Brazil Is the New America: How Brazil Offers Upward Mobility in a Collapsing World (38 page)

In 2008, there were 706 hydroelectric power plants in operation in Brazil. They provided approximately 85 percent of Brazil's electricity in that year. Brazil has become an exporter of expertise in dam building and construction of hydroelectric power plants. Currently, electricity consumption per capita in Brazil stands at just 560 kWh. This is far lower than electricity demand in the leading temperate economies. The comparable figure for the UK is 1,900 kWh, and in the United States it is more than 4,500 kWh.

With Brazil's population rising and its consumer spending boom set to increase the number of televisions, washing machines, refrigerators, and air-conditioners in use, Brazil's Energy Research Company (EPE), projects that the installed potential of the national grid will jump from 110 GW in 2010 to 171 GW by the end of 2020. Large-scale hydro-power is projected to rise from an installed capacity of 85 GW currently to more than 115 GW by 2012. Much of the increase will be attributable to the new Belo Monte Dam under construction on the Xingu River in the state of Pará. After it reaches full capacity by January 2019, the Belo Monte Dam alone will be capable of supplying electric power to 18 million homes housing 60 million people. It will be the world's third-largest hydropower installation.
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Brazil's estimated hydro potential is 261 GW, or the renewable equivalent of 3.57 million barrels of oil per day.

Brazil is also a world leader in bioelectricity. One hundred percent of Brazil's sugar and ethanol refineries are self-sufficient in electricity. Many of these facilities also produce surplus power that they sell to the nearest electricity grid. In fact, sales of electricity to the grid account for 35 percent of the profit earned by Brazilian ethanol producers. Bioelectricity generated from burning sugarcane bagasse, otherwise a waste product, currently accounts for 3.1 percent of Brazil's energy output, with an installed capacity of 3,400 MW. Brazil is exporting its expertise in the technology and construction of ethanol plants to many countries in Africa, as well as India, China, and Japan, among others.

Renewable Energy World
magazine notes that Brazil's wind power potential is one of the greatest on the planet, “much of its northeast is blessed with some of the strongest and most consistent winds in the world.” Further, “Brazilian wind energy is the cheapest in the world (based on last year's auction prices) because its wind farms are so productive.”
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EPE projects that installed wind power will multiply 12 times over by 2020. But Pedro Perelli, executive director of the Brazilian Wind Energy Association (ABE Eolica) looks for a 22-fold increase. At that level, installed capacity would represent just 6 percent of Brazil's wind power potential, now estimated at 350 GW, or the equivalent of 4.79 million barrels of oil per day. The Brazilian utility giant Eletrobras has committed to wind power in a big way, as part of its ambition to become the world's largest clean energy producer.

Of particular interest, following an auction in August 2011 by Brazil's National Electric Power Agency, Brazilian wind power is now cheaper than natural gas. Nelson Hübner, director of Brazil's National Electricity Regulatory Agency (ANEEL), says, “The results of the energy auction represent a new paradigm in power generation in Brazil because they confirm it is possible to produce wind energy at a price that is competitive with those of thermal plants, which are more polluting.”
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In general terms, economically generated electricity can be an adequate or even superior substitute for hydrocarbon energy for uses that don't involve mobility. It is little remembered today that the impetus that motivated Edwin Drake to drill the 69-foot well in Titusville, Pennsylvania in 1859 that launched the world oil industry was the very high price of petroleum commanded then, primarily for use as an illuminant. Even before the first well was drilled, oil that seeped “along Oil Creek and the salt wells of the Allegheny Valley found a ready market at prices ranging from $0.75 to $1.50 and even $2.00 per gallon.” Given 42 gallons to a barrel, the upper range of these prices corresponds to about $80 per barrel crude oil (in 1859 dollars) or $1,900/barrel in $2009.
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Within several decades, electric lighting had replaced the use of kerosene as an illuminant. Electric lighting was a superior alternative to illuminant derived from petroleum at $1,900 per barrel. One kilowatt hour of electricity costs homeowners on average $0.12 in the United States today. One kilowatt hour is equivalent to 3,412.3 BTUs. As there are 5,600,000 BTUs in a barrel of oil, there is the equivalent of 1,641.12 kWh of energy in a barrel of oil. So at $1,900 per barrel, (in $2009 equivalent) consumers of kerosene in 1859 were paying the equivalent of $1.16 per kilowatt hour for illumination.

While Brazil has perhaps the world's leading portfolio of renewable energy sources, it also has a strong portfolio of more conventional power. The huge oil finds made early in this century are obviously the headline grabbers. But Brazil also has large and growing proven reserves of natural gas.

According to
The Oil and Gas Journal
, Brazil had 12.9 trillion cubic feet of proven natural gas reserves in 2011. With additional, vast amounts being discovered in the deep offshore basins, Petrobras says that the Tupi block alone could contain 5 trillion to 7 trillion cubic feet of recoverable natural gas. With much of the country relatively unexplored, Brazil's gas reserves could be gigantic. When looking at reports from the U.S. Department of Energy's Energy Information Administration (
www.eia.gov
), there is a general feeling that the Amazon could hold a considerable amount of untapped natural gas.

Natural gas accounts for about 8 percent of Brazilian energy consumption, with about 85 power plants installed to generate as much as 10.6 GW of thermal electricity from natural gas.

Brazil also has some coal, with current reserves estimated at about 32,000,000,000 tons. Current Brazilian coal production is approximately 11.2 million tons annually. True to Jeffrey Sachs' characterization that “coal deposits are overwhelmingly concentrated in the temperate zone,”
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all of Brazil's coal mines are in its three southern states—Paraná, Santa Catarina, and Rio Grande do Sul—that lie entirely within the temperate zone. Coal is used mainly for thermal generation of electricity in 10 small plants in the southern states with a total installed capacity of about 2,100 MW. The thermal generation is used to supplement hydropower rather than as a principal source of supply. The Brazilian coal industry claims that the marginal costs for purchasing coal to fuel the thermoelectric supplement to the hydroelectric power for peak loads “translates into lower rates for the final consumer.”

Brazil also has a nuclear power industry along with the sixth-largest uranium reserves in the world, an estimated 309,000 tons. Brazil's first nuclear power plant was the Angra I, which came online in 1983 with a capacity to generate 657 MW. The larger Angra 2 facility has a capacity of 1,350 MW. A third nuclear power plant, also with 1,350 MW capacity, but with more advanced technology, is currently under construction. When completed, it will bring Brazil's installed nuclear power capacity to 3,357 MW.

I am persuaded that a not insignificant cause of the decline in the fortunes of the British economy after the advent of peak coal on the eve of World War I was the lack of access to higher energy density oil in the United Kingdom.

Similarly, as we look forward to growing global supply constriction associated with peak oil it seems likely that the U.S. economy will be challenged. Just as the United Kingdom lacked the abundant oil deposits that enabled the United States to grow rapidly through most of the twentieth century, so today the United States lacks Brazil's tropical climate that provides much of its advantage in producing sugar-based ethanol, as well as the abundant, year-round sunshine that promises to make Brazil a solar energy powerhouse, as well as a leader in harnessing indirect solar energy in the form of wind. The whole or better parts of 10 Brazilian states, an area totaling more than 1.5 million square kilometers, have daily average solar radiation ranging between 5,700 Wh per square meter per day to 6,300 Wh per square meter per day.
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Obviously, these regions have vastly more solar energy potential than the cloudy stretches in northern Europe, Japan, and North America. Eletrobras installed Brazil's first solar power plant, the Megawatt Solar Power Plant, on the roof of the Eletrosul headquarters, with a continuation on the roof of an adjacent parking garage in Florianopolis, Santa Catarina. This is only one of numerous small-scale solar projects currently under development or already operating. Solar water heating systems have been mandatory for all new buildings in São Paulo since 2007.

The two examples cited here are both cases of Brazil adopting solar energy solutions in its temperate zone where the daily global solar radiation annual average falls between 4,500 and 4,700 watts per square meter. But a much greater solar energy potential lies in Brazil's tropical reaches, where typical annual averages for daily solar radiation are 40 percent or higher. As a predominantly tropical country with abundant sunshine all year round, Brazil is ideally placed to draw the greatest possible advantage from solar energy as the technology for doing so matures.

In addition to its other advantages in solar energy, Brazil claims 90 percent of the world's reserves of silicon, the main raw material used for the manufacture of photovoltaic panels.

A little more than a decade since Jeffrey Sachs underscored “the possibility that differences in energy endowments might also have played an important role in the widening income gaps”
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between temperate zone economies and those in the tropics, Brazil has gone far toward closing or even reversing that energy gap.

This success was not just a random accident, but the culmination of decades of research and the investment of billions to improve agricultural productivity and to prospect for oil and gas resources. Brazil's emerging agricultural prowess led directly to its success with renewable fuels, ethanol, and biodiesel. And the presalt oil finds, certainly the most spectacular discoveries of oil in the twenty-first century, could only have been found by a company with a mastery of deep water drilling techniques pioneered by Petrobras. As Gabrielli said, reflecting on Brazil's large new oil finds, “God hid it until Brazil was strong enough to cope.”
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Great Britain surged to the economic leadership of the world in the eighteenth century after its entrepreneurs succeeded in mobilizing new forms of energy in the wake of peak wood. It is too soon to know whether Brazil will succeed in a like fashion in the wake of peak oil. But seven decades after Stefan Zweig said of Brazil that “no degree of imagination suffices to conceive of what this country, this world will mean to the next generation,” there are stronger indications than ever that the future has finally arrived for the country of the future.
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Chapter 11 discusses Brazil's demographics.

1
Representative Doc Hastings, “U.S. Needs Brazilian Approach to Energy Policy,” The Hill, January 24, 2012,
http://thehill.com/blogs/congress-blog/energy-a-environment/206067-rep-doc-hastings-r-wash
.

2
Jeffrey D. Sachs, “Tropical Underdevelopment,” NBER Working Paper No. 8119, 22.

3
James D. Hamilton, “Historical Oil Shocks,” prepared for the
Handbook of Major Events in Economic History
, revised, February 1, 2011, 19.

4
Ibid., 19.

5
Ibid., 22.

6
Cameron Leckie, “Economic Growth: A Zero Sum Game,”
Energy Bulletin
, November 25, 2010,
www.energybulletin.net/stories/2010-11-25/economic-growth-zero-sum-game
.

7
Hamilton, “Historical Oil Shocks,” 4.

8
Ibid.

9
Jeffrey J. Brown, Samuel Foucher, and Jorge Silveus, “Peak Oil Versus Peak Net Exports—Which Should We be More Concerned About?” Association for the Study of Peak Oil and Gas—USA, October 7, 2010.

10
Brown, Foucher, and Silveus, “Peak Oil Versus Peak Net Exports.”

11
Ibid.

12
Terry McAlester, “U.S. Military Warns Oil Output May Dip Causing Massive Shortages by 2015,”
Guardian
, April 11, 2010.

13
Leckie, “Economic Growth: A Zero Sum Game.”

14
T.V. Ramachandra, Yves Loerincik, and B.V. Shruthi, “Intra and Inter Country Energy Intensity Trends,”
Journal of Energy and Development
31. no. 1 (2006): 43–84.

15
Ramachandra, Loerincik, and Shruthi, “Intra and Inter Country Energy Intensity Trends.”

16
Leckie, “Economic Growth: A Zero Sum Game.”

17
James Rickards,
Currency Wars: The Making of the Next Global Crisis
(Penguin Group, Kindle Edition: Kindle Locations 3095–3104).

18
Gregor Macdonald wrote this excerpt in a comment posted on
The Oil Drum
.

19
Gregor Macdonald, “Stagnation and Descent,” excerpted at
http://gregor.us/annual/gregor-us-monthly-2010-annual
.

20
Richard G. Wilkinson,
Poverty and Progress: An Ecological Model of Economic Development
(London: Methuen, 1973).

21
Peter Millard, “Brazil Oil Fields May Hold More Than Twice Estimates,” Bloomberg, January 19, 2011,
www.bloomberg.com/news/2011-01-19/brazil-oil-fields-may-hold-more-than-twice-estimated-reserves.html
.