Energy transition generates euphoria in MG and apprehension in RS

The differences between the cities of Janaúba, in the north of Minas Gerais, and Candiota, in the south of Rio Grande do Sul, today go far beyond the climate and accents of each Brazilian region. Separated by about 2,700 kilometers, the two have very different expectations about the future.

The first is one of the main focuses of investment in solar energy in the country and today coexists with thousands of workers from other parts of the country, who fill hotels and restaurants, boosting the local economy and generating jobs and income.

Known as the national capital of coal, the second is experiencing a climate of uncertainty in the face of growing pressures to reduce greenhouse gas emissions by the energy sector.

A leaf visited the two cities between late November and early December to understand the local effects of the energy transition, accelerated in recent years with the cheapening of renewable sources and warnings about the risks of climate change.

With the works, first of energy transmission substations and then of power plants, Janaúba saw its GDP surpass the R$1 billion mark in 2016. In 2019, the wealth generated in the municipality reached R$1.3 billion, more than 2.5 times that registered in 2010.

Candiota, on the other hand, suffered a hit in the middle of the last decade, with the closure of two generating machines for the Candiota 2 coal-fired power plant and, despite a recent recovery with the inauguration of a new plant, in 2019 it reached a GDP similar to that of had in 2010.

Driven by the fall in the price of panels and subsidies prorated by electricity consumers, the power of solar plants in the country has increased tenfold in five years. Also subsidized, coal lost capacity with the closing of three generating units.

For specialists, the trend is that the difference between the two markets will increase in the coming years. Projections by the EPE (Energy Research Company) indicate that Brazil will gain a further 5.4 GW (gigawatts) in solar energy by 2030, while coal-fired generation capacity will be reduced.

The coal industry complains that the end of subsidies for the purchase of fuel, which cost R$750 million in 2021, will close existing units at the end of energy sales contracts and make three new projects unfeasible with investments estimated at around R$20 billion .

The support is shared by all energy consumers in the country through a sector charge that will be extinguished in 2027. For 2022, the figure should exceed R$ 900 million.

The sector defends a “fair energy transition”, which would keep the current plants in operation until the feasibility of new technologies to reduce emissions and for other uses of coal, such as the production of fuels and fertilizers.

It also claims that coal-fired generation is cheap and still has a small weight in the country’s energy matrix and in the volume of emissions. And he argues that new technologies for reducing pollution and capturing carbon are beginning to prove viable in the world.

But he admits that it will be increasingly difficult to finance new projects. “The discussion about financing is a crucial problem for the coal industry”, says the president of the ABCM (Brazilian Association of Mineral Coal), Fernando Luiz Zancan.

Claiming that it is important to preserve the economy of cities dependent on coal in the southern region, the federal government launched a program in August to develop sustainable uses for the fuel, but not even the BNDES (National Bank for Economic and Social Development) wants to fund the sector further .

The bank’s exit from this market, announced in July, follows the example of Europe and China, which have restricted support for fuel. “The investment funds are closing their portfolios to coal”, adds the coordinator of the Energy Portfolio of the ICS (Instituto Clima e Sociedade), Roberto Kishinami

Former EPE president Maurício Tolmasquim says he sees no sense in maintaining fossil fuel subsidies, especially after the COP26 report called for the end of support programs for more polluting sources and started the implementation of the carbon market.

“In countries that have very large quantities of coal, with relatively new plants, the cost of shutting down would be higher,” he says. “But, in Brazil, we are talking about old, inefficient thermal plants with their useful life running out. There is no point in prolonging this.”