Lessons from So Paulo on integrating sustainability and economic growth

João Carlos de Souza Meirelles, Secretary for Energy and Mining to the State Government of São Paulo, Brazil 

The Brazilian energy matrix is predominantly renewable due to the major participation of hydropower in electricity supply and the importance of ethanol as an alternative fuel to gasoline for light engines. In the state of São Paulo, besides biofuel production, sugar cane biomass has a meaningful role in electricity cogeneration dispatched to the national grid. The share of renewable sources in the state’s energy matrix –hydropower included – in 2015 was roughly 58% while the national figure was about 41.8%.

At this month’s Abu Dhabi Sustainability Week, I will be sharing the many lessons we have learnt in São Paulo and my country as a whole as we move towards a low-carbon economy.

From 1970 to 2014, the national power capacity increased from 11 gigawatts (GW) to 133.9GW, with a growth rate of 5.8% per annum, higher than the GDP growth rate of 3.8% pa[1]. The participation of hydropower prevailed, ranging from 87.4% in 1996 to 67% in 2014. Nuclear generation began in 1985 and wind generation in 1992. Hydro began to retreat from 1999. The São Paulo state’s participation in national hydropower supply, besides that of Minas Gerais state, underpinned the national industrialisation process from the 1950’s to the 1970’s.

While the state’s relative participation in national hydropower decreased, its participation in biomass generation and biofuels – basically ethanol – dramatically increased. The total capacity of electricity generation in São Paulo (2016) is approximately 22.7GW, corresponding to about 15.2% of the 149.7GW national capacity. For hydropower, the São Paulo state’s capacity is roughly 14.5GW or 15.9% of the 91.5GW nationally available. For biomass co-generation, the present capacity in São Paulo is 5.8GW, or 41.1% of the 14.1GW national capacity.

For biofuels – essentially ethanol – São Paulo produced around 6.4Mm3 of anhydrous and 8.15Mm3 of hydrated ethanol in 2015, against approximately 11.3Mm3 and 19Mm3 nationally. A trade-off between sugar and ethanol must be considered in the short term, since ethanol production tends to decrease when the world sugar market overheats, especially when prices of fossil fuels are low.

In 2009 the State of São Paulo passed its Policy on Climate Change law, and in 2011, the first version of the São Paulo Energy Plan to 2020. This plan has targeted renewable sources to reach 69% of the energy mix by 2020. The set targets have since been revised, since in the context of an economic recession, the higher marginal costs of renewable supplies imply lower growth in their relative participation in the energetic mix.

While investment in the expansion of hydropower used to be mostly state-based, thanks to state-owned companies such as CESP in São Paulo, investment in biomass cogeneration and biofuel production, as well as in other renewable sources, is mostly private.

New challenges for expanding renewable sources involve not only the direct investment in generation but also the connections to the regional and national grid. Renewable electricity is not economically competitive at the moment with conventional sources. Widespread distributed generation then emerges as a valid alternative, since the extra costs are compensated by direct supply beyond the grid.

The São Paulo State policy on energy combines different approaches to promote direct private investment in renewable sources and the expansion of power supply from natural gas – to help realise a greater share of renewable energy in the energy matrix as a whole.

With regard to regulation, the main challenge has been to integrate state strategies with the national regulatory systems of electricity and oil & gas and, more generally, the regulated branches of networked services with environmental regulation.