of efforts this niche is still largely untapped. It is also recognized that government initiatives, by
themselves, can not achieve the goal of promoting and creating a viable market for energy efficiency
projects. Among the existing initiatives, it is worth mentioning the following: (i) Eletrobras’ PROCEL
aiming at reducing electricity consumption in major electricity consuming sectors, (ii) Petrobras’
CONPET for rational use of oil and natural gas, (iii) BNDES’s PROESCO which is a risk sharing credit
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line for promoting EE projects through ESCO. Most of these efforts have yielded very limited
achievements, particularly PROESCO.
Though there is no detailed study and estimate of the investment needed in RE and EE projects, all
major market players agree that the market could be worth several billion USD, mainly in the form of
private financing.
Given this context where a lot of effort has been deployed with very weak results, the International
Finance Corporation (IFC) has decided to investigate the private sector financing investment in the
Brazilian RE&EE market. This decision is in line with its strategic priority of adopting Climate Change
in its operations. IFC intends to closely coordinate with the Brazilian FIs to jointly understand the
feasibility of a potential business line and eventually implement EE&RE products.
The objective of the present study mandated by IFC is to conduct a market assessment on EE&RE
investment opportunities in Brazil. The results of this assessment will serve as a basis for IFC and FIs
to assess the feasibility of implementing new business products and/or tailor existing ones with the
ultimate goal of significantly increasing commercial lending activity for EE&RE in Brazil.
The study report intends to provide some answers to the following points:
• Description of on-going EE&RE activities in Brazil, including lessons learned from past
experience
• Description of relevant policy and legal framework for EE&RE in Brazil
• Assessment of investment opportunities in RE and EE markets focusing on growth market
segments
• Identification of key market players that may be interested in a new approach in new market
products in EE and RE.
• Analysis of key barriers to FIs intervention in RE and EE projects financing and implementation,
and recommendations.
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1 EXISTING EE&RE BUSINESSES IN BRAZIL
1.1 OVERVIEW OF ENERGY SECTOR
In 2007, Brazil’s total primary energy supply amounted to 235.6 million tonnes of oil equivalent (Mtoe).
The breakdown of primary energy supply is as follows: 39.9% from petroleum, 13.9% from hydro
power, 13.7% from woodfuels, 13.1% from sugarcane by-products (bagasse), 7.7% from gas, 5.8%
from coal, 1.4% from nuclear, 4.3% from other sources (waste, biofuels) and 0.2% from
geothermal/solar/wind. Brazil is the largest producer of hydroelectricity in the world after China and
Canada. In 2007, it generated 374 terawatt-hours (TWh), equivalent to 77.3% of total electricity
generation. The rest includes: imports (8.5%), gas-fired generation (3.2%), biomass (3.6%), oil
derivatives (2.8%), nuclear (2.5%), coal (2.1%) and other (2.5%)1.
Figure 1: Total Primary Energy Supply (IEA 2009)
The following table summarizes the final energy consumption by sector, as well as non-energy
consumption (such as petrochemical feedstocks, asphalt, etc). Noteworthy is the large consumption of
bioenergy (including ethanol in transportation) and the very small consumption of fuel in the
commercial/public sector.
1
IEA Energy Statistics 2009. http://www.iea.org/statist/index.htm
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Table 3: Final consumption by sector in 2008 (thousand toe) 2
Oil Natural Other Total

Coal Wood Sugarcane Electricity
products gas sources
Energy sector 4,733 4,926 0 0 13,305 1,582 0 24,546
Residential 6,052 229 0 8,237 0 8,220 0 22,738
Commercial 489 171 0 156 0 5,375 0 6,191
Public 592 3 0 0 0 2,972 0 3,567
Agriculture 5,776 2 0 2,545 0 1,582 0 9,905
Transportation 49,135 2,158 0 0 11,013 138 0 62,444
Industrial 12,466 8,453 11,647 12,131 15,390 16,961 5,280 82,328
Sub total energy
79,242 15,942 11,647 23,069 39,708 36,830 5,280 211,718
use
Non-energy use 13,027 710 149 0 791 0 0 14,677
Grand total 92,269 16,652 11,796 23,069 40,498 36,830 5,280 226,394
Overall, the industrial sector consumed almost 39% of the country’s final energy followed by
transportation (mainly oil products, biodiesel and ethanol produced from sugarcane), the energy, and
residential sectors with a share of 29%, 12% and 11%. Obviously, the share of energy per sector will
completely change depending on the energy source. For instance, the public and commercial sectors
consumed about 23% of the electricity while their proportion represents only about 5% in terms of total
energy consumption.
Greenhouse gas emissions
According to the International Energy Agency (IEA), the total CO2 emissions from fuel combustion
were only about 347 million tons of CO2 in 2007. CO2 emissions per unit of GDP fell dramatically from
about 270 tons of CO2 per million USD (2008) of GDP in the 1970s to 215 tons of CO2 per million USD
(2008) of GDP in the early 1980s, due to the effort to substitute oil imports. They returned to earlier
levels during the 1990s, but then stabilized and have been falling since the turn of the century to 230
tons of CO2 per million USD (2008) of GDP in 20073.
Unlike most countries, these energy-related emissions represent a relatively small share of Brazil’s
total CO2 emissions. By far the largest source of CO2 emissions is due to land-use changes and
deforestation – mostly in the Amazon region.
Energy prices
The price of fossil fuels was relatively stable in the 1990s, but has since increased substantially
following international trends. The next figure shows the price trends in current USD of the most
relevant fuels. The prices are for “barrel of oil equivalent” to make comparisons between energy
sources easier. It is relevant to mention the decline of electricity prices for households, following
2
Source: Balanço Energético Nacional, 2009
3
Source: Simplified calculations based on the Balanço Energético Nacional, 2009. Values are approximations
which do not consider differences in the carbon coefficients of net exports and imports of oil derivatives.
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principles of “new model” for the sector that privileges residential consumers and reduces advantages
for industries.
Figure 2: Energy prices (USD/barrel oil equivalent)
There are relatively few explicit subsidies for energy delivered to final consumers. Electricity for low
income residential consumers, rural users and those in isolated off-grid systems are the main
exceptions.
Table 4: Electricity Prices by Sector and Region (November, 2009)4
Sectors Regions
Mid- Northeast North Southeast South Brazil
West
Residential 293 284 307 307 286 299
Industrial 219 221 247 251 224 237
Commercial, services, 278 301 319 287 264 286
and other
Rural 208 215 234 205 170 195
Public power 286 329 345 303 287 309
Public lighting 159 175 178 167 147 165
Public services 185 205 215 220 143 203
Internal consumption 303 316 326 302 265 303
Aquiculture 241 200 251 195 79 192
Rural Irrigation 206 139 229 223 145 166
Total by Region 258 259 288 277 242 266
A noteworthy distortion in energy prices is that peak period electricity rates are far higher than off-peak
rates (7-10 times higher) for medium and high voltage consumers. From the point of view of policy
making for energy efficiency, the consequence is that most investments to rationalize electricity use
emphasize cutting peak period consumption rather than efficiency per se.
4
ANEEL
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Supply and Demand Planning and Perspectives
The “Plano Nacional de Energia” (PNE), which was published in 2007, is an indicative plan for energy
demand and supply with a 25 year horizon. The overall forecasts presented in the PNE are that the
average GDP growth will be 4.1%/year. Assuming that the country’s economy will become more
energy efficient, the PNE forecasted that the final energy consumption growth to be approximately
3.6%/year.
With respect to this energy planning, it is clear that there is need for increased access to energy and
diversified energy sources in order to sustain economic growth. Developing diversified renewable
energy sources reduces the risks related to using other technologies to produce electricity. For
example, droughts or fossil fuel price increases are two important risks that could be mitigated by the
use of various renewable energy sources for electricity generation.
At the same time, promoting energy efficiency in existing and new industries and buildings is another
sustainable means to contribute to private sector competitiveness. When comparing energy intensity
in different economies in Latin America in terms of GDP, it appears that Brazil is among the highest
energy consumers (though this is partly due to a relatively large share of energy intensive industries).
More efficient energy use reduces the operation costs of private companies and thus allows economic
growth with reduced investment in new electricity power plants. This is interesting from a macro-
economic perspective, since power sector expansion is extremely capital intensive compared to most
economic sectors. The same investment in efficiency will usually generate much more employment
than the same investment in new energy supply.
1.2 INSTITUTIONAL, POLICY AND LEGAL FRAMEWORK
The purpose of this section is to present the most relevant government institutions, programs, policies
and regulations that influence the energy efficiency and renewable energy market. The idea is for the
readers to see if there are any possibilities of collaboration with these organizations, marketing-wise,
or as an advisor, or if it is advisable for the local financial institutions to monitor these market players.
1.2.1 Institutional Framework of the Energy Sector
Key government institutions acting in the energy sector are briefly presented briefly outlined below:
• Ministry of Mines and Energy (Ministerio de Minas e Energia –MME). The government
ministry responsible for energy issues in Brazil is the Ministry of Mines and Energy (MME). This
Ministry, through the Secretary of Energy formulates the guidelines and policies for the national
energy sector and coordinates and supervises their execution.
• Energy Research Company (Empresa de Pesquisa Energetica – EPE). The EPE was
created in 2004 as a government body subordinated to the MME to provide services in the areas
of studies and research destined to support energy planning, including National Energy Balance
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(BEN), an official document detailing energy supply, transformation, consumption, energy

efficiency, etc. The final approval of Energy Planning is the responsibility of the National Council
of Energy Policy (NCEP). The Comit de Monitoramento do Setor Elétrico (CMSE) monitors
trends in power supply and demand. If any problems are identified, CMSE will propose
measures to avoid energy shortages, such as special price conditions for new projects and
reserve generation capacity. The Ministry of Mines and Energy hosts and chairs this committee.
• Agência Nacional de Energia Elétrica (Brazilian Electricity Regulatory Agency - ANEEL).
ANEEL was created in 1996 under the MME to oversee the power sector regulation in Brazil. Its
regulatory mandate includes the regulation of prices and other aspects of the electricity industry,
concession granting for the operation of electricity companies, supervision of concession
agreements. In the energy efficiency field, ANEEL has played a leading role through the Energy
Efficiency Program (a.k.a. public benefit wire charge) consisting of compulsory investments in
energy efficiency programs for electricity distribution companies.
• Agência Nacional do Petroleo, Gas, Natural e Biocombustiveis (National Agency of
Petroleum, Natural Gas and Bio-diesel – ANP). Like ANEEL, ANP is the federal government
agency, linked to the Ministry of Mines and Energy, responsible for regulating and monitoring the
production, quality control, distribution and commercialization of both biodiesel and conventional
diesel. It organizes the auctions and was created in 1997.
• Banco Nacional de Desenvolvimento Econômico e Social (National Bank for Economic
and Social Development – BNDES). BNDES was founded in 1952 to support industrialization
in Brazil. It has become, over time, the main funder for all economic sectors—industry,
agriculture, commerce —and during the 80’s incorporated the “S” of social into its mission.
BNDES is also a main player in the RE market. From 2003 to 2009, overall RE lending was
BRL 10.5 billion (about USD 6 billion5), supporting total investments of BRL 15.3 billion
(USD 8.5 billion). Regarding EE, BNDES is a traditional supporter of energy efficiency initiatives
in Brazil, financing in 1998 the first performance contract. All available products can be
considered for EE measures and projects, but in order to provide additional incentives, the bank
created a specific product, named “PROESCO”, exclusively for EE projects.
• Confederação Nacional da Indústria (National Industry Confederation – CNI). The CNI is a
private, not-for-profit organization. As a confederation, it brings together twenty-seven (27)
federations (states and Federal District), representing more than 1,000 industrial organizations
and nearly 200,000 companies. CNI is involved with EE in several forms. Under a cooperation
agreement with PROCEL, CNI funds reports focused on assessments of international practices
for the promotion of EE in industries, as well as detailed potential for energy conservation in 13
industries in Brazil (not yet published). They also funded a study that aimed at forecasting
energy demand in industry and potential savings and GHG emissions reduction; this report has
not yet been published either.
5
Exchange rates have fluctuated during the period of 2005-2009. An average rate of BRL 1.75 has
been assumed to permit approximate translations to USD. We may fine tune this as the project
develops, in this document rates of 1.80 and 2.0 are also used.
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1.2.2 Policy and Regulatory Framework in Renewable Energy
Government policies have been important for promoting renewable energy resources. Some have
been cross-cutting actions: that is, they have been directed at more than one resource. Three lines of
policy action are briefly described below as background for the discussion of each resource.
The new auctions for renewable energy supply
Since a new regulatory framework for the power sector was instituted in 2004 periodic auctions have
been held to contract power 3 and 5 years hence. The contracts to purchase power are long term,
which facilitates project financing. In the beginning the smaller renewables (small hydro, wind &
biomass) had stayed outside the auction process – being regarded as too expensive. They were kept
within PROINFA.
Things began to change with some sugarcane cogeneration projects, which competed successfully
with conventional fossil fuel alternatives in several normal auctions for thermal generators after 2006.
The free market also began to attract some projects.
The next step was an auction for “alternative renewables” in June of 2007. This auction was intended
to show that these sources had evolved sufficiently to permit more market-oriented mechanisms than
PROINFA. The scope was restricted to biomass and small hydro because wind power at the time was
considerably more expensive than the ceiling price of BRL 140/MWh.
This first auction was something of a disappointment. In the end only 12 biomass plants with an
installed capacity of 542 MW and 6 small hydro plants with an installed capacity of 97 MW were
contracted. The relatively low ceiling price was a disincentive at the time, since prices were higher in
the free market.
The next step came with an auction for wind power which was held in December, 2009. The original
motive was apparently to have a major initiative to show at the COP 15 meeting in Copenhagen. This
auction was an unequivocal success. As described in the section on wind energy, not only were
1,800 MW contracted but the average price was surprisingly low – much lower than had been used for
PROINFA.
The success of the wind power auction has changed perceptions of the possible role of wind energy in
the future expansion of electricity supply. More immediately, it has encouraged the organization of a
new auction for “alternative renewables” – known officially as the Auction for Alternative Resources -
to be held in August, 2010. Bids for biomass plants, small hydro and wind power will compete
separately. 517 projects totaling 15,774 MW (installed) have been registered for the auction.
Thus, after a shaky start, the use of auctions to promote the development of renewable energy for
electricity generation appears to be establishing itself as an effective policy mechanism. Officially
sponsored auctions are also used for the purchase of biodiesel to blend with conventional diesel oil,
as will be described later in this report.
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1.2.3 Policy and Regulatory Framework in Energy Efficiency
Brazil has established policy mechanisms that have had impacts on private and public investments
over the years. Public initiatives such as the creation of the national energy efficiency programs
PROCEL (for electricity) and CONPET (for gas & oil derivatives), as well as the National Climate
Change Program, provide an institutional framework for energy efficiency. PROCEL and CONPET
have been direct players, making investments, designing programs, and supporting other agents
(public and private) in developing energy efficiency initiatives.
Some relevant regulations for EE promotion are summarized below:
• National Energy Efficiency Policy. Its main objective is to present the set of goals and policy
instruments to be implemented in the country up to 2030. It will also be an important component
of the National Energy Policy and should provide a clearer picture of priorities and coordination
of energy efficiency initiatives. This document is still in preparation and states very broadly
several measures and guidelines for governmental agencies to promote market transformation,
strengthening their role in supporting and promoting energy efficiency technologies and
practices.
• Regulated investments in energy efficiency (electricity). In 1998, the regulator (ANEEL)
issued a resolution mandating utilities invest a minimum of 1% of their net annual revenues in
EE and research and development (R&D) programs (“1% obligation”). These have been the
largest and most constant flow of financing (BRL 300 million per year) for energy efficiency
investments in the country during the last two decades6. Most of the utilities’ programs have the
characteristic of subsidizing 100% of the equipment and related energy services. In 2000, a
national law7 was approved by Congress changing the allocation of the resources coming from
the “1% obligation” and creating a national fund - CTEnerg, in charge of investing in public
interest energy efficiency and energy R&D.
• The Energy Efficiency Law (Lei de Eficiência energética). Law 10.295 was enacted in 20018
with the goal of guaranteeing the legal mandate for public agencies and procedures to establish
minimum energy efficiency standards for equipment, buildings, and vehicles. The Comit Gestor
de Indicadores e Níveis de Efici ncia Energética – (CGIEE)9 was created with representatives
from governmental agencies, academia, and civil society, with the principal goal of setting
minimum energy efficiency levels. Energy efficient building standards are currently being
implemented in the country on a voluntary basis, and will become mandatory (i.e., become
“codes”) sometime in the future.
6
We estimate that almost USD 1.8 billion was invested in Utilities’ EE programs in the last 10 years.
7
Lei 9.991/2000
8
LEI Nº 10.295
9
The Decree no 4.059/2001 establishes the composition: Ministry of Mines and Energy (Chairman of
the Committee), Ministry of Science and Technology, the Electricity Regulatory Agency, the Oil
Regulatory Agency, Ministry of Industry, Development and International Trade, Academia and a
representative from the civil society.
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• Solar water heating legislation. Some Brazilian cities are introducing municipal legislation or
voluntary regulation to stimulate the use of solar water heating systems in buildings (residential
and commercial sectors). As of 2009, there were about 30 municipalities with legislation in place,
and about 50 others with proposed bills being considered in the respective local parliaments.
There are two types of legislation related to solar water heating in place in Brazil: Incentive
regulation (reduction of local property tax) and mandatory legislation (for instance in São Paulo).
1.3 PAST AND ONGOING INITIATIVES IN EE&RE FINANCING

MECHANISMS IN BRAZIL
1.3.1 Government Programs for Promoting EE and RE Projects
Several programs were set up by the Government through public entities to promote RE and EE in
Brazil. Some of the remarkable programs are briefly introduced hereafter.
National electricity conservation program
The Programa Nacional de Conservacao de Energia Elétrica (National Electricity Conservation

Program – PROCEL) was created on December 30, 1985. PROCEL’s main objective is to promote the
rational use and production of electricity, reducing losses, costs, and investments in the sector.
PROCEL operates in several branches, including commerce, sanitation, education, industry,
institutional buildings, municipalities, and public lighting. Overseen by MME, the program is
administrated by the federally-owned utility ELETROBRAS. In 2008, PROCEL accounted energy
savings of 4.4 GWh, equivalent to 1.1% of electricity consumption in Brazil, with total investments of
BRL 46.3 million, from which nearly 30% originated from operational resources from Eletrobras.
PROCEL’s budget in 2008 was of BRL 31 million, which is nearly 40% less than what it was in 2007
and represents only 28% of the budget of 2006. This budget decline could be partly explained by the
diminution of the RELUZ program for public lighting, mainly due to the problem of contingency of loans
to many municipalities which have reached their debt ceilings. Nevertheless, estimated energy
savings have increased over this period, thanks to the savings generated from the Selo PROCEL
program (“endorsement label program” like the Energy Star program), which accounted for 98.2% of
total savings in 2008.
National program for rational use of oil and natural gas derivatives
The Programa Nacional de Racionalização do Uso dos Derivados do Petroleo e do Gas Natural
(National Program for Rational Use of Oil and Natural Gas Derivatives – CONPET) is an official
program from the MME, coordinated and implemented by PETROBRÁS, the state-owned petroleum
company. The program was created by Federal Decree in 1991, with the goal of integrating and
developing initiatives for the rational use of oil and natural gas derivatives. CONPET was created
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following the same directives as PROCEL, and is not a formal organization. All its operating funds
come from Petrobrás.
CONPET operates on project-based models, and main projects include labeling (vehicles, stoves, and
heaters), transportation (adjustments in diesel trucks and buses), and education. In 2009,
PETROBRÁS invested nearly BRL 9 million (USD 5 million) to maintain CONPET activities.
Programa de Incentivos às Fontes Alternativas de Energia Elétrica (PROINFA)
The Programa de Incentivos às Fontes Alternativas de Energia Elétrica (PROINFA) was the first major
initiative promoting the commercial deployment of projects generating electricity from small hydro,
biomass and wind energy for sale to the national grid. Although it was originally conceived during the
Administration of Fernando Henrique Cardoso, it was promulgated by Law 10762 in November, 2003.
This legislation was complemented in March, 2004 by the creation of a line of credit at the BNDES
(Programa de Apoio Financeiro a Investimentos em Fontes Alternativas de Energia Elétrica) with BRL
5.6 billion to finance the projects to be selected by December 2006. Other official banks and financial
agents also became significantly involved, including: Banco do Brasil, BNB, CEF, BASA/ADA and
ADENE/FDNE (the latter two bringing up to BRL 570 million of bonds convertible into equity).
The program was originally intended to contract and implement (by December 2008) 1,100 MW of
capacity from each category: small hydro, biomass (mostly sugarcane) and wind. The contracts
(Power Purchase Agreements) were for 20 years in order to facilitate financing. The government set a
purchase price for each of these resources and then selected projects based on, for example, who
had first obtained a preliminary environmental license to operate.
In the end, implementation was slower than originally planned and the breakdown of sources was
changed. The share of biomass projects was dramatically reduced, from 1,100 MW to 700 MW; while
wind power increased to 1,400 MW. In August, 2009, about 22% of projects had still not begun
construction – though by then 1,800 MW had entered operation. The situation was particularly difficult
for wind power projects, less than half of which had begun construction.
Despite the numerous difficulties – some, though not all of which, were due to defects in the design of
the program – PROINFA did seriously mobilize the market agents in a range of sectors and valuable
experience was gained. There was never the awaited “PROINFA II”. Instead, the government
changed the strategy for promoting new RE capacity. This strategy, the use of specialized auctions,
has so far proven to be remarkably effective.
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1.3.2 Impact of the general and specialized auctions for contracting new RE capacity
Since the new regulatory framework for the power sector was established in 2004 periodic auctions
are held to contract power 3 and 5 years hence. The contracts to purchase power are long term,
which facilitates project financing. Until recently the smaller renewables (small hydro, wind &
biomass) stayed outside the auction process – being regarded as too expensive. They were kept in
the “PROINFA Ghetto”.
Things began to change with some sugarcane cogeneration projects, which competed successfully
with conventional fossil alternatives in several normal auctions for thermal generators after 2006. The
free market also began to attract some projects.
The next step was an auction for “alternative renewables” in June of 2007. This auction was intended
to show that these sources had evolved sufficiently to permit more market-oriented mechanisms than
PROINFA. The scope was restricted to biomass and small hydro because wind power at the time was
considered to be more expensive than the ceiling price of R$ 140/MWh.
This first auction was something of a disappointment at the time. In the end only 12 biomass plants
with a capacity of 542 MW (140 average-MW) and 6 small hydro plants with a capacity of 97 MW (46
average-MW) were contracted.5 The price paid at the time was R$ 139/MWh for the power from the
biomass plants and R$ 135/MWh from the small hydro plants (equivalent today to about R$ 156 and
R$ 152 respectively per MWh). All but two of the contracted plants are coming into operation as
scheduled, by 2011.
The next step came with an auction for wind power which was held in December, 2009. The original
motive was apparently to have a major initiative to show at the COP 15 meeting in Copenhagen. This
auction was an unequivocal success. Not only were 1806 MW contracted in 71 projects, but the
average price was surprisingly low – R$ 148/MWh - much lower than had been used for PROINFA –
above R$240/MWh (at prices 4-5 years ago).
This success led directly to the recent set of auctions (officially, Reserve Energy and A-3, for
alternative energy sources) which were held on August 25-26, 2010, for wind, biomass and small
hydro. Biomass basically means sugarcane cogeneration. The auctions were contested by 478
projects totaling 14,529 MW. The 89 winning bids totalled 2,892 MW of which: wind – 2048 MW (at
R$131/MWh), biomass 713 MW (at R$144/MWh) and small hydro 132 MW (at R$142/MWh).
The increasing success of these renewable energy auctions is having serendipitous effects on the
strategic planning for power sector expansion. The prospects for sugarcane biomass and wind power
have already been substantially expanded in the latest Ten-Year Plan relative to the PNE 2030.
Firther changes will surely occur. Projections of the market for financing projects are therefore in a
flux, especially for the period after 2013.
5
Average-MW means the average output over a year and thus is smaller than the installed capacity. It is
equivalent to a 100% capacity factor.
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The auctions have also demonstrated the effectiveness of using market mechanisms to reduce the
cost of achieving a higher penetration of new RE supply sources.
This principle could be expanded, through the use of specialized auctions, to segments not yet
dynamized by the existing auction process. These segments have characteristics that inhibited
developers from participating in the existing auctions. The government is just beginning to move this
way with isolated off-grid systems in Amazonia. Other possibilities for extending this approach will be
raised in the sections on urban solid waste and saw-mill residues.
With the rapid expansion of RE contracted through auctions, - more than 8,500 MW in five years –
attention will turn increasingly to performance in building this new capacity.
1.3.3 Existing Renewable Energy Financing
The initiatives cited above to promote the development of renewable energy resources – specifically
small hydro, wind, sugarcane (ethanol and electricity) and biodiesel – have been explicitly
complemented by lines of credit at the main development banks targeting these sectors. The main
source of this credit has been the BNDES, though other official banks and financial agents have
played a role, especially in specific sectors. These include the BNB (especially in wind), Banco do
Brasil (biodiesel), CEF, BASA/ADA and ADENE/FDNE (the latter two have offered bonds convertible
into equity).
Information from the BNDES gives an idea of the considerable level of investment that has been
financed in recent years (Table 5). A significant share of the BNDES has been in “indirect operations”
through financial intermediaries, though no information is available on how much.
Table 5: BNDES approved operations in the electricity sector - 2003 to 2009
Segments Installed N˚ of BNDES Associated

Capacity Projects Credit Investment
6
MW (10 BRL) (106 BRL)
Generation 25,948 198 44,051.0 75,950.5
Hydro 18,675 38 29,136.6 50,943.8
Thermal (fossil) 3,162 11 4,421.8 9,658.3
Small hydro (<30 MW) 1,922 98 6,045.5 8,751.8
Biomass 1,517 34 2,395.4 3,128.7
Wind 673 17 2,051.8 3,467.9
TRANSCOs6 13,839 km 52 7,867.5 14,058.0
DISCOs N/A 37 8,793.6 15,100.6
ESCOs N/A 6 9.5 12.4
Total N/A 293 60,721.6 105,121.5
Source: “BNDES and the Electric Sector”; slide presentation prepared in January, 2010.
6
TRANSCO: electricity transmission company
DISCO: electricity distribution company
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Small hydro (defined as less than 30 MW) has been the largest RE sector, with BRL 6 billion of credit
(around USD 3.5 billion). Biomass, essentially cogeneration from sugarcane, has been the second
largest recipient (BRL 2.4 billion/USD 1.4 billion) with wind close behind (BRL 2.1 billion/USD 1.2
billion). Table 1 summarizes the information on the average size and cost per installed kW of projects
in different sectors.
Table 6: Average size and investment/kW of generation projects approved by the BNDES
during 2003 – 2009
Segments Average Project Size Investment

Capacity BNDES Investment per kW
MW (106 BRL) (106 BRL) (BRL/kW)
Generation 131 222.5 383.6
Hydro 491 766.8 1,340.6 2,728
Thermal (fossil) 287 402.0 878.0 3,055
Small hydro (<30 MW) 20 61.7 89.3 4,553
Biomass 45 70.5 92.0 2,062
Wind 40 120.7 204.0 5,153
Source: “BNDES and the Electric Sector”; slide presentation prepared in January, 2010.
Significant RE lending began in 2005. Much of this financing, especially for wind, was a result of the
PROINFA program, which is still underway. However, in the case of small hydro and biomass there
was significant financing of additional projects outside of PROINFA.
1.3.4 Existing Energy Efficiency Financing Instruments
BNDES’ Risk Sharing Credit Line for ESCOs (PROESCO)
This credit line was created by the BNDES in 2006 with the objective of financing ESCOs and final
energy users (it can also be used by electric utilities) with projects using performance contracts.
PROESCO’S project financing line is divided into three types: Risk shared by BNDES and accredited
financial institutions; indirect operation, where the accredited financial institution is fully liable to bear
the financial amount and the credit risks; and direct operation (performed directly with BNDES).
The PROESCO program was designed based on the assumptions that two of the main barriers to the
implementation of energy-efficiency projects were (I) lack of commercial financing, and (ii) and the FI’s
client risk (either an ESCO or an energy end-users). In 2006, a total of BRL 100 million were made
available for this credit line, although very little of this amount had actually been withdrawn by the time
of Econoler’s mission in March 2010 to Rio de Janeiro. Since its inauguration only six projects have
been financed for a total of about BRL 10 million of loans or roughly USD 5 million. The interviews
conducted by Econoler’s expert indicated that one bank waited 18 months for an approval from
BNDES, and then gave up after receiving no response. EE projects of BRL 1 million are being lumped
together and analyzed the same way as BRL 1 billion loans.
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The interest rate for projects is 6%, plus a management fee of 0.9% plus the spread in relation with
the risk that starts at 3%, for a total of 10% or slightly higher (compared to the commercial rate of LFI
of about 18%).
Only a few accredited financial institutions have participated in PROESCO. So far, only Banco do
Brasil and Itaú have adhered to the partnership with BNDES, to transfer the funds intended to the
beneficiaries of PROESCO.
Clearly, PROESCO has not delivered the expected outputs so far and the entire program design and
operation has to be assessed to better understand the bottlenecks.
Petrobrás Energy Efficiency Program through an Energy Services Company
Petrobrás BR completed a business plan in March 2007 for the implementation and financing of EE
projects in the commercial and industrial sectors of Brazil. The business plan was developed under
REEEP funding and technical assistance from Econoler. It includes project investment portfolio
preparation, sector selection and a marketing strategy, and several staff members have been trained.
The business plan proposes that energy efficiency projects be implemented through private “special
purpose companies” (SPCs) of which Petrobrás BR will be the main shareholder7. The proposed
financing scheme approach is presented in the following chart.
Figure 3: Financial Scheme of Petrobrás EE Program
That new company will be dedicated to energy efficiency projects development for the benefit of
Petrobras BR’s current clients and other targeted clients focusing on clients having annual energy
costs of more than BRL 3,000,000 (USD 1,500,000). It was estimated that a total of BRL 4,111 million
(USD 2,055 million) will need to be invested in the industrial sector (265 customers) with a payback
7
REEEP, Analytical and Synthesis Study of the REEEP Program, March 2009
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period of 4 years. The major part of the investments will occur in chemicals, food and beverages, pulp
11
and paper, non-ferrous metals, cast iron and steel, and mining .
More than one SPC could be created after one year of operation, according to the market
requirements. Other SPCs could be created for specific markets, e.g. the commercial market, for
specific regions or for a specific project.
The project directly contributed to BR’s new SPC with Telemar, which was created in partnership with
Ecoluz and LightESCO, with BNDES financing to undertake EE in 35 buildings. The partnership is 33
per cent BR, 33 per cent Light ESCO, and 34 per cent EcoLuz. The financing is 30 per cent partners
(at 10 per cent each) and 70 per cent BNDES through the PROESCO program for a total budget of
4.5 million Reals.
One of the challenges identified by REEEP’s analytical study has been that Petrobrás BR is a large
state enterprise which moves quite slowly and is accountable to its Board of Directors. This has
resulted in a very low level of implementation of the business plans initially projected.
12
IDB/UNDP/GEF EE Project in Buildings
The Inter-American Development Bank (IDB) along with the United Nations Development Programme
(UNDP) and the Global Environmental Facility (GEF) are deploying an "Energy Efficiency Guarantee
Mechanism (EEGM)" to support energy savings projects in privately owned buildings in Brazil. The
guarantee program will provide various types of local currency credit guarantees to help commercial
banks and other lenders or investors finance energy savings projects for buildings promoted by
Brazilian energy service companies (ESCOs). These projects typically include replacing inefficient
lighting systems, air conditioning, chillers, motors and pumps with more efficient models or technology,
and installing or improving control systems that optimize energy consumption.
The mechanism is a fully independent facility designed to complement PROESCO, a specialized

program from Brazil’s national development bank BNDES that finances energy efficiency investments.
EEGM end-users are expected to be mainly private-sector companies or institutions that own buildings
in need of retrofitting to become more energy efficient.
The guarantee facility will be a USD 25 million funding including USD 15 million from IDB's capital and
a USD 10 million grant from the GEF. The EEGM will be deployed in parallel with technical assistance
activities by UNDP.
The EEGM is intended to support over 200 projects developed by up to 40 Brazilian ESCOs over a
period of five years, with total project energy savings in excess of USD 100 million.
11
The Business Plan is a Petrobrás confidential document. Banks may approach Petrobrás for more
details.
12
IDB, 2009. http://www.iadb.org/projects/searchDocs.cfm?lang=en
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1.3.5 Lessons Learned from Past Activities in EE
While the government initiatives to promote investment in RE market can be viewed as successful, the
same conclusion can not be drawn for EE market. The following key lessons can be learned in the EE
market:
• PROCEL has been very active in promoting efficient use of energy; but while there are many
success stories, market-based mechanisms to stimulate private sector investment in energy
efficiency in Brazil are largely absent. Nevertheless, PROCEL remains the main reference for
energy efficiency in Brazil, hosting “PROCEL Info” portal (www.procelinfo.com.br), with more
than 6,000 registered users and more than 200,000 hits in 2008. PROCEL Info is the main
source for information about energy efficiency in Brazil, focusing on electricity. Financial
institutions could work in close cooperation with PROCEL in order to be aligned with a federal
program and to access the network which has more than 25 years of experience. Although
business opportunities are directly created with PROCEL, the capacity of integration is quite
relevant. Financial institutions can explore the opportunities of sponsoring seminars and other
forms of cooperation, directly reaching other institutions involved in energy efficiency in Brazil.
• It would be convenient for the financial community to work together with CONPET as it is the
only governmental organization focused on fuel savings. CONPET does not have a structure
and scope that is similar to that of PROCEL (e.g., CONPET does not have any projects oriented
to industries). Some level of interaction with banks could be maintained to gather information
and monitor the market. As is the case with PROCEL, CONPET faces difficulties maintaining its
level of funding. Theoretically, the funding should come from all the oil companies of the
Brazilian theoretically competitive market, however in reality Petrobrás is the only contributor.
• PROESCO offers advantages compared to conventional products, especially the absorption of
part of the risk by the bank (converted into an increased spread). One of the weaknesses of
PROESCO is that it is considered as one product among many others that are commercialized
by BNDES. It has no staff exclusively dedicated to it. Projects submitted to PROESCO are still
either managed by the Environment or the Energy division, depending on who the client is.
Business-to-consumers commercialization was left to the market intermediaries by design but in
appearance no business-to-business commercialization was planned between BNDES and the
intermediaries – or at least none that is specifically related to the PROESCO product. It should
be noted that PROESCO cannot be regarded as a success so far. It is as yet unclear what the
causes of this situation are: Is it because of an inappropriate delivery mechanism (i.e., BNDES,
the program administrator, the operation, the lack of customization of the product to the market)?
or because the assumptions that the design was based on were faulty?
• The fact that the PROESCO program effectiveness is compromised by institutional barriers
leaves unchecked the barrier of low creditworthiness of many energy end-users.
• Regarding BNDES operation in EE field, its weaknesses are: (I) BNDES works directly only for
large projects, and has a small capacity of business to consumers’ commercialization activities -
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normally, those who go to BNDES are lenders, (ii) the bureaucracy and time spent to close an
operation with the bank is also always mentioned.
• BNDES is currently trying to redevelop the PROESCO product, based on discussions with LFI
and ABESCO. Nothing should come out of this until many months have passed.
• The private banking sector should position itself as an alternative to PROESCO and collaborate
with the IDB/UNDP/GEF guarantee facility. As this mechanism is designed to provide the
necessary guarantees for ESCO projects that lend money through PROESCO and taking into
account the immobility of PROESCO (which is still non operational), one can think about how to
combine private financing with the guarantee facility to push the market.
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2 INVESTMENT OPPORTUNITIES RENEWABLE ENERGY

In the chapter on renewable energy sources we will describe and assess five different basic
resources:
i) Small hydro (plants less than 30 MW);

ii) Sugarcane biomass for ethanol fuel and for electricity generation (two quite distinct markets);
iii) Wind power for electricity generation;
iv) Biodiesel to blend with conventional diesel;
v) Recovery of energy (electricity) from urban solid waste (as well as some attention to recycling).
In addition, a preliminary survey has been made of the isolated off-grid power systems in the Northern
region of Brazil. This was undertaken, after work had begun on the assessments, at the request of the
IFC to provide preliminary information for the Amazon Roundtable. As part of this work, the survey has
begun identifying possibilities for the generation of electricity from sawmills in the region. This is an
attractive option not only to substitute for the diesel oil which is used in almost all these systems, but
also to increase the value added by the local industry. This would be part of a broader strategy to
diminish deforestation in the region.
The development of the first four resources above (a – d) has been quite rapid in recent years with
direct promotion by the government in all cases except for sugarcane ethanol, whose growth has been
more market driven. Together they account for almost all the growth in commercial renewable energy
in Brazil.
The growth in the recovery of energy from urban solid waste (USW) has been much more modest,
even though this segment is the second largest source of carbon credits in Brazil. Methane recovered
from landfills has usually simply been flared. Different than the other cases above, there has been no
concerted effort to promote energy recovery from USW.
This report has not addressed all the possible sources of renewable energy in Brazil, nor was it
intended to given the limit on the number of options which could be studied.
Photovoltaics and solar thermal power generation systems have not been considered because they
have not progressed beyond the demonstration stage in this country. There is essentially no
commercial development.
Charcoal, produced mostly for the iron & steel industry, is a relatively large sector. However, output
has stagnated in recent years and the regulatory framework is undefined. Serious questions regarding
deforestation abound. Preliminary reconnaissance suggested it would be a difficult sector for outside
investors.
Finally, there is a miscellany of possibilities of generation from other biomass residues, such as rice
husks. However, the output from these sources is trivial compared to that from sugarcane residues. In
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addition, the project is looking at, in a preliminary way, the similar case of sawmill residues in the
Amazon region.
Projections of investment needs have been prepared for four resources: cogeneration from sugarcane
residues, wind power small hydro and urban solid waste. They are summarized in the sections below.
The Sustainable Energy Finance (SEF) program of the IFC is particularly interested in projects smaller
than about BRL 10-20 million or approximately 5 MW (at a unit investment of R$ 4,000/kW). Projects
in most of the renewable resource sectors covered tend to be considerably larger than this ceiling, as
will be described in the sections below. The possible exceptions are:
• Some small hydro projects (though the average is more than 15 MW);
• Some projects to generate electricity from landfill gas;
• Some projects to generate electricity from sawmill residues.
Estimates of the investment potential for these smaller projects are also outlined.
2.1 INVESTMENT OPPORTUNITIES IN SMALL HYDRO
2.1.1 Recent trends in the market and potential
Small hydro (in Portuguese PCH – Pequenas Centrais Hidreléticas) is defined in Brazil as being
between 1 and 30 MW. Below 1 MW (1000 kW), micro hydro plants are referred to as CGHs.
The market for PCHs has been active in recent years. Between 2008 and 2009 installed capacity
increased by more than 800 MW, as shown in the next table. Almost 1000 MW are under construction
and there is “pipeline” of more than 2,000 MW of projects which have been authorized by ANEEL.
However, the market for micro-hydro (CGHs) has been stagnant.
13
Table 7: Evolution of installed PCH and CGH capacity in 2008-2009
Number of plants Installed Capacity (MW)

PCH (1-30 MW) 2008 2009 2008 2009
In operation 310 358 2,209 3,018
In construction 77 73 1,264 998
Authorized (outorgados) 161 145 2,396 2,067
Total 548 576 5,869 6,083
CGH (<1000 kW)
In operation 221 221 117 117
In construction 1 1 0.8 0.8
Authorized (outorgados) 75 75 51.2 51.2
Total 297 297 169 169
This PCH project development activity has had an interesting consequence – a substantial increase in
registered inventory of potential in a short time. In 2008, the total inventoried potential was
13
Source: Tiago et alii, 2010
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16,184 MW, of which 13,975 MW remain to be constructed. In 2009 the total potential had jumped to
22,455 MW, of which 19,437 MW remain to be constructed.
Small hydro has had a long history in Brazil and a substantial share has been constructed by self-
generators and also for the free market, though there has been modest participation in the auctions
and PROINFA was a major stimulus.
2.1.2 Regional aspects of the market
Small hydro development has historically been concentrated principally in the South and Southeast of
the Brazil; principally in Rio Grande do Sul, Santa Catarina and Minas Gerais. More recently
development has begun to shift to the Middle West (Mato Grosso and Goiás) and southern Amazonas
in the North. The potential in the Northeast is relatively small.
2.1.3 Characteristics of typical projects
Most small hydro projects are above 10 MW installed capacity. The average size of plants completed
in 2009 was 17 MW. The average capacity of plants which have been authorized or are under
construction is about 14 MW, while plants financed by the BNDES averaged 20 MW.
This relative large size of plants being built is due to economies of scale for costs which do not vary
much with size, such as studies and executive project designs and O&M. In addition, many sites have
relatively low heads (the height the water falls when passing through the turbine). In the South and
Southeast, where much of the potential has been developed, such sites tend to be what is left. In the
North (Amazonia) and Middle West, where a smaller part of the potential has been developed, sites
with lower heads are typical of the potential in general.
Lower heads imply larger water flows to achieve the same output and as a consequence the costs per
kW of the civil works and the turbo-generator are greater. Thus in order to achieve economic viability
the projects need to be larger, often approaching the 30 MW limit for small hydro.
Smaller plants, between 1 and 5 MW, are viable when the characteristics of the site are favorable.
This allows lower costs for the civil works and the turbo-generators. In addition, since the plants are
small, it is important to minimize the operating costs. This means that remote control and operation (or
at least, semi-remote controlled) is almost a pre-requisite. The best way to improve the viability of
these smaller plants, from the perspective of O&M, is for several to be located within a radius which
permits the use of a single control center and a single maintenance team.
The cost per kW of installed capacity is sensitive to the site and the scale of the plant. A reasonable
range is about BRL 4-6,200/kW. Taking an average of BRL 5,000/kW, the average plant currently
under construction or authorized requires an investment of about BRL 70 million (±20%).
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2.1.4 Brief overview of key players in the market
The supply chain can be divided into three major categories for the purposes of discussion. In each
category there are a large number of active firms. One sees a broad segmentation in each category
between firms targeting larger PCHs and others smaller (roughly less than 5 MW).
• Engineering services - includes all of the initial evaluations of potential and viability, the hydro-
energetic inventory, geological and geotectonic studies, the basic design and executive project,
socio-economic and environmental studies and finally the execution of the project itself.
• Hydromechanical equipment – besides the turbines, this includes equipment which controls the
flow of the water and directs and extracts the hydraulic energy in it.
• Generators and electrical equipment - also includes items such as control panels, meters and
transformers, as well as the systems for automation and communication.
Then there are the project developers and economic groups which have specialized in this market
segment. Some of these groups are international. Two important examples are:
• The Ersa group, which is a joint venture between Patria Investments, Eton Park (an American
asset management group), the Fund BBI FIP (administered by the Banco Bradesco de
Investimento), a GMR Empreendimentos Energéticos and DEG (part of the German group KfW).
It has three plants in operation and nine under construction which will total about 300 MW.
• The Canadian group Brookfield Energia Renovável (ex-Brascan Energia), owns and operates 30
plants with 536 MW, the largest PCH portfolio in the country. It paused during the financial crisis
but is now preparing to embark on new projects.
More information on market players is presented in Appendix 5 of this report.
2.1.5 Overall investment needs and current financing
Table 8 shows estimates of investment needs based on projections in the latest 10 year plan (PDEE-
2019) for capacity entering during the period 2012-15.
While most projected expansion will be in plants larger than 5 MW, about 30% of the plants (by
number) and 7-8% of the investment may be in plants which are smaller.
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Table 8: Summary of investment potential for small hydro
Energy Generation Potential

Increase in installed capacity (MW) 1,400
Energy production (GWh/y) a 4,900 - 5,500
Annual CO2 emissions reduction (million ton CO2 @0.1842 tCO2e/MWh) b 0.90 - 1.01
Average unit cost ($/kW) g $2,800
Typical size range of potential projects (MW) 1 - 30
Average size of projects implemented (MW) c 14.3
Investment requirements for average project implemented (USD Million) h $40
Number of transactions over period 98
Total investment requirements over 5 year period (USD Million) $3,920
Share of projects below 5 MW (based on number of projects) d 30%
Investment requirements projects below 5 MW over period (USD Million) $230 - 290
Financial Aspects
Cost of energy (USD/MWh) e $89-97
Annual energy sales at end of period (USD million) $436 - 535
Annual carbon revenues in USD million (at USD12/tCO2) b $11 - 12
Carbon revenues: % revenue from energy sales 2.2-2.5%
Foreseen equity - total (USD Million) f $1,176
Foreseen equity - projects < 5 MW (USD Million) $69-87
Financing need - total (USD Million) f $2,744
Financing need - projects < 5 MW (USD Million) $160 - 205
a
Range of capacity factor considered is 40 – 45%. b Value at end of the period. c
Based on average size of
d
projects authorized by ANEEL at end of 2009. Based on estimated average size of 3.5 MW for PCH projects
e f
with < 5 MW of capacity. .Estimate of CERPCH Assumes 30% equity and 70% financing. g Average of a
h
range of BRL 4,000 – 6,200 per kW. Could be ±20% depending on the site and the scale.
The main source of financing for PCHs has been project financing by BNDES, which provides loans
for up to 80% of the investment. No information is available regarding the share of loans made directly
by the BNDES versus the share which is lent in “indirect operations” through banks.
Perhaps the most important gap in financing is the lack of instruments, such as performance bonds to
mitigate perceived project risks. The terms for loans currently available are also considered to be too
short for this kind of project.
2.1.6 Summary of risks and attractions
Recent years have seen something of a boom in small hydro construction, though it was slowed by
the general financial crisis of 2009. Nevertheless, while the technology of small hydro is mature, a
substantial “project risk” has emerged. Environmental licensing has become a major cause of delays.
It typically takes two years. Obtaining authorizations from the power sector regulator – ANEEL – has
also been slow. These are the main reasons why the projected expansion by 2015 for small hydro was
Econoler 23
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reduced by about 1,500 MW in the latest 10-year plan (PDEE – 2019) compared to the previous
edition (PDEE – 2017).
In addition, many small hydro plants have under-performed. Historically, of the PCHs with at least five
years of operation (registered in the clearinghouse for energy commercialization, the CCEE - Câmara
de Comércio de Energia Elétrica), 46% generated less than 80% of their Assured Energy. The under-
performance of so many PCHs is not only a problem for the operation of the power system. It also
represents a significant risk for any agent providing financing to these projects. It ultimately goes back
to the quality of the engineering services being provided, principally an inadequate analysis of the
hydrology of the sites. Geological risk is also significant.
The problem has prompted changes in the regulation of PCHs which should lead to more realistic
evaluations of Assured Energy and hence reduced project risk in the future. However, any financial
agent should be attentive to the quality of the analysis underlying the parameters of the project.
2.2 INVESTMENT OPPORTUNITIES IN SUGARCANE BIOMASS
Energy from sugarcane biomass provides a substantial share of the energy supply in Brazil – a
situation which is unique among the larger countries in the world. There are two basic ways that
sugarcane contributes to energy supply:
• The ethanol (both hydrated and anhydrous) which supplies liquid fuel for the transport sector as
well as a feedstock for non-energy uses.
• The generation of electricity from residues - chiefly bagasse from milled cane but also,
increasingly, field residues - in systems of cogeneration which also produce process heat for
sugar and ethanol production.
These constitute distinct, though not entirely separate, markets for investment.
2.2.1 Recent trends in the market and potential for expansion
The sugarcane sector has been growing quite fast since 2003/4, as shown in the following table. This
growth has been driven by increased demand both for sugar and ethanol. In the case of ethanol, the
main driver has been the growth in domestic demand since the introduction of flex-fuel automobiles.
There has also been some growth in exports.
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14
Table 9: Evolution of sugarcane, sugar and ethanol production from 2003 to 2008
2003/04 2004/05 2005/06 2006/07 2007/08 2008/09

Sugarcane (Million metric tons) 359.3 386.1 387.4 425.5 495.7 569.1
Sugar (Billions of liters) 24.9 26.6 25.9 29.9 31.0 31.0
Ethanol 14.8 15.4 15.9 17.7 22.5 27.5
Electricity generation for sale to the grid has also grown rapidly. Traditionally, sugarcane mills were
designed to be self sufficient in electricity, with no surplus for export. They burned their residues in low
pressure (~20 bar) boilers and there was little concern about the efficiency of steam use - large
amounts of which were used per ton of sugarcane processed. This “wasteful” use of the energy in the
residues was a rational response to the low price that could be obtained from the sale either of
electricity or the residues themselves.
Things began to change with the PROINFA program launched in 2004. This offered long term
contracts with guarantees from Eletrobrás for power sold to the grid at much more attractive prices
than heretofore had been available. The prices were fixed by the government.
Almost simultaneously, sugarcane mills began to participate in the general auctions for new thermal
capacity which were established as part of the new institutional model created for the power sector in
2004. Experience there showed that electricity generated in sugarcane mills could compete with
conventional thermal plants. In auctions between 2005 and 2009 3,779 MW of capacity were
contracted.
As a consequence of the new opportunities to sell power at an economically viable price, electricity
generation capacity and output have increased dramatically.
This increase has occurred in two ways. Some comes from new mills in “greenfield” sites. These are
now installing much higher pressure boilers than the older mills and use considerably less steam to
process the sugarcane. Both of these measures result in more electricity being available for sale.
Older mills have also been retrofitted using more efficient technology when their boiler systems have
come to the end of their useful life, or they undertake an expansion of capacity.
There has been a technological sea-change in what has long been a conservative sector. Yet even
today less than ¼ of the sugarcane mills sell power to the grid.
The sugarcane sector entered a profound financial crisis in 2008/2009 as a consequence of over
expansion of ethanol capacity and to a lesser extent, of sugar. Electricity sales were unaffected. As
the crisis passes it is expected that all segments (except domestic sugar) will continue to grow, as
shown in the next table.
14
Source: Unica, 2009
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15
Table 10: Projected expansion of the sugarcane sector in Brazil until the harvest of 2020/2021
2007/2008 2015/2016 2020/2021

Sugarcane produced (million t) 496 829 1.038
Cultivated area (million ha) 7.8 11.4 13.8
Sugar (million t) 31.0 41.3 45.0
Domestic market & stocks 12.4 11.4 13.8
Export 18.6 29.9 32.9
Ethanol (billion liters) 22.5 46.9 65.3
Domestic market 18.9 34.6 49.6
Export 3.6 12.3 15.7
Electricity (MW-average) 1,800 11,500 14,400
The future evolution of the sector is expected to result in a significantly larger share of revenue coming
from electricity generation – increasing from only 1% of revenues in 2006/2007 to 16% in 2015/2016.
The increased share of electricity has the advantage of not being subject to swings in commodity
prices since all the contracts are long term.
2.2.2 Regional aspects of the market
As shown in the next table, the production of sugarcane has been concentrated in the Central-South in
recent years and this trend is expected to continue. Amazônia (except for the State of Tocantins) is
outside the agro-ecological zone for sugarcane. In the Northeast, there is limited land which is apt for
the cultivation of sugarcane, except in Bahia, Maranhão and Piauí.
16
Table 11: Production of sugarcane in Brazil and by regions (thousand metric tons)
Regions 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09

North 670 849 858 1,101 894 1,092
Northeast 59,525 56,544 48,869 52,149 63,716 63,008
Southeast 234,257 261,469 276,914 299,244 339,737 397,166
South 28,580 29,076 24,867 32,087 40,498 44,937
Middle West 36,284 38,153 35,933 40,955 50,879 62,860
Central-South 299,121 328,697 337,714 372,285 431,114 504,963
North-Northeast 60,195 57,393 49,728 53,251 64,610 64,100
Brazil 359,316 386,090 387,442 425,536 495,723 569,063
The State of São Paulo alone produces about 60% of the country’s sugarcane and output continues to
grow despite the higher cost of land. This is due to the high productivity per hectare, availability of
qualified labor, easier access to technical assistance and better infrastructure for commercializing
production. However, improvements in transportation infrastructure could lead to an increasing share
in the Middle West region, where land is cheaper.
15
Source: UNICA, 2008
16
Source: Unica, 2009
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Of the projects submitted to the BNDES for financing, 62% have had a capacity between 1.5 and
2.9 million tc/yr (tons of sugarcane per year), with an average of 2 million tc/yr. However, today there
is tendency to build larger mills, with capacities above 3 million tc/yr. This may have been stimulated
by the rapid growth in output projected by the large economic groups entering the sector. Table 14
summarizes estimates for the effect of scale on the investment per unit of capacity. The unit
investment falls by 20% as the scale increases from one to 4 million tc/harvest (which corresponds in
practice to tc/yr)
17
Table 12: Effect of scale on approximate investments in new sugarcane plants
Milling capacity Industrial investment Unit investment

(million tc/harvest) (million BRL) (BRL/tc/harvest)
1 195 195
2 350 175
3 480 160
4 600 150
On the other hand, this increase in processing capacity will increase the costs of transporting the cane
to the mill and the complexity of the logistics of the agricultural operations.
If we consider an average plant with a milling capacity of 2 million tc/yr (12,000 tc/day), with half going
18
for sugar and half going for ethanol , alcohol output would be 500 m3 per day and sugar, 800 tons per
day. With a boiler and turbo-generator system operating at 65 atmospheres (bar) the exportable
surplus of power would be about 30 MW or 60 kWh/tc. With a system operating at 100 bar these
values would increase to about 45 MW and 90 kWh/tc.
Key elements in the supply chain of the sugarcane sector are the mills and sugarcane producers.
There are more than 430 mills operating as well as about 70,000 independent cane producers. On
average the mills produce about two thirds of the cane which they process. Independent sugarcane
producers supply the other third.
Most sugarcane mills belong to economic groups. In 2008 there were almost 200 groups active in the
sector. There has been a marked tendency towards consolidation and it is estimated that within ten
years the number of groups will be reduced by about half, even as the output of the sector grows.
There are a number of groups with a capacity of more than 10 million tc/yr of sugarcane processing
capacity.
17
Source: Dedini, 2010. Complete plant – excludes investments in sugarcane production
18
In a plant of this type the production lines for sugar and ethanol are somewhat oversized to permit
some short-term flexibility of production depending on market conditions.
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A marked phenomenon of recent years has been the entry of groups from outside the sugarcane
sector (be they Brazilian or foreign). They have been purchasing existing mills, building new
“greenfield” sites, forming joint ventures or a combination of all these strategies. This phenomenon
has to some extent contributed to the growth and financial strengthening of large groups. For example,
the market share of the five largest groups went from 12% in 2004/2005 to 27% in 2009/10. The main
new actors in the sugarcane sector are grouped by their sectors of origin (UNICA, 2010):
• Bioplastics: Dow Chemical, Brasken/ETH Bioenergia, Solvay.

• Oil: Petrobrás, British Petroleum (BP), Shell.
• Agroindustry groups and commodity traders: Louis Dreyfus Commodities, Bunge, Cargill, ADM,
Tereos, Shree Renuka Sugars, Noble Group, Bertin, Adecoagro.
• Electricity: Rede Energia, Companhia de Energia Renovável
• Other sectors: TGM Turbinas, Construcap, Encalso, Banco Pactual, Grandene, Concessionária
Rodovias SP.
Firms involved in other steps of the supply chain, including capital equipment manufacturers, transport
logistics and retail distribution, together with other market players are described in Appendix 6of this
report.
The investments expected for the planned expansion of the sector are large. Table 13 shows a
relatively conservative projection of investments only for sugarcane cogeneration. It is based on
projections for capacity (MW) entering during 2012-15 in the latest 10 year plan (PDEE-2019). These
values are probably low given the result of the auctions for alternative energyin August, 2010.
Expansion plans in the sugarcane sector also point to somewhat higher values – though they are not
disaggregated for cogeneration.
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Table 13: Summary of investment potential for sugarcane cogeneration
Sugarcane cogeneration
Increase in installed capacity for sale to the grid (MW) 1,300
Energy production (GWh/y) a 2,938
Annual CO2 emissions reduction (million ton CO2 @0.1842 tCO2e/MWh) b 0.54
Average unit cost ($/kW) c $1,420
Typical size range of potential projects - installed capacity (MW) 40-70 MW
Average size of projects implemented - installed capacity (MW) c 52 MW
Average size of projects implemented - "export" capacity (MW) 30 MW
Investment requirements for average project implemented (USD Million) $74
Total investment requirements over 5 year period (USD Million) $1,846
Share of projects below 5 MW (based on number of projects) 0
Investment requirements for projects below 5 MW over period (USD Million) 0
Financial Aspects
Cost of energy sold to grid (USD/MWh) d $83
Annual energy sales at end of period (USD million) $244
Annual carbon revenues in USD million (at USD12/tCO2) b $6
Carbon revenues: % revenue from energy sales ~2.5%
Foreseen equity - total (USD Million) e $554
Foreseen equity - projects < 5 MW (USD Million) 0
Financing need - total (USD Million) e $1,292
Financing need - projects < 5 MW (USD Million) 0
a b
Does not include use of field residues which could increase output by 60-70%. Value at end of period
c
(2015). Excludes credits for ethanol. Assumes mills processing 2,000,000 tc/year - 90% at 65 bar and 10%
d e
at 100 bar. Average result of recent auctions (BRL 1.80/USD). Assumes 30% equity and 70% debt.
The dominant ultimate source of financing for the expansion of the sugarcane sector is undoubtedly
BNDES. The total lending of BNDES to the sector during 2004-8 was almost BRL 10 billion (USD 5.5
billion at BRL 1.80 per USD), of which about 10% was for cogeneration plants. Approximately a
quarter of these loans have been “indirect operations” through other financial institutions.
Although the required amount is large, there appears to be no gap in financing capabilities once firms
have recovered from the recent crisis. This appears to be happening. The crisis stimulated a major
consolidation of the sector and, associated with this, increased professionalization of management.
With the recovery of commodity prices, firms have been rebuilding their balance sheets and are again
beginning to invest in new capacity.
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There is very little technical risk in the development of projects. All the technologies are consolidated,
including the high pressure (100 bar) generating plants which have begun entering the market.
The perception of credit risk has been quite high, as the sector passed through a severe financial
crisis in 2008/2009. However the consolidation which this provoked, as well as the changes in
management should strengthen the sector. The main risks concern the vulnerability of economic
groups to oscillations in the price of ethanol and sugar. To the extent that ethanol and sugar prices
move in different ways, the fact that almost all groups produce both provides some degree of a natural
hedge. In addition plants, other than autonomous distilleries, usually have some flexibility in the mix of
products. The risk of overexpansion is most acute with ethanol, where output is expanding quite fast
and there is uncertainty in the main export markets regarding protectionist measures. In the domestic
market the expanding fleet of flex-fuel cars provides a way of expanding sales volume as prices drop,
since consumers can shift to ethanol from gasoline. Since the fleet is expanding, this “cushion” should
grow over time.
Electricity generation is not subject to these risks, since projects have long term sales contracts (with
inflation adjustments) and their fuel is supplied in-house. However, it has been impossible to “ring
fence” electricity generation from the wider sugarcane business. Special Purpose Companies to
generate power (SPCs) are not an accepted business model in the sector. Thus if the sugarcane mill
(or the group owning it) faces financial difficulties, the credit risk extends to the electricity generating
component. In the worst case scenario, which is quite rare, the sugarcane mill could shut down
completely or work at part capacity with the consequence that there would be a lack of fuel to
generate the contracted electricity.
One specific risk for generation projects is the cost of the connection to the grid and the transmission
of the electricity, which is usually uncertain at the time when bids are made in the auctions. However,
the sums involved are unlikely to be large enough to make an otherwise viable project unviable.
The credit risk for retrofits of existing plants may be less than for “greenfield” plants and the volume of
the investment at risk will be smaller. In addition, it may behoove outside investors such as banks to
look closely at the technical characteristics of the electricity generation and steam using systems.
Sugarcane mills investing in state-of-the art technology are likely to have a higher share of stable
revenues from electricity sales than the average.
2.3 INVESTMENT OPPORTUNITIES IN URBAN SOLID WASTE
From the perspective of energy, the handling of urban solid waste (USW) is relevant in two ways.
First, it is possible to recover energy from USW in the form of heat, fuel or electricity, due to the large
share of organic materials in it (typically more than 80% by weight). Second, the separation and
recycling of energy intensive materials such as glass, metals, plastics and paper is possible. Recycling
can be regarded as a form of energy efficiency. The emphasis in this report is on energy recovery.
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More broadly, the rational processing and disposition of USW fits with RE and EE into a broader
strategy of sustainable development and the environmental impacts of economic development. As
such it is likely to be grouped together with RE and EE in the organizational structure of financial
institutions.
2.3.1 Recent trends and regional aspects of the market
For energy to be recovered from USW it must be collected, channeled and disposed of in certain
ways. Open air dumps and simple landfills, besides being environmentally very inadequate, also mean
that energy cannot be recovered. Unfortunately, as the next table shows, much of the USW in Brazil is
disposed of in these ways – more than 43%.
19
Table 14: Destination of urban solid waste, by macro-region
Macro-Region Open Air Dump Simple Landfill Sanitary Landfill

North 38,2% 28,8% 33,0%
Northeast 34,2% 32,9% 32,9%
Center west 22,9% 49,0% 28,1%
Southeast 11,7% 17,1% 71,2%
South 12,9% 18,0% 69,1%
Brazil 19,3% 23,9% 56,8%
There will probably be significant recycling of many materials, regardless of the destination of the
USW, due to a small army of catadores de lixo. But this primitive approach to recycling often exacts a
severe social toll. A rational disposition of USW is more likely to be associated with an
improved/improving socio-economic context for recycling.
There are clearly important regional differences in the disposition of USW. In the poorer North and
Northeast regions open air dumps and simple landfills are more predominant (not to mention the
significant amounts of rubbish which aren’t collected at all). However, more significant than regional
differences are the differences between municipalities. These have the constitutional responsibility for
USW collection and disposition.
In general there are big differences between larger and smaller cities. The average quantity of USW
generated per inhabitant is significantly greater in larger cities, as shown in the next table.
19
Source: ABRELPE, 2009. The categories shown are: (1) open dump (vazadouro a ceu aberto); (2)
simple landfill without impermeabilization (aterro controlado); (3) sanitary landfill (aterro sanitario); and
(4) “other”. The “other” category includes a very wide range of treatment – from composting (2.9%
nationwide) and incineration (0.5%) to dumps in water bodies (0.1%) and unfixed sites (0.5%)
Econoler 31
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20
Table 15: Waste generated per capita, by size of municipality
Size of city → Small Medium Large Mega

Population (1,000 inhabitants) < 30 30 – 500 500 – 5,000 > 5,000
Solid waste per capita (kg/capita/day) 0.5 0.5 - 0.8 0.8 – 1.0 > 1.0
Most of the smaller municipalities, especially those in the poorer regions, have great difficulty in
organizing an adequate system of collection and disposal of solid waste. A survey by ABRELPE
estimated that only 39% out of approximately 5,560 municipalities have an adequate disposal scheme
for their solid waste, ranging from a low of 15% in the North and 25% in the Northeast, to 35% in the
Middle West, 47% in the Southeast and 58% in the South (ABRELPE, 2008).
Various technologies are available for the recovery of useful energy from USW. For example, in
Europe, where space for sanitary landfills is limited, USW treatment strategies seek to limit the volume
of material requiring final disposition. There are also concerns about the longer term impact on
groundwater from the leachate of landfills. Thus, various kinds of high temperature combustion or
pyrolitic/carbonization technologies are increasingly being deployed. However, this approach to USW
treatment is quite capital intensive. In Brazil, the predominant strategy to rationalize USW disposition
in the coming years will be to shift increasingly to sanitary landfills.
In sanitary landfills the approach to recover useful energy is to extract the methane which naturally
results from the decomposition of organic materials in an anaerobic environment. The best conditions
for this kind of energy recovery are found in landfills which have: at least one million tons of USW
stocked; still receive waste or were recently closed and which have a depth of at least 12-13 meters.
Energy recovery involves creating a grid of shallow “wells”, then channeling the gas to a central plant
to clean and dehumidify the gas. Three routes are then possible:
i) Purify and compress the gas for sale as natural gas.

ii) Generate electricity in reciprocating gas engines or small gas turbines
iii) Use the gas on-site to produce process heat.
In general, the most viable approach in Brazil will usually be to generate electricity.
It is estimated that an 11 MW facility, would cost about USD 18 million (including the investment in gas
collection) and could generate electricity, without considering carbon credits, for about USD 92/MWh
21
(BRL 165) with a 20% internal rate of return (IRR) before taxes . Carbon credits would add another
60-65% to the revenue stream.
20
Source: IBAM, 2001
21
The estimate assumes a 68% capacity factor (over the life of the plant) and a payment to the landfill
equivalent to about $6/MWh for the gas collected (SCS Engineers, 2006).
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A challenge facing projects is the varying output of gas over the lifetime of the landfill. A plant which
has the capacity to use a large share of the peak gas output will have a relatively low capacity factor
over its lifetime, which increases costs. Another point is that not all the gas can be captured (whether
for energy recovery or for flaring).
The generation capacity chosen for a given size of landfill may thus vary. A landfill of 100,000
tons/year might support a generation capacity of between 1.3-2.1 MW of power, with roughly a 70%
capacity factor over its lifetime. Given the economies of scale, a landfill much smaller than this may be
uneconomic for electricity generation (though capturing and flaring the gas would be another story).
The table below summarizes the potential in municipalities where more than 100,000 tons/year are
collected. The table discriminates between larger municipalities, with more than 380,000 t/year of
USW, and those between 100,000 and 380,000 t/year. The larger municipalities will have a potential
higher than 5 MW – even with a low assessment of capacity per ton USW.
Table 16: Approximate potential for electricity generation from landfill gas recovery
Region >380,000 t USW/year 100-380,000 t USW/year

USW Theoretical LFG Potential USW Theoretical LFG Potential
t/year MW t/year MW
High Low High Low
North 1,366,578 29 18 810,444 17 11
Northeast 4,846,194 102 63 1,268,376 27 16
Center-west 2,077,696 44 27 683,362 14 9
Southeast 6,102,163 128 79 4,534,323 95 59
South 1,346,931 28 18 650,932 14 8
Total 15,739,562 331 205 7,947,438 167 103
Source: Based on municipal RSU estimates in ABRELPE, 2009.
Assuming a minimum of 100,000 t of USW per year there are 61 municipalities with a combined
potential of 308 to 498 MW, or about 1,900-3,100 GWh/year. Of these, 44 could support plants of up
to 5 MW (using the low capacity estimate), with a combined capacity of 103-167 MW.
However, conditions in Brazil until now have not been propitious for the recovery of useful energy from
sanitary landfills. There are two basic reasons for this.
• The price which can be obtained for the electricity produced is too low to justify the investment in
generation equipment (micro-turbines or gas engines to generate power from the methane in the
biogas).
• The strong incentive of carbon credits for eliminating methane emissions has been allowed for
projects which merely flare the biogas produced by the landfill. Methane is a much more
aggressive greenhouse gas than CO2, by a factor of about 30.
The return on simply flaring gas has been much higher than on generating power, so why bother with
the much larger investment and greater risk?
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Thus there have been many CDM projects to capture and flare the methane in the biogas and very
few to generate electricity. The table below summarizes CDM projects by sector in Brazil. Projects
with sanitary landfills are the second most important in terms of carbon credits and third in number,
with 28.8
22
Table 17: CDM projects by sector
Projects Approved Number of Projects Reduction in Annual Emissions

& in Validation # Share tons CO2 equiv Share
Electricity Generation 159 62% 17,305,374 47%
Pig farming wastes 40 16% 2,035,369 7%
Sanitary landfills 28 11% 8,788,633 24%
Manufacturing 11 4% 1,853,002 5%
Energy efficiency 10 4% 68,730 <1%
Other wastes 2 1% 82,300 <1%
Reduction of N2O a 3 1% 6,205,612 17%
Chemical industry 1 <1% 80,286 <1%
Metallurgy 1 <1% 80,286 <1%
Total 255 100% 36,436,082 100%
a
Principally projects related to agriculture and nitric acid production
There have been only two projects implemented to generate electricity from landfill biogas: the
NovaGerar plant in the Centro de Tratamento de Resíduos in Nova Iguaçu – RJ, and the
23
Bandeirantes sanitary landfill in São Paulo – SP. Both landfills are exceptionally large by Brazilian
standards, which improved their economics.
Two policy measures could radically change the outlook. First, create a specific auction framework for
contracting electricity sales from sanitary landfills – as has been done with small hydro, biomass and
wind. This would allow higher prices to be paid on average, thus remunerating pioneering
investments, while also encouraging competition and cost-effective solutions. Second, and
simultaneously, only allow carbon credits to be granted for biogas collection projects which go beyond
flaring to using the energy in a productive way (at least for landfills above a certain size). This would
avoid the “cream skimming” which has been occurring.
In the future, once an energy recovery market has been established, there could be a move away from
sanitary landfills towards high temperature processing of USW. As already observed, this approach
has the advantages of dramatically reducing the area needed for landfills and presents fewer long
term environmental risks from leakage of the leachate (chorume) into the water table. The pressure to
move in this direction is likely to be felt first in the larger metropolitan areas and should be reflected in
higher avoided costs of landfill tipping fees (these benefits are crucial to the economic viability of high
temperature processing). There are additional important advantages in moving to this approach:
8
It is expected that the large majority of these CDM projects are in larger landfills – i.e.among the 61
municipalities identified above. That means that almost have the potential projects have lost the opportunity to
use carbon credits to help finance energy recovery.
22
Source: ABRELPE, 2008
23
Santander Bank participated in the financing of the Bandeirantes project.
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• The same level of input of USW can result in about 3-4 times more electricity generated.
• The annual fuel input to the power plant varies less, which permits a higher life time capacity
factor.
• All methane emissions can be eliminated (recovery from landfills is incomplete, as illustrated in
the graphs above).
• The cost of treating and disposing of the liquid effluent of a sanitary landfill will be avoided.
The capital cost of a plant with an incinerator and power generation is much greater than for a simple
sanitary landfill. However, the difference narrows greatly if we include the energy recovered from the
landfill. The capital cost per kW of generation is similar (though, since a given amount of USW will
support more power generation, the total capital cost will be considerably higher). This market is still
considerably more speculative, so given the shorter time horizon for this study we have not developed
estimates. However, it could, in time, be a larger market.
Municipalities are responsible for collecting and disposing of USW, though they may outsource the
service to private sector firms either through concessions or PPPs (public-Private Partnerships).
Various government agencies are involved either in the regulation of solid wastes or the development
and financing of improved management. Those involved directly in regulation are:
The Ministry of the Environment (Ministério do Meio Ambiente); CONAMA – National Council for the
Environement (Conselho Nacional de Meio Ambiente); Ministry for Cities (Ministério das Cidades) and
the Ministry of Health (Ministério da Saúde).
The development of projects with sanitary landfills is of considerable interest to some of Brazil’s
largest construction companies, which also have much experience with energy projects. Large groups
such as Camargo Correia, Odebrecht and Queiroz Galvão have subsidiaries specialized in this
market.
There are also many groups specialized in carbon finance and knowledgeable about financing which
are active in the area. There are also firms capable of designing and manufacturing the necessary
equipment. More information on market players is provided in Appendix 7 of this report.
As already observed, under current policies there is no incentive to develop projects to recover energy
from sanitary landfills – only to flare the methane in the gas. Despite this, a small number of projects
may be built, mostly in larger landfills.
However, if a new set of policies (such as those described above) were implemented, the perspective
could change dramatically. Perhaps 80% of the potential in municipalities with more than 100,000
t/year of USW could be implemented in a five year period. The table below summarizes estimates
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about investment potential under these two scenarios and greenhouse gas emissions reduction, as
well as the size of typical projects. It also discriminates between projects which are larger and smaller
than 5 MW (based on the low estimate of 1.3 MW per 100,000 t/year of USW collected). The
investments shown refer only to the landfill gas collection and energy recovery system (not the landfill
itself).
Table 18: Summary of investment potential and GHG reduction
Current Policy Favorable

Policies
Potential net installed capacity (MW) 375-605 375-605
Market penetration rate over a 5-year period (%) 10% 80%
Market potential over a 5-year period (MW) 38-60 300-485
Market potential energy production at end of 5-year period (GWh/y) 233 - 368 1,840 - 2,975
Annual CO2 emissions reduction (million ton CO2 @0.1842 1.1 - 1.8 9.0 - 14.6
tCO2e/MWh)
Average unit cost ($/kW) $1,700 - $2,000 $1,700 - $2,000
Typical size range of potential projects (MW) 1.3-25 1.3-25
Average size of projects implemented (MW) a 9.5-15 6-10
Investment requirements for average project implemented (USD $16-30 $10-19
Million)
Number of transactions over period 4 50
Total investment requirements over 5-year period (USD Million) $64 - $120 $510 - $970
Share of projects below 5 MW (based on number of projects) 25% 70%
Investment requirements for projects below 5 MW over period (USD $7 - $13 $140 - $266
Million)
Financial Aspects
Cost of energy (USD/MWh) b $92 $92
Annual energy sales at end of period (USD million) $21 - $34 $169 - 274
Annual carbon revenues in USD million (at USD12/tCO2) $14 - $22 $109 - $176
Carbon revenues: % revenue from energy sales
(a) Due to credits from converting landfill gas from CH4 to CO2 60-65% 60-65%
(b) Due to credits from sale of electricity ~2% ~2%
Foreseen equity - total (USD Million) c $13 - $24 $102 - $194
Foreseen equity - projects < 5 MW (USD Million) $1.5 - $2.5 $28 - $53
Financing need - total (USD Million) c $52 - $96 $408 - $ 776
Financing need - projects < 5 MW (USD Million) $5 - $10 $112 - $213
a
Range of values in each scenario based on low and high capacity estimates per 100,000 t/year of USW (1.3 –
b
2.1 MW). Excludes carbon credits and includes $6/MWh for landfill gas. Based on a plant with a cost of
$1,700/MW. c Assumes 20% equity and 80% financing.
The Caixa Econômica Federal (CEF) and BNDES are the standard sources of credit for improvements
in the basic public services of Brazil’s municipalities. These loans have conditions which are well
known and are subject to restrictions in the overall debt level of the municipality (contingenciamento),
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which can make planning investments complicated. The use of Public-Private-Partnership

arrangements can help overcome this barrier.
Given the unusual level of activity with the CDM, the BNDES and FINEP (Financiadora de Estudos e
Projetos – a parastatal linked to the Ministry of Science and Technology – MCT) also provide lines of
credit for the development of projects for the CDM. Almost all CDM projects themselves have been
developed with the involvement of private resources.
As stated above, electricity generation projects in most sanitary landfills are economically unviable
under the current policy framework. If the context were to change, project developers would be able to
benefit from the considerable experience which has been gained in past CDM regarding projections of
gas flow over time. With long term contracts, revenue streams would be relatively predictable, which
should make projects financially attractive.
2.4 INVESTMENT OPPORTUNITIES IN WINDPOWER
2.4.1 Recent trends, potential and regional aspects of the market
Wind energy is the most recent renewable resource to become a significant factor in the supply of
electricity in Brazil. In 2005, total installed capacity was only 29 MW. The PROINFA program was the
first major stimulus. It offered long term contracts at a fixed purchase price guaranteed by Eletrobrás.
This led to a rapid expansion of installed capacity, which had reached 561 MW by the end of 2009 as
contracted capacity began to come on line.
The auction for wind power in December, 2009 inaugurated a new approach to promoting wind power.
The result was dramatic: 1,806 MW were contracted from 71 projects at an average price of BRL
148/MWh. This average price was less than that in some recent auctions for thermal generation
plants. It was also much lower than the price offered by PROINFA.
As a result of PROINFA and the December auction, Brazil should have an installed wind power
capacity of about 3,200 MW within three years. The extent to which this represents a change in
perceptions can be illustrated by the fact the National Energy Plan for 2030, published in 2006,
projected a total of 3,480 MW in 2025.
As a consequence of the success of the December auction, another auction will be held in August,
with separate sub-auctions for wind, biomass and small hydro. More than 10,500 MW of wind capacity
have been registered to bid in the auction.
A factor which has encouraged the government of Brazil to stimulate the expansion of wind power has
been studies which show that the natural variation of wind power output can be relatively easily
absorbed by the dominant hydroelectric system, at least until levels are far higher than those that have
Econoler 37
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so far been contracted (perhaps in the range of 15-20% of total electricity generating capacity). In
addition, the variation in wind output tends to be complementary to that of the natural hydro flows on a
seasonal basis and annual variation appears to be considerably smaller than the variation in average
annual river flows. Finally, advances in techniques for predicting shorter term (hourly and daily)
changes in output are facilitating the dispatch of wind power plants within the power system.
The most favorable areas for developing wind power have average annual wind speeds of 7-7.5
m/second or more. These areas are relatively small, but are sufficient to allow a large expansion, even
if only a small percentage (less than 5-10%) is ultimately covered by wind farms. Favorable areas for
development are found in the South, the mountainous areas of the north of Minas Gerais and the
interior of Bahia and especially near the coast in the Northeast.
The expansion of the market has been especially dramatic in the Northeast region. In the December
auction almost 90% of the contracted capacity was in this region, the remainder being in the South.
This regional predominance may have been due in part to the favorable terms and easier access to
credit offered by the Banco do Nordeste, the development bank for that region. It is likely that the
results of the next auction will see a broader regional distribution of projects.
The average capacity of the wind farm projects approved in the December 2009 auction was 25.4
MW. Only five of the 71 projects contracted had a capacity of less than 10 MW, the smallest being for
6 MW. At the same time, only five projects had more than 30 MW, the largest being 50 MW. The large
majority of projects are between 20 and 30 MW.
One factor dimensioning projects was the 30 MW upper limit for projects to be eligible for the 50%
24
discount on transmission charges (TUSD/TUST). In many cases one finds that projects are
geographically contiguous and will in fact be operated as a unit in wind farms of as much as 150 MW.
The average investment per kW was BRL 4,000 or slightly less (all costs included for a commissioned
wind farm). It is likely that the investment per kW in the upcoming auction will be slightly lower than in
the last. The consolidation of the sector and the increasing volume of business may permit more cost
reductions.
The capacity factor of the winning projects in the auction was quite high by the standards of wind
power – 43.8%. It is possible that the average capacity factor of winning projects in the next auction
will be even higher, perhaps as much as 48%. A higher capacity factor improves the economics of a
wind farm by diluting the fixed investment over more MWhs each year.
Taking the nominal size of the winning projects in the December auction as a guide, a typical project
of 25 MW would require an investment of about BRL 100 million.
24
This discount was originally given to small hydro and was subsequently extended to wind power
projects.
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Some larger firms have now begun to accumulate substantial stakes in the wind energy market. These
include traditional energy supply companies, such as Petrobrás, CPFL, Iberdrola, Eletrosul, as well as
firms more specialized in wind and (possibly) other renewables, such as Renova, Dobreve.
Nevertheless there is considerable capacity in the hands of relatively small developers. Many, having
won in the auction, are prepared to sell on their projects for execution. This “secondary market” opens
opportunities for larger better capitalized firms to enter or expand their presence in the market.
Most of the principal international wind turbine manufacturers are present in the Brazilian market.
Several, including GE, Vestas and Enercon offer turn-key plants and to do this work closely with local
firms. Hyundai is preparing to do the same. There is a spectrum of more specialized equipment and
service providers. One set of services of great importance is the certification of projects (for example,
evaluating the analyses underlying projections of capacity factor). Major international certifiers, such
as GL Garrad Hassan and DEWI GmbH are now present in Brazil. More information on market players
is presented in Appendix 8 of this report.
Large investments are projected for wind power. Table 19 shows estimates based on projections of
the latest 10-year plan (PDEE-2019) for capacity entering during the period 2012-15. These values
are probably low given the result of the auctions for alternative energy in August, 2010.
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Table 19: Summary of investment opportunities in wind power

Increase in installed capacity (MW) 3,150
Energy production (GWh/y) a 11,600
Annual CO2 emissions reduction (million ton CO2 @0.1842 tCO2e/MWh) b 2.14
Average unit cost ($/kW) c $2,200
Typical size range of potential projects (MW) 6 - 50
Average size of projects implemented (MW) 25
Investment requirements for average project implemented (USD Million) $56
Total investment requirements over 5-year period (USD Million) $6,930
Share of projects below 5 MW (based on number of projects) <3%
Investment requirements for projects below 5 MW over period (USD Million) $35
Financial Aspects
Cost of energy (USD/MWh) c $83
Annual energy sales at end of period (USD million) $963
Annual carbon revenues in USD million (at USD12/tCO2) $26
Carbon revenues: % revenue from energy sales ~2.5%
Foreseen equity - total (USD Million) d $2,079
Foreseen equity - projects < 5 MW (USD Million) $11
Financing need - total (USD Million) d $4,851
Financing need - projects < 5 MW (USD Million) $25
a b
Assumes capacity factor of 42% (average of December 2009 auction was 43.8%) Value at end of period
c d
(2015). Average result of December auction (BRL 1.80/USD). Assumes 30% equity and 70% debt.
It is expected that very few, if any, projects will be as small as 5 MW – at least those connected to the
national grid. Given the very low coefficient of CO2 emitted per MWh generated in Brazil, the potential
carbon credit is very small relative to the revenue from energy sales.
The two principle sources of credit for project financing are BNDES and the BNB. BNB finances
projects in the Northeast Region. As shown in the following table, the terms of the BNB are
significantly more favorable for project developers than are those of BNDES.
Table 20: Comparison of the credit terms of the BNDES and the Banco do Nordeste
Development Bank Max share of Interest Depreciation Grace

Investment Rate (%) (Years) Period
BNDES 80% 9-11 14 6 months
BNB – Banco do Nordeste 90% 7-10 20 Up to 4 years
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Usually the loans from BNDES for wind power projects are “indirect operations” through commercial
banks, be they public (Banco do Brasil) or private (Itaú, Bradesco, Santander & HSBC). In the case of
BNB, the loans are made directly from the development bank to the borrower.
Wind power is attracting many new equity investors and some banks are active in providing services
to help structure finance. Santander has been the most active and even enters into equity partnerships
in some cases.
The rapid growth of wind power represents a challenge and poses some project or technical risks for
investors. One problem is the quality of many analyses of the output of a wind farm and the resulting
certifications of output. Many are prepared by institutions which have little recognition in this area and
are of doubtful reliability. These certifications are accepted by BNB (Banco do Nordeste), which was a
major financial player in the last auction, BNDES, on the other hand, is more rigorous and requires
certifications of output by internationally recognized entities. This situation has resulted in some sloppy
analyses. Proper reviews have subsequently found differences of 25% or more in the certifiable
output. Projects with this kind of analysis were frequently prepared with the intent of selling them on
after winning the bid, hence the original developer was not incurring the risk of not producing the
claimed output.
In addition, some of the equipment manufacturers’ technology is not very reliable. Some turbines do
not even have a certified power curve with wind speed. Problems have already been encountered with
equipment recently installed in the PROINFA program. For example, there have been fires in the rotor
hub of some wind turbines due to the improper functioning of the control system.
Another common risk is related to the cost and uncertainties surrounding the connection of the project
to the grid. Many projects are located in areas where the existing grid is quite weak and are “at the
end of the line”, which exacerbates the problem. In these cases significant investments will be needed
to connect the new wind farm to the grid and project developers are faced with great uncertainty
regarding collection arrangements. Under the existing arrangements, the wind farm developer must
evaluate the cost of an isolated connection. Since criteria should be conservative in order to be
prudent, this tends to increase the viable price for selling electricity. If a number of wind farms are in
the same neighborhood (which is often the case) it would be cheaper to create a feeder system for the
projects as a group, instead of doing so individually. One possibility is an ICG (“Instalações de
Transmissão de Interesse Restrito para Conexão Compartilhada de Centrais de Geração”). This
approach has so far been avoided by project developers due to uncertainties about rules and
allocations of costs.
Finally, the intense competition in the auction may have prompted some project developers to make
over-optimistic assessments of costs. There may be inadequate provisions for project contingencies.
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On the other hand, measures are being taken to reduce the technical risk. Rules for certifying projects
are becoming stricter. For example, the period of measurement required at a site to register for the
auction will soon increase to two years and then three.
2.5 INVESTMENT OPPORTUNITIES IN BIODIESEL
2.5.1 Recent trends in the market and potential
The National Program for the Production and Use of Biodiesel (PNPB - Programa Nacional de
Produção e Uso de Biodiesel), which began in 2005 to substitute for diesel oil. Legislation in that year
established a chronogram for minimum % mixtures in diesel. This chronogram was subsequently
revised to what is shown in the following table:
25
Table 21: Evolution of the required blend of biodiesel in diesel from fossil fuel
2005-2007 From Jan 2008 From July 2008 From July 2009 From January 2010
2% authorized 2% obligatory 3% obligatory 4% obligatory 5% obligatory
Since production effectively began in March of 2005, biodiesel output has grown quickly, as shown in
the next table. The regional profile has changed. In 2007, the Northeast was the largest producing
region, but output there has actually fallen since.
26
Table 22: Evolution of the production of pure biodiesel (B100, in m3)
Region↓ Year→ 2005 2006 2007 2008 2009

North 510 2,421 26,589 15,987 41,821
Northeast 156 34,798 172,200 125,910 163,905
Middle west 0 10,121 125,808 526,287 640,077
Southeast 44 21,562 37,023 185,594 284,379
South 26 100 42,708 313,350 477,871
Brazil 736 69,002 404,329 1,167,128 1,608,053
There are now 48 biodiesel plants with a capacity of 11.9 thousand m3/day which have been
authorized to produce and commercialize biodiesel. There are also 5 new plants authorized for
construction and 7 existing plants authorized to expand; resulting in capacity expansion of
2.6 thousand m3/day.
With the current (since January, 2010) obligatory mix of 5% (B5), the tendency is for production to
grow. Diesel consumption in 2008 was 44.2 million m3, which implies a minimum of 2.2 million m3 of
biodiesel, growing at about 5% per year. The market is being adequately supplied and the installed
processing capacity greatly exceeds demand. Indeed, the nominal annual processing capacity,
including authorized expansion, is about 4.8 million m3 (assuming a 90% capacity factor).
25
Source: Ministério das Minas e Energia
26
Source: ANP as stipulated in ANP Resolution n° 17/2004.
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The average prices in the auctions for supply in January-March 2010 were BRL 2,319-2,329 per m3 of
biodiesel and BRL 2,218-2,242 for April-June.
Although there is much interest in “mini-processing” plants of 1,000 to 5,000 liters per day (l/day), the
average capacity of existing plants is much larger – 248,000 l/day. There are substantial economies of
scale in the processing plants. Assuming a plant of 185,000 l/day, the total investment in the
27
processing facility will be about BRL 27 million.
By far the largest component of costs is the feedstock material – typically 80% or more. By far the
most important feedstock is soybean oil (82%), followed by animal fat from slaughterhouses (12%).
The recent and projected prices of different sources of oil in natura are shown in the next table. One
ton of feedstock produces approximately one ton of biodiesel.
28
Table 23: Prices of oil & fat feedstocks for biodiesel (USD/ton)
Year Soybean Sunflower Palm Oil Mamona Mamona Animal Recycled

(international) (Domestic) Fat Frying Oil
2008 $1,097 $1,543 $1,046 $2,005 $908 $771 $658
2013 $1,337 $1,548 $1,110 $2,443 $1,107 $940 $802
Although recycled frying oil is the cheapest feedstock, difficulties in collection have made it as yet
unviable on a commercial scale. The availability of animal fat is also limited and competition with
tradition uses is pushing prices up. The projected tendency is for the prices of the feedstock from
oilseeds to also increase.
Assuring a reliable supply of feedstock is of crucial importance and feedstock supply has often been a
problem.
Biodiesel is sold exclusively through quarterly auctions which are coordinated by the National Agency
29
for Petroleum, Gas and Biofuels (ANP). Petrobrás is the only buyer in these auctions. It defines the
size of the lots of biodiesel for each of the distributors of conventional diesel (e.g. BP, Shell, etc)
based on the average share of the market of each one. The lots are then sold on to each distributor at
the average purchase price of the auction.
Other public sector agents include:
27
This includes the trans-sterification unit, the laboratory, utilities and equipment for preparing the raw
oil, treating water and effluents, weighing and unloading/loading shipments.
28
Source: EPE
29
The ANP also monitors quality control and the commercialization of biodiesel.
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• The Ministry of Mines and Energy (Ministério das Minas e Energia – MME) which structures the
overall program and defines the targets for the volume of biodiesel to be blended.
• The Ministry of Agriculture (Ministério da Agricultura – MAPA) is responsible for structuring the
agricultural supply chain and for the agro-climatic zoning of possible crops.
• The Ministry of Agrarian Development (Ministério do Desenvolvimento Agrário – MDA) is
responsible for monitoring the inclusion of small farmers in the biodiesel program and issuing the
“Certificate of Social Fuel”. This certificate is required for most of the volume auctioned as well
as to obtain the PIS/COFINS tax exemption worth about BRL 218/m3.
Key players in the market include the owner/operators of the processing plants. There are seven
groups with the capacity to produce more than 600 m3/day each. Together they have a capacity of
about 7,500 m3/day, more than half the total, in 14 plants. The smallest of the plants operated by these
firms have 300 m3/day of capacity. There is a marked tendency towards consolidation of producers in
the sector.
There is a variety of producers of specialized equipment and services for processing biodiesel. Finally,
given the need to find a viable alternative to soybeans in the longer term, the public support of R&D is
crucial. This effort is led by EMBRAPA (the agricultural research arm of the government) and
Petrobrás. More information on market players is provided in Appendix 9 of this report.
It is difficult to project future investment needs, especially since the existing and authorized processing
capacity is almost double the short-term market for B5.
Brazil’s public sector and development banks – BNDES, Banco do Brasil, Banco do Nordeste and
Banco da Amazônia – offer credit for the construction of processing plants, the agricultural production
of the raw material (investment and operations), the purchase of the feedstock by the plants and the
commercialization of the biodiesel product. BNDES focuses more on the processing, while the Banco
do Brasil, besides intermediating loans from BNDES (“indirect operations”), also provides credit for
investment in agricultural production.
In principle, the BNDES’ interest terms are quite concessional, especially for small/medium producers
with the “Social Certificate” (TJLP + 1% in “direct operations”). Indirect operations add the
remuneration of the financial intermediary. We do not have information regarding the share of BNDES
operations which are direct, indirect or mixed. However, the participation of private sector banks in
intermediating indirect operations appears to be very small, if there is any at all.
Apparently the IDB has provided credit since 2009 which includes resources for biodiesel. However,
no information is as yet available on this operation and how it is structured.
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Unlike the auctions for the sale of electricity from renewable resources, which result in long term
contracts which provide a relatively secure future revenue stream, the auctions for biodiesel are only
for supply during a three month period.
In addition, if the producer is unable to deliver at least 80% of the contracted amount in the quarter
that it is due, it faces penalties.
Securing adequate supplies of feedstock can be a problem, especially if the feedstock is not
soybeans. Organizing small farm producers, a precondition for the “Social Certificate” can be a
problem, especially in the Northeast where there is little tradition of agricultural cooperatives.
Meanwhile, soybeans are subject to commodity price fluctuations.
Finally, in the longer term, there may be political risk as the volume of subsidies grows. The level of
subsidy is currently BRL 250/m3, though this may be an underestimate. The risk of reducing the
subsidy would grow if there were sustained upward pressure on the price of a sensitive basic food
commodity, such as soybean oil.
2.6 OVERVIEW OF SMALLER ISOLATED OFF-GRID SYSTEMS IN

AMAZÔNIA
In this section we provide a brief overview of off-grid power systems currently serving smaller
30
communities in the interior of Brazil’s Amazon region . Figure 4 shows the geographic distribution of
the plants serving these smaller isolated systems. Public service plants and their capacities are listed
in Appendix 10.
30
At a meeting with IFC on April 8 it was agreed to conduct a survey of existing isolated off-grid systems in
Amazônia in order to provide useful background information for the Amazon Roundtable. It was emphasized
from the beginning that the nature of this study component would be distinct from the assessment of the five
renewable market segments presented earlier in this chapter. It is intended only as a very preliminary market
reconnaissance to provide a basis for further studies which might be undertaken for the Amazon Roundtable.
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Figure 4: Isolated power plants in the Amazon region
The vast majority of isolated systems are supplied by thermal plants using diesel oil, as shown in
Table 24. The only state in the region with a significant contribution from small hydro is Rondônia.
Table 24: Number of generating plants by resource
State Diesel Small/micro hydro a Wood residues Total

Acre 14 0 1 15
Amapá 7 0 0 7
Amazonas 72 0 0 72
Pará 35 5 0 40
Rondônia 14 18 0 32
Roraima 73 1 1 75
Total 215 24 2 241
89% 10% 1% 100%
Source: Based on information from utilities in these states.
a
Small hydro (PCH) includes plants from 1-30 MW. Micro hydro (CGH) less than 1,000 kW.
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Most of the isolated systems are quite small. Table 25 shows the size profile of thermal plants. Out of
a total of 217 isolated systems, 85% are smaller than 5 MW. This profile is particularly interesting
given the orientation received on June 17 regarding the approximate upper limit of project size that
could be financed with the financial instrument most immediately contemplated by IFC.
Table 25: Profile of installed capacities of thermal plants in isolated systems
State < 1 MW 1-5 MW 5-20 MW > 20 MW Total

Acre 8 6 0 1 15
Amapá 3 1 2 1 7
Amazonas 20 33 16 3 72
Pará 8 22 5 0 35
Rondônia 6 4 4 0 14
Roraima 68 6 0 0 74
Total number 113 72 27 5 217
Percentage 52% 33% 12% 2% 100%
31
The capacity factor of most isolated systems is quite low, which increases the cost of service . Figure
5 shows the relation of system size and capacity factor for a sample of municipalities in Pará
(described below). There is in fact very little correlation and the large majority of systems have
capacity factors in the range of 15-30%.
31
Not only does a low capacity factor mean that fixed costs are spread over fewer kWh of output, the
efficiency of diesel engines at partial load is quite low, which increases fuel costs.
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Figure 5: Capacity Factor vs Installed Capacity
Regarding the size of the isolated systems, Roraima is an interesting case. In that state 63% of the
plants (47 units) have a capacity of less than 100 kW. Some are as small as 5-10 kW. This may be
due to the fact that the utility supplies many villages in the Indian reservations, which is unusual. This
raises an important point. The survey considers plants providing a public service, not self-
32
generators. The number of self-generators may be substantially larger (and the plants usually
smaller). However, systematic information on self generators in the region is not available.
Many of the smallest communities and much of the rural population in the region are not yet supplied
with electricity by a public service. Providing this service is a priority of the Federal electrification
program Luz para Todos (Light for Everyone). Amazônia is the most challenging region for achieving
the goal of universal access given the very small size of many loads and the long distances. The
dominant approach has been to extend transmission and distribution lines.
• One variant is to link small isolated systems with each other (or with a larger system, for
example in the capital city), as well as extending lines to communities as yet unserved. This has
been going on steadily for years, notably around Manaus, in Rondônia or in Amapá. The
systems are still isolated, but there are economies of scale.
• At the southern and eastern edges of Amazônia the tendency is to link the isolated systems to
the National Grid (SIN – Sistema Interconnectado Nacional). This is now occurring in southern
32
In fact a number of the plants surveyed are owned and operated by the government agency
CINDACTA IV for stations providing signals for airplane navigation systems. It is not clear whether
they also serve local neighborhoods.
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Marajó and much of Rondônia (which will be connected to the SIN due in part to the construction
of the large hydro plants on the Madeira River).
In both cases, most of the local diesel plants are deactivated.
In addition to the survey of existing public systems serving smaller communities in the region, an initial
reconnaissance was made of the possibilities of using sawmill residues in Pará (see Figure 6). Two
sub-regions of Pará state were considered for preliminary review: the island Marajó and Baixo
Amazonas.
• In Marajó there are 19 isolated systems with a total of 32 MW.

• In Baixo Amazonas there are 12 municpalities, of which 8 have isolated systems totaling 51 MW.
The use of sawmill residues to supply power, especially when linked to cogeneration systems to
provide steam for drying wood, appears to be of particular interest to the Amazon Roundtable. This
approach not only substitutes for expensive diesel generation, but helps the sawmill industry add
much more value locally to the wood being extracted. This can be helpful as part of a broader strategy
to reduce deforestation in the region.
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Figure 6: Sawmill clusters in Pará (Baixo Amazonas Region not shown)
The number of municipalities identified in these two sub-regions with clusters of sawmills was in fact
quite small – four – though a more detailed assessment might identify more. Of these, two
municipalities in Marajó (Breves and Portel) are due shortly to be connected to the national grid (SIN).
This does not mean that investments in cogeneration from sawmill residues are necessarily
uninteresting or inviable in these municipalities, though the cost reduction would be much smaller than
if they substituted for the existing diesel plants.
One consideration is the fact that these municipalities will be connected to Tucuruí by a line of at least
260 km. Under such circumstances some local generation could be helpful in maintaining the stability
and reliability of the electricity supply. This is important to bear in mind when evaluating the
possibilities for exploiting the considerable biomass potential in sawmill residues for electricity
33
generation. Most wood processing in Pará is done in clusters which are in fact already connected to
the national grid – albeit precariously at times. A similar situation seems to prevail in the north of Mato
Grosso, though it was outside this survey.
33
Just in the state of Pará, officially registered wood consumption was 7.6 million m3 of which about
half is residues.
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Thus, it would appear that the possible contribution of sawmill residues to diminishing the dependence
on diesel use in isolated systems is rather limited, though not to be dismissed. However, their potential
contribution to distributed generation in a large area of Brazil with loads spread over large distances,
be they connected to the grid or not, could be substantial. Even more significant could be the benefits
from stimulating the sawmill industry to increase its productivity (in terms of value added per m3 of
wood processed). The high road to achieving this objective would be investment in controlled drying
technology associated with cogeneration. Though many sawmills use residues to generate power in
very inefficient (but low cost) plants, cogeneration associated with drying is quite rare. It is
considerably more capital intensive than rudimentary generation systems without drying.
A first step has been taken by government policy towards promoting this potential. In April, 2010, the
first auction of renewable energy supply for isolated systems was held. The auction was small. There
were winning bids (both from sawmills) for only two sites – there was no winning bid for a third site.
The prices were about BRL 149/MWh, which is very competitive with the prices expected for
renewables in the August, 2010 auction for the national grid. The concept of this auction might be
expanded to plants on the national grid as well, at least within the Amazon region – and require
cogeneration (or very efficient generation) as a pre-requisite to compete. The reason for expanding
the scope of the auctions to include plants on the grid is that the sawmill sector is very disorganized
and too fragmented to compete in the broader renewable market for electricity generation. Most firms
in the sector are much smaller than those in, say, the sugarcane sector, and have little tradition of
optimizing energy use, selling electricity or financing energy investments with banks. Today, most
would not even dream of competing with the “big boys”. Once a successful track record is established
and the market is consolidated, this attitude could well change – opening a whole new (and relatively
neglected) sector for energy investment. There is a parallel with the dramatic changes which have
occurred in Brazil’s sugarcane sector over the past 5-6 years with regard to electricity generation.9
Sawmills are not, of course, the only possible basis for renewable energy generation to substitute for
diesel – though small hydro tends to be very limited in the Amazon sedimentary basin and wind
resources appear to be unpromising except along the coast. For the smallest settlements (and the
hardest to reach with distribution lines), with loads of a few kilowatts, attention needs to be given to
photovoltaics and micro “hydro-kinetic” plants. The latter are close to commercial and can be quite
interesting for loads of 5-50 kW. No dam is required, only a small relatively fast flowing course of
water.
Photovoltaics have gone almost nowhere in Brazil in recent years. Amazônia is not ideal for solar
energy because of the frequent cloud cover and humidity. However, the seasonal variation of
insolation is quite small, which is a significant advantage. Other more speculative approaches which
use local biomass resources on a small scale and may be uneconomic elsewhere also merit attention.
Examples are small gasifiers or Stirling engines. However, in all these cases someone besides a
commercial financial agent must take the lead to begin to create a market. Ultimately it must be
9
A list of sawmills in the State of Pará is shown in Appendix 10
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recognized that the consumption of diesel oil receives large automatic subsidies. This has been a
longstanding national policy to assist the development of the region. Until there is a concerted policy to
“level the playing field”, diesel will reign supreme.
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3 INVESTMENT OPPORTUNITIES IN ENERGY EFFICIENCY

This chapter on opportunities in energy efficiency hopes to provide information on the potential of
investments by local financial institutions in EE projects. The energy efficiency potential depends on
several factors that need to be assessed in a more comprehensive way:
• Actual and forecast energy consumption of the targeted sectors, including public and
commercial buildings (offices buildings, public schools, universities, hotels, hospitals).
• Eligible buildings to private sector financing (size and bundling potential, savings potential and
acceptable pay-back period).
• Energy saving potential for each sector (technical, economical, and financial).
• Analysis of the tariff structure for each sector.
• The investment context including market players, policy and regulatory framework, barriers and
risks.
• Available implementation options: outsourcing (including engineering firms and ESCO) or do-it-
yourself approach.
As a minimum result, the assessment of EE investment opportunities is supposed to provide the

following information to investors: the segmentation of sectors, the type of EE measures, the energy
and cost savings, the investments needed for each segment, the number of transactions, financial
indicators on the cost-effectiveness and benefits analysis. In this study, the main challenge was to
find/generate the needed data for a full and comprehensive assessment of the energy efficiency
market in the different economic sectors of Brazil. Most studies have been developed from the
government programs perspectives and lack factors that could justify and motivate the participation of
the private banking sector and create a real market push initiative.
As an alternative, the present assessment was based on some basic assumptions listed hereafter:
• Energy consumption patterns are used as starting points for identifying relevant sectors to be
focussed on while taking into account the taming of the available technologies by the market
actors and the complexity of dealing in the sector. Three sectors were selected: existing public
buildings, commercial buildings, and industries. Four industrial subsectors were particularly
targeted; chemical, ceramics, food and beverages, and pulp and paper.
• Based on the selected sectors and available data, the end-use energy is broken down per end
usage. The energy savings potential is then set on the conservative side along with a projected
penetration rate for a 5-year period. The CO2 emissions reduction potential is derived from the
saved energy using an emission factor.
• For each EE measure/technology, the energy savings potential as well as the penetration rate of
the proposed measures for the 5 coming years is assumed on the conservative side based on
the technical potential and a reasonable estimate of market acceptance.
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• The total investment is calculated based on the cost investment required to save one unit. It was
further assumed that the project owners will secure only 20% of the total investment from its own
equity while 80% will be sought from financial institutions.
• The energy cost savings is based on the energy price for each target sector and the energy mix
used.
3.1 OVERVIEW OF EXISTING STUDIES ON EE POTENTIAL IN BRAZIL
Several energy savings potential studies have been conducted by the government, by associations
and by academics using different methodologies and assumptions. However, it needs to be mentioned
that none of the studies currently available in Brazil can provide a comprehensive picture of the market
for all energy sources.
EPE’s Energy Savings Potential Estimate – National Energy Plan 2007 - 2030
As the National Planning Company, the EPE has published the National Energy Plan 2007-2030
(PNE) which provides an estimate of savings potential for the overall economic sectors in Brazil using
different scenarios and assumptions. For all energy sources, the PNE estimated that there is an
34
energy savings potential of 8.7% by 2030 , as shown in the following table:
Table 26: Energy savings by sector (base year: 2005), reference scenario
Sector 2010 2020 2030

Agriculture 0.8% 3.3% 6.0%
Commercial / public 0.6% 5.1% 5.8%
Transportation 4.2% 6.9% 12.1%
Industrial 2.1% 5.8% 7.9%
Residential 1.2% 3.4% 4.1%
TOTAL 2.5% 5.7% 8.7%
In the table, it appears that the main energy savings potential lies in transportation (12% in 2030),
where the investment potential for small- and medium-scale EE projects is quite low. The energy
savings potential in the industrial and commercial and public sectors is interesting too, even in short
and medium terms perspective (respectively almost 6% and 5% has been forecasted by 2020).
In terms of electricity only, one of the first and probably most important electricity savings potential
studies was published by EPE and defined the basis of the National Energy Plan for 2007-2030. The
EPE assessment resulted in the following figures for the main market segments:
34
Source: EPE (2007), Plano Nacional de Energia 2030
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35
Table 27: Energy efficiency potential, by level and sector
Sector Technical Economic Savings Market Savings

Savings Potential Potential Potential
Industrial 20% 10% 6%
Commercial and public 13% 6% 4%
Residential 7% 3% 1%
EPE considered for 2030 a potential for electricity conservation of 10%, consisting of a combination of
two scenarios: a) a business-as-usual scenario with a continuation of current improvement rates using
existing programs and mechanisms until 2030; and b) a more aggressive change with the introduction
of additional mechanisms in Brazil. This number – 10% in 2030 – guided the recent efforts from the
Ministry of Mines and Energy to establish a “Strategic Energy Efficiency Plan”.
As part of the Ten-Year Power Expansion Plan 2010-2019, EPE presented the forecast of electricity
savings in the residential, industrial, and commercial sectors. According to this document, Brazil will
avoid the consumption of 23.3 TWh in 2019 due to energy efficiency, or more than 3% of final
electricity consumption. The following table presents a breakdown of these savings, by consuming
sector.
36
Table 28: Savings in electricity consumption (TWh) by sector
Sector 2010 2014 2019 2019 (% of total

consumption)
Residential 0.3 2.2 6.0 3.7%
Industrial 1.6 4.6 9.2 2.5%
Commercial 0.4 2.3 5.1 4.1%
Other 0.3 1.4 3.0 3.5%
Total 2.7 10.5 23.3 3.2%
The Ministry of Mines and Energy’s Useful Energy Balance (Balanço de Energia Util – BEU)
The MME published in 2005 the final energy balance including a comprehensive estimate of the
energy savings potential based upon technologies available in the market. The MME’s 2005 BEU has
a breakdown of the energy savings into seven different end uses. BEU results for the year 2004 are
presented in the table below.
35
Source: EPE (2007), Plano Nacional de Energia 2030 – Eficiencia Energetica – The (B1) scenario.
36
Source: EPE (2010), Plano Decenal de Expansão de Energia 2019
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37
Table 29: Savings potential by sector and end-use (1,000 toe)
Motor-Driven Process Direct Eletro-

End uses: Refrigeration Lighting Total
Systems heat Heat chemic
Residential 20 48 1,818 309 773 0 2,968
Commercial,
Agriculture, Public 267 82 166 169 494 0 1,178
Transportation 4,456 0 0 0 0 0 4,456
Industrial 540 1,511 2,347 84 68 208 4,758
Energy 440 490 29 0 22 0 980
Total 5,723 2,131 4,359 562 1,357 208 14,340
BEU estimates, thus, a savings potential of 7.5% per year of final energy consumption in Brazil, which
is way above the slow ramp up of 0.5% per year of the EPE’s 2007 electricity savings potential study.
Despite the precision of the estimates provided by the study, MME’s 2005 BEU has two main
disadvantages: (i) not all the energy efficiency measures were considered equally, for instance,
measures related to optimization, or “operational” measures, were left aside, (ii) the real disadvantage
of the BEU is that it only considers the technical potential in the market.
Discussions on the Energy Savings Potential
Two main points can be drawn from the Government publications. First, the energy efficiency potential
does not provided any information on the needed investments to tackle the estimated savings.
Second, the potential of energy savings seems to low compared to what is currently observed in
developing countries. One attempt to explain these values is that the payback period for the targeted
projects (no cost, low cost projects) may be very short, less than 2 years as in most government
interventions in EE.
The Eletrobras Procel, in partnership with the National Industry Confederation (CNI), has prepared a
recent study titled “Energy Efficiency in Industry: What has been done in Brazil, opportunities for cost
reduction and international experience”. The study indicates a technical potential for a reduction of
25.7% of total energy consumption can be achieved in Brazilian industry. Of all that potential, 82% is
in fuel, predominantly for furnaces and boilers. The potential of electricity savings is concentrated in
drive systems (motors), accounting for 14% of the total energy consumption. The value of the energy
savings for the industry was estimated at BRL 6.8 billion (USD 3.4 billon) per year, just for electricity38.
The study analyzed the main opportunities for energy savings in 13 selected sectors including mining
(metallic and non metallic), steel, chemicals, metals, food and beverage, pulp and paper, leather,
textiles, automotive, ceramic, casting, etc.
37
Source: MME (2005), Balanco de Energia Util 2005
38
CNI. 2009. eficiência energética na indústria: o que foi feito no Brasil, oportunidades de redução de
custos e experiência internacional. Electrobars PROCEL Industry.
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In the same vein, the technical energy savings potential in the public and commercial sector found in
various literature and from Econoler’s experience is much higher. For existing buildings, the technical
savings potential varies from 20% to 50% using commercially available technologies. Work from the
Energy Efficiency in Buildings Laboratory of the Federal University of Santa Catarina concluded that
savings potential of 22% to 40% in two buildings of about 10,000 m² of floor area for lighting and air
conditioning systems were possible. The payback was too long, ranging from 4 to 8 years, due to the
cost of technologies in 1998. Today, the payback would certainly fall to around 1-4 years39.
3.2 INVESTMENT OPPORTUNITIES IN COMMERCIAL AND PUBLIC

BUILDINGS
The commercial sector in Brazil encompasses more than 1.6 million companies, of which 1.3 million
are retail enterprises, and employ 8.4 million people. Compared to 2006, the number of employees
increased by 11% and operating income, by 16% (IBGE data).
3.2.1 Energy Consumption Profile in Public and Commercial Buildings

40
In 2006 , the total energy consumption in the commercial sector was estimated to be about 18 TWh,
including 84% in the form of electricity, 8% petroleum products (diesel oil, fuel oil, liquified petroleum
gas) and 5% natural gas.
The commercial sector includes the following:
• Hotels and restaurants

• Hospitals
• Financial institutions’ buildings and other office buildings
• Wholesale trade of food products, beverages and tobacco and personal articles
• Wholesale trade of personal articles;
• Retail trade - supermarkets and hypermarkets, and specialized stores.
Public buildings are defined as the Federal, state and local government office premises. According to
41
the MEE data of 2006 , these buildings consumed an equivalent of 40 TWh from all energy sources
in 2006; predominantly electricity (82%) as in most buildings.
The breakdown by usage is presented below:
39
Lamberts, R., Westphal, F. Energy Efficiency in Buildings in Brazil, Energy Efficiency in Buildings
Laboratory - Federal University of Santa Catarina
40
Source: MME (2006), Brazilian Energy Balance 2006
41
Source: MME (2006), Brazilian Energy Balance 2006
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Table 30: Energy Breakdown per End Usage in Commercial and Public Buildings
End Usage Commercial Buildings Public Buildings

Electricity Oil Total Electricity Oil Total
(GWh) products (GWh) (GWh) products (GWh)
and gas and gas
(GWh) (GWh)
Driving force (motors) 8,064 - 8,064 9,222 - 9,222
Cooling and AC 18,392 - 18,392 5,950 - 5,950
Lighting 23,087 23,087 16,428 - 16,428
Process and space 4,639 8,584 13,223 826 7,098 7,925
heating
Other 1,049 - 1,049 661 - 661
Total 55,232 8,584 63,816 33,088 7,098 40, 186
In the commercial buildings, it is worth noting that the share of the total energy consumption per sub
segments is as follows:
Commercial & Communication

financial & transport
buildings 9.2%
Other (ports,
24.6%
hospitals, etc)
26.4%
Hotels and
restaurants
13.4% Wholesale &
retail
26.4%
Figure 7: Energy Share in the Commercial Sector
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3.2.2 Energy Savings Opportunities and Characteristics of Typical Projects
The first step in identifying the energy savings opportunities is to focus on end-use with the largest
energy consumption share.
Table 31: Energy Consumption per Usage in Public and Commercial Buildings
End Usage Commercial Buildings Public Buildings

Driving force (motors) 14.6% 27.9%
Air conditioning and refrigeration
33.3% 18.0%
systems
Lighting 41.8% 49.7%
Heating 8.4% 2.5%
Other 1.9% 2.0%
The percentage of energy use per end usage is indicated in the above table which calls for the
following remarks and conclusions: i) space cooling and lighting systems represent by far the most
electricity end use in both commercial and public building, ii) driving force systems which include all
systems with separate motors (pumps, fans for air handling system, elevators) are also a significant
energy consumption usage. In both commercial and public buildings, the main use of electricity is
lighting with 41.8% and 49.7% of the total electric energy consumption respectively. Air conditioning
and refrigeration rank second in the commercial buildings with one third of the total electricity
consumption split as almost 20% for air conditioning and 13% for refrigeration. Motor systems
consume one quarter of the electricity, while heating systems (hot water, laundry) represent a not
negligible 8.4% of the electric energy consumption in these buildings. In public buildings, air
conditioning represents 18% of the total electricity consumed behind motor systems with almost 28%
of the electricity consumption.
Based on the above conclusions, the following energy savings measures/technologies have been
focused on reducing the energy requirements of motor systems, air cooling and refrigeration systems
(chillers, cooling towers, and refrigeration), lighting systems and domestic hot water mainly included in
heating.
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The proposed EE measures and technologies are the following:
EE Opportunities Description
Efficient lighting The main energy conservation measures are:

systems • De-lamping to comply with standards, but not more.
• Change lamps to more energy-efficient alternatives (incandescent to
CFL, 40WT12 to 32WT8 or T5 fluorescent lamps with electronic
ballasts, LED based lighting, etc.).
• Changing fixtures to reflective fixtures with greater performance.
• Control systems using scheduling, dimming, as well as presence
and/or light sensors.
In this segment, the FI would have to do business with the technical
directors of all sorts of public organizations and institutions, and/or third
party project developers. This market segment is generally fertile ground for
ESPC projects.
Efficient air The energy conservation measures in buildings air conditioning and
conditioning and refrigeration systems are too many to be all listed here, but the main
refrigeration investments are going to be:
systems • Replacement of inefficient compressors.
• Retrofits of condensing systems (including cooling towers and
evaporative condensers).
• Replacement of existing chillers by more energy-efficient alternatives.
• Installation of premium or high efficiency motors on pumps and
blowers.
• Various control modifications on centralized systems, such as
conversion to variable volume ventilation systems, use of free cooling
and installation of local electronic temperature sensors.
• Replacement of inefficient portable air conditioning systems by
energy-efficient window units or split systems.
• Replacement of localized air conditioning units by a centralized
system.
Measures are often bundled to make a viable project. Project size will be
between USD 50,000 and USD 1 million. The typical simple payback period
for these measures is usually 2 to 5 years. In this segment, the FI would
have to do business with the school or hospital technical directors, and/or
third party project developers. This market segment is generally fertile
ground for ESPC projects.
Efficient motors and This measure consists of retrofitting existing motors and driving systems
driving systems using variable speed drives in systems with variable loads and premium
motors with higher efficiency and in elevators, pumping systems, water
circulating system, fans for ventilation and air handling systems, correctly
sizing motors and pumps as well as pipes and ducts. Depending on the type
of the motors, this measure can result in significant energy savings and is
easy to implement.
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Solar water heating Solar energy for water heating is a technically and economically attractive
opportunity for the Brazilian commercial and institutional sector. Solar
panels, tanks, and the required plumbing job are implemented on the roof of
the commercial or institutional facilities to use the energy of the sun to heat
domestic water. Typically, 40% to 70% of the domestic water can be heated
by using Solar Water Heating (SWH). SWH is more cost-effective when and
where there is more demand for domestic hot water. The FIs would have to
do business with real estate investors and property managers.
Control systems and Energy management combined with a building management system with
energy management central control of the lighting and the air conditioning system is among best
practices for continuous energy savings. Typically, this measure may
accompany all other measures to ensure the sustainability of the
implemented measures.
It is worth noting that other EE measures in buildings could include efficient windows, insulation and
absorption systems for the cooling and refrigeration systems.
3.2.3 EE Investment Potential in Public and Commercial Buildings
The following two tables summarize the investment requirements for EE projects to be implemented in
the commercial buildings and public building based on the aforementioned assumptions.
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Table 32: EE Investments Estimate in Commercial Buildings
Efficient Air Solar Driving Control and Total

Lighting conditioning Water Systems42 energy
&Refrigeration Heating management
Energy Savings Potential
Total EE potential 4,617 3,678 2,645 1,210 1,276 13,426
(GWh/y)
Technico Economical 1,847 920 661 302 319 4,049
Savings Potential - 5
years (GWh/y)
CO2 emissions 340,209 169,392 121,789 55,701 58,775 745,867
reduction in tCO2
Investment cost for $ 70 $ 240 $ 340 $ 160 $ 75 $ 160
reduced unit
(USD/MWh)
Investment $ 129 $ 221 $ 225 $ 48 $ 24 $ 647
requirements (USD
Million)
Typical size of potential -- -- -- -- -- $0.05 - $5
projects (USD Million)
Number of transactions -- -- -- -- -- 324
over period
Financial Aspects
Energy Cost Savings $ 149 $ 74 $ 53 $ 24 $ 26 $ 326
(USD Million/year)
Payback (years) 0.9 3.0 4.2 2.0 0.9 2.0
Carbon revenues in $ 4.1 $ 2.0 $ 1.5 $ 0.7 $ 0.7 $ 9.0
USD Million (at USD
12/tCO2)
Foreseen equity (USD $ 26 $ 44 $ 45 $ 10 $5 $ 129.4
Million)
Financing need (USD $103 $177 $180 $39 $19 $518
Million)
The investment estimate for commercial buildings suggests the following conclusions:
• Investment requirements. It has been estimated that a total of USD 647 million is required to
save about 4,000 GWh per year or 6.4% of the total energy consumed in commercial buildings
over a 5-year period. Based on a debt ratio of 80%, the financing needed from the banks
amounts to USD 518 million. Taken by technology, the major projects will be structured around
lighting projects, improvements of air conditioning systems and water heating. The investment
in water heating systems seems big because of the assumed high investment cost per reduced
unit. Measures such as energy management, automation, and building management systems
should not be stand-alone projects, at least from bank financing.
42
Driving systems include all electric motor-driven equipment and related devices, including electric
motors, fans, pumps, variable speed drives (VSD), etc.
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• Number of transactions. The required investment represents a total of 324 financial

transactions, if a total project cost of USD 2 million is assumed per transaction for a packaged
project involving several EE measures. It is more likely that projects will target specific end-
usage and EE measures. That is to say the number of transactions will be much larger than
the value shown here. Depending on the nature of the measures and partial or complete
retrofits, a typical projects cost may range from USD 50,000 to USD 5,000,000, but banks may
not be willing to invest in projects with an investment requirement of less than USD 200,000
because of higher transaction costs. Strategies for banks to reduce transaction costs include
the focus on projects with high investment requirements, project bundling and EE programs.
From the building sub-segments angle, it is important to note that the EE measures to invest in
will depend upon the energy consumption profile. For example, hot water systems are more
precious in hotels than in office buildings and retail stores.
• Benefits for end-users. From the end users’ perspectives, the total energy cost savings are
estimated at USD 326 million per year with an overall payback of about 2.0 years. Depending
on the type of project, the payback will vary from 1 year (or less) to 5 years. In terms of GHG
emission reduction, about 745,000 tCO2 will be avoided from the national grid which has a very
low emission factor due to the predominance of hydropower. The sale of the carbon reduction
will earn a total of USD 9.0 million per year (USD 90 million for a CDM crediting period of 10
years). The main challenge from CDM registration will rely on the demonstration of additionality
and monitoring requirements which are more difficult for EE projects that RE projects.
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Table 33: EE Investments Estimate in Public Buildings

Efficient Air Solar Driving Control and Total
Lighting conditioning Water 43 energy
Systems
&Refrigeration Heating management
Total EE potential 4,107 1,190 792 1,383 804 8,277
(GWh/y)
Technico Economical 821 178 158 208 121 1,486
Savings Potential - 5
years (GWh/y)
CO2 emissions reduction 151,306 32,879 29,194 38,222 22,207 273,808
in tCO2
Investment cost for $70 $240 $340 $160 $50 $130
reduced unit (USD/MWh)
Investment requirements $57 $43 $54 $33 $6 $193
(USD Million)
Typical size of potential -- -- -- -- -- $0.05 - $3
project (USD Million)
Number of transactions -- -- -- -- -- 193
over period
Financial Aspects
Energy Cost Savings $66 $14 $13 $17 $10 $120
(USD Million/year)
Payback (years) 0.9 3.0 4.2 2.0 0.6 1.6
Carbon revenues in USD $ 1.8 $ 0.4 $ 0.4 $ 0.5 $ 0.3 $ 3.3
Million (at USD 12/tCO2)
Foreseen equity (USD $11 $9 $11 $7 $1 $39
Million)
Financing need (USD $46 $34 $43 $27 $5 $155
Million)
As with commercial buildings, the following comments could be made on the investment requirements
in public buildings:
• Investment requirements. . A total of USD 193 million has to be invested in public buildings
to save about 1,500 GWh per year or 3.7% of the total energy consumed in public buildings
per year over a 5-year period. The financing needed from the banks amounts to USD 155
million when a debt ratio of 80% is used. Taken by technology, the major projects will be
structured around lighting projects, improvements of air conditioning systems and water
heating. The implementation of control systems and energy management should be associated
with other measures, particularly lighting systems and air conditioning systems.
• Number of transactions. The required investment represents a total of 193 financial

transactions, if a total project cost of USD 1 million is assumed per transaction for a packaged
project involving several EE measures. It is more likely that projects will target specific end-
43
Driving systems include all electric motor-driven equipment and related devices, including electric
motors, fans, pumps, variable speed drives (VSD), etc.
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usage and EE measures. That is to say the number of transactions will be much larger than
the value shown. Depending on the nature of the measures and partial or complete retrofits, a
typical projects cost may range from USD 50,000 to USD 3,000,000, but banks may not be
willing to invest in projects with an investment requirement of less than USD 200,000 because
of higher transaction costs. Strategies for banks to reduce transaction costs include focusing
on projects with high investment requirements, project bundling and EE programs.
• Benefits for end-users. From the end users’ perspectives, the total energy cost saving is
estimated at USD 120 million per year with an overall payback of about 2 years. Depending on
the type of project, the payback will vary from 1 year (or less) to 5 years. In terms of GHG
emissions reduction, almost 275,000 tCO2 will be avoided from the national grid which has a
very low emission factor due to the predominance of hydropower. The sale of the carbon
reduction will earn a total of USD 3.3 million per year (USD 33 million for a CDM crediting
period of 10 years).
3.2.4 Stakeholders Analysis
The key market players in EE in commercial and public buildings include public institutions and
programs, industry associations, equipment and technology suppliers, and service providers. Most of
the key government institutions and programs have been outlined in Section 1.2. The other main
players are discussed in the following table.
Table 34: Key Market Players in Building Sector
Key market players Description/Role Interaction with IFC initiatives

The Department of National DASOL's mission is to develop sustainable Monitoring of policies on solar
Solar Heating ABRAVA (DASOL) applications for solar heating through the heating systems.
(http://www.dasolabrava.org.br) creation of best practices in the industry,
encouraging research and development,
supporting the establishment of public
policies and financial incentives, as well as
through the removal of key barriers to the
growth of this technology in Brazil.
INMETRO’s Labeling Program This program aims to provide consumers It will be important to monitor all
(Programa Brasileiro de with information to enable them to national labels (PROCEL
Etiquetagem, PBE) evaluate and optimize the energy endorsement label for higher
consumption of electrical appliances, energy efficient appliances and
choose products with higher efficiency and INMETRO comparative label) and
better use appliances, thus enabling cost standards in the building sector. A
energy savings (PBE, 2010). variety of EE products to be
offered by banks could build on
the label and standards.
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The Solar Cities initiative "Solar Cities" is a partnership between Monitoring of policies on solar
(Cidades solares) NGOs and socio DASOL/ABRAVA, whose heating systems.
goal is to mobilize Brazilian society toward
taking environmental and social
advantages of decentralized energy
generation, mainly from solar heating. This
partnership prepared a report on public
policies to promote the use of solar
heating systems in Brazil.
ABRASCE – Associação Association of the main shopping center Marketing channel for project
Brasileira de Shopping Centers networks in Brazil. Its mission includes: identification and implementation
(Brazilian Association of identify and certify shopping centers in
Shopping Centers, accordance with international standards,
www.portaldoshopping.com.br) disseminate information, knowledge and
best practices, and reward excellence.
Create and develop a business network
for developing new markets.
ABRAS – Associação Brasileira Association of leading supermarket chains Marketing channel for project
de Supermercados (Brazilian in Brazil. Its mission is to represent the identification and implementation
Association of Supermarkets, supermarket sector to the society and
www.abrasnet.com.br) government institutions.
ABADI - Associação Brasileira Association that brings together real estate Marketing channel for project
de Administradores de Imóveis management companies, including identification and implementation
(Brazilian Association of Real commercial building management
Estate Management, companies. Its mission is mainly to
www.abadi.com.br) represent such companies, adding value
to this activity and disseminating
knowledge and ethical values.
ABIH (Associação Brasileira da ABIH is the association of the Brazilian Marketing channel for project
Indústria de Hotéis) hotel industry. This market segment is identification and implementation
most important for water heating, air-
conditioning and lighting systems.
Government Programs As presented in Section 1.3, PROCEL and In the particular case of private
(PROCEL and CONPET) CONPET are government initiatives for sector investment in public
electricity and fuel conservation. PROCEL building, it will be critical to lean
has resulted in many success stories on a government program to
particularly in the marketing of technical facilitate the intervention. Private
capacity buildings in EE. sector intervention in public
buildings can only be through a
public-private partnership to
overcome barriers related to
public regulations.
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BNDES’ PROESCO At its creation, PROESCO was announced The PROESCO case suggests
as a major initiative to address the the following comments.
financing needs that could urge private PROESCO is a good financing
firms to invest in EE projects. The very low mechanism to boost the ESCO
uptake, if not the total failure, astonished market. However, the operation of
everyone. However, the assessment of the PROESCO may lack some
reasons for such failure will be a very dynamism and orientation
useful lesson learned for future initiatives. towards the actual market needs
instead of trying to get the market
to adapt to PROESCO. There is
no clear management team for
PROESCO and its functioning is
a replication of BNDES’ current
rules.
The lFC and local banks EE
program should be adapted to the
market structure (small ESCO,
small projects when taken as a
piece), need for a management
team with technical knowledge of
EE, etc.
The PROESCO fund can be used
by the local bank. They need to
be accredited as partners.
However, arrangements should
be found with BNDES to avoid the
same ineffective rules and
bureaucracy.
Associação Brasileira das ABESCO is the Brazilian ESCO ABESCO is an important partner
Empresas de Serviços de association with about 50 associated for marketing banks’ products
Conservação de Energia members. ABESCO is very active in among the ESCO and the
(ABESCO) promoting EE business in Brazil. It has a professionals. ABESCO can also
cooperation agreement with PROCEL and advise on the kind of products
PROESCO as well as with other EE needed to boost the ESCO
programs in Brazil. market.
Petrobas and other utilities As part of the ANEEL’s Energy Efficiency Involving utilities in EE project
Program, utilities have implemented implementation can facilitate
energy efficiency projects using the wire reimbursement mechanisms,
charge. Some utilities have created particularly when the project
ESCO, like Light ESCO to implement EE repayment is based on energy
projects in their clients’ premises. saved (ESCO model). Banks may
Petrobras’ EE program works along the have utilities as project partners.
same lines. Moreover, bank intervention can
help the relationship between the
utilities and their clients and
invest in their project portfolio.
IDB/GEF EEGM Energy efficiency guarantee mechanism to The fund has to be approached to
facilitate lending to ESCO initiate a partnership and make
the necessary arrangements for
the ESCO market in other
segments.
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For reference, several cooling system and solar water heater providers are to be found in Appendix 1
and Appendix 2.
3.2.5 Barriers and Risks
Energy efficiency in general, faces a number of barriers that can be found everywhere, in developing
countries, but also in developed countries. The differentiation is how these barriers could influence the
stakeholders’ interventions. From the Brazilian financing institutions investment in EE view point, the
following barriers are to be considered:
Institutional and cultural barriers
• The building managers are unable to implement EE projects because of various operation rules.
There are no energy management practices and no accountability for the energy cost paid.
• Besides, the public regulatory framework has not been streamlined for ESPC yet. It should be
unclogged before financing starts to be offered.
• IN THE BRAZILIAN PUBLIC SECTOR: Financial institutions and ESCOs have been very
reluctant to invest directly in energy efficiency projects in the public sector44. This perceived risk
can be explained by institutional barriers. There are difficulties with tendering and contracting EE
projects in the public sector. Contracts with the public sector in Brazil are regulated by public
tendering processes which are usually slow and very bureaucratic (Law 8666). There are also
risks in multi-year projects and the budgeting process of public entities45.
• Issues with the regulation of the wire charge scheme which led to an inefficient use of ratepayers
money by financing each energy efficiency investment with 100% of ratepayers money (leaving
virtually no space for other sorts of financing in the mix).
Consequently, in the short term, almost all opportunities for commercial financing in the public sectors
are inaccessible. There is not much that Brazilian financial institutions can do to by-pass or mitigate
these institutional barriers, which are generally regarded as being very difficult to resolve. It is up to
the policymakers and those who write and oversee the public procurement rules in Brazil to tackle
these problems. One way is to work directly with government programs like PROCEL and CONPET to
establish a framework for commercial financing.
44
There have only been two projects performed by ESCOs under publically tendered ESPC contracts. In neither
case was a financial institution involved.
45
Nexant 2004 Nexant Ltda: Contratos de Desempenho para Serviços de Eficiência Energética no Setor
Público do Brasil: Questões Jurídicas e Possíveis Soluções; report for the U.S. Agency for International
Development and Brazil’s Ministry of Mines and Energy, Brasília DF, 2004
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Informational barriers
• The managers are not aware of EE opportunities and benefits. They might not figure out the
positive impacts of EE projects as energy savings are immaterial and the measurement and
verification is a challenge.
• Performance contracting is still unfamiliar in Brazil.
• Energy end-users as well as local financial institutions are not familiar with the existing energy
valuation standardized concepts and methodological approaches.
• IN THE BRAZILIAN PUBLIC SECTOR: Limitations on the ability of most public sector organs to
identify and develop projects, as well as incentives for them to do so.
• The local financial institutions have difficulties in assessing the technical nature of energy
efficiency projects.
Any EE financing program in Brazil should include a strong technical assistance to continue
awareness raising activities, capacity building and knowledge transfer to the local FIs. The necessary
tools including the Measurement and Verification (M&V) plan (working with ABESCO), project
evaluation criteria (for banks), financial proposals preparation (for end-users, ESCO, consultants and
engineering firms) have to be developed or adapted.
Technical barriers
There are few major technical or technological barriers or risks in EE projects as most technologies
are well known and there are skilled human resources to diffuse the technologies. The relatively large
investments in energy efficiency due to the wire charge during the last decade had the important result
of creating a pool of relatively qualified human resources and engineering companies in Brazil. The
PROCEL and ANEEL’s EE programs have created a qualified niche of professionals.
However, the ESCO market as promoted till now has to prove and confirm its maturity on the technical
and project management side using performance contracting.
Market barriers
Most end-users have a budgetary disconnect between capital projects and operating expenses
(energy and maintenance) if they do not consider energy costs as a non manageable fixed expenses.
Low-investment cost is mostly considered when the decision has to be taken to change equipment.
This observation also applies to banks intervention where the emphasis is put on capital projects
rather than in operation cost reduction projects.
Another noticeable feature of the market is the small size of EE projects, at least those presented by
private service providers like ESCOs. An option for banks is to work in this field on a programmatic
basis or through project bundling.
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A discussion has to be conducted on how local banks can customize a special product for EE
financing. Learning from PROESCO, the operation of such products and the marketing approach have
to be designed properly to address issues like heavy bureaucracy, lack of a management team, lack
of adapted evaluation criteria, nature of collaterals, etc.
Financial barriers
• Low creditworthiness of many energy end-users for direct loan.

• Brazilian ESCOs are not willing to take technical risks – the savings not being achieved by the
project that they implement – which greatly limits the development of energy services
performance contracts.
• With BNDES, the interest rate spread available to the financial intermediaries (i.e., the
commercial banks) is very small (especially by Brazilian standards).
• Typically, FIs do not accept the EPC as collateral (at least not the way EPCs are written now in
Brazil). The ESCOs are too small to be able to provide any other interesting collateral for
financial institutions. BNDES is not allowed, except on an exceptional basis, to finance the
acquisition of foreign equipment, which is often used by ESCOs for EE projects.
• IN THE BRAZILIAN PUBLIC SECTOR: Limits on public sector lending has restricted states and
municipalities access to credit.
3.3 INVESTMENT OPPORTUNITIES IN INDUSTRIAL SECTOR

46
According to the IBGE , the Brazilian industrial sector is made up of a total of approximately
160,000 enterprises, employing 7.3 million workers. In 2008, the value added by industry accounted
for 25% of the Brazilian total, corresponding to almost USD 400 billion.
3.3.1 Energy Consumption Profile in Industries
In energy terms, the industry in Brazil represents 40% of total final consumption, and electricity is
approximately 45% of this amount. The following graphic presents the energy balance of industries in
Brazil, as per the main industrial sectors and regardless of energy sources:
46
Annual Industrial Survey - Company, 2007 edition
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FOODS AND
BEVERAGE
26%
PIG-IRON AND STEEL TEXTILES

22% 2%
FERRO-ALLOYS
2%
76 757 ktoe (2006) MINING /
PELLETIZATION
4%
PAPER AND CEMENT

CERAMICS
PULP 4%
5%
10%
CHEMICAL
10% NON-FERROUS AND
OTHER METALS
OTHER INDUSTRIES 7%
8%
47
Figure 8: Energy balance per industrial sector (2006)
In accordance with the data shown so far and with the analysis conducted on the Brazilian industrial
market, four key sectors have been identified for investment in energy efficiency due to their high
respective energy savings potential and to the size and number of possible transactions. These
industrial sectors are as follows:
i) Food and Beverage

ii) Pulp and Paper
iii) Chemical Industry
iv) Ceramics
The total energy consumption of these four industries accounts for more than 50% of the total energy
consumption of the Brazilian industrial sector46, including almost 35% of the overall industrial electricity
consumption and nearly 45% of the industrial fossil fuel and natural gas consumption. The following
sections provide more details on the specificities of each target industrial sector.
Food and Beverage
According to the 2008 annual report of the Associação Brasileira da Indútria de Alimentos (ABIA), the
national income of the Brazilian food industry totaled BRL 270 billion in 2008 (approximately
48
USD 150 billion), which represents an increase of 16% compared to the previous year . That year,
47
Brazilian Energy Balance, EPE, 2006 data.
48
ABIA, Anuário ABIA 2009, http://www.abia.org.br/
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38,000 food companies employed 1.4 million people. Most of the companies are small ones (85%),
with less than 19 employees; only 0.9% of them have more than 500 employees. The main food
sector is food processing, followed by coffee, tea, cereals, oil and grease products. Noteworthy is that
while oil and grease, coffee, tea and cereals sectors recorded large growth (more than 20%), the
sugar sector recorded the lowest growth rate of the Brazilian food industry.
With regards to the beverage industry, the Associação Brasileira de Bebidas (ABRABE) states that the
49
main alcoholic beverages produced are beer (88.8%) and a local product called cachaça (6.6%) . It is
worth noting that Brazil is also a large producer of various sodas, mineral water and orange, lemon,
50
and grape juices .
While more than one quarter of the total energy consumption of the Brazilian industrial sector is
related to food and beverage processing activities, said industrial sector presents a high potential for
investment in energy conservation projects. And considering that most of the food companies are
small ones, there is an opportunity for developing a programmatic approach to energy efficiency
projects. By bundling several small energy efficiency initiatives in the food and beverage sector, the
program would amount to a viable investment opportunity. On the other hand, ABIA’s 2008 annual
report shows that there are more than 1,500 food companies with more than 100 employees, where
energy conservation projects could be developed without bundling with other companies.
The main energy sources of food and beverage industries are sugarcane bagasse (slightly more
than 75%), electricity and firewood (which both account for almost 10% of total energy consumption).
Consequently, the EE measures with the highest energy savings potential are those related to boilers,
dryers, motor-driven equipment and refrigeration systems.
Paper and Pulp
In 2009, there were 220 pulp and paper companies, spread across 450 municipalities throughout the
51
country . That year, this industry accounted for 14.4% of the Brazilian Trade Balance, i.e.
approximately USD 3.7 billion. In the last ten years, the total investments in this sector are estimated
to be USD 12 billion. Currently, almost 115,000 jobs are directly related to forestry and pulp and
paper; it is also estimated that half a million jobs would be indirectly related to this industry. The
average annual growth is currently estimated at 7.5% for pulp production and 5.7% for paper
production.
Regarding the pulp processing, most companies produce chemical and semi-chemical pulps. In fact,
mechanical pulps and other high performance pulp products account for less than 1.5% of total
income related to pulp production. Almost 95% of the chemical and semi-chemical pulps are
49
ABRABE, http://www.abrabe.org.br/mercado.php
50
http://www.brazilbrand.com/brazil_industry_import_export_food_beverages.htm
51
BRACELPA, Pulp and Paper Industry Performance, June 2010,
http://www.bracelpa.org.br/eng/estatisticas/pdf/booklet/booklet.pdf
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processed in the States of Espírito Santo (28%), São Paulo (23%), Bahia (18%), Minas Gerais (14%)
and Rio Grande do Sul (11%).
The paper industry is mainly located in the southern part of the country. In fact, almost 75% of national
paper production activities come from the states of São Paulo (53%) and Paraná (20%). As per the
next figure, the main uses of the paper produced are packing and printing and writing in terms of tons
of paper produced:
Packing
46% Printing and
Writing
26%
Special
Sanitary
Purposes
Purposes Paperboard
5%
11% 12%
Figure 9: Breakdown of paper production in Brazil
The main energy sources used in the pulp and paper industries are fossil fuels (mainly black liquor),
biomass (firewood and other wastes), and electricity. The main energy end-uses are process heating,
pumps, fans and processing equipment.
Chemical Industry
After the food & beverage and the energy production sectors, the chemical industry is the third most
52
important transformation activity in Brazil in terms of GDP . The chemical industry is largely
dominated by manufacturers of industrial chemical products, whose net sales represent 48% of the
53
total sales of this market sector . As shown in the next figure, pharmaceuticals, perfumes and
cosmetics, as well as fertilizers, are the other main chemical segments in Brazil:
52
IBGE - PIA Companies, 2007 data.
53
ABIQUIM, A indústria química brasileira, http://www.abiquim.org.br/
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Paints and varnishes Fibers Total USD 106.6 billion

Soaps and $6.1 Others
$1.0
detergents $1.5
$6.1
Crop protection
$6.3 Industrial chemicals
$48.3
Fertilizers
$9.8
Perfumes and
cosmetics
$11.6 Pharma
$15.9 * Estimated Ethanol not included
Sources: Abiquim and Sectoral Trade Associations
Figure 10: Main segments in Brazilian chemical industry
More than 1,000 chemical plants are operating in Brazil. They are mainly located in the Southeast
Region (751 plants, including 602 plants in the State of São Paulo). The South Region (167 plants
well-distributed over all three states) and the Northeast Region (116 plants, mostly located in the State
of Bahia) are the other areas where most of the chemical producers are based.
With regards to energy consumption, it is worth noting that the main energy sources are petroleum
products (41%) and natural gas (30%). Electricity accounts for only 25% of total energy consumption.
Therefore, the main energy savings potential lies in retrofitting boilers and furnaces, and optimizing
steam networks.
Ceramics
54
According to the Brazilian Association of Ceramic Tile Manufacturers (ANFACER) , the ceramic tiles
sector encompasses nearly 100 companies, which operate 117 plants located in 18 states throughout
the country. Most of the plants are located in the South and Southeast regions, especially in the states
of São Paulo and Santa Catarina. This industrial activity is nevertheless growing fast in the Northeast
region of Brazil.
In terms of employment, it is estimated that roughly 25,000 people work directly for this industry, while
approximately 200,000 jobs would be indirectly related to ceramic activities. From a global point of
view, Brazil ranks second in both ceramic production and consumption, with more than 700 million
square meters produced in 2008.
54
ANFACER, Panorama Overview 2009, http://www.brasilceramictiles.com/
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With regards to energy consumption, the main energy sources used are firewood and natural gas;
they account for 75% of the overall energy consumed by this industry. While the ceramic production
process requires a lot of heat, electricity is less than 8% of the energy balance.
The first step for identifying the energy savings opportunities is to focus on end-uses with the largest
energy consumption share. The following table presents the energy balance in the four industrial
segments identified as having the best investment potential for energy conservation initiatives:
55
Table 35: Breakdown per energy source in Brazilian industries
Industrial Segments Biomass Coal Electricity Fossil fuels Natural gas

Ceramics 50.8% 1.2% 7.8% 14.7% 25.5%
Chemical 2.3% 0.9% 25.5% 41.0% 30.4%
Food and Beverage 84.8% 0.2% 9.2% 3.1% 2.8%
Pulp and Paper 24.3% 1.0% 16.6% 51.1% 7.0%
TOTAL 53.7% 0.6% 13.7% 21.2% 10.9%
According to the above table, biomass (mainly firewood in all sectors and sugarcane bagasse in food
and beverage) is the largest energy source used. The best energy efficiency measure to reduce the
consumption of biomass is the implementation of a cogeneration plant, especially in the food and
beverage, ceramics, and pulp and paper industries. Section 3.4 is fully dedicated to the assessment of
cogeneration potential in the Brazilian industrial sector.
In the four targeted industrial sectors, fossil fuels (e.g. fuel oil and black liquor) and natural gas are
mostly used for process heating. Consequently, the largest energy savings potential for these energy
sources lies in retrofitting and optimizing furnaces, dryers, boilers, and steam networks. On the other
hand, electricity is used for various purposes, depending on the processes and requirements of each
56
industrial segment as shown in the table below :
Table 36: Energy balance per end usage in four Brazilian industries
Handling and Process

Industrial Compressed
Pumps Fans Refrigeration process and direct Lighting Other
Segments air system
equipment heating
Ceramics 18% 12% 14% 0% 38% 6% 3% 9%
Chemical 21% 9% 22% 2% 20% 4% 3% 20%
Food and Beverage 14% 7% 7% 14% 28% 13% 4% 14%
Pulp and Paper 29% 18% 4% 1% 26% 3% 1% 19%
TOTAL 20% 11% 12% 6% 25% 7% 3% 17%
55
56
Source: EPE (2007), Plano Nacional de Energia 2030
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According to the above table, equipment driven by electric motors, such as pumps, fans, compressors,
and handling systems, accounts for most of the electricity consumption (73%). Well-known energy
efficiency measures can be implemented on most of those systems, except for the handling and
process equipment. In fact, said equipment is used for very varied purposes and it would be difficult to
estimate their energy savings potential. Moreover, some of them are directly related to the process
line and could have an impact on production.
Based on the above discussion, the following energy savings measures and technologies have been
focused on reducing the energy requirements of furnaces and boilers, pumps and fans, motors,
refrigeration systems (chillers, cooling towers, refrigeration), and lighting systems.
The proposed EE measures and technologies are described as follows:
Energy efficiency The main energy conservation measures are:

measures on • Replacement of boilers and furnaces by more energy-efficient
furnaces, boilers, alternatives.
and steam networks • Installation of economizers, heat exchangers, flash steam recovery
systems, etc.
• Fine-tuning of the controls in the furnace or boiler room.
• Optimization of heat or steam distribution systems.
• Retrofitting and installing insulation material on furnaces, boilers, hot
water tanks, and steam pipes.
Energy savings potential to be generated by furnace, boiler and steam
system optimization was estimated at 25% in Brazilian industries, but could
be as high as 40% on old and poorly maintained systems. For instance, heat
recovery measures, such as the installation of an economizer or flash steam
recovery system, could reduce the energy consumption of the boiler by 10%
to 30%.
Efficient motors and This measure consists of retrofitting existing motors and driving systems
driving systems using variable speed drives in systems with variable loads and premium
motors with higher efficiency and in elevators, pumping systems, water
circulating systems, fans for ventilation and air handling system, correctly
sizing motors and pumps as well as pipes and ducts. Depending on the type
of the motors, this measure can result in significant energy savings and is
easy to implement.
In terms of electricity, pumps and fans in Brazilian industries account for
32% of total consumption. This percentage rises to 39% when only the four
targeted industrial sectors are considered.
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Energy efficiency Typical energy conservation measures in compressed air systems are:
measures on • Replacement of the air compressor(s) by others that are more energy
compressed air efficient
systems • Optimization of controls and receiver tank in the mechanical room
• Leak reduction campaigns
• Compressed air distribution system optimization
• Use of the compressors’ dissipated heat.
The overall efficiency of a compressed air system is usually 5 to 10%. There
are heat losses on each main component of the system, including motor,
compressor, cooler, dryer and filter. Moreover, air leaks on poorly
maintained networks could cause as high as 20 to 30% of energy losses in
57
air capacity and power . In Brazilian industries, the electricity consumption
58
of compressed air systems amounts to approximately 15% of total
consumption; this percentage remains the same when only the four target
industrial sectors are taken into account.
Efficient lighting The electricity savings potential from lighting system is very low compared to
systems that on other systems such as pumping, fans and compressed air systems.
However, EE measures for lighting systems could easily be included in a
bigger energy efficiency project and hence generate low-risk energy savings
with small incremental costs.
The main energy conservation measures are:
• De-lamping to comply with standards, but not more.
• Change lamps to more energy-efficient alternatives (incandescent to
CFL, 40WT12 to 32WT8 or T5 fluorescent lamps with electronic
ballasts, LED based lighting, etc.).
• Changing fixtures to reflective fixtures with greater performance.
• Control systems using scheduling, dimming, as well as presence
and/or light sensors.
Control systems and The implementation of an energy and electric demand control system could
energy management allow facility managers to perform Monitoring and Targeting (M&T), which
helps to assess energy use and related costs. Energy management systems
support the manager’s decision-making process toward reducing energy
costs through improved energy efficiency and energy management control.
Typically, this measure is part of a project with several other measures to
ensure the sustainability of the project’s implementation.
In addition to the EE measures presented in the last table, the implementation of a cogeneration plant
is another energy conservation project in the industrial sector whose potential energy savings could be
57
US Department of Energy, Improving Compressed Air System Performance, 2003
58
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very high. While such projects require high investment, cogeneration opportunities in Brazilian
industries are presented in a separate section (refer to 3.4).
For reference, the National Industry Confederation (CNI – Confederação Nacional da Indústria)
estimated the energy efficiency potential to be about 25% of final consumption in the Brazilian
59
industrial sector. Main results of CNI’s study are presented in the following table.
60
Table 37: Best Available Technologies savings potential for Brazilian industry (2007)
End-Uses Savings potential Savings potential Industrial sectors with highest

(1,000 toe) (% of total) potential
Furnaces 9,104 62.1 Iron & steel, ceramics, cement
Dryers 416 2.8 Ceramics, food & beverage, textile
Boilers 2,358 16.1 Pulp & paper, textile, food & beverage
Other fuel uses 75 0.5 Chemicals
Sub-total fuels 11,952 81.5
Drivers 2,032 13.9 Iron & steel, mining, food & beverage
Refrigeration 47 0.3 Food & beverage, chemicals, textile
Furnaces 371 2.5 Iron & steel, non-ferrous metals, ferro-alloys
Processes 191 1.3 Non-ferrous metals, chemicals, pulp & paper
Lighting 60 0.4 Food & beverage, textile, pulp & paper
Other electricity uses 2 0.0 Mining
Sub-total electricity 2,704 18.5
GRAND TOTAL 14,656 100.0
59
In partnership with PROCEL, CNI published a summary of findings for energy efficiency in industry,
considering the “BAT – Best Available Technologies” concept – a comparison of technologies in use in
Brazil with the most efficient ones available worldwide. It is expected that complete reports will be
published in 2010.
60
Source: CNI (2009), Eficiencia energetic na industria
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3.3.3 EE Investment Potential in Industries
The following table summarized the investment requirements for EE project implementation in the four targeted industrial segments, based on
the aforementioned assumptions and on the assessment conducted on the Brazilian industrial sector:
Table 38: Investments Estimate in Industrial Market Sector
Compressed Pumping Fans Refrigeration Lighting Boilers Heat Energy Total

air systems systems systems and recovery management
steam & process
systems control
Total EE potential (GWh/y) 1,467 1,881 995 688 90 18,103 12,068 4,151 39,443
Technico Economical Savings Potential - 293 376 199 138 27 2,715 1,810 415 5,974
5 years (GWh/y)
CO2 emissions reduction in tCO2 54,053 69,289 36,659 25,331 4,987 500,175 333,450 76,467 1,100,412
Investment cost for reduced unit ($/MWh) $160 $150 $125 $160 $70 $200 $120 $50 $156
Investment requirements (USD Million) $47 $56 $25 $22 $2 $543 $217 $21 $933
Typical size of potential project (USD -- -- -- -- -- -- -- -- $0.5 - $5
Million)
Number of transactions over period -- -- -- -- -- -- -- -- 373
Financial Aspects
Energy Cost Savings (USD Million/year) $36 $46 $24 $17 $3 $102 $68 $26 $322
Payback (years) 1.3 1.2 1.0 1.3 0.6 5.3 3.2 0.8 2.9
Carbon revenues in USD Million per year $0.6 $0.8 $0.4 $0.3 $0.1 $6.0 $4.0 $0.9 $13.2
(at USD 12/tCO2)
Foreseen equity (USD Million) $9 $11 $5 $4 $0 $109 $43 $4 $187
Financing need (USD Million) $38 $45 $20 $18 $2 $434 $174 $17 $747
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Based on the above table, the main conclusions on investment potential in the industrial sector can be
summarized as follows:
• Investment requirements. It has been estimated that a total investment of almost

USD 1 billion in the four targeted industrial segments would generate nearly 6,000 GWh of
savings per year, which corresponds to 2.9% of the total energy consumed in those sectors
per year over a 5-year period. The financing required from the banks amounts to
USD 747 million if a debt ratio of 80% is used. Broken down by technology, the major projects
would include EE measures on furnaces, boilers, and steam systems and electric motor-driven
equipment (pumps, fans, compressed air systems…). The implementation of control and
energy management systems should be bundled with other measures within an energy
efficiency project. Lastly, it is noteworthy that most of the EE projects to be undertaken will not
be directly related to industrial processes; they will only affect auxiliary systems, including
compressed air or refrigeration systems, steam networks, etc.
• Number of transactions. The required investment represents a total of 373 potential financial
transactions when an average EE project cost of USD 2.5 million is assumed per transaction.
Depending on the nature of the measures and partial or complete retrofits, the typical project
cost may range from USD 50,000 to USD 5,000,000, but banks may not be willing to invest in
projects which require investment of less than USD 500,000 because of the high transaction
costs and risks involved. Strategies for banks to reduce transaction costs include focusing on
projects with high investment requirements, project bundling and EE programs.
estimated at USD 322 million per year with an overall payback of approximately 3 years.
Depending on the type of project, the payback may vary from 1 year (or less) to more than
5 years. In terms of GHG emissions reduction, about 1.1 million tCO2 might be avoided from
the national grid, which has a very low emission factor due to the predominance of
hydropower. The sale of the carbon reduction would earn a total of USD 13 million per year
(USD 130 million for a CDM crediting period of 10 years).
The key market players in EE in the industrial sector include public programs, industry associations,
equipment and technology suppliers and service providers. Most of the key government institutions
and programs have been presented in Section 1.2.
Other key stakeholders for EE projects have already been presented in section 3.2.4 on EE
opportunities in the commercial and public building sectors. These key players include government
programs (e.g. PROCEL and CONPET), BNDES’ PROESCO financing scheme, ABESCO and
Petrobras’ initiatives.
The other main stakeholders specific to the industrial market sector are discussed in the table below:
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Table 39: Key Market Players in Industrial Sector

The CNI organization is active in defense of Marketing channel for project
the industrial sector with a mission to boost identification and implementation.
CNI – National Confederation Brazilian Industry competitiveness. It This association could also help
of Industry Brazil represents 27 Industry Federations in the to disseminate technologies and
(www.cni.org.br) states and Federal District. best practices, and to disseminate
awareness of EE opportunities
and benefits.
ABIA – Associação Brasileira ABIA was created with the aim of bringing Marketing channel for project
da Indútria de Alimentos together companies involved in the food identification and implementation
(http://www.abia.org.br/) industry and to serve as interlocutor with the
Government, acting as technical and
advisory body. ABIA collaborates with public
authorities and public or private entities in
studying and addressing problems that
involve not only the food industries in Brazil,
but also with international entities.
Entity that brings together small, medium Marketing channel for project
ABIQUIM – Associação
and large chemical manufacturers and identification and implementation
Brasileira da Indústria Química
service providers to the industry, such as
(www.abiquim.org.br)
carriers and logistics operators
ABRABE – Associação ABRABE represents beverage processing Marketing channel for project
Brasileira de Bebidas companies. It acts as a representative to the identification and implementation
(http://www.abrabe.org.br/merc government and as a reference center for
ado.php) officials, lawmakers, other professional
associations, regulatory bodies, media and
public opinion;
ANFACER – Brazilian ANFACER represents the Brazilian ceramic Marketing channel for project
Association of Ceramic Tile tile industry, which is made up of almost identification and implementation
Manufacturers 100 companies located throughout the
(http://www.brasilceramictiles.c country.
om/)
Represent cellulose (100%) and paper Marketing channel for project
BRACELPA – Associação (approximately 80%) producers in the identification and implementation
Brasileira de Celulose e Papel country. Its mission is to promote
(www.bracelpa.org.br) competitiveness and sustainable
development in the sector.
Energy efficiency in general faces a number of barriers that can be found everywhere, in developing
countries, but also in developed countries. The differentiation is how these barriers could influence the
stakeholders’ interventions. From the Brazilian financing institutions’ point of view, the following
barriers should be considered:
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Institutional and cultural barriers
• EE projects could be perceived as risky, especially when the EE measures proposed could have
an impact on the industrial process or assembly line, and consequently on company’s
productivity and income.
• Issues with the regulation of the wire charge scheme which led to an inefficient use of ratepayers
money by financing each energy efficiency investment with 100% of ratepayers money (leaving
virtually no space for other sorts of financing in the mix).
As for EE in public and commercial buildings, one way to foster the commercial financing in the
industrial sector is to work directly with government programs like PROCEL and CONPET to establish
a tailored framework.
Informational barriers
• Lack of awareness of facility managers toward energy conservation practices and positive
benefits related to them.
• Low availability of facility staff to manage EE projects.
• Performance contracting is still unfamiliar in Brazil.
• Energy end-users as well as local financial institutions are not familiar with the existing energy
valuation standardized concepts and methodological approaches.
• The local financial institutions have difficulties in assessing the technical nature of energy
efficiency projects.
• Some industrial processes have to remain secret. The involvement of a private company
(ESCO, engineering firm) within the framework of an EE project would thus be more difficult in
the plant. Moreover, it would obviously be harder to obtain a good understanding of the
processes and the required documents explaining the facility’s activities. Equipment
manufacturers/suppliers are more accepted in the industrial sector.
Any EE financing program in Brazil should include strong technical assistance to continue awareness
raising activities, capacity building and knowledge transfer to the local FIs. The necessary tools
include the M&V plan (working with ABESCO), project evaluation criteria (for banks), financial
proposals preparation (for end-users, ESCO, consultants and engineering firms) have to be developed
or adapted.
Finally, there are often various behavioral barriers built into the organizational structure of the plant
operation and maintenance teams: double-agent barriers, informational barriers.
Technical barriers
• Lack of knowledge and technical skills of engineers and consultants to implement the project in
an industrial context. In fact, all industrial processes are different and a good knowledge of one
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is required before starting to develop EE measures for it. On the other hand, it is noteworthy that
industrial staff are often more skillful than public or commercial buildings’ maintenance teams.
This situation could help to overcome the services providers’ lack of technical capacity in the
industrial market sector.
• Most EE measures in industries are implemented by equipment manufacturer rather than by
engineering firms, consultants and ESCOs. In fact, manufacturers have a better understanding
of their equipment and they are already collaborating with industries on various other projects.
• EE projects must be installed when the process and assembly lines are shut down, for instance
due to maintenance activities, holidays or during non-operating hours.
• Some of the energy efficiency technologies in the industrial sector could be perceived as more
risky than similar technologies in an institutional building.
Market barriers
• Most end-users have a budgetary disconnect between capital projects and operating expenses
(energy and maintenance) if they do not consider energy costs as a non manageable fixed
expenses. Low-investment cost is mostly considered when the decision has to be taken to
change equipment. This observation also applies to banks intervention where the emphasis is
put on capital projects rather than in operation cost reduction projects.
• While energy costs account for a small part of operation costs in most industrial companies,
additionally EE is normally not considered a priority. There are plenty of potential process
improvement projects with a payback of less than 5 years in most industries. Priorities are more
in increasing the market share of a products and increasing the production capacity. EE projects
must compete with those projects to obtain the commitment of the top management.
Financial barriers
The problem is not a lack of available funds, but how to access to available funds at Local Financial
Institutions. This situation is caused by a disconnect with LFIs’ current “asset-based” lending practices
and lack of the industry top management buy-in of EE culture.
Projects initiated by services providers like ESCO encounter other barriers as they have too small and
EPC is not currently accepted as collateral by FIs in Brazil.
Besides, investments need to be paid back in less than 2 to 5 years because of the instability of the
market for transformed goods due to several concerns, such as competition or the risks related to a
decrease in the production rate or bankruptcy of the plants, inherent in every industrial segment.
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3.4 INVESTMENT OPPORTUNITIES IN INDUSTRIAL COGENERATION
3.4.1 Energy Consumption Profile for Cogeneration in Industries
In addition to the information provided in section 3.2.1 on the Brazilian industrial sector, it is worth
noting that industrial processes used require a lot of heat. As shown in the next figure, biomass, fossil
fuels, natural gas and coal account for almost 80% of the total energy consumption of this market
sector:
Natural gas
10%
Biomass
36%
Fossil fuels
28%
Coal
Electricity 5%
21%
Figure 11: Energy source balance in industrial sector
From the above statistics, it appears that energy conservation from the main heat generation
equipment, including boilers and steam systems, represents an interesting potential to generate
energy savings. The implementation of a cogeneration plant could be an attractive opportunity to
retrofit existing aged boilers and thus reduce operation costs thanks to the generation of low-cost
electricity in addition to heat (steam).
In Brazil, cogeneration development in the industrial sector is growing at a rapid pace. In fact, PNE
indicates that the participation of self-production (considering especially cogeneration, but also other
arrangements) will be approximately 9% of electricity consumption in 2030, compared to 6% of the
total recorded in 2006. The regulations have recently been straightened up and streamlined so the
operators of cogeneration plants can sell their surplus power to the grid. There is currently a
movement by utility companies to invest in distributed power generation including cogeneration.
Looking just at the State of Sao Paulo, COGEN-SP61, it estimates the cogeneration potential in the
industrial sector to be more than 2,700 MW, which could result in a reduction of daily natural gas
61
COGEN-SP: Associação Paulista de Cogeração de Energia, www.cogensp.com.br
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consumption by almost 17 million m3 per day. Targeted industrial sectors include chemicals, pulp and
paper, steel and iron, and cement since these offer the largest cogeneration potential. For the state of
Rio de Janeiro, the cogeneration potential is somewhat lower as shown in the following table:
62
Table 40: Potential for Cogeneration Projects in Industrial Sector - Rio de Janeiro
Activity Potential (MW)

Beverages and Food Products (15) 73,1
Textiles (17) 19,2
Pharmaceutical and chemical products (24) 95,0
Publishing and printing (22) 19,6
Metallurgy (27) and metal products, except machinery and equipment (28) 48,5
Pulp and Paper (21) 162,0
Products from non-metallic minerals (26) 36,0
(Red Ceramics) 54,0
Market Potential Estimated 507,4
Three perspectives should be considered in assessing the market potential for cogeneration in the
industrial sector:
• Adding cogeneration plants in new projects where this feature was not initially planned.
• Installing cogeneration plants in industrial plants in operation.
• Upgrading existing cogeneration plants, and thus increasing their efficiency and the steam and
electricity surpluses to be sold either to other industrial plants or directly to the grid (for electricity
only).
More technical details on cogeneration technology and potential projects in the industrial sector are
provided in Appendix 3.
3.4.3 EE Investment Potential in Industries
Considering that section 2.2 already assessed cogeneration projects using sugarcane bagasse as a
renewable energy, the current EE investment evaluation covers only projects whose combustible fuel
for process heating is not biomass. Moreover, only the cogeneration projects whose generation
capacity was lower than 15 MW were considered in the assessment. In fact, most of the projects
whose generation capacity is higher than this threshold tend to be larger and stand-alone projects.
Almost 100% of the projects that were found compliant with the two aforementioned specificities are
cogeneration plants using natural gas to produce heat and power (or cold).
The table below presents the investment potential established for cogeneration projects in the
Brazilian industrial sector:
62
INEE - National Institute for Energy Efficiency
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Table 41: Energy generation and investment potential for cogeneration projects in industries

Potential for installed capacity <15MW 114.0
Energy production (electricity+heat) GWh/year 721.7
Annual CO2 emissions reduction (million ton CO2) 0.27
Average unit cost (USD/kW) $3,000
Total Investment Requirements – for capacity <15MW (USD Million) $342
Number of transactions 18
Financial Aspects
Cost of energy (USD/MWh) $64
Annual energy costs savings (USD million) $46
Payback (years) 7.4
Annual carbon revenues in USD million per year $3.2
Foreseen equity - total (USD Million) $68
Financing need - total (USD Million) $274
Based on the above table, the main conclusions on investment potential in the industrial sector can be
summarized as follows:
• Investment requirements. It has been estimated that it would be possible to invest

USD 274 million in the industrial sector to implement cogeneration projects with a capacity of
less than 15 MW. The total potential for installed capacity would then be 114 MW. The main
energy source targeted by these projects is natural gas. Approximately 720 GWh of heat and
electricity (and maybe cold) would be produced by these cogeneration plants on an annual
basis. The financing required from the banks amounts to almost USD 275 million if a debt ratio
of 80% is used.
• Number of transactions. The required investment represents a total of 18 potential financial

transactions, with an average EE project costing USD 19 million per transaction. Depending on
the generation potential and on the characteristics, the typical project costs may range from
USD 2.5 million to USD 40 million.
estimated at USD 46 million per year with an overall payback of approximately 7.5 years. In
terms of GHG emissions reduction, about 0.27 million tCO2 might be avoided from the national
grid. The sale of the carbon reduction would earn a total of USD 3.2 million per year
(USD 32 million for a CDM crediting period of 10 years).
The list of cogeneration projects used to conduct this assessment can be found in Appendix 3 for
reference.
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The key market players for cogeneration projects in the industrial sector include public programs,
industry associations, equipment and technology suppliers, and service providers. Most of the key
government institutions and programs have been presented in Section 0.
Other key stakeholders for EE projects have already been presented in the sections on EE
opportunities in the commercial and public building sectors (section 3.2.4) and in the industrial sector
(section 3.3.4). These key players include government programs (e.g. PROCEL and CONPET),
BNDES’ PROESCO financing scheme, ABESCO, Petrobras’ initiatives and consumer associations,
such as ABIA, ABIQUIM and BRACELPA. Moreover, key players for sugarcane cogeneration projects
have been introduced in section 2.2.4.
The other main stakeholders specific to the industrial cogeneration are discussed in the following
table:
Table 42: Key Players for Cogeneration Projects in Industrial Sector
Consumer associations Description Interaction with IFC initiatives

The COGEN Association is a non- Marketing channel for project
profit group that aims to promote identification and implementation.
COGEN – Accociação da integration and cooperation among its This association could also help to
Indústria de Cogeração de members in order to establish and disseminate technologies and best
Energia (www.cogen.com.br) strengthen industry's energy practices, and to disseminate
cogeneration in Brazil. awareness of EE opportunities and
benefits.
Entity that brings together companies Marketing channel for project
in the textile and garment sector, identification and implementation
ABIT – Associação Brasileira da organized into technical committees
Indústria Têxtil (www.abit.org.br) (corresponding to manufacturing
activities, and have no energy
committee or similar).
UNICA's mission is to lead the Marketing channel for project

transformation of the traditional sector identification and implementation
of sugarcane into a modern
ÚNICA – União da Indústria de
agricultural industry capable of
Cana de Açúcar
competing in a sustainable way in
(www.unica.com.br)
Brazil and around the world, in the
production of ethanol, sugar and
bioelectricity.
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Consumer associations Description Interaction with IFC initiatives

Entity that represents steel producers Marketing channel for project
in Brazil, defending its interests and identification and implementation
promoting its development. The
Institute carries out activities to
Instituto Aço Brasil
promote its members’ interests, such
(www.ibs.org.br)
as conducting various researches and
studies, collecting data and statistics,
participating in product standardization
and developing programs and policies
for each subsector.
In addition to the abovementioned stakeholders, lists of steam turbine and cogeneration integrated
system suppliers are provided in Appendix 4.
Almost all barriers to cogeneration projects in industries are the same as those presented in sections
2.2.6 on cogeneration using sugarcane bagasse and 3.3.5 on EE in industrial sectors. No other
relevant barriers have been identified within this study for this EE opportunity.
3.5 INVESTMENT OPPORTUNITIES IN OTHER MARKET SEGMENTS
There are many other market segments where EE investment can be oriented. Although, these
segments could be interesting for commercial financing, the authors suggest focusing first on the
segments discussed in previous sections and dealing with the segments presented in this section on a
case by case and one deal opportunity basis.
3.5.1 Green Buildings
There is an opportunity for more green building projects, through a new targeted marketing strategy.
Green building projects have larger initial investments, and are worth more after construction
completion because of lower operation cost, and co-benefits such as the comfort of occupants, fancier
architecture, renown of the building, etc. It is estimated that by acting at the building design stage, a
green and sustainable building can save from 50% up to 90% of the energy used in standard buildings
depending on the country using latest available design practice, premium equipment and renewable
energy. The incremental investment costs to make a new building a green building is about 22% in the
63
case of Brazil as compared to a cost increase of 16% in the USA, 28% in China or 12% in France .
The opportunity is to look forward to more green building projects, through a new targeted marketing
strategy. Green building projects have larger initial investment, and are worth more after construction
completion because of lower operation cost, and co-benefits such as comfort of occupants, fancier
architecture, renown of the building, etc.
63
WBCSD. 2007. Energy Efficiency in Buildings: Business realities and opportunities
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The level of technical risk really depends on the level of innovation; however project performance is
not much of an issue in this case because of the collateral available: the building. These projects are
going to be larger than the conventional ones because of investments in top of the line electro-
mechanic systems, improved architecture and superior quality of building materials (or recycled
building materials that are often more costly). Investment size is on the high side as these are full
construction projects. This is a market most LFIs are already in and know very well. The LFIs would
have to do business with real estate investors and property managers.
It is worth noting that double-agent barriers might be an issue. New policies such as building labeling
and green certification are being developed to tackle this issue.
3.5.2 Street Lighting
The energy conservation measures are: i) changing lamps for energy efficient alternatives (e.g.
replacing mercury vapor lamps with metal halide lamps with pulse-start ballast, or by low-pressure
sodium lamps or LED lighting), ii) change the fixtures to more energy efficient fixtures that concentrate
the light toward the ground, iii) sectioning circuits and automatic sensor controls.
The utility companies have been exploiting this market segment using monies from the wire charge
scheme for the last 10 years. These are generally low-risk technical investments (for a & b) and they
are reasonably cost-effective. In addition, the program RELUZ was intended to tackle the barriers in
this segment. There would be potential for substituting with commercial financing.
However, the funding of RELUZ has been drastically reduced since 2004. In addition, recent limits
imposed on public sector lending (contingenciamento in Portuguese) have restricted states and
municipalities access to credit. This sector is going to be clogged by regulatory barriers for a while.
The LFI would have to do business with the municipalities (facing public sector creditworthiness
issue), along with the utility companies and/or third party project developers because this market
segment is generally fertile ground for ESPC projects.
3.5.3 Water Pumping and Sewage Treatment
The energy conservation measures are: a) replacing or modifying oversized and inefficient pumps and
motors by energy-efficient pumps and motors, b) installation of variable speed drives and demand-
control systems, c) pipe network optimization and control, and d) water loss reduction.
These are generally low- to high-risk technical investments and they have fair to high cost-
effectiveness. In addition, the SANEAR program of PROCEL was intended to tackle the barriers in this
segment. Similar observations could be made as in street lighting.
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3.5.4 Residential Solar Water Heating
The market potential is large, and the site-wise potential is medium. These systems are relatively
inexpensive (around USD 1,000 for a one-family system); but still expensive enough that home
owners and landlords need financing. Technical risk is relatively low – if assumptions taken to
estimate the savings are sufficiently conservative. There are local manufacturers and local contractors
that are accustomed to SWH. Various policies were launched concerning SWH: standards and
labeling, awareness and communication, and so on.
However, the systems for homes are much smaller than those for commercial and institutional
facilities, which makes them less cost-effective. The commercialization is also more challenging than
for the commercial sector. The approach will be similar to micro-credit or a dedicated program if
favorable regulations are in place. There is not going to be regulation forcing home owners to install
these systems. In the case of high-rise multi-residential buildings, the double-agent barrier might be an
issue.
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4 CONCLUSIONS AND RECOMMENDATIONS

There are major investment opportunities in renewable energy for Brazilian banks and equity
investors. Wind power and energy from sugarcane are expanding rapidly under the auction system.
Small hydro, a more traditional investment segment, is expected to grow more slowly due to delays in
licensing, higher costs and issues of technical risks. Biodiesel is also expected to grow, but private
sector third party participation in financing has been very limited.
Without policy changes prospects for energy recovery from urban waste are very limited. It is much
easier and more profitable to flare landfill gas and capture the resulting carbon credits. However, a
change in policy context (an improved market for energy sales and new additional requirements for
carbon credits) could make it an interesting market with important and very visible socio-environmental
impacts. However, this potential could only be achieved in the future and is now speculative.
All segments present risks. In the case of wind, small hydro and urban solid waste the expected
performance (e.g., MWh per year) needs careful assessment. There have already been problems with
small hydro and the relatively short time of many wind measurements could result in problems there.
There can be significant risks for wind, small hydro and sugarcane cogenerators regarding the cost of
connection to the grid. In many projects, there is little room for contingencies.
Environmental licensing is already a measure problem for small hydro. So far it has not been such a
barrier for wind but there are already cases of poorly sited wind farms. A backlash could develop as
projects become more common. It is important to think not only in terms of individual projects but also
in terms of the cumulative impact of wind farm or hydro plant groups.
Today, there is substantial overcapacity in biodiesel and supply contracts are short term. In addition,
securing feedstock can be a problem (especially at a time of rising commodity prices).
Only a small share of the renewable energy market reviewed in this report is in projects defined as
small (i.e., less than 5 MW or USD 10 million) which are of most interest to IFC. There are some
possibilities for small hydro and plants to recover energy from urban solid wastes. There are also
some opportunities with agricultural and forestry residues. There is interesting potential for small
projects in some isolated off-grid systems (as well as in the sparsely settled frontier areas which are
on the grid) with biomass residue resources – especially from sawmills.
There are relevant EE investment opportunities in three market sectors, namely commercial buildings,
public installations and various industrial segments. In the commercial and public sectors, most of the
EE saving potential lies in retrofitting lighting, air conditioning systems and electric motors. There is
also a relevant opportunity in installing solar water heaters. However, there are some issues related to
performance contracting and existing bureaucratic procedures which make the implementation of EE
projects more difficult. Additionally, the regulation of the wire charge scheme, (which finances each
energy efficiency investment with 100% of ratepayer money), the low creditworthiness of many energy
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end-users and the fact that energy costs are often considered as non-manageable fixed expenses are
as many other barriers to commercial investments in EE projects.
In the industrial sectors, four key segments have been targeted due to their high energy saving
potential and the average size of potential EE transactions not large enough to be standalone projects
without IFC involvement. These industrial segments are as follows: food and beverage, pulp and
paper, chemicals and ceramics. Most of the energy and cost saving potential lies in retrofitting process
heating equipment (boilers, furnaces, dryers, etc.), handling and process equipment, pumps, fans and
compressed air systems.
In addition to several barriers which also exist in the commercial and public sectors, investors in
industrial sector EE projects could have to overcome some barriers related to industrial secrets, lack
of knowledge and technical skills of engineers, professionals and consultants in specific industrial
processes. Moreover, the fact that EE projects could be perceived as risky, especially when the EE
measures proposed could have an impact on the process or the assembly line, could constitute an
additional potential barrier. Furthermore, EE investments need to be paid back within 2 to 5 years
because of the instability of the industrial market sector. Regardless of all inherent risks and barriers,
the EE investment potential in the industrial sector still remains larger and more attractive than in the
commercial and public building sectors.
Another relevant EE opportunity in industries is the implementation of cogeneration plants. In fact,

cogeneration development in the industrial sector is growing at a rapid pace in Brazil. Several natural
gas and diesel oil projects whose individual capacity was lower than 15 MW have been identified in
Brazil. Three perspectives should be considered to assess the market potential for cogeneration in the
industrial sector:
• Adding cogeneration plants in new projects where this feature had not been initially planned.
• Installing cogeneration plants in industrial plants in operation.
• Upgrading existing cogeneration plants, thus increasing their efficiency and the steam and
electricity surpluses to be sold either to other industrial plants or directly to the grid (for electricity
only).
Cogeneration projects could be considered as risky in some industrial segments and could be slowed
by usual EE barriers in industries. Moreover, typical paybacks for cogeneration projects are much
longer than those of other abovementioned EE measures in this market sector. The projects targeted
and assessed in this part of the study have lower investment requirements than typical sugarcane
bagasse cogeneration projects, as presented in the RE section. However, the benefits related to
cogeneration projects of less than 15 MW of capacity could make them attractive enough for both
industries and investors. This would thus create a sustainable investment window for commercial
financial institutions.
Other EE initiatives, such as the Green Building standard for new construction, the retrofitting of street
lighting and water pumping systems, as well as the installation of residential solar water heaters, could
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be considered as interesting commercial financing opportunities. Nevertheless, it is suggested not to

prioritize such projects over those previously presented in the commercial, public and industrial market
sectors.
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APPENDIXES
APPENDIX 1 SERVICE PROVIDERS AND SUPPLIERS IN AIR
CONDITIONING AND REFRIGERATION SECTOR
Service providers
ABESCO - Brazilian Association of Companies for Energy Conservation Services
www.abesco.com.br
It brings together consultants and developers of energy solutions for a total of approximately 80
member companies. Its mission is to foster and promote actions and projects for the growth of the
energy market, benefiting not only its members but also the Brazilian society and the country as a
whole.
ABRAVA - Brazilian Association of Refrigeration, Air Conditioning, Ventilation and Heating
www.abravanet.com.br
It brings together designers and manufacturers of air conditioning equipment and refrigeration, as well
as the sponsors and companies that install these systems.
SINDRATAR - Industry Union of Refrigeration, Heating and Air Treatment (organized in several states,
the main ones being in Rio de Janeiro and Sao Paulo).
www.sindratar.com.br (SINDRATAR - Rio de Janeiro)
http://www.fiesp.com.br/sindicato/sindratar_08/default.aspx
It brings together manufacturers and installers of air conditioning and central cooling. Whose mission
is to represent member companies, and coordinate efforts to develop the sector.
Product suppliers and manufacturers
Trane of Brazil
www.trane.com.br
Site of the company in Brazil, with information about offices, products and services offered by the
company. Gives no information about customer financing.
York from Brazil
www.yorkbrasil.com.br
Site of the company in Brazil, presenting information on offices, products and services offered by the
company. Section presents specially targeted financing of their products, indicating the possible
modalities of financing:
• BNDES: FINAME, BNDES Card
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• PROGER (Bank of Brazil)
• Vendor Program (Citibank)
• Consumer crédito
• Leasing
Carrier in Brazil
www.springer.com.br
Site of the company in Brazil, presenting information on offices, products and services offered. Gives
no reference to funding.
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APPENDIX 2 SOLAR WATER HEATING SYSTEM
SUPPLIERS
The following list presents the main suppliers and manufacturers of solar water heating products:
• Atual Indústria e Comércio de Aquecedores Solares Ltda, located in Mogi-SP, is in the

market offering solar heating systems for the residential, industrial, hotels, motels, clubs,
hospitals, gyms, amongst others.
• Alpina Alo Solar, located in Sao Bernardo do Campo, manufactures plate heat sinks and tanks.
The company installed more than 150,000 square meters of SWH plates in the last 15 years.
• Alternativa Solar, located in Ponte Nova, Minas Gerais, mainly produces panels for water
heating tanks for its storage and distribution, and systems for heating pools. Its mission is "to
provide the best solution for use of solar energy, according to the needs of each client and the
most suitable technology, providing you with comfort, safety and economy.”
• Aquasolis Tecnologia Solar e Construções Ltda, located in Belo Horizonte, works in
construction and manufacturing systems for heating water from solar energy.
• Aquecedores Cumulus S.A Indústria e Comércio, whose current production facility is located in
Guarulhos - SP, is a 100% Brazilian company, owns the widest line of equipment for water
heating in the domestic market, being the only company able to offer alternative solutions in hot
water.
• Arkson Indústria e Comércio Ltda, located in Belo Horizonte-MG, manufactures of stainless
steel thermal tanks and solar panels made of extruded aluminum profiles and coil with copper
tubes.
• AstroSol Aquecedores, installed in São Paulo-SP, manufactures solar water heaters for
showers, kitchens, pools, etc.
• Soletrol, in San Manuel-SP, is the largest manufacturer of solar water heaters in the Americas.
The company serves the entire country, with hundreds of merchants equipped with complete
infrastructure for marketing, installation and servicing of solar water heaters produced by the
company.
• Heliotek, located in Barueri, SP, manufactures solar water heaters and heat exchangers for
swimming pools. The company has a wide range of representatives and dealers located across
five continents.
• Mastersol, 100% national company located in Sorocaba-SP, is company with over than
13 years of experience in the solar heater market, and whose distribution network covers the
entire country directly or through their representatives.
• Transsen, located in Birigui-SP, is a manufacturer of solar water heaters. All company products
are tested and approved by INMETRO and has a wide range of thermal reservoirs with seal
Procel.
Econoler A-97
REF: 5574
APPENDIX 3 TYPICAL COGENERATION PROJECTS
For CHP, means the simultaneous use of electricity and heat generated from a single fuel source. This
is a solution for energy optimization in view of the possibility of using a greater amount of energy
contained in fuel, combining electricity generation with an aim temperature.
Thus, the overall energy performance is enhanced. The figure below shows a comparison between an
arrangement of conventional generation, where electricity and heat are produced from different
sources, and a solution for cogeneration.
Figure 12: Comparison and Solution for Cogeneration
To be observing the thermal and electrical demands, the CHP needed 100 units of energy, with losses
of 15 units. The conventional arrangement would require 165 units of energy, with losses of 71 units.
Although power generation in Brazil was largely of hydraulic origin, the contribution of the thermal is
rising.
There are several commercially available technologies, and systems based on cogeneration are
widely used in several countries, especially those where the generations of electricity from thermal
sources are the majority. It is estimated that only the United States have more than 100 GW of electric
generation (approximately the total installed capacity in Brazil) from CHP, and that these systems will
account for 20% of the total capacity of that country in 2030.
In Brazil, some industries use cogeneration widely arrangements, especially those in the
manufacturing process causes fuel products such as sugar and alcohol industries, pulp and steel. In
the commercial sector, its use is fairly limited, focusing the assistance of separate thermal and
electrical needs.
Econoler A-98
REF: 5574
In a simplified form, can be described two arrangements for cogeneration:
• The burning of fuel initially generates steam, which will be used for thermal applications and
power generation;
• The burning of fuel initially generates electricity, with heat recovery for thermal purpose.
The best solution from the technical point of view depends on a number of factors, but mainly:
• The size of the facility (demand);

• From the balance between the needs of electricity or heat;
• The conditions for supply of backup power (backup), if the demands are not met by the
cogeneration system.
For industries, given the diversity of processes involved, it is impossible to define an arrangement
"typical." However, one can consider that the usual form includes the initial production of steam, and
subsequently the generation of electricity. In this arrangement, there are two possible technologies:
• Steam turbines backpressure;

• Condensing steam turbines, using part of the steam produced to generate electricity.
Besides electricity, especially relevant for use in drives in the industry, originated in the heat
cogeneration can be used in various forms:
• In the form of steam for heating at low temperatures (relative);

• In direct heating, with use of hot air directly into furnaces and ovens;
• For hot water production.
In some industries, such as the beverage industry, even if the CO2 produced from combustion can be
used in processes of carbonation (addition of carbon dioxide in beverages such as soft drinks).
According to the Bank Information Generation ANEEL, are in operation the following ventures with
qualified cogeneration in Brazil, for the industrial sector.
Econoler A-99
REF: 5574
Table 43: Ventures with Qualified Cogeneration in Brazil
Plant Potencial (kW) Fuel
Açominas 102.890 Blast furnace gas
Cogeração International Paper (Fases I e II) 50.500 Fuel oil
Colombo 65.500 Sugar cane bagasse
Energy Works Kaiser Pacatuba 5.552 Natural gas
Copesul 74.400 Process gas
Suape, CGDe, Koblitz Energia Ltda. 4.000 Natural gas
Suzano 38.400 Natural gas
Celpav IV 139.424 Natural gas
São José 84.805 Sugar cane bagasse
Barra Grande de Lençóis 62.900 Sugar cane bagasse
LDC Bioenergia Leme (Ex.Coinbra - Cresciumal) 42.300 Sugar cane bagasse
Energy Works Kaiser Jacareí 8.592 Natural gas
São Francisco 25.200 Sugar cane bagasse
Lucélia 15.700 Sugar cane bagasse
Santa Adélia 42.000 Sugar cane bagasse
Brahma 13.080 Natural gas
UGPU (Messer) 7.700 Natural gas
Mandu 25.000 Sugar cane bagasse
Guarani - Cruz Alta 40.000 Sugar cane bagasse
São José da Estiva 19.500 Sugar cane bagasse
Unidade de Geração de Energia -Área II 6.000 Natural gas
Rhodia Paulínia 12.098 Natural gas
Bayer 3.840 Natural gas
CTE Fibra 8.812 Natural gas
Cerradinho 75.000 Sugar cane bagasse
Pioneiros 42.000 Sugar cane bagasse
EnergyWorks Corn Products Mogi 30.775 Natural gas
EnergyWorks Corn Products Balsa 9.199 Natural gas
Colorado 52.760 Sugar cane bagasse
Santa Terezinha Paranacity 52.500 Sugar cane bagasse
Santa Elisa - Unidade I 58.000 Sugar cane bagasse
Santo Antônio 23.000 Sugar cane bagasse
Stepie Ulb 3.300 Natural gas
Inapel 1.120 Natural gas
Eucatex 9.800 Natural gas
Campo Florido 30.000 Sugar cane bagasse
Coruripe Iturama 24.000 Sugar cane bagasse
Bunge Araxá 23.000 Sulfur
Millennium 4.781 Natural gas
Veracel 126.600 Black liquor
Pamesa 4.072 Natural gas
Imcopa 7.000 Natural gas
Quirinópolis 40.000 Sugar cane bagasse
Goodyear - Divisão Spiraflex 972 Diesel oil
Alumar 75.200 Mineral coal
Levori 4.110 Natural gas
These projects are totalling 1,595 MW of electricity, with an average of 34.7 MW of electric power. It is
observed that most projects use sugar cane bagasse or natural gas as primary fuel source.
Assuming an average cost of USD 3,000/kW, only the component of electricity generation would
require a value of USD 104 million for a project average. Assuming that the use of heat demand same
Econoler A-100
REF: 5574
value, an average of qualified cogeneration project in industry represents an investment of
USD 200 million.
A broader base refers to the self-production, including other settings that are not based on
cogeneration. For 2008, data from BEN - National Energy Balance (EPE / MME) have the following
values (in GWh):
Table 44: Values Data - 2008
Regarding the development of projects, the initiative is usually the owner’s, in search of greater
security in electricity supply and reduce costs. When the owner takes the initiative, are usually
contracted the services of a consulting firm to a preliminary examination of the viability of cogeneration
system.
In this initial study, a basic question concerns the supply of fuel - both as a guarantee quanidades
price. Logically, if the cogeneration scheme aims to use waste from the industrial process - sugar cane
bagasse, black liquor, waste gas (in chemistry or steel), the analysis of supply become part of the
analysis of the business, industrial.
Econoler A-101
REF: 5574
APPENDIX 4 SUPPLIERS IN COGENERATION MARKET
SECTOR
The following list presents the main steam turbine suppliers in the Brazilian industrial sector:
• Dresser - Rand do Brasil Ltda

• EG Turbinas Consultoria e Serviços Especiais Hass - Csi Ar Industrial
• IBM Indústria de Bronzinas e Mancais Ltda
• Inatech Indústria Ambiental e Tecnologia Ltda
• MTM Métodos em Tecnologia de Manutenção Ltda
• NG Metalúrgica Ltda
• Salgueiro Indústria e Comércio de Aço Ltda
• Siemens Ltda
• Stemac S/A Grupos Geradores
• Texas Turbinas a Vapor Ltda
• TGM Turbinas Indústria e Comércio Ltda
• Turbimaq Turbinas e Máquinas Ltda
• Turbocare Serviços de Turbomáquinas Ltda
• Uni Systems do Brasil Ltda
• Usimaq Usinagem e Máquinas Ltda
• Usimec Usinagem e Mecânica Ltda
• Usitec Serviços e Comércio Ltda
• Voith Siemens Hydro Power Generation Ltda
• WS Automação Industrial Ltda
• TGM Transmissões Indústria e Comércio de Redutores Ltda
Suppliers of integrated solutions could be found easily through COGEN association (Associação
Paulista de Cogeração de Energia, www.cogensp.com.br)
COGEN is an entity that brings together companies in the state of Sao Paulo, participants in the
sectors of sugar industry (which has traditionally adopt CHP), natural gas distribution and electricity
and manufacturers and service providers in that area. Its purpose, as established by statute, to
promote integration and cooperation among its members to implement and strengthen the
cogeneration market in São Paulo. The COGEN fit, yet:
• Represent the common interests of its members;

• Represent the common interests of its members;
• Combine and coordinate initiatives and efforts of its members, promoting the optimization of the
pooling of their goods and services;
• Monitoring and suggesting adjustments of legislation and regulation applicable to cogeneration,
monitor technological developments, changes in economic relations of exploitation activities
related to the cogeneration;
Econoler A-102
REF: 5574
• Collaborate and advocate with government agencies on matters of common interest related to
the promotion of cogeneration;
• Participate in action oriented research and development of methods and technologies for
cogeneration of interest of members;
• Promoting the technical and technological training in specialized cogeneration;
• Provide technical cooperation and give opinions on its own initiative or when requested, in its
specialty;
• Encourage, develop and participate in market research projects and technological development
in the area of cogeneration and interest of members;
• Collaborate with other associations, institutes or organizations with similar interests and in this
case, partnering, covenants, agreements and / or cooperation with these associations, institutes
or entities.
Econoler A-103
REF: 5574
APPENDIX 5 SMALL HYDRO MARKET SECTOR
Recent trends in the market and potential
Small hydro (in Portuguese PCH – Pequenas Centrais Hidreléticas) is defined in Brazil as being
between 1 and 30 MW. Though the category has been explicitly defined since the early 1980s, the
current upper limit of 30 MW was established as recently as 1998. Prior to that the upper limit was
10 MW. Below 1 MW (1000 kW) small hydro plants are referred to as CGHs.
The market for PCHs has been active in recent years as is shown by Figure 13 and Figure 14. Figure
13 summarizes the number of basic project designs (projetos básicos) which have been registered
with ANEEL since 1998, as well as the associated capacity in MW. Figure 14 shows the number and
capacity of projects which have been authorized by ANEEL over the same period.
Projetos Básicos de PCH's Aprovados entre 1998 e 2009
1.400 90
80
1.200
70
1.000
Potência Aprovada (MW)
60
800 50
600 40
30
400
20
200
10
0 0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Potência (MW) 34 173 71 344 546 961 1.265 537 744 664 815 778
Quantidade 7 22 6 28 37 61 82 41 45 49 74 63
Figure 13: Basic project designs for small hydro approved by ANEEL, 1998-200910
10
Source: Hubner, 2010
Econoler A-104
REF: 5574
Evolução da Outorga de PCH (1998-2009)
120 1.800
1.600
100
1.400
80 1.200
1.000
60
800
40 600
400
20
200
0 -
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Quantidade Potência (MW)
Figure 14: Small hydro projects authorized by ANEEL, 1998-200911
At the end of 2008 there were 310 PCHs in operation with a capacity of 2,209 MW, another 77 plants
with 1,264 MW were under construction, while 161 with 2,396 MW had received their authorization
from ANEEL.
By the end of 2009 the number of PCHs in operation had grown to 358, with a capacity of 3,018 MW.
The capacity under construction was somewhat smaller – 998 MW – while those with authorizations
also fell slightly to 2,067 MW. Table 45 summarizes this information for PCHs, as well as for the
smaller CGHs. There was no evolution in either the number or capacity of CGH plants.
Table 45: Evolution of installed PCH and CGH capacity in 2008-200912
Number of plants Installed Capacity (MW)

PCH (1-30 MW) 2008 2009 2008 2009
In operation 310 358 2,209 3,018
In construction 77 73 1,264 998
Authorized (outorgados) 161 145 2,396 2,067
Total 548 576 5,869 6,083
CGH (<1000 kW)

In operation 221 221 117 117
In construction 1 1 0.8 0.8
Authorized (outorgados) 75 75 51.2 51.2
Total 297 297 169 169
This PCH market development activity has had an interesting consequence – a substantial increase in
registered inventory of potential in a short time, as shown in Table 2.1.2. In 2008, the total inventoried
potential was 16,184 MW, of which 13,975 MW remain to be constructed. In 2009 the total potential
had jumped to 22,455 MW, of which 19,437 MW remain to be constructed.
11
Source: Hubner, 2010
12
Econoler A-105
REF: 5574
Table 46: Evolution of small hydro potential in 2008-200913
Status of development Number of plants Installed Capacity (MW)

2008 2009 2008 2009
In operation 310 358 2,209 3,018
In construction/authorized 238 218 3,660 3,065
Inventory in preparation 759 1,047 4,984 10,344
Executive project in preparation 527 1,535 5,331 6,028
Total potential 1,834 3,158 16,184 22,455
Regional aspects
An idea of project development activity by region can be had from Table 47, which shows the number
of Executive Projects (Projeto Básico) and inventory studies of sites by region.
Table 47: Number of Executive Projects and Inventory Studies by Region14
Region Executive Projects Inventory Studies

Southeast 330 190
South 361 351
Northeast 35 89
North 29 102
Center-West 94 205
Total 849 937
The values are not restricted to small hydro, but they serve to illustrate regional differences. The
historic dominance of the South and Southeast are shown, as is the increasing development in the
Center-West.
Characteristics of typical projects
Most small hydro projects are above 5 MW installed capacity. A register of 285 operating small hydro
plants at ANEEL shows that 60% are larger than 5 MW (Table 48). When one takes account of the
fact that most of the older PCHs (built before PROINFA and other programs to promote small hydro)
were smaller than 5 MW, it is clear that more recent developers have preferred to build larger plants.
Table 48: Small hydro plants in operation15
< 1 MW 1-3 MW 3-5 MW 5-10 MW 10-20 MW 20-30 MW Total

31 51 31 49 65 58 285
11% 18% 11% 17% 23% 20% 100%
The average size of plants completed in 2009 was 17 MW. The average capacity of plants which have
been authorized or are under construction is about 14 MW.
13
14
Source: Banco de Informações de Geração, ANEEL. Excludes projects and studies which have not yet begun
or have been stopped.
15
Source: CERPCH, from www.aneel.gov.br
Econoler A-106
REF: 5574
This preference is due to the lower financial attractiveness usually associated with smaller PCHs.
There are economies of scale for costs which do not vary much with size, such as studies and
executive project designs and licensing. One source estimates that there are costs on the order of
BRL 6 million (USD 3.3 million) to develop a PCH, almost regardless of the size of the project.16 This
represents a heavy burden for smaller projects.
In addition, many sites have relatively low heads. In the South and Southeast, which are quite
developed, such sites tend to be what is left. In the North (Amazonia) and Center-West regions, which
have had less of their potential developed, sites with lower heads are typical of the potential due to the
topography. Lower heads imply larger water flows to achieve the same output and as a consequence
the costs per kW of the civil works and the turbo-generator are greater. Thus in order to achieve
economic viability the projects need to exploit economies of scale larger, often approaching the
30 MW limit for small hydro.
Figure 15 illustrates the effect of lower heads, using data from real projects. The horizontal axis shows
the “power ratio” which is a ratio of power to head. A low head site will tend to have a higher power
ratio.
Figure 15: Small hydro costs/MW as a function of the “power ratio”17
Smaller plants, between 1 and 5 MW, are viable when the characteristics of the site are favourable.
This allows lower costs for the civil works and the turbo-generators. In addition, since the plants are
small, it is important to minimize the operating cost. This means that remote control and operation (or
at least, semi-remote controlled) is almost a pre-requisite. The best way to improve the viability of
these smaller plants, from the perspective of O&M, is for several to be located within a radius which
permits the use of a single control center and of a single maintenance team.
16
Estimate of Fábio Dias, Executive Director of the Association of Small and Medium Energy Producers
(APMPE - Associação dos Pequenos e Médios Produtores de Energia – APMPE).
17
Source: CERPCH. The power ratio, shown on the horizontal axis, is defined as
Econoler A-107
REF: 5574
The cost per kW of installed capacity is sensitive to the site, as shown in the graph above, as well as
the scale of the plant. A reasonable range is about BRL 4-6,200/kW based on the recent experience
(with smaller plants tending towards the higher end of the range). At this range of unit costs, the
average plant currently under construction or authorized requires an investment of about BRL 56-
70 million.
The construction costs of small hydro plants have grown substantially in recent years. This is due in
part to the fact that the heads in available sites have diminished and the water flows have increased,
which increases project costs as discussed above. Also, the increase in demand led the
manufacturers to increase the price and to lengthen the delivery time of equipment.
The cost of electricity generated evidently depends strongly on the site, but projects which have been
implemented in recent years generally sell their power for BRL 160-175/MWh (USD 89-97/MWh).
The small number of PCHs registered to participate in the upcoming auction for alternative energy and
A-3 (scheduled for the third quarter of 2010) has been a motive of much discussion in the sector. Out
of a total of 478 projects with 14,500 MW, only 18 projects are small hydro with a capacity of 255 MW.
One explanation is the delays and difficulties in obtaining authorizations from ANEEL and
environmental licenses. Another is the alleged lack of some tax exemptions (ICMS) granted to wind
power projects. Finally, the maximum price allowed for PCHs in the auction is BRL 155/MWh – which
is below the economically viable price for most projects. Curiously, the ceiling for wind power and
biomass projects was set higher at BRL 167/MWh.
While PROINFA and earlier alternative energy auctions have been an important factor in promoting
the development of small hydro, PCHs have a long history in Brazil and a substantial share has been
constructed by self-generators and also for the free market. Given the difficulties with the auction,
these markets continue to be attractive for part of the 149 PCHs with 2.3 GW which have received
authorizations from ANEEL (the power sector regulator) but have not yet started construction.
Overview of the regulatory framework
Small hydro (PCH) is subject to the same basic legislation as larger hydro, with simplifications and
some exemptions to reduce costs.
For the development of larger hydroelectric plants government agencies (principally EPE) prepare the
inventory of river basins and obtain the preliminary environmental licenses for individual sites. These
sites then go in auctions to the lowest bidders, who develop them.
In the case of small hydro (PCH) it is the interested developer(s) who prepare(s) the inventory study.
In addition, there is no formal auction of sites.
Econoler A-108
REF: 5574
An inventory study is an analysis which is intended to identify sites along a given river basin that
optimize the division of the fall line in order maximize energy generation, minimize costs and
environmental impacts and permit multiple uses of the water when appropriate. In 2008 ANEEL
changed the regulation for this activity in Resolution 343. Among the changes compared with the
previous regulation (Resolution 395 of 1998):
• It requires a deposit as a guarantee to register the inventory study - which would be returned on
completion.
• It fixes a time limit for the completion of the study, which previously had been left for the
developer to define.
• The acceptance (aceite) of the analysis of the basic project designs (projetos básicos) of the
sites defined in the inventory now defines a single winner (criteria are in the Resolution) whereas
before it permitted more than one.
• In order to receive the authorization to begin construction of the plant, it is now necessary to
make a deposit guaranteeing commitment to the specified chronogram. Such a deposit was not
needed before.
• At least 40% of the inventoried potential is reserved for whomever prepared the inventory study,
it being the responsibility of the other entrepreneurs to cover the costs of the inventory study.
Since the publishing of this Resolution, ANEEL has encouraged those groups interested in
developing a given hydrographic basin to work together to share the costs of collecting and
analyzing the needed field data and aerial surveys.
• The new Resolution also requires the preparation of an Integrated Environmental Evaluation
(AAI- Avaliação Ambiental Integrada) of the basin being inventoried together with the relevant
agent for environmental licencing. This is in order to define, before the elaboration of the basic
project designs (projetos básicos), which of the sites really are likely to be authorized. With this
measure it is hoped to reduce the conflicts which have frequently occurred when the time comes
to obtain the environmental licence for the project from the relevant Environmental Council.
In order to avoid these new more demanding rules, there was a large increase in the registration of
basic project designs (projetos básicos) for small hydro plants with ANEEL in 2008. More than 700
applications were made in the three months prior to the publication of Resolution 343, falling to almost
zero afterward.
There have been two other recent changes in the regulatory framework for smaller hydro plants:
In the interest of promoting the development of hydro by self-generators and independent power
producers, the upper limit for exemptions from the standard auction process for hydro was extended to
50 MW (Law nº 11,943/2009 amending article 26 of Law nº 9.427/1996).
In addition, there were important changes in the compensation of PCHs’ guaranteed energy in the
Market for Reallocating Energy (MRE - Mercado de Realocação de Energia). The MRE, was
established in 1998 (Decree 2.655/1998 and Resolution 169/2001 of ANEEL) to share the hydrological
risk between hydro plants, including those which are not centrally dispatched - which is the case for
PCHs.
Econoler A-109
REF: 5574
The MRE is intended to minimize the impacts of the occasional unavailability of power from a plant. If
the availability is lower than that used in the calculation of Assured Energy (AE) of the plant, the
energy lacking will be reallocated by the market, using surpluses from other plants. However, it was
understood that the MRE should not cover that part of the unavailability which exceeds the value
established by ANEEL when calculating the plant’s Assured Energy. In the case of plants which are
not centrally dispatched, there should be the physical guarantee that the “firm energy” attributed to the
plant is consistent with its generating capacity and that shortfalls would only occur occasionally.
However, over the years problems have emerged regarding the guarantee of small hydro plants’
assured energy, such as:
• Historically, 46% of the PCHs with at least five years of operation (registered in the
clearinghouse for energy commercialization, the CCEE - Câmara de Comércio de Energia
Elétrica) generated less than 80% of their Assured Energy;
• This poor performance was not detected by the mechanism to reduce assured energy (MRA -
Mecanismo de Redução de Energia Assegurada) – not even in extreme cases.
• Many plants sought retroactively to expunge the value for Assured Energy attributed to them,
alleging lack of water flow. This suggests that there had been an overestimate of the
hydrological resource at the time of the original calculation of Assured Energy.
These and other problems led ANEEL to propose new rules for the calculation of the physical
guarantee (NT 039/2009-SRG/ANEEL) as well as for the participation of PCHs in the MRE (Portaria
049/2009). In addition, the Ministry of Mines and Energy (MME) published Portaria nº 463/2009, with
some modifications of the rules.
The initial calculation of Assured Energy continued to be based on the hydrology of the site and the
availability and efficiency of the turbo-generators as declared by the project developer. However, over
the first 48 months of commercial generation of the plant (60 months total since the first 12 months are
not counted), the average generation may not be less than 80% nor more than 120% of the value of
the Guaranteed Energy. After the 60th month of commercial operation, the average may not be less
than 90% nor more than 110% of the Physically Guaranteed level of output.
The historical problem of the under-performance of so many PCHs being addressed by the changes in
regulation are clearly not only a problem for the operation of the power system. They also represent a
risk for any agent providing financing to these projects. “Project risk” was highlighted in one of the
interviews with commercial banks participating in this market assessment. It ultimately goes back to
the quality of the engineering services being provided. Hopefully the rule changes will lead to reduced
project risk in the future.
Finally, a deposit (caução) is required by ANEEL to reserve the concession for a site. It varies
between BRL 100,000-500,000. This deposit and the costs of environmental licensing can weigh
heavily on smaller projects.
Econoler A-110
REF: 5574
Policies and programs to promote development
One approach to promoting small hydro is the simplifications of procedures to reduce the transaction
costs and the granting of some exemptions. For example, PCHs are exempt from the normal payment
of 6% of revenue to compensate local municipalities for the inundated areas in reservoirs. However,
this exemption has become a common source of conflict in approval hearings where its
constitutionality is frequently challenged. Rather than being a factor promoting small hydro, this
exemption may represent a complication.
An important area of policy support has been in technology research and development. Since the
passage of Law 9.991 in 2000, all utilities are required to invest a percentage of their gross revenue in
R&D - generating companies must invest 1%. These funds may be spent internally or in grants to
research institutions and universities. As a result of the resulting programs there have been significant
advances in technologies for generation, with improvements in environmental impacts. 18
Currently, research is underway to improve the quality of hydraulic turbines using quantitative
techniques to simulate flows in the turbines and the distribution of losses in the generators. In addition,
there are improvements in systems of automation and control of turbo-generators and the use of
generators with varying speeds of rotation.
There is also interest in the development of new turbine technologies to exploit low head sites and
very small generators with low rotation speeds. Regarding the dams, there is attention to new
configurations where the dam is integrated to the powerhouse, the concept of mobile dams and new
construction materials – ranging from metallic dams to the use of tubes with composites of fiberglass
and resins.
There is also research in environmental issues, such as ways to reduce the impact on fish
populations, studies of methane emissions from reservoirs and the impacts of retaining sediments in
the reservoir.
The supply chain and key market players
The supply chain can be divided into three major categories for the purposes of discussion
• Engineering services
• Hydromechanical equipment
• Generators and electrical equipment
Engineering services include all of the prospection phase of the hydro site, the initial evaluations of
potential and viability, the hydro-energetic inventory, analyses of hydrology, geological and
geotectonic studies, the basic design and executive project, socio-economic and environmental
studies and finally the execution of the project itself.
18
There do not appear to be any obvious opportunities for IFC venture capital investment to leverage these
R&D grants. However, the range of R&D is very broad and diverse. If the IFC wants to seriously evaluate
possibilities for venture capital a separate review of the energy R&D program would be needed.
Econoler A-111
REF: 5574
There are many firms providing this kind of service in Brazil. In some cases their primary experience is
with the design and construction of large hydro plants and need to adapt themselves to the conditions
of smaller plants. The same distinction between suppliers for larger and smaller plants can be made in
the other two categories of suppliers described below.
Hydromechanical equipment is that which controls the flow of the water and directs and extracts the
hydraulic energy in it. These include the grates, stop-logs, gates, pipes, valves and above all the
hydraulic turbines. The turbine manufacturers normally supply the other hydromechanical equipment
as part of a single package. However, there are other manufacturers who produce this kind of
equipment, such as: Confab, Vilares, Badoni-ATB, Serme, Coemsa, Bardella, CEM, CatLeo and
Saint-Gobain. For smaller plants the list of suppliers could expand greatly since the fabrication is quite
straightforward.
Table 49: Hydromechanical equipment for small hydro projects
Firm Site Contact

Confab www.tenaris.com/TenarisConfab (12) 3644 9000
Vilares www.villares.com.br (11) 3094 6600
For the turbines as such, suppliers can be divided into two groups. In the first group are large
international companies with a presence in Brazil, such as Alstom, Voith and Vatech. These
manufacturers are competitive for turbines larger than about 5 MW. In the second group are domestic
companies such as Wirz, Hisa, Hacker, MCA, Rischbieter and Framaq. These firms have the capacity
to supply turbines of up to about 6 MW.
Table 50: Tubine suppliers for small hydro projects
Firm Site Contact

Dedini www.dedini.com.br (11) 3371 9900
Bardella www.bardella.com.br (11) 2487 1111
Alstom www.power.alstom.com (11) 3612 7000
Voith www.voith.com.br (11) 3944 5100
Andritz www.andritz.com.br (11) 4133 1260
Wirz www.turbinaswirz.com.br (51) 3712 1677
HISA www.hisa.com.br (49) 3551 9000
Hacker www.hacker.ind.br (49) 3441 8000
Rischibiter www.rischbieter.com.br (41) 2104 1717
SEMI www.semi.com.br (11) 3079 7343
Mecamidi www.mecamidi.com.br (11) 3063 5710
Generators and electrical equipment: As with the turbines it is possible to divide manufacturers into
two groups. The larger manufacturers are competitive only in the larger size range, where at times it is
necessary to use generators with vertical axes. Voith-Siemens and Alstom are examples.
For smaller plants with conventional generators, up to about 4 MVA, there various other
manufacturers who can supply the market for PCHs. These include Toshiba, WEG, Gevisa, Negrini,
Equacional, Bambozzi and Kolbach.
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Electrical equipment also includes items such as control panels, meters and transformers, as well as
the systems for automation and communication. The same suppliers of the generators, as well as
many other firms, can provide this equipment – which is widely used in industries and electrical
substations. The same can be said for transmission lines. There is a large diversity of suppliers of
cables, structures, posts and accessories.
Table 51: Generator and electrical equipment supplier for small hydro projects
Firm Site Contact

Toshiba www.toshiba.com.br (31) 3329 6650
WEG www.weg.com.br (47) 3337 1000
Gevisa www.gevisa.com.br (11) 3614 1930
Negrini www.negrini.com.br (11) 2020 9999
Equacional www.equacional.com.br (11) 2100 0777
Bambozzi www.bambozzi.com.br (16) 3383 3800
Siemens www.siemens.com.br 0800 -119484
ABB www.abb.com.br (11) 3688 9111
Balteau www.balteau.com.br (35) 3629 5518
Orteng www.orteng.com.br (31) 3399 6600
Grameyer www.grameyer.com.br (47) 3374 6300
A crucial set of agents are the project developers and economic groups which have specialized in
small hydro. Many are quite small, but there are some larger groups which are active. Two important
examples are:
• The Ersa group, which is a joint venture between Patria Investments, Eton Park (an American
asset management group), the Fund BBI FIP (administered by the Banco Bradesco de
Investimento), a GMR Empreendimentos Energéticos and DEG (part of the German group KfW).
It has three plants in operation and nine under construction which will total about 300 MW.
• The Canadian group Brookfield Energia Renovável (ex-Brascan Energia), owns and operates
30 plants with 536 MW, the largest PCH portfolio in the country. It paused during the financial
crisis but is now preparing to embark on new projects.
Developers often outsource the operation of the plants to specialized firms.
Overview of sources of financing used until now
The main source of financing for PCHs has been project financing by the BNDES, as shown on next
table. Up to 80% of the plant and accompanying transmission can be financed with an amortization
period of up to 14 years.
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Table 52: BNDES financing for PCH projects
BNDES Line TJLP19 a BNDES Fee BNDES Finance Collateral

Credit Risk Intermed required21
Credit Risk20
Direct FINEM 6.0% 0.9% Up to 3.75% --- 100%
Operations Project Finance 6.0% 0.9% Up to 3.75% --- 130%
Indirect
FINEM 6.0% 0.9% --- Up to 3.50% 100%
Operations
There is no information on the share of financing which is done directly by the BNDES and the share
lent in “indirect” operations through financial intermediaries. Almost all projects are large enough to be
financed directly by the BNDES. Private commercial banks appear to be wary of the technical risks
which have appeared. Many small hydro plants have under-performed due to inadequate hydrological
analyses, while geological risk is also a common concern.
The main difficulties encountered by many project developers in obtaining financing have been:
• Amortization periods which are too short for hydro plants (though this suggests that these plants
are only marginally economic.
• Lack of capital for the initial development and definition of the projects as well as a lack of equity
for the project financing itself;
• Inadequate credit ratings;
• Guarantees required to obtain loans;
• Perceptions of project risk and the lack of instruments to mitigate them (e.g. performance
bonds). Some kind of certification procedure, as exists for wind power projects, could mitigate
this barrier. However, the more stringent requirements for project design may simply make
smaller projects unviable.
One approach to mitigating the project risk is to purchase insurance in the form of a “completion bond”
which guarantees the completion date, the capacity and contracted energy (MWh/year) or a project.
The BNDES allows up to 50% of the value which has been financed to be covered by this kind of
insurance.
Insurance firms in Brazil specialized in guarantees are interested in this market. The principal Brazilian
re-insurers are:
• ACE Resseguradora S/A

• IRB Brasil Resseguros S/A
• JMalucelli Resseguradora S/A
• Mapfre Re do Brasil Companhia de Resseguro
• Munchener Ruck do Brasil Resseguradora S.A
• XL Resseguros Brasil S.A
19
The TJLP (long term interest rate) is the underlying cost of capital for the BNDES loan–rate in July 2010
20
Spread for the credit risk of the authorized financial intermediary.
21
Garantias reais in Portugese.
Econoler A-114
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However, there are no large insurance firms in Brazil which are active in this market. Normally,
specialized firms active in this market negotiate the reinsurance with IRB Brasil-Re and with large
foreign reinsurers. Sometimes they establish partnership links with them. Typically the domestic
insurer assumes 30% of the contracted risk and passes on 70% to the foreign reinsurer. There are
other, less comprehensive, types of insurance available to mitigate risks in energy projects. An
example is contracts for engineering risk, which covers items such as the civil works and the proper
functioning of the equipment.
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APPENDIX 6 SUGARCANE BIOMASS MARKET SECTOR
Energy from sugarcane biomass provides a substantial share of the energy supply in Brazil – a
situation which is unique among the larger countries in the world. There are two basic ways that
sugarcane contributes to energy supply:
• The ethanol (both hydrated and anhydrous) which supplies liquid fuel for the transport sector as
well as a feedstock for non-energy uses.
• The residues - chiefly bagasse from milled cane but also, increasingly, field residues - which are
used for process heat in sugar and ethanol production, as well as to generate electricity in
systems of cogeneration.
Scale of the market and recent trends
Brazil is by far the largest producer of sugarcane in the world and the sugarcane sector has
considerable weight in Brazil’s economy. The below table illustrates this point. It presents the GDP of
the sugarcane sector broken down by different markets – with and without taxes included. Energy
products (ethanol and electricity) already account for 56% of total sales.
Table 53: Estimate of the GDP of the sugarcane sector by product and market (millions of
USD)g
Product Domestic Market Exports Total (Domestic + Exports)

Includes Without Exempt Includes Without
Taxes f Taxes from Taxes Taxes Taxes
Ethanol - Hydrated 11,114.5 a 9,105.1 23.8 11,138.3 9,128.9
Ethanol - Anhydrous 2,972.9 b 2,250.9 2,366.3 5,339.2 4,617.2
Ethanol - Nonenergy 438.8 c 351.6 -- 438.8 351.6
Sugar 5,297.1 d 4,455.8 5,483.0 10,780.1 9,938.8
Electricity 389.6 e 242.87 -- 389.6 242.9
Byproducts 21.4 19.4 42.2 63.6 61.6
Carbon credits -- -- 3.5 3.5 3.5
Total 20,234.4 16,425.7 7,918.8 28,153.1 24,344.4
a
Sales by retail gasoline stations (formal and informal markets) b Sales of distilleries to distributers (formal and
c d
informal markets) Sales to drinks and cosmetics industries Sum of sales to industries and to retail e
f
Sales of the mills in the auctions for electricity Taxes are IPI, ICMS, PIS e COFINS g Sum of all the sales
in the supply chain less the costs of intermediate goods used in production
Source: Neves, Trombin e Consoli, 2009
Note that ethanol output is divided into two categories: hydrated ethanol and anhydrous. Anhydrous
ethanol is an additive for gasoline which enhances the octane of that fuel. It is used in proportions
between 20% and 25% (the blending percentage of ethanol in the gasoline is determined by the
government, based on analysis of supply/demand scenario). Hydrated ethanol is somewhat cheaper
to produce and has traditionally been used in pure form as a substitute for gasoline since it was
introduced some 30 years ago. In 2003 Brazilian automobile manufacturers began to sell “Flex Fuel”
vehicles which can use hydrated ethanol mixed in any proportion with gasoline (which in Brazil is
always mixed with 20-25% anhydrous ethanol).
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Sugarcane was processed in more than 400 sugar mills and distilleries in 2008. The evolution of
sugarcane production and sugar and ethanol output is summarized in Table 2.3.2.
Table 54: Evolution of sugarcane, sugar and ethanol production from 2003 to 2008
2003/04 2004/05 2005/06 2006/07 2007/08 2008/09

Sugarcane1 359.3 386.1 387.4 425.5 495.7 569.1
Sugar1 24.9 26.6 25.9 29.9 31.0 31.0
Ethanol2 14.8 15.4 15.9 17.7 22.5 27.5
Notes: 1 Million metric tons, 2 Billions of liters
Source: Unica, 2009
The sector’s expansion began to accelerate in 2004. The principal factor was the growth in the internal
market for ethanol. This acceleration was stimulated by:
• The introduction of “Flex Fuel” vehicles and the rapid growth in that fleet, which passed the 8
million mark in 2008 and has now reached about 10 million.
• The increase in the price of gasoline over much of this period, which encouraged drivers to use
more ethanol and less gasoline.
The large and growing fleet of Flex Fuel vehicles guarantees a growing domestic market for ethanol
so long as oil prices maintain their current levels.
Overview of potential
The potential for expansion of ethanol production (beyond the normal expansion of sugar) and of
electricity generation is very large in Brazil. In the short and medium term it is limited by market growth
and investment rather than by natural resources.
There are various factors which contribute positively to the prospects for the growth of the sector in the
shorter and longer term.
Brazil is highly competitive in world markets as a sugar producer, ensuring gradual growth in this
export oriented segment.
Brazilian ethanol production is also competitive with gasoline, without subsidies. In the International
Energy Agency’s (IEA) price projections for gasoline, Brazilian ethanol will continue to be cheaper
than gasoline.
The technology for producing and processing sugarcane is both mature and cutting-edge, which helps
insure lower costs in the future. This technological sophistication and dynamism of Brazil’s sugarcane
sector includes the genetic improvement of sugarcane (more than 500 varieties of cane have already
been developed) and improvements in agronomy and crop management which will continuously
increase yields per hectare.
Ethanol from Brazilian sugarcane was recently classified by the U.S. Environmental Protection Agency
as an “advanced biofuel” which in principle opens the door for future exports to that country, though
tariff barriers still remain (see below). Similarly, Brazilian ethanol also satisfies the prerequisites of the
Econoler A-117
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Renewable Energy Directive (RED) of the European Union in terms of greenhouse gases (GHG)
reduction.
The recent auctions for electricity organized by ANEEL have shown that electric power can be
generated for sale to the grid at prices which are competitive with other thermal generation resources
based on fossil fuels. The use of field residues is increasing as field burning is reduced and this will
further increase the potential. All of this will aggregate more value to the cane being processed in the
mills.
An estimate of the expansion of the sector through the harvests 2015/2016 and 2020/2021 prepared
by UNICA (União da Indústria de Cana de Açúcar) is shown in Table 55. In this scenario of the sector,
the sugar output will become even more dominated by exports (going from 60% to 73% in 2020/2021)
while output will grow at respectable but relatively modest rates. Much greater expansion is projected
for ethanol and electricity generation.
Table 55: Scenario of expansion of the sugarcane sector in Brazil until the harvest of 2020/2021
2007/2008 2015/2016 2020/2021

Sugarcane produced (million t) 496 829 1.038
Cultivated area (million ha) 7.8 11.4 13.8
Sugar (million t) 31.0 41.3 45.0
Domestic market & stocks 12.4 11.4 13.8
Export 18.6 29.9 32.9
Ethanol (billion liters) 22.5 46.9 65.3
Domestic market 18.9 34.6 49.6
Export 3.6 12.3 15.7
Electricity (MW-average) 1,800 11,500 14,400
Source: UNICA, 2008
In this scenario, the ethanol market would continue to be dominated by domestic demand (still 76% in
2020/2021) though exports would grow fourfold. This projection of exports assumes the continuation
of existing trade barriers. The fastest growing segment would be electricity generation, which would
grow eightfold over the period.
The dramatic growth in electricity sales would contribute to a significant shift in the profile of sales of
the sector, as shown in Table 56. The share of energy products in income from sales would increase
from 43% in 2006/2007 to 67% in 2015/2016, with the greater part of the increase in revenues due to
growth in electricity (the value in this table is different from Table 53 because it only includes sales at
the sugarcane mill’s gate, not the gross internal product of the supply chain). It is interesting to
observe that, even today, less than ¼ of the sugarcane mills sell power to the grid.
Table 56: Projected change in the revenue profile of sugarcane mills
Products 2006/2007 2015/2016

Electricity 1% 16%
Ethanol 42% 51%
Sugar 56% 32%
Source: UNICA, 2008
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One characteristic of income from electricity sales is very significant from a financial point of view.
Unlike sugar (and to a lesser extent ethanol) the price of electricity sold in long term contracts is quite
stable. This will be helpful to reduce the volatility of income of the sector.
The technical potential to dramatically increase the sale of surplus power to the grid certainly exists,
as will be discussed in the section below on the characteristics of typical plants.
An attractive aspect of using cogeneration from sugarcane for electricity supply is that, in the South-
Central macro-region of Brazil, the sugarcane harvest period coincides with the drier part of the year.
This provides a natural complementation to the river flows in the region and hence the dominant
hydroelectric system, as shown in Figure 16. As a consequence the volume of hydro reservoir
capacity required for a given level of “firm” energy is reduced. This is helpful because many
environmental and social impacts are usually associated with large hydro reservoirs. In addition, the
ratio of hydro reservoir capacity to hydro generation capacity has steadily declined in recent years and
will continue to fall.
Figure 16: Complementation of the natural flow hydropower by seasonal sugarcane mill
generation22
Despite this attractive complementation of the natural cycles of hydro and sugarcane, there has
traditionally been a certain resistance in the electricity market to buying “seasonal” power. This
resulted in deep discounts for sales from sugarcane mills. The recent auctions have begun to mitigate
this problem.
A question which faces the use of sugarcane residues for electricity generation is their future
availability if “second generation” liquid biofuels take off. “Second generation” biofuels in this case
refers to liquid fuels produced from ligno-cellulosic materials such as sugarcane residues. These are
the subject of massive R&D investments, especially in the United States. It is anyone’s guess when
(or if) a commercially viable solution to this challenge will emerge. However, in the United States the
22
Source: Castro et al., 2009
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Energy Independence and Security Act of 2007 (Renewable Fuel Standard 2 or RFS2) requires that at
least 60 billion liters of “second generation” alcohol (or equivalent) be used in 2022.
The development of liquid biofuels from ligno-cellulose is likely to be slow (the IEA believes that
“second generation” will play no significant role until the 2020s). This could open an export opportunity
for Brazil. As already observed, Brazilian ethanol has already been qualified as “advanced”, that has a
market share targeted by the RFS2 of 15 billion liters by 2022. Of course, the practical opening of this
potential market will be eminently political since the customs tariffs on Brazilian alcohol are still there.
In addition, RFS2 does not allow advanced biofuels (such as Brazilian ethanol), to substitute for
cellulosic ethanol.
But what if there is a breakthrough faster than expected? Given the dynamism of bioengineering, that
is not impossible.
First, conventional Brazilian ethanol from sugarcane is still very likely to be cheaper. In the US (and
elsewhere) the “second generation” is competing against more expensive alternatives, such as
ethanol from corn. This perspective is reinforced by an analysis of the International Energy Agency
(IEA) which concludes that ethanol from sugarcane is the only “first generation” liquid biofuel which
can survive in the longer term, as illustrated in next figure.
Figure 17: Biofuels consumption and land use in a global scenario to reduce greenhouse
gases by 50%23
Within Brazil the transition to “second generation” biofuels is likely to be quite gradual. If the new
technology begins to enter the market it will create a price for sugarcane residues. For sugarcane mills
which have invested, say, ten years before in electricity generation (and hence amortized much of the
investment), it is very unlikely that this price could compete with that for electricity generation. The
impact will be felt in new “greenfield sites”. However, the new technology should not make previous
investments unviable (at least those made a few years earlier, which means at least the next 5 years).
Another point is that the sector is growing accustomed to producing three major products: sugar,
23
Source: IEA, 2008. Biodiesel BtL means “Biomass to Liquid”; it refers mostly to biodiesel fuels from the
Fischer-Tropsch process.
Econoler A-120
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ethanol and electricity. This approach has proven to be helpful to reduce the economic risks of
producing commodities in a globalized market.
Characteristics of typical projects – choices of scale and investment
When the sugarcane sector began its new phase of expansion, technical studies were made of the
optimum size for new “greenfield” plants. The reason for such studies arose from the fact that, on the
one hand, there is a strong economy of scale in investment which favors larger mills. On the other
hand, the increase in processing capacity will also increase the costs of transport of the cane to the
mill and the complexity of the logistics of the agricultural operations (e.g. number of fronts for
harvesting cane, movement of workers and machines). The result of these studies suggested that the
optimal scale for a new plant would be on the order of 2 million tons of cane per year (tc/yr) –
equivalent to about 12,000 tc/day.
In fact, 62% of the projects submitted to the BNDES for financing have had a capacity between
1.5 and 2.9 million tc/yr, with an average of 2 million tc/yr. However, today there is tendency to build
larger mills, with capacities above 3 million tc/yr. This may have been stimulated by the rapid growth in
output projected by the large economic groups entering the sector. Table 57 summarizes estimates for
the effect of scale on the investment per unit of capacity. The unit investment falls by 20% as the scale
increases from one to four million tc/harvest (which corresponds in practice to tc/yr).
Table 57: Effect of scale on approximate investments in new sugarcane plants24
Milling capacity Industrial investment Unit investment

(million tc/harvest) (million BRL) (BRL/tc/harvest)
1 195 195
2 350 175
3 480 160
4 600 150
If we consider an average plant with a milling capacity of 2 million tc/yr (12,000 tc/day), with half going
for sugar and half going for ethanol,25 the typical parameters of a modern plant would be as shown in
Table 58. In an autonomous distillery, there is no sugar production and ethanol output would increase
from 500,000 to 1,000,000 litres per day – the remaining parameters would remain approximately the
same.
24
Source: Dedini, 2010. Complete plant – excludes investments in sugarcane production. Assumptions:
A. Turn-key plants; boilers of 66 bar/520 ºC; condensing/extraction turbo-generators (CEST) or separate
condensation and back pressure turbogenerators.
B. Process steam consumption between 340 and 400 kg per ton of cane (kg/tc).
25
In a plant of this type the production lines for sugar and ethanol are somewhat oversized to permit some
short-term flexibility of production depending on market conditions.
Econoler A-121
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Table 58: Typical parameters of sugarcane mill with a capacity of 2 million tc/harvest a
Daily milling capacity 12,000 tc/day (divided between 6 crushing mills)

Ethanol production 500,000 liters/day
Sugar production 800 tons/day
Bagasse production 260-280 kg/tc
Process steam consumption 340-400 kg/tc
Boilers 2 of 150/ton steam/hour @ 66 bar/520˚ C
Turbo-generator Condensing/extraction with 47 MW
Total capacity to generate electricity 47 MW
Surplus capacity available to export to the grid 40 MW
Capacity of mechanical equipment driven by steam 9 MW
a
Here and elsewhere, when referring to a capacity of 2 million tc/harvest, a standard harvest period is assumed
of 167 days. More accurate would be to refer to the hourly milling capacity which would be 500 tc/hour.
The amount of electricity generated per ton of cane processed can vary widely, depending on:
• The pressure and temperature of the steam produced;

• The consumption of process steam;
• The choice between simple back pressure turbo-generators and extraction/condensing turbo-
generators;
• The choice between drives for the equipment which prepares and crushes the cane (basically
mechanical, using steam, and electrical or electrical/hydraulic);
• The fibre content of the cane.
The next table illustrates the differences between some alternatives.
Table 59: Broad alternatives for generating surplus electricity for sale
Steam Type of Fuel status Surplus Surplus

Conditions turbogenerator generation capacity
(kWh/tc) a (MW) a b
22 bar/300 ºC Back pressure Bagasse in excess 0-10 0-5
65 bar/480 ºC Back pressure Bagasse in excess 40-60 20-30
100 bar/520 ºC Extraction/condensation All bagasse used c 70-90 d 35-45
Bagasse+50% field
100 bar/520 ºC Extraction/condensation 130-150 35-45 e
residues d
Source: The consultant (Regis Leal) based on Lamônica, 2009.
a
The lower end of the range in each alternative reflects the conditions in older plants, while the higher values
assume optimized energy configurations normally used in new plants (eg the use of electrical or
b
electric/hydraulic drives in the preparation and crushing of cane). Assumes a milling capacity of 500 tc/hour
c
or a nominal 2 million tc/harvest. All available bagasse is consumed, assuming only 5% held for shut downs
d
and start-ups of the plant. All available bagasse is consumed, complemented by 50% of the field residues.
e
Electricity is generated thoughout the year and not only during the harvest, unlike the other options.
Average values for period during the harvest and between harvests
A more detailed view of the impacts of different technological options on the generation of surplus
electricity to sell to the grid is provided by a study of Dedini, the largest equipment manufacturer for
the sector (Dedini, 2008). Table 60 summarizes a series of alternatives ranging from the 21 bar boilers
which were prevalent in the 1990s, through 65 bar boilers which have predominated in more recent
years to the state-of-the art 100 bar boilers with efficient use of steam in the processing of the
sugarcane.
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Table 60: Surplus electricity for sale with alternative energy configurations26
Steam Scenario Steam Total In plant consumption Surplus for

Conditions consumption generation MW sale
bar/ ºC kg/tc MW kWh/tc Electricity Mechanicalg MW kWh/tc
21/300 A-Reference a 492 6,5 13,0 6,5 13,0 0 0
21/300 B-Bagasse b 492 15,2 30,4 6,5 8,0 8,7 17,4
42/420 C-Steam 492 33,0 66,0 6,5 8,8 26,5 53,0
drive c
65/485 D-Steam 492 41,3 82,6 6,5 9,3 34,8 69,6
drive c
65/485 E-Steam 400 45,8 91,6 6,5 9,3 39,3 79,6
drive c
65/485 F-Electrical d 400 58,7 117,4 18,0 0 40,7 81,4
100/530 G-State of art 300 69,9 139,8 19,2 0 50,7 f 101,4 f
e
a
Reference scenario: mill is self sufficient in electricity and there is an excess of bagasse. This is typical of mills
b
built in the late 1980s. All the bagasse is used (275 kg/tc), less 5-7% for plant shutdowns, hot standby and
start-ups. This is true for all the scenarios below with higher steam pressures.
c d
Steam-driven equipment to prepare and crush the sugarcane. Electrical: equipment to prepare cane is
e
driven by electric motors and crushing is done with electrical-hydraulic systems. State-of-art system with
electrical/hydraulic drives for cane preparation and crushing, monodrum 100 bar boiler and
f
extraction/condensation turbo-generators. The values here for exportable surplus are higher than in the
equivalent case of the previous table, in the third line (100 bar, all bagasse used) - for example 101 kWh/tc
versus only 90. This because the values here are for a completely optimized plant (300 kg steam per tc and
89% boiler efficiency), whereas in the table above the values are those actually being achieved in recent new
mills (350 kg steam per tc and 85% boiler efficiency).
g
Refers to the power of the steam driven equipment to prepare and crush the sugarcane.
It can be seen from the table that the amount of surplus electricity available to sell to the grid depends
strongly on the steam pressure and temperature produced by the boiler. It is also somewhat sensitive
to other energy optimization measures, such as reduced process steam use or the use of
electrical/hydraulic drives for preparing and crushing the cane instead of the traditional steam driven
mechanical drives. The study cited only considers the use of bagasse and not any field residues. The
impact of the fibre content of the sugarcane was not considered in this study but can also be
significant.
Table 61 shows the boiler pressure of projects submitted to the BNDES for financing in recent years. It
can be seen that more than 2/3 been with steam pressure of about 65 bar.
26
Source: Dedini, 2008. Only includes bagasse for fuel – no use of field residues.
Econoler A-123
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Table 61: Boiler pressures in proposals for financing submitted to the BNDES27
Boiler Pressure (bar) DEBIO a DEGAP b Total Share

21 2 - 2 2.5%
30-33 3 - 3 3.8%
42-45 13 - 13 16.3%
64-70 37 22 59 73.8%
97-100 2 1 3 3.8%
Total 57 23 80 100%
a
DEBIO–Departamento de Biocombustíveis, deals with projects for the whole sugarcane operation.
b
DEGAP–Departamento de Gás, Petróleo e Energias Alternativas, deals with generation projects
specifically for selling electricity to the grid.
However, some investors are beginning to opt for higher pressure (100 bar) systems. Table 62
compares the investment in 65 bar and 100 bar cogeneration plants.
Table 62: Impact of plant pressure and scale on investment28
Pressure and Investment

Capacity USD/kW USD 106
100 bar
50 MW $1,694 $85
70 MW $1,389 $97
65 bar
41 MW $1,597 $65
60 MW $1,250 $75
The vast majority of new plants in recent years have installed the traditional back pressure turbo-
generators. Extraction/condensing turbines, though somewhat more expensive, decouple electricity
generation from the process steam requirements of the mill. This means that the plant can respond
more flexibly to variations in the electricity market during the harvest season (when it is in co-
generation mode). Probably more important, this also means that the mill can generate electricity
outside the harvest season. Both kinds of flexibility are very helpful for adding the use of sugarcane
field residues (“ponta e palha”) as a fuel.
Environmental restrictions are increasingly limiting the use of field burning and commercial unburned
(green) cane harvesting techniques have been developed. Although part of this straw residue (“ponta
e palha” in Portuguese) must be returned to the soil a large part can be used as fuel. More study is
needed to determine the ideal quantity of straw which should be left in the fields to protect the soil
against erosion, to maintain soil moisture, recycle nutrients and especially, to make possible the use
no tillage technology in sugarcane cultivation. Today, without further studies, it is considered that 50%
recovery is a reasonable value. This would correspond to about 7 - 8 tons of dry matter per hectare.
The availability of straw in the fields will depend essentially on the spread of cane harvesting without
burning. Considering the Federal Law that determines the phase out of cane burning in Brazil and the
27
Source: BNDES (Position in 07/2008). Data in atmospheres/bar.
28
Source: Dedini. Costs include transport and taxes but may vary by ±10% due to different plant conditions.
Assumes an exchange rate of BRL 1.80/USD.
Econoler A-124
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two Environmental Protocols in the states of São Paulo and Minas Gerais, the share of sugarcane
harvested without burning should evolve as shown in Table 6329.
Table 63: Estimated phase out schedule for sugarcane burning30
Year % of cane harvested without burning

SP/MG a Brazil b
2010 55 45
2014 75 65
2017 100 85
2020 and afterwards 100 90
a
Environmental Protocols in São Paulo and Minas Gerais
b
Federal Law 2,661
Thus, the use of the straw residues which have traditionally been burnt in the field is a near and
medium term possibility for increasing electricity output. This increase can be quite significant. With
boilers operating at 100 bar, the use of 50% of these residues could add about 60 kWh per ton of
sugarcane processed, as shown above in Table 59. This increase is close to what mills generate
today for sale from all their bagasse with boilers operating at 65 bar.
The technology for collecting field residues, however, is still not mature. Bailing straw and leaves
blown onto the field suffers from bringing quite large amounts of earth with fuel (10% by weight can be
ash). This might be mitigated by some kind of cleaning process at the mill. Another approach is to
leave some of the leaves and straw together with the cane. This increases transportation costs
because the density of the load is considerably reduced. The technique of blowing the residues into a
separate trailer has not so far worked. This kind of engineering problem might be solved more rapidly
if there were an urgent demand for this residue. However most mills would not be able to use more
than a small part of the residue collected because they are already dimensioned to only use bagasse
during the harvest season and they are incapable of using the residue at other times, since they have
back pressure turbines. There is a chicken-and-egg problem here.
Today, the best returns are obtained with 65 bar plants operating in pure cogeneration mode. Whether
the market will evolve towards a higher share of 100 bar plants will depend on investors’ perceptions
of future energy prices and the impact of the increasing availability of field residues. There is also a
competition for investment resources to expand sugar and ethanol production.
A longer term possibility, outside the horizon of this study, is the use of biomass gasification with
combined cycle technology. This technology could lead to an exportable surplus of ~300 kWh/tc, or
almost double that which could be achieved in the new mills using 100 bar steam turbines using field
residues. However, to achieve this level it would require using 70% of field residues (versus 50% now
contemplated) and steam consumption reduced to 280 kg/tc (versus 350 kg/tc, though not much
below the state-of-the-art of 300 kg/tc). All this will take time, but given the advances in recent years it
is not impossible.
29
Cane burning for 10% of production is assumed to remain for social and technological reasons, especially in
the hilly areas in the Northeast. In the long run this 10% will probably diminish to close to zero.
30
Source: Leal, 2009
Econoler A-125
REF: 5574
Significant regional differences
Brazil can be divided into two broad regions for sugarcane production:
• The Central-South31 region accounts for 90% of total production and the harvest is primarily in
the period from April to November.
• In the North-Northeast region, which accounts for about 10% of total production, the harvest is
primarily in the period from September to February.
As shown in Table 64 production has concentrated more in the Central-South in recent years and this
trend is expected to continue. Amazônia (except for the State of Tocantins) is outside the agro-
ecological zone for sugarcane. In the Northeast, there is limited land which is apt for the cultivation of
sugarcane, except in Bahia, Maranhão and Piauí.
Table 64: Production of sugarcane in Brazil and by regions (thousand metric tons)32
Regions 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09

North 670 849 858 1,101 894 1,092
Northeast 59,525 56,544 48,869 52,149 63,716 63,008
Southeast 234,257 261,469 276,914 299,244 339,737 397,166
South 28,580 29,076 24,867 32,087 40,498 44,937
Middle West 36,284 38,153 35,933 40,955 50,879 62,860
Central-South 299,121 328,697 337,714 372,285 431,114 504,963
North-Northeast 60,195 57,393 49,728 53,251 64,610 64,100
Brazil 359,316 386,090 387,442 425,536 495,723 569,063
The State of São Paulo alone produces about 60% of the country’s sugarcane and continues to grow
despite the higher cost of land. Indeed, as shown in Table 65, the State’s share of financing from the
BNDES has varied between 65% and 70%. This is due to the high productivity per hectare, availability
of qualified labour, easier access to technical assistance and better infrastructure for commercializing
production.
Table 65: Profile of loans by the BNDES to the sugarcane sector, by state, from 2004-2008 (%)33
State 2004 2005 2006 2007 2008

São Paulo 69,8 66,6 72,8 64,7 70,4
Minas Gerais 5,4 6,9 7,6 4,6 9,8
Paraná 9,0 12,1 7,8 6,9 8,1
Goiás 9,8 7,2 7,6 16,4 7,0
Mato Grosso do Sul 0,7 0,3 1,2 1,1 2,7
Pernambuco 2,1 2,1 1,1 1,1 0,5
Alagoas 1,2 1,5 0,6 0,4 0,2
Outros 2,1 3,2 1,3 4,8 1,3
31
This region includes the Southeast, Middle West and Southern regions more generally used to divide Brazil
geographically.
32
Source: Unica, 2009
33
Source: BNDES (Position in 07/2008)
Econoler A-126
REF: 5574
Barriers and risks
Barriers to the market penetration of ethanol in Brazil are now very small given the expansion of the
Flex Fuel vehicle fleet. Barriers to exports continue to be the heavy customs duties which are applied
to Brazilian ethanol. In the USA this is USD 0.54/gallon (3.8 litres) + 2.5% ad valorem tax. In the
European Union, EUR 192/m3 of ethanol.
Requirements for certification of biofuels which will soon be imposed – principally those related to
calculations of the emissions of GHG due to land-use changes (LUC and ILUC). The requirements for
certification will probably favour sugarcane ethanol produced in Brazil when compared with grain
ethanol produced in the USA or the EU, especially with respect to GHG abatement potential.
However, it will introduce a risk in the biofuel business since these requirements are not fully
developed yet).
Perceptions of competition with food supply which are exaggerated by campaigns of interests who are
opposed to the expansion of biofuels.
For electricity generation, the primary risks today involve the costs in comparison with other alternative
of power generation and uncertainties regarding future electricity price and demand as well as
reinforcement of the connection with the grid to sell power.
Overview of the regulatory framework for ethanol
The production and use of ethanol began to be regulated in Brazil back in 1931, when a 5% mixture
was decreed for imported gasoline. The objective at the time was to reduce the surplus of sugar
produced, which was depressing prices for the commodity. The Institute for Alcohol and Sugar (IAA -
Instituto do Açúcar e do Álcool) was created in 1933 to set production quotas and prices for cane,
sugar and alcohol – including for the export market.
With the creation of Proálcool in 1975 (Decree Nº 76.593) ethanol began to have a distinctive
treatment as a product potentially as important as sugar. At that time 600 million litres of ethanol were
already being produced annually. The Constitution of 1988 began the deregulation of the sector. In
1990 the IAA was extinguished. In 1991 the prices of anhydrous and hydrated ethanol were liberated
at the producer level. In 1999 the government ceased to fix the price of sugarcane in the mills and the
retail price hydrated ethanol. Since then prices have been set by the market. As part of this change a
Council of the Producers of Sugarcane, Sugar and Alcohol (CONSECANA - Conselho dos Produtores
de Cana, Açúcar e Álcool) was created in 1997. The setting of prices for sugarcane was left to be
negotiated between the independent sugarcane growers and the mill owners.
In 2005 the regulation of biofuels was passed to the ANP (today the National Agency for Petroleum,
Natural Gas and Biofuels). This includes fixing the level of anhydrous ethanol in gasoline (between 20
and 25%, depending on the balance of supply and demand), assuring the maintenance of adequate
stocks and guaranteeing ethanol supply throughout the country.
The Interministerial Council for Sugar and Alcohol (CIMA) was created by Decree 3,546 in 2000 inside
the Ministry of Agriculture (MAPA - Ministério da Agricultura, Pecuária e Abastecimento). It deliberates
Econoler A-127
REF: 5574
on factors and mechanisms necessary for the self-sustainability and growth of the sector, including
scientific and technological development.
The norms establishing the specifications for ethanol, including minimum parameters for quality, are in
the Regulamento Técnico Nº 07 which was published in Resolution 36/2005 of the ANP. Currently
Brazil, the European Union and the USA are trying to negotiate na international specification.
Unfortunately, there are still some significant differences between the proposals. In 2009, the
International Organization for Standardization (ISO) began the process to prepare a norm for certifying
biofuels, including ethanol.
The taxes which apply to ethanol are the IPI (Tax on Industrialized Products - Imposto sobre Produtos
Industrializados), the ICMS (Tax on the Circulation of Goods and Services - Imposto sobre Circulação
de Mercadorias e Serviços), the CIDE and the social taxes (PIS & COFINS).
Overview of the regulatory framework for the sale of power to the grid
The first legislation concerning the sale of surplus power to the grid by co-generators such as
sugarcane mills was published in 1981 (Decreto-Lei 1872). It allowed the electric utilities to purchase
power from self-generators, so long as it was generated without the use of oil derivatives. It was not
until 1987 that the first sugarcane mill could exploit this possibility (São Francisco de Sertãozinho in
São Paulo).
There is a huge number of regulatory acts and Federal and State laws bearing on the sale of power by
self-generators to the grid. Here we only summarize some key legislation.
A crucial step was taken by Decree 2003 in 1996, which regulated the generation of electricity by IPPs
(Independent Power Producers) and self-generators.34 It guaranteed the access of both to the
transmission and distribution systems of the utilities with payment of fees set by ANEEL (the power
sector regulator). In 2000 ANEEL (Resolution 21) set the prerequisites for a plant to be considered a
cogeneration plant in order to be qualified for incentives to promote cogeneration projects. In 2006 the
prerequisites were revised in Resolution 235, with more stringent energy efficiency parameters
required to be considered cogeneration.
The PROINFA program to explicitly promote the use renewable resources for electricity generation -
including biomass, small hydro and wind - was launched by Law 10,438 in 2002. This PROINFA
program is briefly described elsewhere in this report.
The new general institutional framework for the power sector was defined in Law 10,848, passed in
2004. The most relevant aspects of this landmark general legislation are:
• The creation of periodic sector-wide auctions to contract new capacity three and five years
hence. These auctions are planned by the MME (and under it, the EPE) and organized by
ANEEL (Decree 5163 of 2004).
34
Self-generators are distinguished from IPPs by the fact that their sales to the grid would be sporadic and
temporary.
Econoler A-128
REF: 5574
• The possibility of individual utilities to organize mini auctions (approved by ANEEL) for
distributed generation to supply up to 10% of their demand.
In addition, at that time the Normative Resolution 77 of ANEEL reduced the charges for use of the
T&D system by 50% - amplifying a concession given originally to small hydro plants to biomass and
wind power.
Biomass cogeneration plants, dominated by sugarcane, have been active players in the different
categories of general auctions for years, as shown in the Table 66.
Table 66: Summary of biomass projects in auctions since 200535
Auctions Projects # MW Installed MW average Average Price

BRL/MWh
1º New energy (16/12/2005) 7 270 97 150,6
2º New energy (29/06/2006) 6 188 70 135,1
3º New energy (10/10/2006) 5 234 61 141,5
1º Alternative sources (18/06/2007) 12 542 140 142,2
1º Reserve energy (14/08/2008) 31 2385 548 155,7
Auction A-5 2008 (30/09/2008) 1 144 35 145,0
Auction A-3 2009 (27/08/2009) 1 47 10 144,6
Total 63 3779 961 150,4
The Reserve Energy and A-3 auctions of August, 2010, added 12 projects with 713 MW at an average
price of BRL 144/MWh.
Among the new and renewable energy alternatives, the sugarcane sector is the most consolidated
and the most market-driven. Explicit public policies to promote development are less prominent than in
other renewable energy segments, even most R&D is undertaken privately. Perhaps the most
important area is interventions to improve infrastructure for the commercialization of different products,
including electricity. An example is a recently created program to mitigate the impacts of the
seasonality of ethanol production.
Ethanol is produced during seven months of the year, while consumption goes on throughout the year.
Considerable capacity to store ethanol is therefore required. However, capacity outside the
sugar/ethanol plants has been limited.36
As a consequence there has been a significant seasonal variation in prices as shown in Figure 18 for
hydrated ethanol. Producers often need to sell ethanol during the harvest when prices are low, which
also tends to stimulate consumption in the Flex Fuel vehicle fleet. This can mean lower availability in
35
Source: COGEN, 2010
36
Decree n 94,541 of 1987 established norms for the commercialization and storage of ethanol, mandating
Petrobrás to create and maintain a security reserve equal to two months’ consumption. However, this norm was
never enforced and the stocking of ethanol continued to be the responsibility of (and at the cost to) the
distilleries.
Econoler A-129
REF: 5574
the off-season. Prices increase substantially and in some years the government has had to reduce the
blend of anhydrous ethanol in gasoline in order to balance supply and demand.
Álcool Hidratado Combustível
1,2
1,1
Preço por litro (R$) 1,0
0,9
0,8
0,7
0,6
0,5
0,4
Figure 18: Variation of the price of hydrated ethanol in 2009
In order to increase the storage capacity for and the effective stocking of ethanol, the BNDES created
the - PASS (Programa de Apoio ao Setor Sucroalcooleiro). Clients are divided into two broad groups,
depending on the harvest seasons (those beginning in April and those beginning in September).
Key elements in the supply chain of the sugarcane sector are the mills and sugarcane producers.
There are 430 mills operating in 23 states as well as about 70,000 independent cane producers. On
average the mills produce about two thirds of the cane which they process – with about half of this
coming from their own land and half from rented land. Independent sugarcane producers supply the
other third. The methodologies for determining the value of the payments to independent producers
vary some from region to region. However, all are based on, and are very close to, the CONSECANA
system which takes into account the quantity and quality of the cane delivered as well as the sales
prices of the final products (sugar and ethanol) derived from it.
Most sugarcane mills belong to economic groups. In 2008 there were almost 200 groups active in the
sector. There has been a marked tendency towards consolidation and it is estimated that within ten
years the number of groups will be reduced by about half, even as the output of the sector grows.
Some of the larger groups are briefly described below. They provide a representative sample of
different strategies being followed to expand.
• Copersucar S.A. (www.copersucar.com.br): It is the largest Brazilian producer of sugar, ethanol

and bio-electricity. It is not the owner of the 35 associated mills, but receives all of their output of
sugar, ethanol and electricity and manages the entire chain of commercialization and logistics
from the mill-gate to the final client. However, electricity is commercialized directly by the mills.
The group seeks to control 30% of Brazil’s production of sugar and ethanol by 2018 – up from
13% in the Central-South region in 2008/9. It is already the largest exporter of sugar in the world
Econoler A-130
REF: 5574
and is successfully negotiating long term contracts for ethanol exports. Approximately
1 billion litres/year (28% of output) is now exported.
• Cosan Indústria e Comércio (www.cosan.com.br): Founded in 1936, it owns 23 mills (of which
21 in São Paulo). In addition it has four sugar refineries and terminals at ports. A subsidiary
(Cosan Combustíveis e Lubrificantes) has the rights to the brands Esso and Mobil in Brazil and
operates a network of 1500 filling stations acquired in 2008. It has been publically listed in the
stock market (BOVESPA) since 2005. It is in the process of merging with Shell in a deal of about
USD 12 billion with strategic implications for both firms. It is planned to increase sugarcane
output from the current level of 53 million tons to 60 million in a short time. The number of filling
stations to sell ethanol will increase by the 4500 in the Shell network.
• Companhia Brasileira de Bioenergia – Brenco: It currently has two mills under construction
(MT e GO) each with a capacity to process 3 million tc/yr of sugarcane and two mills still being
licensed (GO & MS). The original plan was to reach a capacity to process 44 million tc/yr by
2015 with 10 plants which would produce 3.8 billion liters/yr of ethanol after an investment of
BRL 5.5 billion. The strategy is interesting because the sugarcane would be produced on
degraded land and abandoned pastures. It has been focused on renewable energy and
preoccupations of sustainability since the beginning.
Brenco recently began a process of merging with another group which is also a newcomer to the
sugarcane sector: ETH Bioenergia. The immediate objective is to process 11 million tc/yr of
cane during the 2010/2011 harvest season. The BANDESPAR, as an investor in Brenco, will
have 16,6% of the new company’s equity.
• Louis Dreyfus Commodities Bioenergia (LDC): LDC has been active in the sugarcane sector
as a trading company. It then began to purchase individual mills and the group Tavares de Melo.
By 2007 it controlled 8 mills. In 2008 it inaugurated a large new mill of 4.5 Mtc/year costing
BRL 700 million. With this LDC had reached a capacity of 20 Mtc/yr. In 2009 it bought Santa
Elisa Vale with 13 mills. The new firm, called LDC-SEV is now the second largest group in Brazil
after COSAN,37 with a capacity of 40 million tons of cane per year (Mtc/yr). LDC has a 60%
share of the new firm.
• Grupo Bunge: This important commodities trading company entered the sugarcane sector in
2007 by acquiring a new mill in Minas Gerais which began operation in 2006 and should reach
4 Mtc/yr. In 2009, Bunge purchased the shares of the Moema Group in six mills and now has
16 Mtc/yr of capacity. It is estimated to have invested USD 1.35 billion in these operations, which
should increase to USD 1.5 billion when settlements with minority shareholders are made. In
addition, Bunge is constructing two mills to begin operation in 2010 and one to begin in 2012. It
expects to process 21 million tc/yr by the 2010/2011 harvest and 30 Mtc/yr by 2014.
• Açúcar Guarani S.A.: The French group Tereos controls Açúcar Guarani, which has four Mills
in Brazil and one in Moçambique, with a total capacity to process 15.5 million tc/yr. Petrobrás will
invest BRL 1.6 billion in return for a 45.7% share of Açúcar Guarani. This is part of a strategy of
the oil company to acquire minority shares in a number of mills. The deal, besides alleviating
Açúcar Guaraní’s debt burden opens the possibility of a strategic partnership with Petrobrás.
37
COPERSUCAR, though larger does not constitute a group in the same sense, since it does not own the mills.
Econoler A-131
REF: 5574
• Grupo São Martinho: This group processes 13 million tc/yr and has the largest single mill in
Brazil – São Martinho – which processed more than 8 million tc in a single harvest. The group
recently joined with Amyris Biotechnologies to begin the commercial production biodiesel and
other chemicals from sugarcane juice in a unit to be constructed at the São Martinho mill.
• Grupo Zilor: This group has three mills with a capacity of 10.35 million tc/yr, which should
increase to 11 milllion tc in 2010. The expansion includes a modernization of existing mills which
will result in a considerable increase in electricity sold to the grid. The associated investment is
about BRL 500 million, of which the BNDES is financing BRL 252 million.
The next table summarizes the profile of output of some of these groups. There are large differences
between them in terms of the relative importance of sugar, ethanol and electricity.
Table 67: Comparison of product mix of different economic groups in the sector
Group Sugarcane Sugar Ethanol Electricity

million tc/yr thousand tons/yr million liters/year GWh/year
Copersucar 67.6 3,200 3,690 na
LDC 20.0 1,100 950 na
Açucar Guaraní 15.5 1,300 430 300
Zilor 11.0 675 552 1,080
There are various other groups which have a capacity to process above 10 million tc/yr of sugarcane,
such as USAÇUCAR, Coruripe Group, Lincoln Junqueira, Carlos Lira Group, Irmãos Biagi S.A.
However, information on these groups would contribute little more to the picture of the ways that the
sugarcane sector in Brazil is expanding, with construction of new “greenfield” capacity, expanding and
modernizing existing mills, mergers, acquisitions and partnerships.
As already indicated above, groups from outside the sugarcane sector (be they Brazilian or foreign)
have been entering the business. They have been purchasing existing mills, building new “greenfield”
sites, forming joint ventures or a combination of all these strategies. This phenomenon has to some
extent contributed to the growth and financial strengthening of large groups. For example, the market
share of the five largest groups went from 12% in 2004/2005 to 27% in 2009/10. The main new actors
in the sugarcane sector are grouped by their sectors of origin (UNICA, 2010):
• Bioplastics: Dow Chemical, Brasken/ETH Bioenergia, Solvay.

• Oil: Petrobrás, British Petroleum (BP), Shell.
• Agroindustry groups and commodity traders: Louis Dreyfus Commodities, Bunge, Cargill, ADM,
Tereos, Shree Renuka Sugars, Noble Group, Bertin, Adecoagro.
• Electricity: Rede Energia, Companhia de Energia Renovável
• Other sectors: TGM Turbinas, Construcap, Encalso, Banco Pactual, Grandene, Concessionária
Rodovias SP.
The BNDES, through BNDESPAR, has taken equity participation in some groups and some Banks
have participated in the mergers and re-structuring of various groups. These include Banco Itaú,
Bradesco and Citi.
Econoler A-132
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With regard to the logistics of transporting ethanol, Petrobrás (through the subsidiary Transpetro) and
some of the larger producers are seeking ways to reduce the current overwhelming dependence on
road transport. This should reduce both the costs of commercializing output and the environmental
impact. One approach is to increase the use of water borne transport. Transpetro plans to move
4 billion litres/year (15% of Brazil’s output) this way, principally the Tietê-Paraná waterway (Barros,
2010) in the west of São Paulo. Coopersucar has also used this modality (as well as railways). The
National Plan for Logistics and Transport seeks to achieve a massive shift of freight in general to
waterways (from 13% to 29% in 12 years).
Another modality being developed is pipelines. Petrobrás, together with Camargo Corrêa and Mitsui
plans to construct an “alcoolduto” of more than 1000 km with a capacity to carry 8 billion litres per year
from Senador Canedo in Goiás to the port of São Sebastião in São Paulo (the last stretch from
Paulínia to São Sebastião would use existing pipelines). The project is estimated to require
USD 1 billion and is part of the plans of Petrobrás to export 4.5 billion liters/yr by 2012. Petrobrás is
also considering a second pipeline of 919 km from Campo Grande (MS) to the port of Paranaguá in
Paraná.
An important link in the supply chain are the fuel distributors and retailers who run filling stations.
There are many firms in this business. However, the ten largest have an 80% market share. The
largest are BR Distribuidora, Shell/Sabba and Ipiranga with market shares de 19.2%, 12.6% e 11.7%
respectively of the market for biofuels.
Another important sector in the supply chain is the Brazilian capital goods industry which provides the
equipment and services needed to expand existing units as well as build new plants on “greenfield”
sites. The largest and most traditional equipment supplier for the sugarcane sector is Dedini Indústrias
de Base, which is prepared to build new plants on a “turnkey” basis. Another big supplier is Praj
Jaraguá (Praj is a traditional equipment supplier in India which entered the Brazilian market relatively
recently). Other equipment manufacturers include more specialized firms such as Caldema, Simisa,
Equipalcool, Mausa, Santal, Sermatec, Smar, TGM Turbinas.
Investment requirements and sources of financing used until now
The total investment for sugarcane mills through 2015/2016, excluding the purchase of land, would be
about BRL 58 billion (USD 32 billion).38 Besides land, there are investments in other parts of the
supply chain, especially in logistics. Assuming cogeneration plants operating at 65 bar, this implies a
new installed capacity of 8.3 GW (4.7 GW for sale) and an investment of almost USD 12 billion for
cogeneration. If half the new capacity were at 100 bar these values would increase to 10 GW installed
(6.4 GW for sale) and USD 14 billion. The PDEE projects an expansion of 4.3 GW between 2010 and
2015.
The primary ultimate source of financing for the expansion of the sugarcane sector has undoubtedly
been the BNDES. The total lending of the BNDES to each sub-sector during 2004-2008 is shown in
Table 68.
38
Based on projections in Table 55. A unit cost of BRL 175/tc is assumed for a 2 million tc/yr mill. Future plants
may be larger on average, with lower unit costs (about 10%).
Econoler A-133
REF: 5574
Table 68: Total BNDES loans disbursed by sugarcane sub-sectores (BRL milhões)39
Sub-sector 2004 2005 2006 2007 2008

Sugarcane (cane production) 194 224 367 572 437
Sugar 273 480 898 1,264 966
Ethanol 60 138 447 1,630 1,028
Cogeneration 77 256 265 128 250
Total 605 1,098 1,976 3,592 2,680
Another perspective on the financing of the sugarcane sector is given in Table 69, which summarizes
the status of operations considered to be “active” in mid-2008. The table also disaggregates the
portfolio of existing and potential projects by department of the BNDES at that time.
Table 69: Outstanding loans and loan applications of the sugarcane sector, BNDES40
Situation ↓ Department → DEBIO DEGAP AOI DEPRI Total BNDES

Contracted (BRL million) 4,674 1,419 6,565 - 12,657
Approved (BRL million) 1,954 154 - - 2,108
In analysis (BRL million) 760 849 - - 1,609
“Enquadrada” (BRL million) 5,337 94 - - 5,431
Initial consultation (BRL million) - - - 1,646 1,646
Total (BRL million) 12,725 2,515 6,565 1,646 23,451
DEBIO: Departamento de Biocombustíveis
DEGAP: Departamento de Gás, Petróleo e Energias Alternativas
AOI: Area for Indirect Operations (solicitations below BRL 10 million)
DEPRI: Department for Prioritization (analysis of recently arrived loan applications)
It is interesting to observe the relatively large volume of indirect lending (Department AOI) and,
presumably, smaller loans. It is not clear what share of total lending is undertaken directly and what
share indirectly through financial intermediaries.
The sugarcane sector passed through a severe crisis in 2008/2009 which has resulted in a substantial
consolidation of capacity in fewer groups. As part of this process there has been an increasing
professionalization of the management of the mills. These factors, plus the recovery of commodity
prices have helped the sector recover its capacity to invest.
39
Source: BNDES (position 07/2008)
40
Source: BNDES (position 07/2008). Data in BRL million in 07/2008.
Econoler A-134
REF: 5574
References for sugarcane
Barros, R., 2010, Rota do etanol começa a tomar forma, CanaMix, Ano 3, Nº 24, Abril de 2010, p. 18-
20.
BNDES, 2008, Banco Nacional de Desenvolvimento Econômico e Social, O Perfil de Apoio do
BNDES ao Setor Sucroalcooleiro, Rio de Janeiro, 34 p.
COGEN, 2010, Associação da Indústria de Cogeração de Energia, Resumo Geral dos Leilões.
Disponível em: http://www.cogensp.com.br/leiloes/resumo_geral.pdf. Acesso em: 28 de abril de 2010.
Dedini, 2010, Comunicação pessoal.
Dedini, 2008, Cogeração: Uma Nova Fonte de Renda para as Usinas de Açúcar e Etanol, SIMTEC
2008, Piracicaba, SP, 04 de julho de 2008.
Figliolino, A., 2010, A Lógica da Concentração Setorial, Reunião Anual da Canaplan 2010 – Cana de
Açúcar e Produtos – Safra 2010/2011 e Tendências e Desafios Setoriais, Ribeirão Preto, 15 de abril
de 2010.
IEA, 2008, International Energy Agency, Energy Technologies Perspectives 2008, Paris, França, 650
p.
Lamônica, H.M., 2009, Comunicação pessoal.
Leal, M.R.L.V., 2009, Uso do bagaço e palha para produção de etanol e energia, FOLicht Ethanol
Production Workshop, São Paulo, SP, 23 de março de 2009.
Neves, M.F., Trombin, V.G. e Consoli, M.A., 2009, Mapeamento e Quantificação do Setor
Sucroenergético em 2008, Relatório Final, Centro de Pesquisa e Projetos de Marketing e Estratégias,
Ribeirão Preto, SP, 24 de setembro de 2009, 36 p.
REN21, 2009, Renewable Energy Policy Network for the 21st Century, Renewables Global Status
Report 2009 Update.
UNEP, 2009, United Nations Environmental Program, Global Trends in Sustainable Energy
Investment 2009, 64 p.
UNICA, 2009a, União da Indústria da Cana-de-açúcar, Dados e Cotações – Estatísticas. Disponível
em: http://www.unica.com.br/dadosCotacao/estatistica/. Acesso em: 25 de abril de 2010
UNICA, 2009b, União da Indústria de Cana de Açúcar, Ethanol: A Sustainable Alternative for
Transport, World Future Energy Summit 2009, Abu Dhabi, 20 de janeiro de 2009.
UNICA, 2010, União da Indústria de Cana de Açúcar, A Alta dos Preços de Açúcar Estimula Novos
Investimentos na Indústria Brasileira, FOLicht Sugar and Ethanol Brazil, São Paulo, SP, 23 de março
de 2010.
WEO 2008, World Energy Outlook 2008, International Energy Agency, Paris, França, 2008.
Econoler A-135
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APPENDIX 7 URBAN SOLIDE WASTE MARKET SECTOR
The collection and processing of urban solid waste (USW) are relevant in two ways for energy. First, it
is possible to recover energy from USW in the form of heat, fuel or electricity, due to the large share of
organic materials in it. Second, the separation and recycling (or reuse) of energy intensive materials
such as glass, metals, plastics and paper is possible. Recycling should be regarded as a form of
energy efficiency, but as a matter of convenience is briefly treated here. The main emphasis is on
energy recovery.
Characteristics of the market, issues and regional differences
Statistics on the solid waste which is generated and collected in Brazil need to be treated with caution.
There is no systematic reporting of data and there are considerable discrepancies between major
studies.
The broadest survey was performed in 2000 by the IBGE (the agency responsible for the census and
many other national statistics) in a questionnaire sent to all of Brazil’s municipalities at the time (PNSB
- Pesquisa Nacional de Saneamento Basico). It was estimated that about 84 million tons per year of
urban solid waste (USW) were collected in 2000. A more recent survey was carried out by the Ministry
of Cities in 2005 (Ministério das Cidades, 2007), however the sample was much smaller
(192 municipalities out of 247 responded, in a universe of more than 5,500).
A later estimate by ABRELPE (Associação de Empresas de Limpeza Pública e Resíduos Especiais),

appears to be more reliable and hás the advantage of being updated annually. For 2009 it estimated a
much smaller value than the IBGE for collected USW - about 50.3 million tons per year (up from
46.6 million tons in 2008).
Despite the discrepancies between sources, a broad picture emerges. First, a significant percentage
of USW (about 12% or 7 million tons/year) is not collected at all (ABRELPE, 2009). Second, of that
which is collected, a large part is ultimately disposed of in an environmentally inadequate way, as
illustrated in below table.
Table 70: Destination of urban solid waste, by macro-region41
Macro-Region Open Air Dump Simple Landfill Sanitary Landfill

North 38,2% 28,8% 33,0%
Northeast 34,2% 32,9% 32,9%
Center West 22,9% 49,0% 28,1%
Southeast 11,7% 17,1% 71,2%
South 12,9% 18,0% 69,1%
Brazil 19,3% 23,9% 56,8%
The categories shown are: (1) open dump (vazadouro a ceu aberto); (2) simple landfill without
impermeabilization (aterro controlado); (3) sanitary landfill (aterro sanitario). The first two categories
41
Econoler A-136
REF: 5574
represent a clearly unsatisfactory destination for USW and accounted for 43% of the total collected
nationwide.
The table shows some significant regional differences. The poorer North and Northeast macro-regions
have a larger share of USW going to open air dumps and simple landfills, as does the Center-West.
However, it is arguable that the biggest differences aren’t between regions but between cities. Some
cities have been much more active than others in the same region in improving the standard of waste
disposition.
In general there are big differences between larger and smaller cities. The average quantity of USW
generated per inhabitant is significantly greater in larger cities (at least up to about 3 million
inhabitants), as illustrated in Figure 19 and Figure 20 for two regions in Brazil.
Figure 19: Relation of city population and per capita solid waste, Southeast Region42
Figure 20: Relation of city population and per capita solid waste, Northeast Region43
Most of the smaller municipalities, especially those in poorer regions, have great difficulty in organizing
an adequate system of collection and disposal of solid waste. The survey by ABRELPE, estimated
that only 39% out of approximately 5,560 municipalities have an adequate disposal scheme for their
42
Source: ABRELPE, 2009. Representative sample
43
Source: ABRELPE, 2009. Representative sample
Econoler A-137
REF: 5574
solid waste, ranging from a low of 15% in the North and 25% in the Northeast, to 35% in the Middle
West, 47% in the Southeast and 58% in the South (ABRELPE, 2008).
Table 71 summarizes an estimate of the composition of urban solid waste. Although information on
regional differences has not been gathered, it is likely that the share of organic wastes will be
somewhat higher in the North and Northeast than in the South and Southeast.
Table 71: Average composition of Urban Solid Waste44
Type of Waste Average Composition

Organic waste 52%
Paper 25%
Others 16%
Plastic 3%
Metal 2%
Glass 2%
The recycling of energy intensive materials found in USW - such as metals, glass, plastics and paper -
is an important strategy for conserving both energy and some natural resources. Aluminum is the most
intensely recycled material, due to its high value. In Brazil more than 90% is recycled. This share is
one of the highest in the world and has been stable since 2003. There is less data on steel cans, but
the share which is recycled appears to be over 80%. Other recycled materials include:
• Glass – approximately 47% was recycled in 2007, up from about 45% in 2003.
• Recyclable paper - approximately 45% (almost 4 million tons) was recycled in 2007, the same
share as in 2003.
The recycling of plastics varies dramatically, depending on the type. PET bottles are the third most
intensely recycled material – about 60%, or 400,000 tons in 2007. The share has been increasing
steadily in recent years. Low density polystyrenes and polyethylenes are the second largest – with
about 250,000 tons recycled. The recycling of polypropylenes is increasing somewhat faster and
reached about 190,000 tons in 2007. All other kinds of plastic contributed 225,000 tons and overall the
quantity has stagnated.
Most recycling is done by a large number of waste pickers (catadores de lixo) working informally, often
in insalubrious conditions. There are many initiatives, including with financing from the BNDES to
change the conditions under which recycling is done.
In addition to “conventional” urban solid waste, there are important categories of “special wastes” also
largely generated in urban areas. These are:
• Construction and demolition wastes: These amount to about 26 million tons per year (ABRELPE,
2008). Their potential energy content is quite small.
• Wastes from hospitals and clinics: These amount to about 390,000 tons per year. Although small
in volume they present a particular challenge from the point of view of public health. According to
44
Source: FIESP, 2009 (based on ABRELPE, 2008 & CEMPRE, 2007)
Econoler A-138
REF: 5574
(ABRELPE, 2008) only about 30% are treated according to the norm.45 In 70% of municipalities
there was no special treatment at all (IBGE, 2000). The capacity to treat these residues is
roughly double that actually used. Illegality is rife.
• Industrial residues: Are by volume the largest category of solid waste, but have been only
inventoried in some States. It is roughly estimated that they total about 86 million tons per year,
of which about 4% (3.7 million tons) are considered to be dangerous (ABRELPE, 2008 & FGV,
2003).
The general panorama is that there is much to be done in terms of the management of urban solid
waste in Brazil. This should raise opportunities for energy-related investments.
Characteristics of typical projects and the implications for potential
A range of technologies is available for the recovery of useful energy from USW. There are various
high temperature incineration or pyrolitic/carbonization technologies which leave only a relatively small
amount of ash for final disposition in sanitary landfills. These high temperature technologies are
common in OECD countries, not only because the space available for landfills is often limited but also
because of concerns regarding the impacts on groundwater of the leachate - after 20-30 years the
impermeabilization layer in the landfill deteriorates. The European Union in particular is moving in this
direction.
In Brazil the immediate challenge is more rudimentary. It is simply to achieve an adequate standard of
landfill disposition – the sanitary landfill. The use of high temperature technologies for final disposition
is still at the pilot stage. In sanitary landfills methane is produced from the anaerobic decomposition of
organic materials. The gas which seeps out is approximately 50% methane which has a greenhouse
effect approximately 30 times greater than CO2. Energy recovery involves creating a grid of shallow
“wells”, then channeling the gas to a central plant to clean and dehumidify the gas. Three routes are
then possible:
i) Purify and compress the gas for sale as natural gas.

ii) Generate electricity in reciprocating gas engines or small gas turbines
iii) Use the gas on-site to produce process heat.
In general, the most viable approach in Brazil will usually be to generate electricity. Active landfills are
generally far from natural gas pipelines and potential users of process heat, though some gas could
be used to evaporate and condense the landfill leachate (chorume) which is gathered.46 The best
conditions are found in landfills which have: at least one million tons of USW stocked; still receive
waste or were recently closed and which have a depth of at least 12-13 meters.
45
Resolution n° 306 of 2004 of the National Agency for Sanitary Vigilance (Agência Nacional de Vigilância
Sanitária - Anvisa).
46
About 1 m3/day of effluent is produced for every 1000 tons/year received by the landfill. This effluent is
generally transported to a sewage treatment plant for treatment and disposal. The volume can be reduced by
70% with evaporation. In principle the heat for evaporation could also be achieved with waste heat from the
electric power plant, a form of cogeneration.
Econoler A-139
REF: 5574
Sanitary landfills present a complex challenge for energy recovery. The decomposition process which
produces the gas is relatively slow, while a landfill is “active” (receiving USW) for a limited time until it
is filled. Figure 21 and Figure 22 illustrate the dynamics of gas output from the landfill and trade-offs
involved in two opposite situations. In the first case (A) a landfill gas collection system is in place when
the landfill is opened. In the second case (B) landfill gas only begins to be collected when the landfill is
nearly full.
Figure 21: Illustrations of landfill gas output and recovery over time, case (A)47
Figure 22: Illustrations of landfill gas output and recovery over time, case (B)48
In both cases, one clear challenge is the varying output of gas over the lifetime of the landfill. A plant
which has the capacity to use a large share of the peak gas output will have a relatively low capacity
factor over its lifetime, which increases costs. Another point is that not all the gas can be captured
47
Case (A): Landfill opened in 2009 and closed in 2032; collection system in place at opening. Source: SCS
Engineers, 2006
48
Case (B): Landfill opened in 1994 and closed in 2008; collection begins in 2007 (simulation assumed that
landfill closed about 6 weeks into 2009). Source: SCS Engineers, 2006
Econoler A-140
REF: 5574
(whether for energy recovery or for flaring). The share may be higher than in the examples shown, but
at an increased cost.
The generation capacity chosen for a given size of landfill may thus vary. Table 72 summarizes the
potential in municipalities where more than 100,000 tons/year are collected. A landfill of this size might
support a generation capacity between 1.3-2.1 MW of power, with roughly a 70% capacity factor over
its lifetime. Given the economies of scale, a landfill much smaller than this may be uneconomic for
electricity generation (though capturing and flaring the gas would be another story). The table
discriminates between larger municipalities, with more than 380,000 t/year of USW, and those
between 100,000 and 380,000 t/year. The larger municipalities will have a potential higher than 5 MW
– even with a low assessment of capacity per ton USW.
Table 72: Approximate potential for electricity generation from landfill gas recovery49
Region >380,000 t USW/year 100-380,000 t USW/year

USW t/year Theoretical LFG Potential MW USW t/year Theoretical LFG Potential MW
High Low High Low
North 1,366,578 29 18 810,444 17 11
Northeast 4,846,194 102 63 1,268,376 27 16
Center-
West 2,077,696 44 27 683,362 14 9
Southeast 6,102,163 128 79 4,534,323 95 59
South 1,346,931 28 18 650,932 14 8
Total 15,739,562 331 205 7,947,438 167 103
Assuming a minimum of 100,000 t of USW per year there are 61 municipalities with a combined
potential of 308 to 498 MW, or about 1,900-3,100 GWh/year. Of these, 44 would support plants of up
to 5 MW (using the low capacity estimate), with a combined capacity of 103-167 MW.
Table 73: Profile of the amount of USW collected in municipalities50
Region Number of municipalities collecting:

>380,000 t USW/yr 100-380,000 t USW/yr 50-100,000 t USW/yr
North 2 6 2
Northeast 6 5 11
Center-West 2 4 2
Southeast 5 24 12
South 2 5 9
Total 17 44 36
It is estimated that an 11 MW facility, would cost about USD 18 million (including the investment in gas
collection) and could generate electricity, without considering carbon credits, for about USD 92/MWh
(BRL 165) with a 20% IRR before taxes.51 Carbon credits would add another 60-65% to the revenue
stream.
49
50
51
The estimate assumes a 68% capacity factor (over the life of the plant) and a payment to the landfill
equivalent to about $6/MWh for the gas collected (SCS Engineers, 2006).
Econoler A-141
REF: 5574
However, conditions in Brazil until now have not been propitious for the recovery of useful energy from
sanitary landfills. There are two basic reasons for this:
• The price which has been obtained for the electricity produced is too low to justify the increased
investment in the equipment to generate power from the collected landfill gas.
• The strong incentive of carbon credits for eliminating methane emissions has been allowed for
projects which merely flare the biogas produced by the landfill. Methane is a much more
aggressive greenhouse gas than CO2, by a factor of about 30.
The return on simply flaring gas has been much higher than on generating power, so why bother with
the much larger investment and greater risk?
Thus there have been many CDM projects to capture and flare the methane in the biogas and very
fuel to generate electricity. As shown in Table 74, CDM projects with sanitary landfills are the second
most important in terms of carbon credits and third in number.
Table 74: CDM projects by sector52
Projects Approved Number of Projects Reduction in Annual Emissions

& in Validation # Share tons CO2 equiv Share
Electricity Generation 159 62% 17,305,374 47%
Pig farming wastes 40 16% 2,035,369 7%
Sanitary landfills 28 11% 8,788,633 24%
Manufacturing 11 4% 1,853,002 5%
Energy efficiency 10 4% 68,730 <1%
Other wastes 2 1% 82,300 <1%
Reduction of N2O a 3 1% 6,205,612 17%
Chemical industry 1 <1% 80,286 <1%
Metallurgy 1 <1% 80,286 <1%
Total 255 100% 36,436,082 100%
a
Principally projects related to agriculture and nitric acid production
At the same time, there have been only two projects implemented to generate electricity from landfill
biogas: the NovaGerar plant in the Centro de Tratamento de Resíduos in Nova Iguaçu – RJ, and the
Bandeirantes sanitary landfill in São Paulo – SP.53 Both landfills are quite large by Brazilian standards,
which improved their economics.
Unless this context changes there is no reason to expect a significant number of projects generating
electricity from landfill gas.
A combination of two policy measures could radically change the outlook. First, create a specific
auction framework for contracting electricity sales from sanitary landfills – as has been done with small
hydro, biomass and wind. This would allow higher prices to be paid on average, thus remunerating
pioneering investments, while also encouraging competition and cost-effective solutions. Second, and
simultaneously, only allow carbon credits to be granted for biogas collection projects which go beyond
flaring to using the energy in a productive way (at least for landfills above a certain size). This would
avoid the “cream skimming” which has been occurring.
52
53
Santander Bank participated in the financing of the Bandeirantes project.
Econoler A-142
REF: 5574
Somewhat further in the future, once an energy recovery market has been established, there could be
a move away from sanitary landfills towards high temperature processing of USW. As already
observed, this approach has the advantages of dramatically reducing the area needed for landfill and
presents fewer long term environmental risks from leakage of the leachate (chorume) into the water
table. The pressure to move in this direction is likely to be felt first in the larger metropolitan areas and
should be reflected in higher avoided costs of landfill tipping fees (these benefits are crucial to the
economic viability of high temperature processing). There are additional important advantages in
moving to this approach.
• The same level of input of USW can result in about 3-4 times more electricity generated.
• The annual fuel input to the power plant varies less, which permits a higher life time capacity
factor.
• All methane emissions can be eliminated (recovery from landfills is incomplete, as illustrated in
the graphs above).
• The cost of treating and disposing of the liquid effluent of a sanitary landfill will be avoided.
The capital cost of a plant with an incinerator and power generation is much greater than for a simple
sanitary landfill. However, the difference narrows greatly if we include energy recovery from the
landfill. The capital cost per kW of generation is similar (though, since a given amount of USW will
support more power generation, the total capital cost will be considerably higher).
Over time the market for this form of energy recovery could be greater than using landfill gas. Modules
capable of processing 150 t/day are commercially available. That is equivalent to about
60,000 tons/year. This lower threshold may substantially expand the number of municipalities which
could benefit – though the economics of these smaller units would need to be carefully evaluated
(there are economies of scale and the avoided tipping fees are likely to be lower). Table 75 provides
rough estimates of the potential with high temperature thermal technology, discriminating by size of
municipality – including those in the range of 50-100,000 tons/year of USW. As was shown in Table
73, there are currently 36 of these in Brazil.
Table 75: Approximate potential for electricity generation from high temperature treatment of
USW54
Region >380,000 t USW/year 100-380,000 t USW/year 50-100,000 t USW/year

MW GWh/yr MW GWh/yr MW GWh/yr
North 75 615 45 365 7 54
Northeast 266 2,181 70 571 40 326
Center-West 114 935 38 308 7 58
Southeast 336 2,746 249 2,040 47 388
South 74 606 36 293 37 306
Total 866 7,083 437 3,576 138 1,132
It is possible that the smaller environmental footprint of this technology may also facilitate the
formation of consortia of smaller municipalities, increasing even more the potential scale of the market
in the longer term.
54
Econoler A-143
REF: 5574
The current legislative framework, with national guidelines for basic services related to public hygiene
(solid wastes, water supply & treatment which are referred to as saneamento basico), is provided by
the Law 11,445 of January 5, 2007. The collection and disposition of urban solid waste (USW) is
basically an attribution of the municipalities (as is water supply and sewage treatment) – though the
municipalities may delegate functions through contracts of concession (including operations under the
category of “public-private partnerships” or PPPs).
Under this legislation municipalities may also form consortia with neighbors to manage their solid
waste. This is important, because many of Brazil’s municipalities are far too small and poor to
organize and invest in the necessary measures to adequately manage their solid wastes.
Tariffs charged for these services should assure the financial equilibiurm of the activity while seeking
“moderation” in prices for consumers (“modicidade tarifaria”)
The “outsourcing” of waste management is an established trend. So far, 29 municipalities with about
30 million inhabitants (including Curitiba and Belo Horizonte) have negotiated contracts of concession
with private sector operators. In these contracts more than BRL 3 billion have been committed to
investment in the collection, transport and final disposition of USW. The municipality of Osasco in the
metropolitan area of São Paulo has negotiated a Public-Private-Partnership (PPP) of the type known
as “administrative concession”.
An amended version of a bill introduced by the Ministry of the Environment (MMA) to establish a
National Policy for Solid Residues has been passed by the Câmara dos Deputados and the Senate
and awaits the President’s signature. It is hoped that this legislation will establish a clear legal basis
for the management of urban solid wastes.55
The bill addresses the issue of the environmental responsibility for solid wastes and applies the
principle of “reverse logistics”, i.e. who produces the wastes shares responsibility for their final
disposal. Thus entities in each component of the supply chain of a product – manufacturers, importers,
wholesalers, retailers and even consumers – will have some responsibility for relevant steps in the
complete life-cycle of goods, from raw materials to final disposition. Thus there will be new agents
responsible for collection of residues and wastes besides the traditional public service entities of waste
collection.
There are also prohibitions of activities such as the burning of wastes in the open air or any unlicensed
container or incinerator, or throwing wastes into any body of water.
Hopefully a more integrated approach to solid wastes (including the “special wastes” cited in the first
section) will emerge. The lack of a clear regulatory framework has meant that there has been a
multiplicity of norms and rules which are sometimes contradictory. This situation has produced
uncertainty and instability in the whole chain of management of solid wastes.
55
The bill is based in part on earlier legislation on solid wastes promulgated in the State of São Paulo in March,
2006.
Econoler A-144
REF: 5574
Policies to promote development
The Ministry of the Environment (MMA) has been supporting the preparation of State Plans for the
Integrated Management of Solid Wastes since 2007. These plans seek to eliminate open air dumps,
promote the use of sanitary landfills with appropriate technology to recover the methane, improved
recycling, composting where appropriate and other measures. Complementary programs to promote
investments in these areas are being proposed. Another initiative of the MMA is a pilot program to
purchase the future results of managing solid wastes, providing resources for the construction of
sanitary landfills and investments in recycling. The pilot program is small, with resources of about
BRL 10 million.
An initiative to promote the generation of electricity from the methane produced by sanitary landfills is
being evaluated by the Ministry of the Environment (MMA), the Ministry of Mines and Energy (MME)
and ANEEL (the power sector regulator). It involves the creation of a market with longer term contracts
to purchase this electricity.
Key market players in the supply chain
Municipalities are responsible for collecting and disposing of USW, though they may outsource the
service to private sector firms either through concessions or PPPs (public-Private Partnerships).
Various government agencies are involved either in the regulation of solid wastes or the development
and financing of improved management. Those involved directly in regulation are:
• Ministry of the Environment (MMA - Ministério do Meio Ambiente): Responsible for promoting
the adoption of principles and strategies for the protection and restoration of the environment
and the sustainable use of natural resources. http://www.mma.gov.br.
• CONAMA – National Council for the Environment (Conselho Nacional do Meio Ambiente): The
advisory and deliberative organ for environmental norms, presided by the Minister of the
Environment. http://www.mma.gov.br/port/conama
• Ministry for Cities (Ministério das Cidades): Responsible for policies to promote sanitation (both
water and the treatment of solid wastes).http://www.cidades.gov.br/secretarias-
nacionais/saneamento-ambiental/programas-e-acoes-1/residuos-solidos.
• ANVISA – Agência Nacional de Vigilância Sanitária: Agency within the Ministry of Health
responsible for oversight of public health standards http://portal.anvisa.gov.br.
Relevant associations of agents involved in solid waste management include:
• ABRELPE – Associação Brasileira de Empresas de Limpeza Pública e Resíduos Especiais: An

association which brings together public and private sector agents involved in the collection and
treatment of different urban solid wastes. It is an important source of surveys and information.
http://www.abrelpe.org.br/.
• IBAM – Instituto Brasileiro de Administração Municipal: It is an NGO with the objective of
preparing research and analyses to improve municipal services in general.
http://www.ibam.org.br
Econoler A-145
REF: 5574
The development of projects with sanitary landfills is of considerable interest to some of Brazil’s
largest construction companies, which also have much experience with energy projects. These groups
include:
• Cavo Serviços e Saneamento S/A (www.cavo.com.br), subsidiary of the Camargo Correa group.
• Vital Engenharia Ambiental S.A (www.vitalambiental.com.br), subsidiary of the Queiroz Galvão
group.
• Foz do Brasil (www.fozdobrasil.com.br), subsidiary of the Odebrecht group.
There are a large number of private sector providers of services and equipment relevant to the
treatment of USW. The most important can be found at the website of ABRELPE given above.
There are also many groups specialized in carbon finance and knowledgeable about financing which
are active in the area of USW. Companies who are working with CDM projects in Brazil include:
• Ecopart Assessoria Ltda. Belongs to the Ecopart Group (formerly Ecoinvest) which is also active
in projects with biomass, hydro and wind power.
• GDF Suez Energy International (part formerly was Econergy). Is is also active in projects with
biomass, wind power and large hydro projects (UHE Jirau).
• Ecobio Carbon Empreendimentos Ecológicos Ltda. Specialized in the capture and flaring of
biogas from landfills and diverse activities, including especially agro-industry (pigs, chickens,
effluents from ethanol distilleries).
• ASM Ambiental S.A. Project development services related to carbon credits in renewable
energy, forest management and environmental services.
• PricewaterhouseCoopers Ltda. Project development services related to carbon credits, carbon
inventories and corporate strategies and the commercialization of carbon credits.
• Max Ambiental S.A Project development services related to carbon credits. It invests own
resources or those of third parties in projects which reduce or absorb carbon emissions.
More information about activities in the CDM and carbon mitigation market can be obtained from
ABEMC (Associação Brasileira das Empresas de Mercado de Carbono) http://www.abemc.com
Investment requirements and observations on financing
As already observed, under current policies there is no incentive to develop projects to recover energy
from sanitary landfills – only to flare the methane in the gas. However, if a new set of policies were
implemented, the perspective could change dramatically. Perhaps 80% of the potential in
municipalities with more than 100,000 t/year of USW could be implemented in a five-year period.
Econoler A-146
REF: 5574
The investment in the complete collection and energy recovery system (not the landfill itself) will cost
approximately USD 1,700 to USD 2,000 per kW of “exported” electricity. Assuming the parameters
summarized above (with a range of recovery rates), the total potential for investment in this period
would be approximately:
Table 76: Total investment potential for USW projects on a five-year period
Low Recovery: High Recovery:

Total investment USD 510-600 million USD 825 – 970 million
Of this, approximately 25-30% of the total investment could be in projects with less than 5 MW (using
the more conservative recovery rate of 1.3 MW per 100,000 tons/year).
The Caixa Econômica Federal (CEF) and the BNDES are the standard sources of credit for
improvements in the basic public services of Brazil’s municipalities. These loans have conditions
which are well known and are subject to restrictions in the overall debt level of the municipality
(contingenciamento), which can make planning of investments complicated. This barrier can be
avoided with Private-Public Partnerships (PPP).
Given this segment’s unusual level of activity with the CDM, the BNDES and FINEP (Financiadora de
Estudos e Projetos – a parastatal linked to the Ministry of Science and Technology – MCT) also
provide lines of credit for the development of projects for the CDM. Almost all of the CDM projects
themselves have been developed with the involvement of private resources.
Most Brazilian municipalities are chronically short of financial resources. This severely limits their
capability to invest in improvements in the final disposition of solid wastes, such as sanitary landfills.
Even with the outsourcing of these investments, via concessions, it is necessary to make the higher
payments for the service.
However, it is relevant to observe that the costs required to implement sanitary landfills actually
represent a very small share of municipalities’ net annual income (RCL – Receita Corrente Líquida, in
Brazilian public sector accounting). Assuming a cost of BRL 30/ton of USW it amounts on average to
0.8%, at BRL 50/ton it comes to 1.3%. The share of income tends to be somewhat higher in the poorer
states of the North and Northeast, as well as in larger municipalities - e.g. those with more than
100,000 inhabitants (Mello, 2008).
Econoler A-147
REF: 5574
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Limpeza Pública e Resíduos Especiais.
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Empresas de Limpeza Pública e Resíduos Especiais.
CEMPRE, 2007. http://www.cempre.org.br/
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do Aproveitamento Energético dos Resíduos Sólidos Urbanos de Campo Grande, MS; Série
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Indústrias do Estado do Rio de Janeiro, Janeiro, 2009 (www.firjan.org.br )
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Indústrias do Estado de São Paulo, Departamento de Meio Ambiente.
http://www.fiesp.com.br/ambiente/area_tematicas/residuos.aspx
IBAM, 2001; Manual de Gerenciamento Integrado de Resíduos Sólidos; Instituto Brasileiro de
Administração Municipal.
IBGE, 2000; Pesquisa Nacional de Saneamento Básico – PNSB; Instituto Brasileiro de Geografia e
Estatistica
ICLEI - Governos Locais pela Sustentabilidade, Secretariado para América Latina e Caribe. Manual
para Aproveitamento de Biogás, Volume 1 - Aterros Sanitários. Escritório de projetos no Brasil, São
Paulo, 2009.
Luftech Soluções Ambientais Ltda, 2004. “Breve Análise do Mercado de Prestação de Serviços de
Destinação de Resíduos de Serviços da Saúde”.
Mello, Gustavo, 2008; Notas sobre o Gerenciamento de Resíduos Sólidos Urbanos no Brasil; BNDES.
Ministério das Cidades, 2007; Diagnóstico do Manejo de Resíduos Sólidos Urbanos – 2005;
Secretaria Nacional de Saneamento Ambiental.
MdC & MMA, 2008; Elementos para a Organização da Coleta Seletiva e Projeto de Galpões de
Triagem; Ministério das Cidades e Ministério do Meo Ambiente http://www.cidades.gov.br/secretarias-
nacionais/saneamento-
ambiental/biblioteca/MANUAL%20Coleta%20Seletiva%20FINAL%20corrigido.pdf
MMA, 2009; Gestão Integrada de Resíduos Sólidos (Série "Mecanismo de Desenvolvimento Limpo
Aplicado a Resíduos Sólidos, vols. 1, 2, 3 e 4); Ministry of the Environment.
http://www.mma.gov.br/sitio/index.php?ido=publicacao.publicacoesPorSecretaria&idEstrutura=125.
SCS Engineers; Landfill gas to energy feasibility study and CDM project evaluation for the Muribeca
Landfill; Los Angeles, USA, 2006.
Tavares, F.B. & Rocha, E.R.P; Mecanismos para Financiamento de Aterros Sanitários com Geração
Elétrica através de Biogás. Grupo de Economia do Meio Ambiente (GEMA), UFRJ. III Seminário
Internacional do Setor de Energia Elétrica (SISEE), Rio de Janeiro, 2008.
http://www.nuca.ie.ufrj.br/gesel/eventos/seminariointernacional/2008/arquivos/P_EricoFelipe.pdf
Econoler A-148
REF: 5574
Vanzin, E. et alii; Uso do biogás em aterro sanitário como fonte de energia alternativa: aplicação de
procedimento para análise da viabilidade econômica no aterro sanitário metropolitano Santa Tecla;
(http://www.fae.edu/publicacoes/pdf/IIseminario/pdf_praticas/praticas_01.pdf )
Econoler A-149
REF: 5574
APPENDIX 8 WIND POWER MARKET SECTOR
Scale of the market and recent trends
The first major stimulus for wind power was the PROINFA program. As discussed earlier PROINFA
suffered from a general flaw. The energy price and the quantities were set by government
bureaucrats. Projects were selected based on when they had obtained the Licence to Install.
In spite of its flaws, PROINFA left the largest wind industry in Latin America and valuable experience
was gained in constructing and operating plants.
The auction for wind power in December, 2009 inaugurated a new approach to promoting wind power.
The results were dramatic: 1,806 MW were contracted from 71 projects with an average price of
BRL 148.33/MWh. This average price was less than that in some recent auctions for thermal
generation plant. It also meant a fall by almost half in the average price of PROINFA – from
BRL 270/MWh. The following table shows the breakdown of capacity by State.
Table 77: Winning projects in the December 2009 Auction, by State
Northeast Installed MW Share South Installed MW Share

Bahia 389 21.6% R. Grande do S. 186 10.3%
Sergipe 30 1.7%
R. Grande do N 657 36.4%
Ceará 543 30.1%
Total 1619 89.7% Total 186 10.3%
Some larger firms have now begun to accumulate substantial stakes in the wind energy market. Table
78 shows that half-a-dozen firms, each with at least 90 MW of winning projects in the auction (5% of
the total), own almost half of the new capacity.
Table 78: Largest owners of winning projects in the December 2009 Auction
Owner/Developer Installed MW
Renova 270
Petrobras 101
Dobreve 144
CPFL 180
Eletrosul 90
Enerfin 96
Total large owners 881
Nevertheless there is considerable capacity in the hands of small “individual developers”. This may
produce opportunities for agents with capital.
The success of the December, 2009 auction for wind resulted in the schedulingof a new auction in
August, 2010 with distinct segments for wind, biomass and small hydro. This auction resulted in the
contracting 2,892 MW – of which 2,048 are windpower plants, at an average price of BRL 131/MWh.
There is now an upward revision underway in sector expansion plans of wind’s possible role in Brazil’s
power generation mix in the coming years.
Econoler A-150
REF: 5574
Overview of potential; significant regional differences and barriers
The evaluation of wind resources for electricity generation begins with the identification and
delineation of areas where wind speeds are relatively high on average and reasonably constant. A
common mapping convention is the Battelle Wind Power classification (see Table 2.6.3). This ranks
the potential of areas in seven categories, ranging from “Poor” to “Superb”. The values for each
category vary with the height, since average wind speed tends to increase with height.
Table 79: Classes of wind potential by wind speed56
Class Resource Power Density Wind speed (m/s)

Potential At 50 m – W/m2 50 m height 65 m height 80 m height
3 Fair 300-400 6.4-7.0 6.6-7.3 6.8-7.5
4 Good 400-500 7.0-7.5 7.3-7.8 7.5-8.1
5 Excellent 500-600 7.5-8.0 7.8-8.3 8.1-8.6
6 Outstanding 600-800 8.0-8.8 8.3-9.1 8.6-9.4
7 Superb 800-1600 8.8-11.1 9.1-12.4 9.4-12.8
The areas with higher class wind resources are more attractive because they permit higher capacity
factors with equivalent turbines. Exactly how much higher depends on the wind speed distribution,
which is approximately characterized by the Weibull number. A narrower distribution of wind speeds
(which implies a more constant wind regime) has a higher Weibull number.
Brazil is one of the most thoroughly mapped countries in Latin America. Even so, estimates of wind
potential are very much in flux. The basic reference is the Brazilian Atlas of Wind Potential published
by CEPEL in 2001. Figure 23 shows the geographical distribution of annual average wind speeds in
Brazil.
56
Wind speeds assume a Weibull k value of 2.0.
Econoler A-151
REF: 5574
Figure 23: Map of average annual wind speeds at 50 m57
As can be seen on last figure and also in Table 80, the best areas for wind are limited in size. Of the
million km2 categorized in said Table, 90% are no better than “Fair” (Class 3), with average wind
speeds below 7 m/s. Only 3%, or about 30,000 km2, have Class 5 or better wind potential (average
wind above 7.5 m/s).
Table 80: Areas of Land in Different Wind Speed Classes Brazil58
Average Wind Speed Approximate Wind Class Area in Class

(m/s @ 50 m height) (km2)
6 Class 2 667.391
6.5 Class 3 (starts 6.4) 231.746
7 Class 4 71.735
7.5 Class 5 21.676
8 Class 6 6.679
8.5 & higher Class 6/7 1.775
Even though the areas with high quality resources are relatively small, the estimated gross potential in
the Brazilian Wind Atlas is large - about 60 GW and 147 TWh in the areas with wind speeds above
7.5 m/s (Class 5 and above).
57
Source: CEPEL, 2001
58
Source: CEPEL, 2001. The total land area of Brazil is about 8 million km2.
Econoler A-152
REF: 5574
This estimate of gross technical potential in high quality wind areas now appears to be excessively
conservative. Consider, for example, the capacity factors attributed to different wind classes by the
Brazilian Wind Atlas (CEPEL, 2001) and the USDOE analysis of 20% wind penetration in the United
States (EERE/USDOE, 2008). As can be seen in Table 81, the former are much lower and appear to
be excessively conservative by today’s standards. The average capacity factor being contracted by
the wind farms in the wind energy auction of December 2009 was 43.8%, which suggests that the
revised values in Brazil will be much closer to the Modified values.
Table 81: Approximate Capacity Factor Associated with Wind Speed Class59
Average Wind Speed Approximate Wind Class Capacity Factor (%)

(m/s @ 50 m height) USDOE Brazil Atlas
6 Class 2 NA 14.6%
6.5 Class 3 (starts 6.4) 32% 18.2%
7 Class 4 36% 21.7%
7.5 Class 5 40% 26.4%
8 Class 6 44% 30.7%
8.5 & higher Class 6/7 47% * 34.3%
* The 47% value is for Class 7, which begins above 8.8 m/s at 50 meters.
There are several reasons for the conservatism of the Brazilian Atlas. It was prepared a decade ago
and reflects the technological assumptions of that time, or even somewhat before. The effective wind
speed in the same class is higher because turbines today reach 90m or more and average wind speed
will usually increase by 1 m/s as a result. The efficiency of turbines has also improved. On top of this,
the analysis was conservative then regarding estimates of average wind speed.
After capacity factor, a second factor to consider is the density of power capacity per unit area, in
MW/km2, which can be achieved in wind farms. Each turbine produces downstream turbulence in the
air, so there are physical limits on how closely turbines can be packed together in order to avoid
mutual interference which degrades performance. It is difficult to generalize about the spacing of
turbines because topography and wind conditions have an influence. A general rule of thumb is that
there should be about 7 rotor diameters between each turbine, in each direction (Krohn, personal
communication).60
Thus on relatively flat, even terrain one can achieve about 6-7 MW/km2 on average. This value may be
somewhat conservative, at least at the level of specific wind farms of a size less than 50-100 MW.
Wind farm developers in Brazil tend to use 10 MW/km2 as a general rule, with Energy Yield
Assessments resulting in values anywhere from 7-30 MW/km2 (Pacheco, personal communication).
Interestingly, the achievable power density is not influenced by the size or height of the turbines,
though the capacity factor is.
Table 82 illustrates the impact of using revised parameters on estimates of the gross technical
potential of wind energy in Brazil by wind class. Due to the higher capacity assumed per km2 (6 MW
59
Sources: EERE/USDOE, 2008; CEPEL, 2001
60
If wind comes from one direction only, the turbines may be spaced more closely in a line, but then if there is a
second line behind it must be further away, say 9 rotor diameters.
Econoler A-153
REF: 5574
versus 2 MW) and the higher capacity factors assumed for equivalent classes of wind speed, the
resulting gross potential is far higher than in the Brazilian Atlas.
Table 82: Gross Brazilian wind energy potential – Brazil Atlas and modified parameters
Wind Class Wind Capacity (GW) a Generation (TWh)

Speed Brazil Atlas Modified Brazil Atlas b Modified c
Class 3 (from 6.4) 6.5 m/s 464 1,390 739 3,705
Class 4 7 m/s 144 430 272 1,290
Class5 7.5 m/s 43 130 100 433
Class 6 8 m/s 13 40 36 147
Class 6/7 8.5 m/s 3,6 11 11 39
Total Classes 3-7 >6.5 m/s 667 2,002 1.158 5,614
Classes 4-7 >7.0 m/s 204 611 419 1,910
Classes 5-7 >7.5 m/s 60 181 147 619
a
The Brazilian Atlas assumes a power density of 2 MW/km2. The modified scenario assumes 6 MW/km2.
b
Capacity factors used as in Table 81.
c
The capacity factors in Table 81 for USDOE were reduced by 5%, except for the Classes 6/7 which were
reduced by 10% since Class 7 starts at a higher wind speed (8.8 m/s). The resulting capacity factors were:
Class 3 – 30.4%; Class 4 – 34.2%; Class 5 – 38.0%; Class 6 – 41.8%; Class 6/7 – 42.3%.
A revision of estimates of Brazil’s wind potential is in fact under way and there are indications that the
new values will be closer to those in the “Modified” case above in Table 82.
Of course, both of these estimates are for a kind of gross technical potential. One should not assume
that more than a relatively small percentage of the land area which is apt for wind power could be
developed. Some of the best potential sites may be in areas with characteristics that severely limit or
prohibit development. Unusual scenic areas are one example. Places with concentrations of birds may
be another. Buffer areas between wind farms are advisable and some land uses may be incompatible
- though this is not the case with agriculture (while renting space for the towers can be a source of
income for farmers). Technological advance has reduced some impacts, for example noise and the
distracting reflection from turning rotor blades.61
However, even large restrictions of area allow a big contribution to future supply: in order to supply
25% of the electricity generation today (448 TWh in 2007), would require wind farms to cover just 6%
of Class 4-7 land area (about 6,000 km2 or 0.08% of Brazil’s land area).
Another approach to evaluate potential is to consider up to what share of total generating capacity
could be wind without imposing high additional reserve and backup costs. In large thermally
dominated systems, this is currently reckoned to be about 20%. In a hydro system like Brazil’s the limit
may be higher. However, assuming this level, about 21,000 MW of wind (75 TWh) could be
incorporated in today’s system. This value would increase as the total system expands.
61
A review of environmental impacts can be found in USDOE/EERE, 2008. The noise level at 300 meters from
modern large turbines is less than 45 dB. The impact on avian populations is reviewed, most studies show
relatively low mortality, but this impact will be quite site dependent.
Econoler A-154
REF: 5574
The average capacity of the wind farm projects approved in the December 2009 auction was
25.4 MW. Only five of the 71 projects contracted had a capacity of less than 10 MW, the smallest
being of 6 MW. At the other end of the scale, only five projects had more than 30 MW, the largest
being of 50 MW. The large majority of projects were between 20 and 30 MW. In August, 2010,
auction the average size increased to 29 MW.
One factor dimensioning projects was the 30 MW upper limit for projects to be eligible for the 50%
discount on transmission charges (TUSD/TUST).62 In a number of cases one finds that the projects
are geographically contiguous and will in fact be operated as a unit in wind farms of as much as 150
MW (examples include the projects being developed by Renova, Dobreve, Enerfin and CPFL)
The average investment per kW was BRL 4,000 or slightly less (all costs included for a commissioned
wind farm). There was a sharp drop in estimates of investment per kW before and even during the
auction as the project developers and turbine manufacturers responded to competitive pressures.
Before the ceiling price (of BRL 183/MWh) for the auction was announced the norm had been about
BRL 4,800/kW, reflecting in part the lesser incentive for cost control in the PROINFA program.
The August, 2010, auction saw a further reduction in average price (BRL 131/MWh) which implies that
the investment per kW continued to fall. The consolidation of the sector and the increasing volume of
business appear to allowing more cost reductions.
The capacity factor of the winning projects in the auction was quite high by the standards of wind
power – 43.8%. Interestingly, the average of the projects which were registered to bid in the auction
was significantly lower – 38.7%. It is possible that the average capacity factor of winning projects in
the next auction will be even higher, perhaps as high as 48%. A higher capacity factor improves the
economics of a wind farm by diluting the fixed investment over more MWhs each year. However, there
is a trade-off. Capacity factors this high may also imply reduced exploitation of the potential of the site.
Taking the nominal size of the winning projects in the December auction as a guide, a typical project
of 25 MW would require an investment of about BRL 100 million.
The specific regulatory environment for wind power generation is being defined in the sequence of
special auctions which has now begun for smaller scale renewable resources.
Guidelines were published in MME Portaria no 211 of May 28, 200963, amended by MME Portaria
no 242 of July 25, 2009 64. These regulations refer to the Technical Note of EPE (Empresa de
62
This discount was originally given to small hydro and was subsequently extended to wind power projects.
63
http://www.epe.gov.br/leiloes/Documents/Leil%C3%A3o%20de%20E%C3%B3lica%202009/Portaria%20MME%20n%C2%B0%20211-
09.pdf
64
http://www.aneel.gov.br/cedoc/prt2009242mme.pdf
Econoler A-155
REF: 5574
Pesquisa Energética), NT-EPE-DEE-RE-014/2009-r0, which present a methodology of accounting for
wind electricity generation. 65
The electricity generated by the projects selected in the December 2009 Auction should be delivered
to the grid no later than July 1, 2012. The terms of sale are:
• The price of electricity sold will be re-adjusted annually by the IPCA (Índice Nacional de Preços
ao Consumidor Amplo) published by the IBGE (Instituto Brasileiro de Geografia e Estatística);
• Contractual year starts on July 1. Payments are in twelve uniform monthly tranches.
• Annual output may range between 90% and 130% of the contracted value without penalty.
Output above 130% will receive only 70% of the contractual value. Below 90% the shortfall will
suffer a 15% penalty and must be paid to the Reserve Energy Account (Conta de Energia de
Reserva – CONER) in twelve equal monthly installments the following contractual year.
• Every four years output will be reviewed and a new range set.
• A positive balance in one wind farm can be used to compensate a shortfall in another selected in
this same auction.
The auction price includes the cost of interconnecting the wind farm to the grid, as well as a
transmission charge to a predefined node in the grid.
Barriers and risks
A major barrier is frequently the cost and uncertainties surrounding the connection of the project to the
grid. Many projects are located in areas where the existing grid is quite weak and are “at the end of
the line”, which exacerbates the problem. In these cases significant investments will be needed to
connect the new wind farm to the grid and project developers are faced with great uncertainty
regarding collection arrangements. Under the existing arrangements, the wind farm developer must
evaluate the cost of an isolated connection. Since criteria should be conservative in order to be
prudent, this tends to increase the viable price for selling electricity. If a number of wind farms are in
the same neighborhood (which is often the case) it would be cheaper to create a feeder system for the
projects as a group, instead of doing so individually. One possibility is an ICG (“Instalações de
Transmissão de Interesse Restrito para Conexão Compartilhada de Centrais de Geração”). This
approach has so far been avoided by project developers due to uncertainties about rules and
allocations of costs.
Another problem is the quality of many analyses of the output of a wind farm and the resulting
certifications of output. Many are prepared by institutions which have little recognition in this area and
are of doubtful reliability. These certifications are accepted by the BNB (Banco do Nordeste), which
was a major financial player in the last auction (see below), though the BNDES is more rigorous and
requires certifications of output by internationally recognized entities, such as DEWI or GL Garrad
Hassan. This situation has opened space for sloppy analyses. Proper reviews have subsequently
found differences of 25% or more in the certifiable output. Projects with this kind of analysis were
65
http://www.epe.gov.br/leiloes/Paginas/Leil%C3%A3o%20de%20Reserva%202009%20-
%20E%C3%B3lica/AprovadasasdiretrizesdoLeil%C3%A3odeEnergiadeReserva2009%E2%80%93E%C3%B3lica.aspx
Econoler A-156
REF: 5574
frequently developed with the intent of selling on after winning the bid, hence the developer was not
incurring the risk of not producing the claimed output.
In addition, the technology of some of the equipment manufacturers is not very reliable. Some turbines
do not even have a certified power curve with wind speed. Problems have already been encountered
with equipment recently installed in the PROINFA program. For example, there have been fires in the
rotor hub (“nacelle”) due to the improper functioning of the control system.
These kinds of problems will increase the perceived technical or project risk of wind farm projects,
which could exacerbate difficulties with financing in the future. Other risks which can have an impact
on financial viability are: unexpected increases in the cost of transporting the electricity; unexpected
increases in the cost of maintenance and repairs; unexpected increases in taxes or power sector
charges.
Since PROINFA, there have been no Government institutions and/or programs which have been
promoting wind. However, the auctions have represented a powerful stimulus to develop the sector.
Informally, one can also see an engagement of EPE’s Planning Department to understand and model
wind energy and even present proposals to develop the market.
New evaluations of potential are being supported. Until recently, much attention was given to updating
atlases and campaigns with temporary measurements. Now it is more clearly recognized that high
quality time series are also needed.
Most of the principal international wind turbine manufacturers are present in the Brazilian market.
Several, including GE, Vestas and Enercon offer turn-key plants and to do this work closely with local
firms. Hyundai is preparing to do the same. There is a spectrum of more specialized equipment and
service providers. One set of services of great importance is the certification of projects (for example,
evaluating the analyses underlying projections of capacity factor). Major international certifiers, such
as GL Garrad Hassan and DEWI GmbH are now present in Brazil. More information on market players
is presented elsewhere in this report.
Eight categories of agents were considered:
i) Manufacturers of wind turbines and associated equipment;

- ENERCON – Eduardo Lopes (15)2101-1700 Sales manager
(http://www.enercon.de/en/_home.htm, http://www.wobben.com.br/)
- VESTAS – Marcelo Hutschinski (11)2755-8002 Director (http://www.vestas.com/)
- GE – http://www.gepower.com/businesses/ge_wind_energy/en/index.htm)
- SIEMENS - Eduardo Angelo (11)4585-5932
(http://www.energy.siemens.com/entry/energy/hq/en/?tab=energy)
- FUHRLÄNDER – Bastian Fenner (85)3275-7044 and Nuno Sá +49 2664 9966, Commercial
Director (http://www.fuhrlaender.de/index_en.php)
Econoler A-157
REF: 5574
- ALSTOM – (http://www.power.alstom.com/home/wind/)
- HYUNDAI – Mauro Bittencourt (11)3033-5783 Comercial manager (http://english.hhi.co.kr/)
Among the manufacturers cited above, ENERCON, GE, and VESTAS are offering turnkey
implementation of projects (including civil works, substations and connection with the grid) as
well as turbine/tower. In order to provide the latter service the manufacturers are associating
with local engineering firms. HYUNDAI also intends to provide this service soon.
ii) Importers and wholesalers of RE equipment (when distinct from manufacturers and are
an important part of the supply chain):
The Brazilian market is not yet sufficiently developed to have this kind of agent. All equipment
supply is provided by the manufacturers.
iii) c. Project developers and turnkey contractors (when distinct from manufacturers):
Larger firms include:
- TOSHIBA – Otone Zamberlan (11)4083-7900 Commercial Director
- ENERFIN/ELECNOR – Marco Morales (51)9235-7475 Director / Ricardo Encinas (11)2139-
8100 General Director.
This category is incipient. TOSHIBA is only beginning to enter the market. Enerfin/Elecnor have
not yet executed projects for third parties and suffer from their being owner/operators (and
hence competitors) of possible clients.
There is considerable capacity in the hands of relatively small individual developers. Having won
in the December, 2009 auction, many of these are positioned to sell their project for execution to
larger firms – creating opportunities for the latter to enter or expand their participation in the
market. The buyers are Brazilian energy companies (e.g. CPFL, Energisa, Light, CEMIG,
CHESF, Eletronorte, Eletrosul); large Brazilian construction companies and mining companies
(e.g. Vale); foreign utilities (e.g. SNPOWER-StatKraft of Norway); domestic and international
investment funds.
Little information is publicly available about this “secondary market”. The prices paid vary
between about USD 55,000 -140,000 (€ 40,000 - 100,000) per MW of contracted installed
capacity, depending on the projected performance of the wind farm, the characteristics of the
connection to the grid and the logistics of the site (such as ease of access).
iv) d. Owners of plants or groups of plants (only leading firms):

Some larger firms have now begun to accumulate substantial stakes in the wind energy market.
These include traditional energy supply companies, such as Petrobrás, CPFL, Iberdrola,
Eletrosul, as well as firms more specialized in wind and (possibly) other renewables, such as
Renova, Dobreve. Some contacts are:
- ENERFIN – Marco Morales (51)9235-7475 director
- MULTINER – Julio Pedro (21)2272-5500 director
Econoler A-158
REF: 5574
- IBERDROLA – Laura Porto (21)3820-1519
- PACIFIC HYDRO – Maurício Vieira (84)4009-0112 manager for business development
- PETROBRAS – Anário Quintino Jr. (21)3212-4923 coordinator for wind energy
As observed in the previous item, there is also substantial capacity in the hands of smaller
developers. Many of these are interested in selling on their projects for implementation to larger
agents.
v) Professional associations of businesses:

- ABEEOLICA – Lauro Fiuza (SERVTEC) (11) 3660-9700. President.
vi) Commercial banks which have been engaged in financing investments in this area:
Although most credit is ultimately from the BNB and the BNDES, financial intermediaries such as
Santander, Itaú BBA and HSBC have entered in some of these operations.
Among the private banks, Santander has been the most active. It already has extensive
experience in Europe in this area. It acts not only as an intermediary for BNDES loans, but can
finance equity and provide guarantees. In addition, they may participate as a shareholder in
projects – generally >50% of the equity for a period of up to 36-40 months (with tag along
agreements with the original partners) – and provide resources for project design/development.
The bank has global agreements with various manufacturers, which can reduce the cost of
turbines and contracted O&M. It is considering entering into leasing arrangements for wind
turbines. Contact: Eduardo Klepacz, eklepacz@santander.com.br, (11) 3012 7189.
vii) Green investment funds (including carbon funds):

- Perenia Carbon (www.pereniacarbon.com) - manager for Latin American operations Cintia
Dias (21) 9444 8504.
viii) Principal firms (domestic and international) certifying projects in Brazil:

- DEWI GmbH (dewi.com) – internacional (http://www.dewi.de/)
- GL Garrad Hassan – internacional (http://www.gl-garradhassan.com/)
- Camargo Schubert – nacional (http://www.camargo-schubert.com/)
The two principle sources of credit for project finance are the BNDES and the Banco do Nordeste de
Brasil (BNB). The BNB finances projects in the Northeast Region. As shown in the table, the terms of
the BNB are significantly more favorable for project developers than are those of the BNDES.
Table 83: Comparison of credit terms between those of BNDES and of Banco do Nordeste
Development Bank Max share of Interest Depreciation Grace

Investment Rate (%) (Years) Period
BNDES 80% 9-11 14 6 months
BNB – Banco do Nordeste 90% 7-10 20 Up to 4 years
Econoler A-159
REF: 5574
During the time of PROINFA, the BNB had a small credit window for wind and was not much used.
However, lending capacity for wind projects was increased in time for the December 2009 wind
auction. A large fraction of lending for the selected projects should come this year from the BNB.
It is indeed quite possible that the availability of such concessional finance for the Northeast was a
major factor behind the very large share of capacity (almost 90%) that was won by projects in the
region.
It is not clear to what extent BNDES operations are “direct” or “indirect” (through banks). A typical
project of 25 MW would involve ~BRL 100 million of total investment, which would qualify for “direct”
financing. However, it appears that a significant share of the lending for projects from the December
2009 auction will be “indirect”.
The winning projects, once commissioned, will have long term contracts with predictable and credible
revenue streams over a 20-year period.
Econoler A-160
REF: 5574
APPENDIX 9 BIODIESEL MARKET SECTOR
Scale of the market and recent history
The National Program for the Production and Use of Biodiesel (PNPB - Programa Nacional de
Produção e Uso de Biodiesel), was begun in 2005 to substitute for diesel oil.66 Legislation in that year
established a chronogram for minimum % mixtures in diesel as well as a framework for monitoring this
new fuel’s insertion in the market. The program originally authorized a voluntary 2% mix (B2) between
2005 and 2007. Between 2008 and 2012 this 2% mix would be obligatory and would increase to 5%
(B5) from 2013.
However, the popularity of the program and the rapid development of the market brought a revision of
the targets for the obligatory mix. In March, 2008, the government authorized a 3% mix (B3) from July
of that year and in 2009 there were more changes. Table 84 shows the evolution of the mix until now.
Table 84: Evolution of the required blend of biodiesel in diesel from fossil fuel67
2005-2007: From Jan 2008: From July 2008: From July 2009: From January 2010:
2% authorized 2% obligatory 3% obligatory 4% obligatory 5% obligatory
Since production effectively began in March of 2005, biodiesel output has grown quickly, as shown in
Table 85. The regional profile has changed. In 2007, the Northeast was the largest producing region,
but output there has actually fallen since.
Table 85: Evolution of the production in m3 of pure biodiesel (B100), 2005-200968
Region↓ Year→ 2005 2006 2007 2008 2009

North 510 2,421 26,589 15,987 41,821
Northeast 156 34,798 172,200 125,910 163,905
Middle West 0 10,121 125,808 526,287 640,077
Southeast 44 21,562 37,023 185,594 284,379
South 26 100 42,708 313,350 477,871
Brazil 736 69,002 404,329 1,167,128 1,608,053
There are now 48 biodiesel plants with a capacity of 11.9 thousand m3/day which have been
authorized to produce and commercialize biodiesel. There are also 5 new plants authorized for
construction and 7 existing plants authorized to expand which increase capacity by 2.6 thousand
m3/day.
With the current (since January, 2010) obligatory mix of 5% (B5), the tendency is for production to
grow. The market is being adequately supplied and the installed capacity comfortably exceeds
demand.
66
Ethanol has long been used in Brazil to substitute for gasoline. Since it has a high octane it is suited for use in
spark ignition engines (Otto cycle) generally used in automobiles. However, for this very reason, it is unsuited
for mixture with diesel, which is used in compression ignition engines.
67
Source: Ministério das Minas e Energia
68
Source: ANP as stipulated in ANP Resolution n° 17/2004.
Econoler A-161
REF: 5574
Overview of potential; significant regional differences and barriers
In the short term, Brazilian biodiesel production should grow because of the strong internal market.
Besides the steadily increasing demand for diesel (B5 and subsequently higher % mixes), there is the
prospect of various fleets of urban buses beginning to use either B20 or B100, or pure biodiesel.
There is biodiesel production in all of the macro regions of Brazil as shown in Table 85. The most
important region is the Center-West (Centro-Oeste) but, other than in the North (roughly, Amazonia)
all regions have important production. The current geographical distribution of production capacity is
projected to continue in the near future, with some increase in the relative weight of the Southern
Region, as shown in the following table:
Table 86: Current regional shares of biodiesel production capacity and projected shares in the
near term69
Region Current Production Future Production

Northeast 18.9% 18.2%
South 19.8% 26.2%
Southeast 17.6% 17.5%
North 4.8% 3.2%
Center-West 38.9% 35.0%
Nominal production capacity has been substantially larger than actual output, as illustrated in the next
map.
69
Aproximately 2 years with the addition of processing plants currently under construction or which have been
authorized. Source: FNP- Agrianual 2010
Econoler A-162
REF: 5574
Figure 24: Map of biodiesel nominal production capacity versus actual output, 200870
Many different raw materials are used to produce biodiesel, but by far the largest feedstock is
soybeans – which supply 82% of the biodiesel produced. The second largest feedstock (12%) is
animal fat from slaughterhouses, followed by cottonseed oil (2%). The remaining materials account for
6%.
Although soybeans are the dominant feedstock for biodiesel today, their use as a raw material is
widely criticized since the oil is a staple food product. No other source, however, is as well understood
from an agronomic or industrial processing perspective. All the other potential feedstocks today have
their difficulties. For example, Castor beans – considered by the government to be the archetypical
biodiesel crop for small family farms in the Northeast – is very viscous which complicates its
processing and means the product must be blended with other vegetable oils. Developers using this
feedstock in the Northeast have suffered setbacks. Agronomic research in Pinhão manso, also in
principle an attractive crop for small family farms in the Northeast, is very limited to provide a basis for
industrial scale supply. Table 87 summarizes the principal advantages and disadvantages of different
raw materials.
70
Source: ANP
Econoler A-163
REF: 5574
Table 87: Advantages and disadvantages of different feedstocks for biodiesel71
Feedstock Advantages Disadvantages

Soybeans • Well developed technology • Low % of oil in the seed
• Cultivation consolidated in Brazil • Used for food
• Global commodity • Large price volatility
Sunflower • High % of oil in the seed • Cultivated area in Brazil is small
• Fits in well as a second crop in • Used for food
rotations in Center-South
Castor Beans • High % of oil in the seed • Small and poorly developed market,
• Not used for food associated with subsistence
• Crop fits social development agriculture
objectives in Northeast • Little technology for industrial
development
• Low productivity per hectare
• Oil is very viscous
Cottonseed • Well developed technology • Low % of oil in the seed
• Global commodity • Used for food
• Cultivated area in Brazil is small
Jatropha Curcas • High % of oil in the seed • Limited agronomic understanding
(Pinhão Manso) • Not used for food • Lack of stable genetic material
• Crop fits social development • Little research has been undertaken
objectives • Commercial harvest after 3rd year
Palm oil (Dendê) • High % of oil in the seed • Used for food
• Global commodity • High initial investment cost
• Excellent option for tropical regions • Large price volatility
• Commercial harvest after 4th year
• Manual harvest increases cost
• Natural oil solidifies at low
temperature
Bovine animal fat • Raw material substantially cheaper • Large expansion would increase
than vegetable oils feedstock price, competing with soap
• Since solid at 22o C, requires more
expensive processing
In general, for the vegetable oils for which there is a developed commodity market the opportunity cost
of redirecting the oil towards fuel use is quite high, which requires subsidies.
Brazil is one of the largest producers of biodiesel in the world and one of the few capable of supplying
increasing global demand – notably that in the European Union where several countries have targets
to increase the mix of biodiesel. Argentina is also a major biodiesel producer. However, the demands
of the internal market resulting from the compulsory 5% (B5) mix may limit that country’s ability to
export. In some other countries there is a tendency for production to decline, given a lack of cultivable
land and concerns about the conflict between food versus fuel.
However, the export of biodiesel is still for some time off in the future, after the internal market has
been consolidated. Though Brazil is a comparatively low cost producer, neither it (nor any other
country) produces biodiesel which can compete directly with conventional diesel oil – the cost in Brazil
71
Source: FNP Agrianual 2010 - Biocombustíveis and Antonio Claudio Horta Barbosa
Econoler A-164
REF: 5574
is roughly double.72 Countries which provide strong subsidies for biodiesel (such as the USA and
Germany73) may be loath to see foreign producers benefiting from these subsidies. As in Brazil, a
strong aspect of the overall motivation for biodiesel production is to provide income and employment
in rural areas. This context can lead to protectionist posture regarding imports. The problem seems to
be rather similar to that faced with sugarcane ethanol.
Although there is much interest in “mini-processing” plants of 1000 to 5000 liters per day (l/day), the
average capacity of existing plants is much larger – 248,000 l/day. There are substantial economies of
scale in the processing plants. Assuming a plant of 185,000 l/day, the total investment in the
processing facility will be about BRL 27 million.74 Compared with an autonomous distillery producing
ethanol from sugarcane, the unit investment per m3/day of output is modest, about
BRL 145,000/m3/day versus BRL 350,000/m3/day. However, electricity and alcohol must be purchased
for the process.
By far the largest component of costs is the feedstock material – typically 80% or more. As already
observed, the most important feedstock is soybean oil (82%), followed by animal fat from
slaughterhouses (12%). The recent and projected prices of different sources of oil in natura are shown
in the next table. One ton of feedstock produces approximately one ton of biodiesel.
Table 88: Prices of oil & fat feedstocks for biodiesel (USD/ton)75
Year Soybean Sunflower Palm Oil Mamona Mamona Animal Recycled

(international) (Domestic) Fat Frying Oil
2008 $1,097 $1,543 $1,046 $2,005 $908 $771 $658
2013 $1,337 $1,548 $1,110 $2,443 $1,107 $940 $802
Although recycled frying oil is the cheapest feedstock, difficulties in collection have made it as yet
unviable on a commercial scale. The availability of animal fat is also limited and competition with
traditional uses is raising prices. The projected tendency is for the prices of the feedstock from
oilseeds to also increase.
Assuring a reliable supply of feedstock is of crucial importance and feedstock supply has often been a
problem.
Overview of regulation and the framework for commercializing biodiesel
Biodiesel is sold exclusively through periodic quarterly auctions which are coordinated by the National
Agency for Petroleum, Gas and Biofuels (ANP). The quantity put to bid in each auction is based on
72
A possible exception is production for local use in remote areas of Amazonia, where the cost of transporting
diesel is extremely high.
73
For example, Germany grants biodiesel complete exemption to taxes, which amount to US$0.47/liter. In the
US there is a tax credit of $0.50/gallon ($0.13/liter) for renewable fuels used for transport and $1.00/gallon for
use in agriculture.
74
This includes the trans-sterification unit, the laboratory, utilities and equipment for preparing the raw oil,
treating water and effluents, weighing and unloading/loading shipments.
75
Source: EPE
Econoler A-165
REF: 5574
estimates of the projected consumption of diesel in the next quarter. From these estimates the
calculation is made of the volume of biodiesel needed to meet the obligatory % blend (Bx) in that
quarter.
The ANP then determines the maximum “reference” price (or price cap) for biodiesel based on
estimates of the cost of production. The winning bidder is that who charges the lowest price for each
lot which has been specified. The ANP sets pre-requisites for the producers to be credentialed to
participate in the auctions. These pre-requisites may change as the market develops.
Petrobrás is the only buyer in these auctions. It defines the size of the lots of biodiesel for each of the
distributors of conventional diesel (e.g. BP, Shell, etc) based on the average share of the market of
each one. The lots are then sold on to each distributor at the average purchase price of the auction
since Petrobrás intermediates the operation without any spread or profit. The biodiesel producers are
responsible for delivering the product to the ultimate distributors who then blend it with the
conventional diesel before delivery to the retail fuel stations.
The biodiesel producer who wins the supply of a lot has three months to deliver 80% of the contracted
volume. If the producer fails to do so, it may be barred from future auctions. The fact that each
contract is short term introduces a significant degree of risk for investments in the processing plant.
In the first auctions, a “Certificate of Social Fuel” was required for 80% of the purchased volume. The
remaining 20% could be purchased from producers without this certificate. Since the twelfth auction in
2008, the total volume in each auction has been divided in two lots. The first lot requires the Certificate
while the second does not. The average prices in the most recent auctions are shown in the following
table.
Table 89: Volumes and prices in the 16th and 17th auctions of biodiesel76
16th Auction 16th Auction 17th Auction 17th Auction

Lot 1 Lot 2 Lot 1 Lot 2
For delivery in January – March, 2010 April – June, 2010
Volume contracted (m3) 460.000 115.000 452.000 113.000
Average price (BRL/m3) 2.328,54 2.319,18 2.241,69 2.218,49
The “Certificate of Social Fuel” reflects the strong social dimension of the PNPB. It is a mechanism
which requires the biodiesel producers to purchase a certain share of their raw material from smaller
family farms. The required share varies from one macro-region to another as shown in Table 90.
Table 90: Minimum required share of raw material input from small family farms77
Region 2009/2010 Harvest 2010/2011 Harvest

North 10% 15%
Center-West 10% 15%
Northeast 30% 30%
Southeast 30% 30%
South 30% 30%
76
Source : ANP. Bids for Lot 1 must have a “Social Certificate”.
77
Source: Ministério do Desenvolvimento Agrário - MDA
Econoler A-166
REF: 5574
As already observed, the “Certificate of Social Fuel” is pre-requisite for participating in much of the
bidding in the auctions. It also gives the firms the right to reduced rates for the PIS and COFINS taxes.
However, there have been some difficulties in organizing small farmers for industrial scale production,
especially in the Northeast where small farmers tend to be subsistence farmers and the tradition of
farmers’ cooperatives is much weaker.
There are several lines of policy action to promote the development of biodiesel. The periodic auctions
have been an important way of stimulating biodiesel production in sufficient quantity to supply the
mandated % blend (Bx). This instrument is gradually being modified and could move towards a free
market, as exists with ethanol, as the market matures. For now, there is a strong parallel with the
structured auctions being carried out for purchases of electricity small hydro, wind energy and
biomass (largely sugarcane mills).
A second line of policy is the tax incentives which are available to producers who meet the
requirements of the “Certificate of Social Fuel” (Selo Combustível). The reduction in PIS/COFINs is
worth BRL 0.218 per liter. These are the only tax incentives. However, it can be observed that in all of
the auctions which have taken place, the producers with the “Certificate of Social Fuel” have obtained
a higher price than those without.
Finally, given the need to find a viable alternative to soybeans in the longer term, the public support of
R&D is crucial. Petrobrás and EMBRAPA (the agricultural research arm of the government) as well as
other centers of research and universities are developing and testing new varieties, new agronomic
techniques and conversion technologies.
An interesting project in Pará state will be the first test on a large scale to produce palm oil (dendê) for
biodiesel. Undertaken by a consortium composed of Vale with Biopalma da Amazônia SA it is
expected to produce 160,000 ton/year, with production beginning in 2014. Total project investment of
about USD 500 million. The biodiesel will supply a B20 blend for Vale’s own fleet of locomotives in the
North and heavy mining equipment in Carajás. While at a much larger scale, the experience may be
useful for subsequent development of projects to supply isolated electrical systems (and boats) in the
region.
Econoler A-167
REF: 5574
Key players in the market include the owner/operators of the processing plants. Some of the largest
producers are shown below. The smallest of the plants operated by these firms have 300 m3/day of
capacity. There is a marked tendency towards consolidation of producers.
Table 91: Key biodiesel producers in Brazil
Firm No Plants Authorized Capacity (m3/day)

Granol 2 1,546
Brasil Eco Diesel 4 1,440
Caramurú 2 1,250
ADM 1 955
Petrobrás 3 905
Biocapital 1 824
Agrenco 1 660
Vale is also investing in a large plant in Pará to produce and process palm oil for its own consumption.
There is a variety of producers of specialized equipment and services for processing biodiesel.
• DEDINI SA- Industrias de Base: Manufactures equipment - www.dedini.com.br

• TecBio Tecnologias Bioenergéticas Ltda.: Manufactures equipment - www.tecbio.com.br
• Quimis SA: Manufactures equipment & chemical products - www.quimis.com.br
• Evonik Industries: Manufactures equipment - www.evonik.com.br
• Intecnial: Electrical & mechanical equipment & services - www.intecnial.com.br
• Gea Westfalia Separator Brasil: Manufactures centrifuges & other specialized equipment -
www.westfaliaseparator.com.br
• Axens IFP Group Technologies: Technology for biodiesel and services - www.axens.net
The website www.biodieselbr.com.br presents information (including contacts) on all of the firms with
plants which produce biodiesel today or are under construction. It also has information on equipment
suppliers and purchasers of by-products, such as glycerine.
There is an association of biodiesel producers – Associação Brasileira das Indústrias de Biodiesel:

http://www.abiodiesel.org.br.
A number of public sector entities are involved in the operation of the PNPB.
• The Ministry of Mines and Energy (Ministério das Minas e Energia – MME) is responsible for
structuring the overall program and defining the targets for the volume of biodiesel to be
blended.
• The National Agency for Petrolem, Gas and Biofuels (Agencia Nacional de Petróleo, Gás e
Biocombustíveis – ANP) is linked to the MME. It is responsible for regulating and monitoring the
production, quality control, distribution and commercialization of both biodiesel and conventional
diesel. It also organizes the auctions described above.
• Petrobrás is the only buyer in these auctions, as described above. The lots are then sold on to
each distributor at the average purchase price of the auction.
Econoler A-168
REF: 5574
• The Ministry of Agriculture (Ministério da Agricultura – MAPA) is responsible for structuring the
agricultural supply chain and for the agro-climatic zoning of possible crops.
• The Ministry of Agrarian Development (Ministério do Desenvolvimento Agrário – MDA) is
responsible for monitoring the inclusion of small farmers in the biodiesel program and issuing the
“Certificate of Social Fuel”.
The development of new varieties and cultivars of potential crops to provide raw material are the
responsibility of EMBRAPA, which subordinated to the Ministry of Agriculture. Petrobrás also plays an
important role in funding and coordinating R&D for biodiesel.
Brazil’s public sector and development banks – BNDES, Banco do Brasil and the Banco do Nordeste
– offer financing both for the construction of processing plants, the agricultural production of the raw
material (investment and operations), the purchase of the feedstock by the plants and the
commercialization of the biodiesel product.
The credit line of the BNDES – Programa de Apoio Financeiro a Investimentos em Biodiesel – was
established in 2004. Operations may be direct, indirect (automatic or non-automatic), or mixed. Under
this program, the BNDES can finance up to 90% of the investment (in items which may be financed)
for projects with the “Certificate of Social Fuel” and 80% of those without this certificate. The table
below summarizes the interest rate for direct operations.
Table 92: BNDES biodiesel support program interest rate for direct operations
Micro, small & medium firms - projects with Certificate of Social Fuel TJLP + 1%
Micro, small & medium firms – projects without Certificate of Social Fuel TJLP + 2%
Large firms - projects with Certificate of Social Fuel TJLP + 2%
Large firms – projects without Certificate of Social Fuel TJLP + 3%
Indirect operations add the remuneration of the financial intermediary. We do not have information yet
regarding the share of BNDES operations which are direct, indirect or mixed.
The Banco do Brasil, besides intermediating loans from the BNDES has diverse lines, such as: Pronaf
Agroindústria (for small family farms), Prodecoop (for cooperatives), Crédito Agroindustrial (for
acquiring raw material) and the FCO-Empresarial (FCO = Constitutional Fund for the Middle West).
Guidelines regarding the agricultural zoning for the proposed crop and the technical recommendations
of the responsible official agency should be observed.
A key criterion for conceding credit is the guarantee for the commercialization of the product, be it the
raw material or the biodiesel.
The BNDES requires collateral78 of at least 100% of the value being financed. In the operational
phase, the collateral requirements (or personal guarantees) may be relaxed if the BNDES or the
78
Guarantees of the following types: hipoteca, penhor (inclusive de títulos) e/ou alienação fiduciária.
Econoler A-169
REF: 5574
intermediary financial agent has first call on the receipts of the sale of biodiesel (vinculação de
receitas provenientes de contrato de venda de biodiesel).
Econoler A-170
REF: 5574
APPENDIX 10 INFORMATION ON ISOLATED OFF-GRID
SYSTEMS IN AMAZÔNIA
Table 93: Thermal Power Plants in Isolated Systems
Acre
Installed
Municipality Capacity Latitude Longitude Owner/Operator Fuel
(kW)
Aeroporto Internacional de Cruzeiro do Sul 216 7°36'0.00"S 72°45'60.00"O Empresa Brasileira de Infraestrutura Aeroportuária Óleo Diesel
Laminados Triunfo 1,500 10° 0'45.00"S 67°46'2.00"O Laminados Triunfo LTDA Resíduos de Madeira
DTCE-RB 528 9°59'36.74"S 67°48'4.15"O Cindacta IV Óleo Diesel
Curzeiro do Sul 21,654 7°36'56.00"S 72°40'28.00"O Guascor do Brasil LTDA Óleo Diesel
Tarauaca 3,314 8° 9'6.00"S 70°45'49.00"O Guascor do Brasil LTDA Óleo Diesel
Feijó 3,177 8°10'31.00"S 70°21'32.00"O Guascor do Brasil LTDA Óleo Diesel
Manoel Urbano 1,169 8° 4'60.00"S 59°15'58.00"O Guascor do Brasil LTDA Óleo Diesel
Assis Brasil 1,494 10°56'5.00"S 69°34'1.00"O Guascor do Brasil LTDA Óleo Diesel
Santa Rosa dos Purus 435 9°26'9.00"S 70°29'35.00"O Guascor do Brasil LTDA Óleo Diesel
Jordão 386 9°11'44.00"S 71°56'42.00"O Guascor do Brasil LTDA Óleo Diesel
Marechal Thaumaturgo 1,029 8°56'37.00"S 72°47'10.00"O Guascor do Brasil LTDA Óleo Diesel
Porto Walter 496 8°15'47.00"S 72°44'29.00"O Guascor do Brasil LTDA Óleo Diesel
DTCEA-CZ 136 7°35'48.20"S 72°46'25.67"O Cindacta IV Óleo Diesel
DTCEA-CZ II 528 7°35'48.20"S 72°46'25.67"O Cindacta IV Óleo Diesel
Centrais
Rio Acre 45 9°57'54.00"S 67°47'35.00"O Óleo Diesel
Elétricas do Norte do Brasil
Amapá
Installed
Municipality
Capacity (kW)
Latitude Longitude Owner/Operator Fuel
Calçoene 1,296 2°29'52.80"N 50°56'56.40"O Companhia de Eletricidade do Amapá Óleo Diesel
Laranjal do Jari 8,675 0°49'38.00"S 52°31'35.00"O Companhia de Eletricidade do Amapá Óleo Diesel
Lourenço 720 2°18'34.00"N 51°37'56.00"O Companhia de Eletricidade do Amapá Óleo Diesel
Oiapoque 8,250 3°50'4.00"N 51°50'10.00"O Companhia de Eletricidade do Amapá Óleo Diesel
Serra do Navio 21,600 0°53'45.60"N 52° 0'7.20"O Amapari Energia S.A. Óleo Diesel
DTCEA-0I 128 3°51'46.54"N 51°47'49.07"O CINDACTA IV Óleo Diesel
DTCEA-MQ 528 0° 3'11.87"N 51° 4'19.00"O CINDACTA IV Óleo Diesel
Econoler A-171
REF: 5574
Amazonas
Installed
(kW)
Alvarães 1,728 3°13'60.00"S 64°46'60.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Amaturá 1,238 3°22'15.00"S 68°11'46.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Anamã 1,566 3°34'45.00"S 61°24'34.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Anori 4,330 3°44'48.00"S 61°39'40.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Apuí 5,000 7°12'9.00"S 59°53'13.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Novo Aripuanã 4,156 5° 7'17.00"S 60°22'58.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Atalaia do Norte 1,400 4°20'8.00"S 70° 9'20.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Autazes 6,042 3°34'46.00"S 59° 7'58.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Axinim 455 4° 2'44.00"S 59°22'14.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Barcelos 2,460 0°58'31.27"S 62°55'28.17"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Barreirinha 3,240 2°48'23.00"S 57° 3'59.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Belém do Solimões 640 4° 2'30.00"S 69°31'43.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Benjamin constant 5,100 4°21'22.00"S 70° 2'7.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Beruri 2,358 3°53'52.00"S 61°22'29.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Boa Vista do Ramos 2,062 2°58'8.00"S 57°35'17.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Boca do Acre 11,300 8°46'5.00"S 67°19'8.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Borba 6,390 4°23'23.00"S 59°35'46.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Caapiranga 1,378 3°19'46.00"S 61°12'40.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Caburi 680 2°27'39.00"S 57° 6'10.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Campinas 280 3°17'60.00"S 60°37'15.60"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Canutama 2,080 6°32'4.00"S 64°23'1.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Carauari 5,456 4°52'44.64"S 66°54'0.31"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Careiro da Várzea 2,500 3°11'52.00"S 59°46'27.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Castanho 6,000 3°49'8.00"S 60°22'5.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Caviana 430 3°17'60.00"S 60°37'15.60"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Coari 22,260 4° 5'26.00"S 63° 8'49.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Codajás 5,200 3°50'26.00"S 62° 3'45.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Envira 3,327 7°26'27.00"S 70° 1'47.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Estirão do Equador 555 4°22'19.20"S 70°11'31.20"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Fonte Boa 3,550 2°31'27.00"S 66° 2'19.00"O 100% para Centrais Elétricas do Norte do Brasil S/A. Óleo Diesel
Guajará 580 7°32'45.60"S 72°35'2.40"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Humaitá 12,930 7°30'56.00"S 63° 1'30.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Iauaretê 1,310 0° 7'48.00"S 67° 5'20.40"O 100% para Hermasa Navegação da Amazônia S/A Óleo Diesel
Ipiranga 288 2°55'51.00"S 69°41'47.00"O 100% para Masisa Madeira Ltda. Óleo Diesel
Ipixuna 2,668 7° 3'17.00"S 71°41'29.00"O 100% para Petróleo Brasileiro S/A Óleo Diesel
Iranduba 6,082 3°16'38.00"S 60°11'3.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Itacoatiara 19,890 3° 8'3.00"S 58°26'46.00"O 100% para CINDACTA IV Óleo Diesel
Itamarati 2,380 6°26'22.00"S 68°14'46.00"O 100% para BK Energia Itacoatiara Ltda Óleo Diesel
Econoler A-172
REF: 5574
Amazonas
Installed
(kW)
Jacaré 290 3°36'7.00"S 60°49'3.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Japurá 180 1°49'19.00"S 66°36'32.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Juruá 1,998 3°28'26.00"S 66° 4'1.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Jutaí 2,911 2°44'32.00"S 66°46'6.00"O 100% para Breitener Jaraqui S/A Óleo Diesel
Lábrea 6,300 7°15'57.00"S 64°47'37.00"O 100% para Breitener Tambaqui S/A Óleo Diesel
Limoeiro 1,930 1°52'40.00"S 66°59'38.00"O 100% para Empresa Brasileira de Infra-Estrutura Aeroportuária Óleo Diesel
Manacapuru 23,692 3°17'43.00"S 60°37'1.00"O 100% para Empresa Brasileira de Infra-Estrutura Aeroportuária Óleo Diesel
Manaquiri 3,080 3°25'55.00"S 60°27'32.00"O 100% para Empresa Brasileira de Infra-Estrutura Aeroportuária Óleo Diesel
Manicoré 5,110 5°48'49.00"S 61°17'53.00"O 100% para Geradora de Energia do Amazonas S/A Óleo Diesel
Maraã 2,050 1°51'21.60"S 65°34'51.60"O 100% para Itautinga Agro Industrial S/A Óleo Diesel
Maués 11,670 3°23'59.00"S 57°42'50.00"O 100% para Companhia Energética Manauara Óleo Diesel
Mocambo 648 2°27'11.00"S 57°17'4.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Murituba 260 3°51'46.00"S 62°28'54.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Nhamundá 2,800 2°12'18.03"S 56°43'8.03"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Nova Olinda do Norte 4,910 3°53'29.00"S 59° 5'32.00"O 100% para Amazonas Distribuidora de Energia S/A Óleo Diesel
Novo Airão 4,082 2°37'17.00"S 60°56'32.00"O 100% para Rio Amazonas Energia S.A. Óleo Diesel
Novo Céu 600 3°23'11.00"S 59°16'26.00"O 100% para CINDACTA IV Óleo Diesel
Novo Remanso 2,300 3°13'13.00"S 59° 1'19.00"O 100% para CINDACTA IV Óleo Diesel
Parintins 23,000 2°37'59.00"S 56°44'26.00"O 100% para CINDACTA IV Óleo Diesel
Pauini 3,018 7°42'52.00"S 67° 0'9.00"O 100% para CINDACTA IV Óleo Diesel
Pedras 432 2°47'47.00"S 57°16'45.00"O 100% para CINDACTA IV Óleo Diesel
São Sebastião do Uatumã 2,184 2°34'19.20"S 57°52'15.60"O 100% para CINDACTA IV Óleo Diesel
Santa Izabel do Rio Negro 1,864 0°25'14.00"S 65° 2'7.00"O 100% para CINDACTA IV Óleo Diesel
Tabatinga 14,520 4°15'27.00"S 69°56'19.00"O 100% para CINDACTA IV Óleo Diesel
Tapauá 3,780 5°37'17.00"S 63°11'16.00"O 100% para CINDACTA IV Óleo Diesel
Tefé 17,245 3°21'16.00"S 64°40'13.00"O 100% para CINDACTA IV Óleo Diesel
Tonantins 2,740 2°53'16.00"S 67°47'39.00"O 100% para CINDACTA IV Óleo Diesel
Tuiué 568 3°41'35.00"S 61° 3'52.00"O 100% para CINDACTA IV Óleo Diesel
Urucará 4,500 2°32'5.00"S 57°45'38.00"O 100% para CINDACTA IV Óleo Diesel
Vila Amazônia 720 2°36'52.00"S 56°40'0.00"O 100% para CINDACTA IV Óleo Diesel
Vila Bittencourt 444 3°51'10.00"S 61°59'38.00"O 100% para Canamã Energética Companhia Ltda. Óleo Diesel
Vila Caiambé 420 3°31'14.00"S 64°24'27.00"O 100% para Canamã Energética Companhia Ltda. Óleo Diesel
Cametá 592 2°47'34.80"S 57° 4'12.00"O 100% para Canamã Energética Companhia Ltda. Óleo Diesel
Vila Sacambu 362 3°16'37.00"S 60°55'59.00"O - Óleo Diesel
Econoler A-173
REF: 5574
Pará
Installed
Municipality
Capacity (kW)
Latitude Longitude Owner/Operator Fuel
Afua 0° 9'47.00"S 50°22'60.00"O Guascor do Brasil LTDA Óleo Diesel

2,040
Almeirim 1°30'43.00"S 52°34'58.00"O Guascor do Brasil LTDA Óleo Diesel

2,726
Altamira 3°11'40.55"S 52°12'33.53"O Cindacta IV Óleo Diesel
80
Centrais
Anajas 0°59'9.00"S 49°56'46.00"O Óleo Diesel
1,112 Elétricas do Pará S/a
Centrais
Aveiro 3°36'25.00"S 55°19'46.00"O Óleo Diesel
624 Elétricas do Pará S/a
Centrais
Bagre 1°53'50.00"S 50°12'40.00"O Óleo Diesel
Centrais
Bannach 7°21'10.00"S 50°24'27.00"O Óleo Diesel
Breves 1°40'0.00"S 50°28'11.00"O Guascor do Brasil LTDA Óleo Diesel
8,701
Cachoeria do Arari 1° 0'39.60"S 48°57'46.80"O Guascor do Brasil LTDA Óleo Diesel
1,008
Centrais
Chaves 0° 9'45.00"S 49°59'31.00"O Óleo Diesel
Centrais
Cotijuba 1°14'59.00"S 48°33'14.00"O Óleo Diesel
Curralinho 1°48'41.00"S 49°48'0.00"O Guascor do Brasil LTDA Óleo Diesel
1,442
Faro 2°10'8.00"S 56°45'1.00"O Guascor do Brasil LTDA Óleo Diesel
954
Gurupá 1°24'26.00"S 51°38'22.00"O Guascor do Brasil LTDA Óleo Diesel
1,603
Centrais
Jacareacanga 6°13'43.00"S 57°45'39.00"O Óleo Diesel
Juruti 2° 9'46.00"S 56° 5'60.00"O Guascor do Brasil LTDA Óleo Diesel
1,675
Centrais
Melgaco 1°48'7.00"S 50°42'55.00"O Óleo Diesel
Monte Alegre 1°59'38.00"S 54° 5'16.00"O Guascor do Brasil LTDA Óleo Diesel
4,563
Muana 1°32'26.00"S 49°15'1.00"O Guascor do Brasil LTDA Óleo Diesel
1,163
Centrais
Novo Progresso 7° 2'20.00"S 55°24'16.00"O Elétricas do Pará S/a Óleo Diesel
9,125 (Soenergy)
Óbidos 1°54'10.00"S 55°31'48.00"O Guascor do Brasil LTDA Óleo Diesel
6,053
Oeiras Do Pará 2° 0'32.00"S 49°51'44.00"O Guascor do Brasil LTDA Óleo Diesel
1,008
Oriximiná 1°46'15.00"S 55°51'47.00"O Guascor do Brasil LTDA Óleo Diesel
8,482
Ponta De Pedras 1°24'12.00"S 48°51'51.00"O Guascor do Brasil LTDA Óleo Diesel
1,499
Portel 1°56'48.00"S 50°48'41.00"O Guascor do Brasil LTDA Óleo Diesel
3,350
Porto De Moz 1°44'51.00"S 52°13'52.00"O Guascor do Brasil LTDA Óleo Diesel
2,566
Prainha 1°48'12.00"S 53°28'40.00"O Guascor do Brasil LTDA Óleo Diesel
1,202
Salvaterra 0°44'44.00"S 48°31'33.00"O Guascor do Brasil LTDA Óleo Diesel
2,633
Centrais
Santa Cruz Do Arari 0°43'6.00"S 49°10'49.00"O Óleo Diesel
Centrais
Santa Maria Das Barreiras 8°50'40.00"S 49°43'53.00"O Óleo Diesel
Centrais
Santana Do Araguaia 9°20'35.00"S 50°19'60.00"O Elétricas do Pará S/a Óleo Diesel
7,323 (Soenergy)
São Sebastião Da Boa Vista 1°43'16.00"S 49°31'42.00"O Guascor do Brasil LTDA Óleo Diesel
1,008
Soure 0°44'1.00"S 50°20'1.00"O Guascor do Brasil LTDA Óleo Diesel
3,470
Terra Santa 2° 6'35.00"S 56°29'55.00"O Guascor do Brasil LTDA Óleo Diesel
1,344
Centrais
Vila – Mandi 9°17'50.00"S 50° 6'7.00"O Óleo Diesel
Econoler A-174
REF: 5574
Rondônia
Installed
(kW)
Abunã 3,180 9°41'27.00"S 65°22'22.00"O Guascor do Brasil LTDA Óleo Diesel
Buritis/Fernando Rivero 12,800 10°12'29.00"S 63°49'22.00"O Guascor do Brasil LTDA Óleo Diesel
Colorado do Oeste 10,946 13° 7'8.00"S 60°31'41.00"O Centrais Elétricas de Rondônia S/A. Óleo Diesel
Pimenta Bueno 13,000 11°41'14.00"S 61°11'4.00"O Centrais Elétricas de Rondônia S/A. Óleo Diesel
São Sebastião 98 8°46'22.00"S 63°56'44.00"O Guascor do Brasil LTDA Óleo Diesel
Vilhena 23,750 12°45'45.00"S 60° 8'14.00"O Centrais Elétricas de Rondônia S/A. Óleo Diesel
Rovema Colorado do oeste 4,500 13° 7'8.00"S 60°31'41.00"O ROVEMA Veículos e Máquinas Ltda Óleo Diesel
Rovema Triunfo 4,340 9°17'49.00"S 63°28'5.00"O ROVEMA Veículos e Máquinas Ltda Óleo Diesel
Rovema Bandeirantes 1,632 9°37'48.00"S 64°32'2.00"O ROVEMA Veículos e Máquinas Ltda Óleo Diesel
DTCEA-GM 408 10°47'12.79"S 65°17'5.98"O CINDACTA IV Óleo Diesel
DTCEA-PV 528 8°42'36.00"S 63°54'6.01"O CINDACTA IV Óleo Diesel
DTCEA-PV II 400 8°42'36.00"S 63°54'6.01"O CINDACTA IV Óleo Diesel
DTCEA-GM II 136 10°47'12.79"S 65°17'5.98"O CINDACTA IV Óleo Diesel
DTCEA-VH 528 12°41'39.70"S 60° 5'53.99"O CINDACTA IV Óleo Diesel
Roraima
Installed
(kW)
Água Fria 48 4°37'52.00"N 60°30'7.00"O Companhia Energética de Roraima Óleo Diesel
Campos Novos 360 2°10'55.20"N 61° 2'27.60"O Companhia Energética de Roraima Óleo Diesel
Canauanim 10 2°36'36.00"N 60°35'49.20"O Companhia Energética de Roraima Óleo Diesel
Caracaraí 11 1°49'21.00"N 61° 7'23.00"O Companhia Energética de Roraima Óleo Diesel
Contão 160 4°25'51.60"N 61° 8'45.60"O Companhia Energética de Roraima Óleo Diesel
Equador 281 0° 8'7.00"N 60°33'59.00"O Companhia Energética de Roraima Óleo Diesel
Félix Pinto 600 2°36'36.00"N 60°35'49.20"O Companhia Energética de Roraima Óleo Diesel
Jundiá 400 0°56'44.28"N 60°25'6.37"O Companhia Energética de Roraima Óleo Diesel
Lago Grande 26 1°48'57.60"N 61° 7'40.80"O Companhia Energética de Roraima Óleo Diesel
Maloca Boca da Mata 48 4°25'51.60"N 61° 8'45.60"O Companhia Energética de Roraima Óleo Diesel
Maloca da Bala 6 3°52'51.60"N 59°37'22.80"O Companhia Energética de Roraima Óleo Diesel
Maloca da Raposa 64 3°52'51.60"N 59°37'22.80"O Companhia Energética de Roraima Óleo Diesel
Maloca do Araçá 48 3°39'7.20"N 61°22'15.60"O Companhia Energética de Roraima Óleo Diesel
Maloca Flexal 24 3°52'51.60"N 59°37'22.80"O Companhia Energética de Roraima Óleo Diesel
Maloca Guariba 24 3°52'51.60"N 59°37'22.80"O Companhia Energética de Roraima Óleo Diesel
Maloca Malacacheta 48 2°36'36.00"N 60°35'49.20"O Companhia Energética de Roraima Óleo Diesel
Maloca Moscow 5 3°21'36.00"N 59°49'58.80"O Companhia Energética de Roraima Óleo Diesel
Maloca Santa Rosa 24 4°25'51.60"N 61° 8'45.60"O Companhia Energética de Roraima Óleo Diesel
Maloca São Marcos 6 2°49'12.00"N 60°40'22.80"O Companhia Energética de Roraima Óleo Diesel
Maloca Trairão 320 3°39'7.20"N 61°22'15.60"O Companhia Energética de Roraima Óleo Diesel
Maloca Três Corações 320 3°39'7.20"N 61°22'15.60"O Companhia Energética de Roraima Óleo Diesel
Econoler A-175
REF: 5574
Roraima
Installed
(kW)
Maracanã 57 3°52'51.60"N 59°37'22.80"O Companhia Energética de Roraima Óleo Diesel
Mutum 72 4°35'45.60"N 60°10'4.80"O Companhia Energética de Roraima Óleo Diesel
Napoleão 72 3°52'51.60"N 59°37'22.80"O Companhia Energética de Roraima Óleo Diesel
Normândia 1,220 3°52'51.60"N 59°37'22.80"O Companhia Energética de Roraima Óleo Diesel
Nova Esperança 32 3°21'36.00"N 59°49'58.80"O Companhia Energética de Roraima Óleo Diesel
Olho D´agua 24 3°52'51.60"N 59°37'22.80"O Companhia Energética de Roraima Óleo Diesel
Panacarica 60 1°48'57.60"N 61° 7'40.80"O Companhia Energética de Roraima Óleo Diesel
Passarão 600 2°49'12.00"N 60°40'22.80"O Companhia Energética de Roraima Óleo Diesel
Petrolina do Norte 80 1°48'57.60"N 61° 7'40.80"O Companhia Energética de Roraima Óleo Diesel
Pium 18 3°21'36.00"N 59°49'58.80"O Companhia Energética de Roraima Óleo Diesel
Rorainópolis 2,600 0°56'45.60"N 60°25'4.80"O Companhia Energética de Roraima Óleo Diesel
Sacaí 48 0°56'45.60"N 60°25'4.80"O Companhia Energética de Roraima Óleo Diesel
Samaúma 24 0°56'45.60"N 60°25'4.80"O Companhia Energética de Roraima Óleo Diesel
Socó 65 4°35'45.60"N 60°10'4.80"O Companhia Energética de Roraima Óleo Diesel
Surumú 332 4°25'51.60"N 61° 8'45.60"O Companhia Energética de Roraima Óleo Diesel
Taiano 500 2°58'48.00"N 61°17'31.20"O Companhia Energética de Roraima Óleo Diesel
Tepequem 65 3°39'7.20"N 61°22'15.60"O Companhia Energética de Roraima Óleo Diesel
Terra Preta 24 0°52'25.00"S 61°55'54.00"O Companhia Energética de Roraima Óleo Diesel
Vila Antônio Campos 24 2°36'36.00"N 60°35'49.20"O Companhia Energética de Roraima Óleo Diesel
Vila Brasil 900 3°39'7.20"N 61°22'15.60"O Companhia Energética de Roraima Óleo Diesel
Vila Cachoeirinha 57 1°48'57.60"N 61° 7'40.80"O Companhia Energética de Roraima Óleo Diesel
Vila Caícubi 48 1°48'57.60"N 61° 7'40.80"O Companhia Energética de Roraima Óleo Diesel
Vila Central 280 2°36'36.00"N 60°35'49.20"O Companhia Energética de Roraima Óleo Diesel
Vila da Penha 10 2°25'48.00"N 60°53'60.00"O Companhia Energética de Roraima Óleo Diesel
Vila Dona Cota 10 0°56'45.60"N 60°25'4.80"O Companhia Energética de Roraima Óleo Diesel
Vila Floresta 24 0°56'45.60"N 60°25'4.80"O Companhia Energética de Roraima Óleo Diesel
Vila Milagre 10 3°52'51.60"N 59°37'22.80"O Companhia Energética de Roraima Óleo Diesel
Vila São José 65 1°48'57.60"N 61° 7'40.80"O Companhia Energética de Roraima Óleo Diesel
Vista Alegre 160 1°44'12.00"S 61° 8'29.00"O Companhia Energética de Roraima Óleo Diesel
Xumina 14 3°52'51.60"N 59°37'22.80"O Companhia Energética de Roraima Óleo Diesel
Santa Maria do Boiaçú 320 0°56'45.60"N 60°25'4.80"O Companhia Energética de Roraima Óleo Diesel
Santa Maria do Xeruini 24 1°48'57.60"N 61° 7'40.80"O Companhia Energética de Roraima Óleo Diesel
São Francisco do Baixo Rio Branco 10 1°48'57.60"N 61° 7'40.80"O Companhia Energética de Roraima Óleo Diesel
Jacamim 10 3°21'36.00"N 59°49'58.80"O Companhia Energética de Roraima Óleo Diesel
Vila Vilena 120 3°21'36.00"N 59°49'58.80"O Companhia Energética de Roraima Óleo Diesel
Maloca do Manoá 32 3°21'36.00"N 59°49'58.80"O Companhia Energética de Roraima Óleo Diesel
Uiramutã 240 4°35'45.60"N 60°10'4.80"O Companhia Energética de Roraima Óleo Diesel
Vila Itaquera 24 0°56'45.60"N 60°25'4.80"O Companhia Energética de Roraima Óleo Diesel
Vila Remanso 26 0°56'45.60"N 60°25'4.80"O Companhia Energética de Roraima Óleo Diesel
São Francisco 320 3°21'36.00"N 59°49'58.80"O Companhia Energética de Roraima Óleo Diesel
Serra Grande II 108 2°36'36.00"N 60°35'49.20"O Companhia Energética de Roraima Óleo Diesel
Econoler A-176
REF: 5574
Roraima
Installed
(kW)
Pacaraima 2,408 4°25'51.60"N 61° 8'45.60"O Companhia Energética de Roraima Óleo Diesel
Maloca Vista Alegre 24 2°49'12.00"N 60°40'22.80"O Companhia Energética de Roraima Óleo Diesel
Maloca Araçá do Amajari 48 3°39'7.20"N 61°22'15.60"O Companhia Energética de Roraima Óleo Diesel
Araçá 32 3°52'51.60"N 59°37'22.80"O Companhia Energética de Roraima Óleo Diesel
São João da Baliza 1,000 0°56'46.00"N 59°54'32.00"O Companhia Energética de Roraima Óleo Diesel
Rovema 4,800 0°56'47.00"N 59°54'31.00"O ROVEMA Veículos e Máquinas Ltda. Óleo Diesel
Aeroporto Internacional de Boa Vista 216 2°49'12.00"N 60°40'22.80"O Empresa Brasileira de Infra-Estrutura Aeroportuária Óleo Diesel
DTCEA-BV 128 2°50'31.87"N 60°41'31.32"O CINDACTA IV Óleo Diesel
DTCEA-BV II 400 2°50'31.87"N 60°41'31.32"O CINDACTA IV Óleo Diesel
Jundiá 40 0°56'44.28"N 60°25'6.37"O CINDACTA IV Óleo Diesel
Surucucu 80 2°53'53.00"N 61°29'29.00"O CINDACTA IV Óleo Diesel
Bio Fuel 4,800 0°57'35.00"N 59°57'21.00"O Brasil Bio Fuels S.A. Resíduos de Madeira
Sawmills in the State of Pará
Firms that are in the Association of Wood Exporting Industries of Pará (AIMEX – Associação das
Indústrias Exportadoras de Madeira do Estado do Pará)
1. ABED - IND. COM. DE IMP. E EXP.DE MADEIRAS

End: Margem Direita do Rio Pacajá - Porto Barro-Alto
CEP: 68480-000 Portel – PA
Fone/Fax: (91) 3784-1176 e-mail: abedmadeiras@uol.com.br
Linha de Produtos: Madeira Serrada e Aparelhada.
2. AGRO INDUSTRIAL BUJARÚ LTDA

End: Rod. PA 140 – SN, Km 03 CEP: 68670-000 Bujarú-PA
Fone: (91) 3746-1260 Fax: (91) 3746-1205
e-mail: agroindustrialbujaru@uol.com.br
Linha de Produtos: Serrados
3. AGRO INDUSTRIAL DE MADEIRAS VALE FÉRTIL LTDA

End.: Estrada do Maracacuera - Km 04 - Icoaraci - CEP: 66815-140 – Belém – PA
Fone: (91) 3297-7868 - Fax: (91) 3247-3724
e-mail: valefertil@prontonet.com.br
Linha de Produtos: Madeira Serrada
4. ALMEIRIM INDUSTRIAL LTDA

End.: Margem Esquerda dos Rios Parú com Amazonas s/n – Zona Rural
CEP: 68230-000 – Almeirim – PA
Fone: (93) 3737-1208 - Fax: (93) 3737-1208
e-mail: almeirim@gruporosa.com.br
Linha de Produtos: Serrados, Compensados e Laminados
Econoler A-177
REF: 5574
5. AMAZÔNIA FLORESTAL LTDA
End.: Av. Alcindo Cacela 1264, Ed. Empire Center – Salas 1201 e 1202 Nazaré.
CEP: 66060-000 Belém – PA
Fones: (91) 3228-1180/1130 /1108 Fax: (91) 3228-1112
Fábrica: Rod. Transamazônica Km 01 – Vila Miritituba
CEP: 68191-400 - Itaituba - PA
Fone: (93) 3541-1255 Fone/Fax: (93) 3541-1257 Cel: (93) 9122 0548
e-mail:geral@amazoniaflorestal.com.br ou florestal@amazon.com.br
Linha de Produtos: Madeira Aparelhada e Pisos de Madeira
6. BRASCOMP - COMPENSADOS DO BRASIL S/A

End.: Distrito Industrial de Ananindeua, Setor I, Q/3, Lote 2
CEP: 67000-000 Ananindeua-PA.
Fone: (91)4005-5800 Fax.: (91)4005-5829
e-mail: matriz@brascompdobrasil.com.br
Linha de Produtos: Compensado
7. CIKEL BRASIL VERDE S/A

End: Rod. do 40 Horas – Km 04 - Nº 17 - CEP: 67120-000 - Ananindeua – PA
Fone: (91) 4005-9900/9955 Fax: (91) 3273-1808
e-mail: manoel@cikel.com.br; cdenadai@cikel.com.br; cida@cikel.com.br;
jbosco@cikel.com.br ; pereira@cikel.com.br; dpd@cikel.com.br
Escritório Paraná: Rua Itupava, 1.235 CEP: 80040-000 Curitiba-PR.
Fone: (41) 264-1188 Fax: (41) 262-8029 Site: www.cikel.com.br
Linha de Produtos: Madeira Serrada, Madeira Aparelhada, Pisos de Madeira, Compensado, Faqueados
e Laminados.
8. EBATA – PRODUTOS FLORESTAIS LTDA

End.: Dist. Industrial de Icoaraci Qd. 6 Setor B Lote 13 – Icoaraci
CEP: 66815-590 Belém – PA.
Fone: (91) 3204-1900 Fax: (91) 3204-1919
e-mail: ebata@ebata.com.br
Linha de Produtos: Pisos, Deck, Madeira Serrada, Aparelhada
9. ELDORADO EXPORTAÇÃO E SERVIÇOS LTDA

End: Dist. Industrial de Icoaraci, Setor B, Q/03 Lote 1 a 11 – Icoaraci
CEP: 66815-590 Belém -PA.
Fone: (91) 3366-8100
e-mail: gustavo.padilha@saint-gobain.com , eldorado@saint-gobain.com ou
Linha de Produtos: Beneficiamento e Exportação de Madeira Serrada, Madeira
Aparelhada, Portas, Janelas e escadas
10. EMAPA – EXPORTADORA DE MADEIRAS DO PARÁ LTDA

End.: Rua Ó de Almeida, 409 Ed. Rotary – Conj. 1101 / Centro
CEP: 66017-050 Belém-PA.
Fone: (91) 4006-8827 Fax: (91) 4006-8828
e-mail:export@emapa.com.br
11. FLORAPLAC INDUSTRIAL LTDA

End: Estrada Colônia do Uraim, S/N – Km 01 – Setor Industrial - Cx.Postal 02
CEP: 68625-970 – Paragominas – PA
Fone/fax: (91)3729 – 3048 / 3084 / 3214
e-mail: florapa@nortnet.com.br
Linha de Produtos: Compensado
Econoler A-178
REF: 5574
12. GLOBAL IND. COM. E NAVEGAÇÃO LTDA
End.: Rua 1º de Janeiro, 110 – União Cx. Postal 47
CEP: 67105-970 Marituba – PA
Fone/Fax: (91) 4005-9400 Fax: (91) 4005-9401
e-mail: globalbelem@yahoo.com.br
Linha de Produtos: Madeira Serrada, Madeira Aparelhada, Pisos de Madeira e Laminas Torneadas,
Forros, Portas, Decks, Etc...
13. IBL - IZABEL MADEIRAS DO BRASIL LTDA

End.: Rod. PA - 236 - Km 06 - CEP: 66033-170 - Breu Branco - Pa
Fone: (91) 3271-2277 - Fax: 3271-2277
e-mail: divino.fagundes@uol.com.br e ibl.mad@bol.com.br
Linha de Produtos: Madeiras serradas: pranchas, vigas, peças especiais e Madeiras Aparalhadas:
Decking, assoalho, forro e peças especiais
14. INDUFEX INDÚSTRIA FURLANETO E EXPORTAÇÃO LTDA

End.: Estrada Caiçaua, Km 05
CEP: 68798-000 - Santa Bárbara do Pará – PA
Fone/Fax: (91) 3621-2018 e 3255-3011
e-mail: marcio@indufex.com.br e orivaldo@indufex.com.br
Linha de produtos: Serrados e Beneficiados
15. JURUÁ FLORESTAL LTDA

End.: Dist. Industrial de Ananindeua - Qd 6 Lote 3 Setor D
CEP: 67033-310 – Ananindeua – PA
Fone/Fax: (91) 3321-3399 Fax: (91) 3321-3355
e-mail: jurua@juruaflorestal.com.br
16. LAMAPA LAMINADOS DE MADEIRAS DO PARÁ S/A

End.: Dist. Industrial de Ananindeua - Qd 3 Lote 7 Setor I
CEP: 67033-009 – Ananindeua – PA
Fone/Fax: (91) 3250-9800 Fax: (91) 3250-3070
e-mail: lamapa@prontonet.com.br
17. MADEIRAS FILTER LTDA

End: Estrada do Outeiro, Lote 12 Setor A – s/n - Icoaraci
CEP: 66815-590 – Belém – PA
Fone: (91) 3227-1270 Fax: (91) 3227-1269 e-mail: filtter@terra.com.br
Linha de Produtos: Madeira Serrada, Madeira Aparelhada, Pisos de Madeira e
Compensados.
18. MADEIRAS MAINARDI LTDA

End: Rua 1º de Janeiro, 111 CEP: 67200-000 Marituba – PA
Fone: (91) 4005-9400 Fax: 4005-9401
e-mail: armandoborges@yahoo.com.br ou globalbelem@yahoo.com.br
Linha de Produtos:
19. MADENORTE S/A - LAMINADOS E COMPENSADOS

End: Av. Roberto Camelier, 337 CEP: 66033-640 Belém - PA.
Fone: (91) 4005-5716/5777 FAX: ( 091) 4005-5750
e-mail:geral@madenorte.com.br ou diretoria@madenorte.com.br
Linha de Produtos: Madeira Serrada, Madeira Aparelhada (S2S e S4S), Decking, Pisos de Madeira
(soalho, parquet, piso industrial e outros), Pisos engenheirado, Compensados e Plataformas. Em varias
espécies e medidas
Econoler A-179
REF: 5574
20. MADESA-MADEIRAS SANTARÉM LTDA
End:Rodovia Santarém/Cuiabá, Km 4 - Caixa Postal 12
CEP: 68030-000 - Santarém-PA.
Fone:(93) 3524-3500/3505 FAX: (93) 3524-1999
e-mail: madesa@madesamadeireira.com.br
Linha de Produtos: Madeira Serrada, Aparelhada e Pisos de Madeir
21. MADEX MADEIRAS PARA EXPORTAÇÃO LTDA

COORDENADAS
End: Rodovia Transamazônica, Km 02 – S/N - Cidade Nova
CEP: 68.501-000 Marabá – PA
Fone: (94) 3324-2121 Fax: (94) 3324-2785
e-mail: madexmaderias_exp@yahoo.com.br ou dhayanih21@yahoo.com.br
Linha de Produtos:
22. MG - MADEIREIRA ARAGUAIA, IND. COM. E AGROPECUÁRIA S/A

End: Rua da Cerâmica, 400 - União CEP: 67200-000 Marituba - PA
Fone: (91) 4005-8600 Fax: (91) 4005-8630
e-mail: mg@mg-araguaia.com.br ou marcelo@mg-araguaia.com.br
Linha de Produtos: Madeira Serrada, Pisos de Madeira.
23. M2000 MADEIRAS LTDA

End.: Distrito Indl de Icoaraci – Lt 18 e 20 – Setor B – Qd. 6
CEP: 66810-970 – Belém – PA
Fone: (91) 3227-2725 Fax: (91) 3227-7700
e-mail: riomoju@uol.com.br
Linha de Produtos: Madeira Serrada e Beneficiada
24. NORDISK TIMBER LTDA

End.: Rod. Augusto Montenegro, S/N - Icoaraci Cx. Postal 141
CEP: 66820-000 - Belém -PA.
Fone: (91) 4006-7700 Fax: (91) 4006-7701
e-mail:dlh@nordisk.com.br Site: www.dlh-group.com
Linha de Produtos: Agenciamento
25. ORSA FLORESTAL S/A

End.: Área Industrial de Munguba, S/N - Bloco A - CEP: 68240-000 – Almeirim-PA
Fone: (93) 3736-6510/6262 Fax: (93) 3736-6349
e-mail: wcvolponi@orsaflorestal.com.br; rssilva@orsaflorestal.com.br
Linha de Produtos: Serrados
26. PAMPA EXPORTAÇÃO LTDA

End: Rod. Arthur Bernardes, Km 09 CEP: 66825-000 Belém - PA.
Fone: (91) 4006-8400 Fax: (91) 4006-8444
e-mail: demorvan@pampex.com.br
Linha de Produtos: Madeira Aparelhada e Pisos de Madeira.
27. PROMAP PRODUTOS DE MADEIRAS DO PARÁ LTDA

End.: Rodovia Estrada do Outeiro, n° 2275. Icoaraci
CEP: 66815-590 - Belém - PA
Fone: (91) 4008-1900 Fax: (91) 4008-1901
e-mail: tadeubragatto@ig.com.br; promap@promapmadeiras.com.br
Linha de Produtos:
Econoler A-180
REF: 5574
28. RIO CONCREM LTDA
End Fábrica.: Rod. BR 010, Km 31
Caixa Postal 34 CEP 68633-000 - Dom Eliseu - PA.
Fone: (94) 3335-1005 Fax: (94) 3335-1499
e-mail: concrem@ligbr.com.br; silvano@rioconcrem.com.br
Linha de Produtos:
29. RONDOBEL MADEIRAS LTDA

End.: Distrito Indl de Icoaraci - Setor A - Qd 5
CEP: 66815-590 - Belém - PA
Fone: (91) 3247-2707 Fax: (91) 3247-2777
e-mail: rondobel@prontonet.com.br
Linha de Produtos: Comércio, Indústria, Imp e Exportação de Madeira
30. SELECTAS S.A INDÚSTRIA E COMERCIO DE MADEIRA

End.: BR 116, Km 106, 18.414 - Pinheirinho
Caixa Postal 1126 CEP: 81690-300 Curitiba - PR
Fone: (41) 3017-2335 fax.: (41) 246-7923 e-mail: sincleia@selectas.com.br
SELECTAS MADEIRAS LTDA
End.: Distrito Industrial de Ananindeua, Setor I, Q/3 Lote 9 - CEP: 67030-970 - Ananindeua-PA.
Fone: (91) 3250-3330 Fax: (91) 3250-3393
e-mail: selecbel@interconect.com.br
Linha de Produtos: Madeira Serrada, Madeira Aparelhada, Faqueados e Laminados.
31. SEMASA – INDUSTRIA COMERCIO E EXPORTAÇÃO DE MADEIRAS LTDA

End.: Rod. Arthur Bernardes, 8047 – Icoaraci – CEP: 66825-000 – Belém – PA
Fone: (91) 4006-6000 Fax: (91) 4006-6041/6043
e-mail: semasa@semasanet.com.br ou jcmalinski@uol.com.br
Linha de Produtos:
32. TOFOLI IND. E COMÉRCIO DE MADEIRAS LTDA

End.: Estrada Caiçaua, s/n – Km 05
CEP: 68798-000 – Santa Bárbara do Pará – PA
Fone: (91) 3621-2023 Fax: (91) 3621-2023
e-mail: tofolimadeiras@bol.com.br
Linha de Produtos: Desdobramento de madeiras
33. TRADELINK MADEIRAS LTDA

End.:Distrito Industrial de Ananindeua, Av. Principal, s/n - Lote 1 - Setor G - Quadra 9
CEP: 67030-180 Ananindeua -PA.
Fone: (91) 4005-7500 Fax: (91) 4005-7524 /7514
e-mail: rweich@tradelink-group.com; brazil@tradelink-group.com
Site: www.tradelink-group.com
Linha de Produtos: Exportação e Beneficiamento de Madeira Serrada, Pisos de Madeira, Painel, S4S e
Decking, Briquetes de Serragem.
34. TRAMONTINA BELÉM S/A – MADEIRAS

End.: Distrito Industrial de Icoaraci, Setor C, Q/2 Lote 3 a 8 - Icoaraci
CEP: 66800-000 Belém – PA.
Fone: (91) 4009-7700 Fax: (91) 4009-7701
Linha de Produtos: Artefatos de Madeira: Utilidades, Cabos de ferramentas e Móveis.
Econoler A-181
REF: 5574
35. W TEX INDÚSTRIA E COMERCIO LTDA
End.: Rod. BR 316, Km 09, S/N – Centro
CEP: 67.033-000 Ananindeua - PA
Fone: 3255-0012 Fax: 3255-2566
e-mail: wtex@wtex.ind.br, perito@wtex.ind.br, manoel@wtex.ind.br
Linha de Produtos: Pisos
Econoler A-182
REF: 5574
Econoler 160, rue Saint-Paul, bureau 200, Québec (Québec) G1K 3W1 Tel.: (418) 692-2592 Fax: (418) 692-4899 A-1
REF: 5574 www.econoler.com

Market Assessment For Promoting Energy Efficiency and Renewable Energy Investment in Brazil Through Local Financial Institutions

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Market Assessment For Promoting Energy Efficiency and Renewable Energy Investment in Brazil Through Local Financial Institutions

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Market Assessment for Promoting Energy

Efficiency and Renewable Energy Investment in

ABBREVIATIONS AND ACRONYMS

IRR Internal rate of return

EXECUTIVE SUMMARY .......................................................................................................................X

2.3.2 Characteristics of typical projects ................................................................................. 32

3.4.2 Energy Savings Opportunities and Characteristics of Typical Projects........................ 84

Table 48: Small hydro plants in operation...........................................................................................106

Existing EE and RE Businesses in Brazil

obligatory in January 2010. Biodiesel is purchased by Petrobrás in quarterly auctions and

• EE measures on furnaces, boilers and steam network;

Table 1: Summary of Investment Potential and GHG Reduction in RE

Small Hydro Sugarcane Wind Power Urban Solid

Table 2: Summary of Investment Potential and GHG Reduction in EE

Industrial Commercial Public Industrial

1 EXISTING EE&RE BUSINESSES IN BRAZIL

1.1 OVERVIEW OF ENERGY SECTOR

Figure 1: Total Primary Energy Supply (IEA 2009)

Table 3: Final consumption by sector in 2008 (thousand toe) 2

Oil Natural Other Total

Greenhouse gas emissions

Figure 2: Energy prices (USD/barrel oil equivalent)

Table 4: Electricity Prices by Sector and Region (November, 2009)4

Supply and Demand Planning and Perspectives

1.2 INSTITUTIONAL, POLICY AND LEGAL FRAMEWORK

1.2.1 Institutional Framework of the Energy Sector

(BEN), an official document detailing energy supply, transformation, consumption, energy

1.2.2 Policy and Regulatory Framework in Renewable Energy

The new auctions for renewable energy supply

1.2.3 Policy and Regulatory Framework in Energy Efficiency

Some relevant regulations for EE promotion are summarized below:

1.3 PAST AND ONGOING INITIATIVES IN EE&RE FINANCING

1.3.1 Government Programs for Promoting EE and RE Projects

National electricity conservation program

The Programa Nacional de Conservacao de Energia Elétrica (National Electricity Conservation

Programa de Incentivos às Fontes Alternativas de Energia Elétrica (PROINFA)

1.3.3 Existing Renewable Energy Financing

Table 5: BNDES approved operations in the electricity sector - 2003 to 2009

Segments Installed N˚ of BNDES Associated

Segments Average Project Size Investment

1.3.4 Existing Energy Efficiency Financing Instruments

BNDES’ Risk Sharing Credit Line for ESCOs (PROESCO)

Petrobrás Energy Efficiency Program through an Energy Services Company

Figure 3: Financial Scheme of Petrobrás EE Program

The mechanism is a fully independent facility designed to complement PROESCO, a specialized

1.3.5 Lessons Learned from Past Activities in EE

2 INVESTMENT OPPORTUNITIES RENEWABLE ENERGY

i) Small hydro (plants less than 30 MW);

2.1 INVESTMENT OPPORTUNITIES IN SMALL HYDRO

2.1.1 Recent trends in the market and potential

Number of plants Installed Capacity (MW)

2.1.2 Regional aspects of the market

2.1.3 Characteristics of typical projects

2.1.4 Brief overview of key players in the market

More information on market players is presented in Appendix 5 of this report.

2.1.5 Overall investment needs and current financing

Table 8: Summary of investment potential for small hydro

Energy Generation Potential

2.1.6 Summary of risks and attractions

2.2 INVESTMENT OPPORTUNITIES IN SUGARCANE BIOMASS

2.2.1 Recent trends in the market and potential for expansion

2003/04 2004/05 2005/06 2006/07 2007/08 2008/09

2007/2008 2015/2016 2020/2021