Bolsonaro wants new coal-fired power plants, but BNDES denies support

Coal Ore 05/25/2021 REUTERS/Carlo Allegri

Coal Ore 05/25/2021 REUTERS/Carlo Allegri

Photo: Reuters

the government plan Bolsonaro to renovate the current park of coal thermal power plants in the country, source recognized as one of the most pollutants in the electrical matrix, foresees the injection of R$ 20 billion in these operations over the next ten years. The question is where will the money come from to finance a business that has been shrinking around the world due to the urgency of reducing greenhouse gas emissions. O BNDES, the main state bank for supporting and financing the electricity sector, is out of this bet, says it only supports clean energy and that, until further notice, it does not intend to put any cents into what is one of the main energy programs of the federal government.

To avoid friction, the Ministry of Mines and Energy (MME) justifies that the bank’s decision would be related to the definition of investment “priorities”, due to the bank’s “restriction of financial resources”. The BNDES, however, makes it clear that it is not a question of a lack of resources, but of the way in which it faces the issue. In the energy sector, the bank said, “such a vision is necessarily in line with efforts to build a diversified and clean energy matrix.”

O state questioned the bank about the plans of the Ministry of Mines and Energy (MME) announced in August to renew and expand coal-fired thermal plants. The BNDES rejected any possibility of financing the operations, on the grounds that “it has a strategic vision that takes into account the sustainable and long-term development of the country and the world”.

The last coal plant financed by BNDES received funds in 2015. The following year, the bank decided to veto transfers for this type of project. This year, the position was formally defined by the bank’s board of directors, to bet on less polluting energy generation projects. In the last five years, the BNDES signed contracts worth R$ 27 billion in financing for generation projects using hydro, solar, wind and biomass sources. Another 12 gas thermal projects received R$7.7 billion in the same period.

“Our vision for the development of the energy sector is in line with several commercial and development banks, which also no longer finance or are reducing their support for projects involving coal, driven by the same sense of urgency to privilege clean energy generation solutions. to help humanity mitigate the effects of global warming,” the bank said.

Without the BNDES transfer, the renovation or expansion of the current park of coal plants will be more difficult. Today, 100% of this structure is limited to seven plants (one in Paraná, two in Rio Grande do Sul and four in Santa Catarina). Together, these plants have an installed capacity of 1,572 average megawatts, enough energy to supply a large part of the southern region.

The concentration of projects in this region is not casual: 99.97% of Brazil’s coal is located in the southern states, with 89.27% ​​of the reserves in Rio Grande do Sul, 10.38% in Santa Catarina and 0.32 % in Paraná. The challenge ahead is to know how Brazil is going to meet its goals for reducing global warming – essentially caused by greenhouse gas emissions -, if it intends to renew and invest in the current park. On the other hand, social and economic measures are required to support thousands of families who live in the coal chain, a sector that moves around R$ 1 billion a year.

“What must be done, in the case of workers in the South Region, is a fair transition, meeting the demand for energy and replacing lost jobs”, says Ricardo Baitelo, project coordinator at the Energy and Environment Institute (Iema). “An example of an energy source capable of supporting economic and social development is solar energy. Rio Grande do Sul, Paraná and Santa Catarina are, respectively, the third, fifth and ninth in the ranking of distributed generation in Brazil and this activity can be amplified with public policies and lines of financing.”

Heavy weight

The mineral sector and thermal plants support the thesis that they have been investing in new technologies in recent years, which has helped to reduce the environmental impact of these projects. Historical data, however, when compared to other sources, gives a clearer idea of ​​what is at stake.

Coal-fired power plant in Baotou City, Inner Mongolia Autonomous Region of China 10/31/2010 REUTERS/David Gray

Coal-fired power plant in Baotou City, Inner Mongolia Autonomous Region of China 10/31/2010 REUTERS/David Gray

Photo: Reuters

Consider the amount of energy needed to supply a city in the Southeast Region, for example, with 1 million inhabitants. If all this energy were generated by a natural gas plant, 1.3 million tons of CO2 equivalent would be released into the air per year. If that same energy came out of a coal-fired thermal, however, the volume would double: 2.6 million tons of CO2 per year.

Ministry says that BNDES prioritized other projects due to “restriction of resources”

The MME declared that the withdrawal of resources from the BNDES is a point that “is in line with the vision presented by the Decennial Plan for Energy Expansion (PDEs 2029 and 2030)”, a document that forecasts the sector’s investments in the next ten years.

According to the folder, during the preparation of the program, meetings were held between the MME and BNDES teams to better understand the bank’s orientation. “The BNDES started to direct its energy generation credit policy towards renewable sources and thermoelectric generation using natural gas in a combined cycle. This is due in part to the fact that, given the restriction of resources, the bank started to raise funds from foreign sources, making loans even more tied to the green economy of the credits given.”

The ministry argued that, “despite the fact that the Brazilian electricity sector already contemplates a series of attractions for investment in electricity generation, it was necessary to create the Program for the Sustainable Use of National Mineral Coal. This program demonstrates a set of elements favorable conditions for investment in this source, while preserving the premises of competition and tariff rationality”.

Given the lack of BNDES as a financial inducer, the MME stated that “generating agents with projects for new coal-fired thermoelectric plants need to seek financing alternatives” and that “commercial banks” have this type of financing. The ministry has not confirmed whether it intends to activate Banco do Brasil or Caixa so that both can launch lines of financing for these projects.

“Considering that BNDES credit lines are competitive, these agents face the challenge of seeking equally attractive conditions for resources to remain competitive in new energy auctions. In fact, the current model of the Brazilian electricity sector offers a series of favorable conditions to the generation entrepreneurs to overcome this challenge. The BNDES itself points out that 63% of the thermoelectric expansion verified between 2007 and 2016 did not have the bank’s resources”, concluded the MME.