In 1 and a half years of government, generation and transmission lines increased; on the other hand, there was no increase in the gas pipeline network and gas reinjection increased
The government Luiz Inácio Lula da Silva (PT) turns 1 and a half years old on Monday (July 1, 2024). In 18 months, the energy transition has been one of the main agendas of the PT administration. During the period, energy generation capacity grew, driven by renewable sources, and transmission lines are also being expanded to flow demand, especially from wind and solar plants in the Northeast.
On the other hand, natural gas, one of the global bets for decarbonization in the transition as it is less polluting than coal and diesel, was practically stagnant. In 1 and a half years, no new major transportation pipelines have been built or at least announced by the government. Without this infrastructure to stimulate consumption, the reinjection of gas into wells has grown and broken records.
The problem in the gas sector predates the current government. The national gas pipeline network has been practically stagnant since 2013, with 9,400 kilometers. It is a well-developed infrastructure smaller than that of Argentinaas already shown by the Power360. Since 2013, only one gas transmission pipeline has been built, just 11 kilometers long, to connect the cities of Itaboraí and Guapimirim in Rio de Janeiro.
The infrastructure was installed in 2012 by the ANP (National Agency of Petroleum, Natural Gas and Biofuels), but it was only completed in 2024 by NTS (New Southeast Transport Company). It will connect the existing NTS network close to the coast to the GasLub Hub, where the new NTS maritime pipeline will arrive. Petrobras to transport gas from the pre-salt, known as Route 3, which should be ready at the end of the year.
The lack of infrastructure is one of the reasons for Brazil to reinject more than half of its natural gas production. There are no gas pipelines to support the growing pre-salt production. In March 2024, the volume of gas returned to wells broke record historical: 58%.
Before Lula returned to Planalto in 2023, the highest level of reinjection had been 51%, recorded in 2022, under the Jair Bolsonaro (PL) government. Under the PT administration, the average level of gas return to wells is 53%. In April 2024, the last month with data released, the percentage reinjected was 54%.
The Lula government has plans to develop the gas market. Still at the beginning of 2023, it announced its intention to launch the Gas to Employ program, which would have measures to stimulate the sector. Working groups were created to design the new rules, but so far the work has not been completed and there is no expectation of when the package will come to fruition.
In April of this year, the Minister of Mines and Energy, Alexandre Silveirapromised a “gas supply shock” in the coming years with new projects that would reduce reinjection. At the time, he listed 6 chances that Brazil will have to increase its internal energy availability, almost all of them only for the long term. Are they:
- new gas pipeline Route 3 (Petrobras) – another 18 million m³/day coming from the pre-salt. It should be ready by the end of this year;
- Raia Project (Equinor) – an additional 14 million m³/day of pre-salt gas from 2028;
- Sergipe Project (Petrobras) – another 18 million m³/day coming from deep water fields in Sergipe. Estimated for 2028;
- onshore reserves – national exploration of unconventional gas (shale), with estimated deposits of 32 million m³/day;
- import from Argentina – import of 3 million m³/day of shale gas from the Vaca Muerta field via the Bolivia-Brazil pipeline or via a new route via Paraguay. Possibility still under negotiation;
- biomethane – production potential in Brazil reaches 60 million m³/day.
RENEWABLES GAIN STRENGTH
While the gas sector has seen few practical measures for its growth so far, renewable energies, on the other hand, have been strongly encouraged under the Lula 3 administration.
The government extended the deadline for granting subsidies for renewable sources. He was published This year, a provisional measure (MP) extended the deadline for starting operations of generating plants by 36 months, maintaining the right to reduce tariffs for the use of transmission and distribution systems.
These discounts are mainly aimed at wind and solar plants, which are expanding in the Northeast. They are subsidized and paid for by consumers’ electricity bills. The objective was to benefit generation projects totaling 145 GW and R$165 billion in investments. The objective with the extra deadline was to give new transmission lines time to be ready to make the projects viable.
In 1 and a half years of government, the Brazilian generating complex has already grown by 13.7 GW in installed capacity. The country could generate up to 191.2 GW of energy in 2022. It currently has capacity for 204.7 GW. And it should reach 236.3 GW in 2026. The vast majority of the expansion is due to solar and wind sources.
In 2023, of the 10.3 GW of capacity added to the electrical system, 4.9 GW came from wind farms and 4 GW from solar farms. The account does not include MMGD (mini and micro distributed generation) photovoltaic panels. Thermal generation gained an additional 1.2 GW of power.
There are 2 major problems with this expansion of renewables in the electrical matrix:
- intermittency – as wind and sun vary and are not available at all hours of the day, these sources do not guarantee the energy security needed to supply the country, unlike hydroelectric and thermal power plants. This poses a risk to the reliability of supply;
- cost to the consumer – subsidies for incentivized sources are paid for by consumers through their electricity bills. The more generation projects with discounted rates grow, the more these subsidies weigh on the CDE (Energy Development Account), which is shared among all consumers.
There is still another problem: the increasing need for transmission lines. One of the focuses of the Lula 3 government in the energy area has been to set up grand projects to expand lines to facilitate the flow of energy to be generated by new renewable projects.
The current government alone has held 3 transmission auctions, totaling R$60 billion in new lines. A 4th auction is scheduled to take place on September 27. Together, the 4 auctions will enable the construction of more than 15,000 kilometers of transmission lines. In 2023, the SIN (National Interconnected System) network was 171,638 kilometers long.
This cost of new transmission lines will be included in tariffs in the coming years. Since 2013, the cost of transmission grew 630% in Brazil, putting pressure on the electricity bill.
Investment in new lines is paid for by energy consumers through electricity bills. By winning the auctions, the companies commit to putting the projects up and running and win a 30-year concession to operate the structures, being remunerated for this through the tariffs that enter the electricity bill.
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