Gas to Power in Brazil

Ahh.. Brazil, the largest nation of the South American continent. It covers some 8.5 million square kilometers with a population of more than 200 million. There are about 24 people for every square kilometer with 85% of the population living in urban settings.

Brazil is facing very important challenges these days. In the political arena, huge corruption scandals are involving all major parties. The economy is stagnant, the inflation is in the 8% range and the Federal Government is not exactly honest, efficient or reliable. Not a rosy scenario and by far.

But…the good news is that there is hope! The corporate world still bets on Brazil. It is the 7th largest global economy, with vast natural resources, great people, mild climate (no freezing temperatures), excellent food and ultimately, great potential.

There are two natural gas applications which might make a lot of sense from a business standpoint. Onsite power projects:

Generation projects

Given the high power rates, natural gas driven power projects should be considered. There are two very specific applications: peaking power and base load , not to mention emergency (when there is no power coming from the grid).

Peaking power generation is a very interesting situation because the regulated on-peak rates are well above a natural gas driven genset.

Base load is a nice application also. Right now the regulator (ANEEL) is about to publish a Resolution which will enable onsite base load generation for some time (not defined yet). The corporate energy user who dispatches natural gas gen sets will receive a hefty compensation.

Gas to Power in Brazil-02

Cogeneration projects

Natural gas driven turbines associated with heat recovery steam generation, especially for industrial energy users, might become a very competitive solution. Thermal efficiencies are in the range of 80% – it means that the fuel cost referred to the delivered energy package is around USD 60/MWh.

Most importantly though is the way these solutions should be structured. The corporate world is, in my opinion, interested in closing deals by which the supplier will invest, own and NTM By Rafael Herzberg operate the solution throughout the contracted term. Like a BOT (build, operate and transfer).

An example of such an arrangement was presented and awarded at Power Gen in 2011.

The case involved a global training (pilots) company which has one site in Guarulhos, in the greater São Paulo Metropolitan area. The company was facing more than 50 hours/year of unplanned interruptions in the power supply and this was hurting their business. The solution was installing a 1 MW genset. In order to make it feasible from an economic standpoint the technical solution was running the genset during the on-peak hours (3 hours/weekday). The savings (as compared to the utility’s rate) were good enough to make the investment very attractive. The business arrangement was a BOT for 8 years. The client is paying for the BOT provider the same value as if it were using the power from the grid during the on-peak hours but there is an emergency option – with no additional cost – to cover for the unplanned interruptions by the local utility company. A win-win situation.

By Rafael Herzberg


RAFAEL HERZBERG

RAFAEL HERZBERG

is a consulting partner at Interact Ltda Energy Consulting, a Brazilian based company he co-founded in 1982, specialized in energy (power, gas, biomass, diesel, etc) contracting, its efficient use and power projects. He is an electric engineer, started his career at ELTEC in 1976, a leading Brazilian electrical power connector manufacturing company where he became its CEO in 1987. In 1992 led ELTEC to joint-venture with ALCOA (its cable division in Brazil).