The controversial decisions Brazil is about to take in the energy sector

Brazil is expected to take two environmentally controversial decisions in the energy sector this year. 

On the horizon are oil and gas exploration in the geologically promising Equatorial Margin and the resumption of the 1.41GW Angra 3 nuclear power project.

Foz do Amazonas 

After failed attempts by TotalEnergies and BP, federal oil giant Petrobras has also been trying for years to obtain a license from environmental regulator Ibama to drill in the Equatorial Margin's Foz do Amazonas basin, but so far without success.

On Wednesday, mines and energy minister Alexandre Silveira told local newspaper Folha de São Paulo that Ibama should issue the authorization. 

“I want to believe that the president of Ibama is a man of common sense and truth. If he is, he will issue the license. Petrobras has already delivered everything he asked for,” Silveira said.

Foz do Amazonas is the star of the Equatorial Margin, which is seen as Brazil’s main hope to avoid oil supply risk in the next decade. 

Federal energy research company EPE estimates that the basin could have recoverable volumes of as much as 10 billion barrels of oil equivalent (Bboe).

“This potential not only guarantees energy security, but also makes it possible to raise revenue that can enable investments in basic sanitation, health and education that are essential for populations located in highly vulnerable regions,” EPE said last December. 

But local and international environmental entities claim that prospecting oil and gas in the region does not make sense, considering the expected decrease in global hydrocarbons demand in the next decades and the harm caused to the flora and fauna in pristine areas.

NGO Greenpeace, for instance, has warned of potential risks stemming from exploration and production in the Equatorial Margin to a coral reef deemed a critical biodiversity corridor between the Caribbean sea and the Atlantic Ocean. 

Nuclear

A report published by EPE concludes that the construction of the Angra 3 plant avoids high abandonment costs, helps to moderate systemic costs, provides energy security and reliability for the system, and contributes to increasing decarbonization and climate resilience of the energy matrix.

Construction of the country’s third nuclear plant has been dragging on since the 1980s due to financial, political, administrative, technical and regulatory problems, besides corruption scandals.

The national energy policy council (CNPE) is expected to make a decision soon on the approval of the project’s rate modeling, which is an essential factor for the conclusion of construction. 

The mines and energy ministry (MME) informs that discussions on Angra 3 remain on the agenda for the next meeting of the CNPE, with the date yet to be announced by the ministry.

According to development bank BNDES, the cost to complete construction of the plant is 23bn reais (US$3.8bn), while the cost to abandon the project would be 21bn reais.

The power rate calculated by the bank is lower than the cost of several thermal plants, measured by the so-called unit variable costs (CVU), with the average for the southeast subsystem (where the nuclear project is located) being 665 reais/MWh, according to data from national grid operator ONS from August 2024.

EPE said that the generation costs highlighted by BNDES are reasonable and align with the principle of rate moderation, which should consider the perspectives of systemic costs, carbon abatement costs after 2030 and climate resilience

It also emphasized that the approach used in its assessment is based on experiences from countries such as France, the UK, Canada and China, and is supported by technical debates underway at the OECD, NEA, IEA and IAEA.

The company highlighted that Sweden recently decided to focus solely on clean energy, resuming the construction of nuclear plants to achieve carbon neutrality by 2050, with energy security and system reliability. It mentioned that Italy is expected to follow the same path.

"Furthermore, the construction of Angra 3 prevents future regrets associated with the loss of technological expertise and the demobilization of the goods and services supply chain in Brazil," concluded EPE.

But Suely Araújo, a former president of Ibama and current coordinator of public policies at local NGO Observatório do Clima, told BNamericas that “the more than 20bn reais earmarked for the completion of Angra 3, which would certainly increase in the process, should be put to nobler uses for the energy sector and for the country.” 

In a report, Observatório do Clima even urged the closure of nuclear plants Angra 1 in 2025, once its operational license expires, and Angra 2, before the end of its useful life, through the termination of the operating contract.

The NGO claims that nuclear energy for electricity generation is associated with serious environmental risks related to radioactive material, as shown by the many serious accidents that have occurred around the world.

“There are no effective, risk-free solutions for what to do with the radioactive waste from the exhausted reactor fuel,” said Araújo. “What's more, these projects involve spending a lot of money, are very expensive, much more so than other sources, and generate little in the way of results.”

She said nuclear energy represents only 2% of Brazil's electricity matrix, according to 2023 data available on the EPE website. 

“Just for comparison, wind power reached 13.2% in the same year,” Araújo said.  

In 2018, when she headed Ibama, Araújo denied TotalEnergies’ request to drill in five blocks of the Foz do Amazonas basin. The group of assets did not include FZA-M-59, where Petrobras intends to drill. 

Araújo, who preferred not to comment on the Equatorial Margin issue when asked by BNamericas, said in 2023 that Foz do Amazonas is environmentally sensitive and has high biodiversity, which still needs to be studied. 

“It is unacceptable to assume that the entire region could be subject to oil exploration, without a comprehensive look at the negative effects from a socio-environmental point of view. The analysis of a specific project in the context of licensing does not cover the assessment that needs to be carried out,” she said in an interview published by Observatório do Clima. 

Datacenters

According to nuclear association Abdan, nuclear energy is the only source capable of guaranteeing that the growing number of datacenters operate sustainably.

Energy sources such as solar and wind are unable to provide the stability, availability and volume needed to meet such demand, Abdan said in a release. 

Amazon, for example, announced investments of over US$500mn in the development of small modular reactors, a new generation of reactors that promises to be more efficient and safer.

Microsoft, on the other hand, made a groundbreaking agreement with Constellation Energy, the owner of the Three Mile Island nuclear plant in the US, to acquire the unit's entire generation and supply its datacenters.

Abdan highlighted that there is currently a global race for advancements in nuclear fusion. Both China and the US are leading the development of this technology, which, once mastered, could provide an almost infinite source of energy. 

"It will be a leap in productivity and wealth, but we don’t know when that will happen," Abdan president Celso Cunha said.