Brazilian Energy Infrastructure

Brazil's ProInfa Kicks into High Gear

Written by Brian Hicks
Posted May 5, 2009

They have a different sense of "normal" here in Rio. . .

I've been all over this city in the past week, talking to people in business suits and bathing suits about what they think of Brazilian biofuels.

Having come down to Brazil out of the schizoid Baltimore April weather, I'm enthralled with the Southern Hemisphere's autumn sun. It's warm but doesn't burn.

Brazilians tell me they're cold now. I tell them to come stay at my house in January and let me know if they still think the same thing.

Aside from the weather patterns, energy expectations are totally different, too.

From the world-famous beaches of Ipanema and Corcovado to the favelas, shanty towns scattered throughout the hillsides and suburbs, sugar ethanol is a fact of life.

It's not by accident, either. Brazilian sugar ethanol has been developing since 1975 under the government's ProAlcool initiative, which gave the country a head start on the United States and other economic titans.

Now, Brazilian ethanol costs about 2/3 of what petrol costs at the pump, and even with slightly lower fuel economy (about 2 kilometers-per-liter less than regular unleaded), ethanol comes out on top in consumers' minds. As Brazilian policy has generated the market for this biofuel, international auto companies have conformed to ethanol demand with flexfuel vehicles.

So what's the next normal for this top emerging market's clean energy supply?

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Hydro and Wind: a Power "Pas-de-Deux"

Brazil's minister of mines and energy, Edison Lobão, called wind energy the "princess of alternative energy" this week. In fact, I'm hearing enthusiasm for wind energy development in my conversations with government officials, industry heads, and beach bums alike.

And I have an idea who the "prince" of Brazilian renewables may be.

Right near where I am in Copacabana, there's an outcropping where the wind whips around so hard that the beautiful bossa nova music you hear while sitting on the rocks could be your last tune. . . if you decide to take a swim.

That dance of the wind and water extends from the seashores into the depths of the Amazon, where flow-of-stream hydropower is supplanting dam construction as the most environmentally friendly method of bringing electricity to underserved regions.

Lauro Fiuza, head of the Brazilian Wind Energy Association, pointed out this week at the Renewable Energy Finance Forum that hydropower wanes to 50% of capacity in the second half of every year. . .

That's right when wind energy picks up, so Brazil's national bank for development, BNDES, is funding up to 80% of projects to tie hydro and wind in a comprehensive power program.

It's all part of ProInfa, the government's national plan for expanding alternative electricity resources.

What ProAlcool has been to vehicular fuel in Brazil, ProInfa is to power.

And Brazil is committed to leading the Latin America-Caribbean region in renewable energy's contribution to skyrocketing industrial and household demand.

Residential electricity demand in the LAC region is expected to quadruple by 2030, according to Lori Kerr of the Inter-American Development Bank. That includes more rural households coming online and urban households in developing countries being able to afford more electronic equipment by the year (the street markets here are full of Nintendo Wii systems!).

Here's the kicker, though. . . While BNDES and other government support structures are very important to creating concerted national energy strategies, the IADB pegs private investment as the key factor.

80% of the investment required to satisfy Brazil's growing energy needs will come from the private sector! $1.8 trillion is needed in infrastructure development alone by 2030.

That means stock opportunities for international investors who take the trends as seriously as locals do. . .

So we're tracking all the market movements in Green Chip International, especially November's Brazilian wind energy auction — the first the country has ever held, and a huge market-oriented step forward for ProInfa.

You may not be able to get down to Brazil to see all of this with your own eyes, but the view from here is quite promising.

Sign up for GCI to get the first crack at our stock plays on Latin American and Brazilian alternative energy expansion (many of which trade right on Wall Street).

Learn more about GCI right here: http://www.angelnexus.com/o/web/12319

Boa Tarde do Rio! (Good afternoon from Rio)

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Sam Hopkins

International Editor