The World Bank

Brazil: big untapped potential for energy efficiency

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Source: The World Bank

Brazil is the 10th largest energy consumer in the world. Much of its energy comes from clean hydroelectric power and biomass fuels, and it consumes about as much oil as it produces. But Brazil is expected to double energy usage by 2030. Despite having had an energy efficiency program since 1985 and a thriving ESCO (energy service companies) industry, an estimated US$2.5 billion in potential energy efficiency improvements remain untapped every year.

'Brazil is a challenging place to do energy efficiency,' says Todd Johnson, a World Bank energy specialist who works on energy efficiency in Brazil. 'Interest rates are high. It's difficult to borrow. Banks now are not lending for energy efficiency—they're focused on the tried and true lines of business.' The financing problem means that most energy efficiency projects in small and medium sized businesses don't get funding.

Energy Efficiency 'Wire Charge'

Instead, the country's ESCO industry derives most of its business from utility companies that are required to fund energy efficiency measures. The main source of funding for most projects is a power sector energy efficiency 'wire charge' that has provided 0.5-1 percent of annual distribution utility net revenues toward energy conservation since the late 1990s.

While the wire charge 'sends a message that energy efficiency is important,' it leaves energy efficiency projects to the discretion of utilities. One result has been that public lighting, which comprises 3 percent of annual energy consumption, has captured most of the resources of the utilities' energy efficiency programs, says the book. 'From the utilities' perspective, energy efficiency investments were a way to minimize losses' from the poor payment histories of many municipalities in the country, it says.

Brazil could improve the wire-charge fund by monitoring results of projects more closely and offering new incentives to save energy, says Johnson. The Bank, along with the Brazilian Development Bank and the Clinton Foundation, is now exploring ways to expand energy efficiency in public buildings and in water and sanitation facilities, where efficiency gains could be large, Johnson adds.

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