Energy in Latin America Ryan Donovan Albert Moy

Agenda n Snapshot of Latin America n Energy in Latin America n Profile of Brazil n Brazilian energy resource

Latin America Consumption Source: IEA

Latin America Energy

Net Energy Flow

Increase in Energy Demand n Economic growth n Urbanization n Growth of population n Growth in per capita income n Increase in energy intensive products n Poor energy efficiency

Financing Concerns § Maintenance of high external indebtedness § Inefficient Spending n Appreciation of RER (Dutch Disease) / low non-energy exports n Fiscal crisis (no access to foreign credit) n Balance of Payments crisis n Devaluation, inflation, recession

Future Financing n n Efforts to ensure a stable economy Creation of an energy futures market Consolidate future energy ties in the region Invest in renewable energy technologies

Attracting Financing n n End government monopolies Foster competition and transparent regulation Government sponsored credit and market-support mechanisms Make adjustment to energy policies to attract foreign investment

Environmental Concerns Ecological and irreversible damage n • Building of hydropower plants in major waterways Destruction of tropical rain forest n • Peten rain forest in Guatemala Emission of CO 2 Rapid Expansion of Cities Water and air pollution n • Major industrial area in LA Soil degradation and erosion n • Construction of roads in remote areas Displacement of Indigenous Cultures n • Ecuador, Brazil, and Guatemala

The Future of Latin American Energy Sector n n Huge investment potential and untapped needs Improving reliability and service leads to higher market penetration and future growth Regional cooperation will limit the economies’ to exposure world energy price volatility Above average economic growth rate

Energy Profile: Brazil

Role of the State n n Electrobras – Created in 1961 by Brazil Ministry of Mines and Energy. Petrobras – Established by Brazil to Manage Brazil’s Oil and Gas Reserves Itaipu Petrobras Oil Platform

Where Energy is Used

Oil

Oil Production 6 – 0% 48 – 3% 306 – 16% 151 – 8% 242 – 13% 748 – 40% 189 – 10%

Brazil’s Electrical Power

Why Hydro?

Brazil’s Electrical Grid 138 230 345 440 500 750 k. W k. W KW

Natural Gas

Natural Gas Pipelines Existing Under Construction Under Study

Coal • Brazil has the largest coal reserves of Central and South America • Low quality due to their high ash content and low calorific value

Political/Economic Issues n n n Partially State Regulated Cheap Electrical Energy Difficult to attract Capital for new Power plants Rural Electrification Drought – June 2001 to March 2002 • High Dependence on Hydro • Consumers and Industry Asked to Reduce consumption by 20%

Environmental • Brazil has low CO 2 Emissions • Air Pollution • Rapid Expansion of Cities • Cities Lacking Infrastructure • Oil Spills • 12 Oil Spills in 2000 • Lost the Petrobras P 36 in 2001 • Weak Environmental Oversight • Amazon Rain Forest • 30% of Worlds Rain Forest • 1/10 of worlds plants and animal species • A CO 2 sink • Threatened by flooding, deforestation, air pollution, oil spills • An area equal to ½ of Massachusetts is cut down annually

Is Solar a Solution?

Types of Solar n n Passive Active • Photovoltaic (12%– 15%) • Thermal n n Power Generation (19% - 30%) Heat (~52%) • Hybrid

Uses for Solar Power in Brazil n Photovoltaics • Rural/Agricultural Communities • Water Purification/Irrigation • Public Buildings – Hospitals, Schools n Thermal • Water heating – Hotels, Hospitals, Homes • Agriculture – Crop Drying, Irrigation • Industrial – Cement, Chemical

Advantages and Disadvantages n Advantages: • • • Non-Hydro Pollution Free Energy Source is Free – No Volatility Grid Independent. No Infrastructure Required Easily Scalable Low Maintenance Disadvantages: n • Weather/Season Dependent • High Initial Costs • Varying Degrees of Technolo • Energy Storage Issues Equator

Cost Drivers n n Solar Availability Grid Connection Cost of Labor & Materials Financing • Number of Years • Social Returns vs. Investor Returns n n n Type of Energy Required Experience Curves Tax Incentives

Questions?