1. Brazil fills an exceptional geographic space in the southern hemisphere, and it has developed its own energy policy which differs significantly from its continental neighbors.
In order to better understand why Brazil is following a path that is very different from that of other countries concerning its energy policy, we need to take a closer look at Brazil’s geography. Brazil is far away from the East Asian markets, countries like Japan, Singapore and India, and resource-rich Middle Eastern countries like Saudi Arabia, Qatar and Iran. The geographical distance to these markets and the distance to the world’s most important energy exporters inevitably leads to high logistics costs for the import of certain raw materials, including oil, to Brazil.
Petrobras destroyed all hopes for Brazil’s energy independance, for the foreseeable future Brazil will not become an exporter of oil and gas in its own right. So hopes were dashed when it was found out that near the coast of Sao Paulo, oil and gas reserves exist, but they are much less then Brazilians had initially estimated them to be. This of course means that Brazil is still dependent on global energy trading, albeit to a limited extent. In the future, crude oil will still have to be shipped to Brazil over huge distances, and Brazil is off the beaten track of the world’s most important sea routes that go west to east, not north to south. These deliveries will find their way to Brazil, to a country where a significant proportion of the population cannot afford diesel and petrol without subsidies.
2. Brazil’s future lies in biomass production, especially the utilisation of sugarcane. Sugarcane is regarded as an important source of energy in Brazil.
This partly explains why Brazil invests so much time in finding alternative fuels to foreign oil supplies. But Brazil can solve this problem swiftly: Sugarcane. Because sugarcane finds optimal growing conditions in Brazil, a country located right on the equator where temperatures do not fall below a certain minimum temperature, below a temperature threshold that would prevent plant growth from happening. It has to be mentioned that Brazil benefits from strong solar radiation due to its proximity to the equator. In addition, Brazil has truly gigantic water reserves, and not only from the tributaries of the Amazon.
Spreading out like a spider web, much of the country, especially in the northern part of Brazil, is covered by rivers feeding the Amazon. The use of hydropower makes sense in the south of the country, where the gradient of the landscape makes it possible to build reservoirs and produce electricity from it. As far as the availability of water is concerned, Brazil is one of the countries in the world with possibly the largest amount of water available anywhere on the planet. In many places water resources have not yet been exploited for hydropower. These enormous water resources make it possible to grow sugarcane, throughout the year. This certainly makes a lot of sense in the south of the country, where the distances from sugarcane producing regions to the industrial heartland of Sao Paulo and Rio are much shorter.
3. Brazil has the greatest potential for hydroelectric power generation in the whole world, but most of it still remains untapped.
Hydropower is already being used quite extensively in Brazil, is used at any time of the day, and at any time of the year. Of course it is obvious why the surplus of electricity is not used to generate heat. The problem is that Brazil is not industrialized enough, there are simply not enough consumers of heat from industry. In the south of the country there are industrial plants around Sao Paulo, but the infrastructure would have to be improved to use that heat effectively. This fact remains, Brazil is warm all year round which underpins once again the assumption that heat cannot be used on this scale.
4. The energy surplus from Brazil’s hydropower plants cannot easily be transported to other regions, Brazil is simply too large and the geography of Brazil works against commerce and trade
The transport of that surplus energy from hydropower plants to the industrial heartland does not make a lot of sense from an economic point of view, as the electricity grid is not well developed. In the transport sector, Brazil is heavily dependent on truck transport. A nationwide rail network is still a dream of the future, and you can easily see why on the world map. The Brazilian coast is surrounded by a mountain range.
It is unfortunate that this mountain range is located exactly where Brazil’s economic heart passionately beats. The construction of roads and highways is very expensive and requires enormous sums of money. To avoid the cost of building tunnels and bridges, many roads meander along mountain slopes, but the roads are often too narrow and not particularly suitable for mass transportation.
5. From an energy point of view, the real problem Brazil has to overcome is that it has to improve transport. The problem is not really energy production. There are some solutions available for energy production, biofuels chief among them.
To summarize: The huge surplus of electricity generated by hydroelectric power stations can only be used regionally to a very limited extent. The rest of the infrastructure is not well developed and the rail network is not suitable for mass transport either. This is why Brazil needs its own production of fuels for transport. One has to bear in mind, however, that oil imports are not particularly profitable and put a burden on Brazilian consumers, simply because Brazil is so isolated from the veins and arteries of the global economy and of the major energy exporters.
The port infrastructure, but above all the infrastructure that links the ports to the hinterland, is poorly developed. This hampers energy imports and leads to high costs, mainly due to time delays. There are only a few large ports suited for global commerce in Brazil. The advantage would be that most of the economic activity takes place near the coast in the south of the country, but the demand in the hinterland is much lower. This means that the advantages that would result from expanding the infrastructure into the hinterland simply do not exist, it is not worth it. The same could be said about the energy infrastructure.
Sugarcane could be a solution for Brazil, but it would stand out as an exception by global comparison. In the United States, the cultivation and commercialization of sugarcane is not worthwhile from an energy point of view. In Brazil, sugarcane has a much better EROI (Energy-Return-on-Energy-Invested) for energy production, but is still low by comparison to other energy sources.
The establishment of an effective distribution network for biofuels is also worthwhile because many Brazilian cities are far apart. Often there are only a few settlements and lots of agriculture in between, especially in the south of the country. These are the reasons why biofuels make a lot of sense in the south of Brazil where there are few but very large urban agglomerations.
Many thanks for the shared interest in the energy world!
This article is just meant to inform the reader of recent developments in the energy industry at large and to share knowledge and insights with a wider audience. The author does not put forth investment recommendations.
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