Andre Luiz Salgado, Managing Director, Areva Renewables Brazil
AREVA Renewables Managing Director, Andre Luiz Salgado, explains the rationale behind investing in biomass, a clean and powerful source capable of meeting the country’s high demand for energy.
Headquartered in France, AREVA has a long history in nuclear power, and yet decided to diversify bye entering renewable energies to become a truly energy focused company. How did AREVA establish itself as a solid renewable player in Brazil?
In 2001, AREVA took its first steps into renewable energies through energy storage. Three years later, AREVA T&D biomass area was incorporated to AREVA Renewables, and started developing projects in biomass. As AREVA went through a series of adjustments, AREVA Renewables was created to reinforce the group’s footprint in renewable energies. AREVA’s plan was to acquire several companies worldwide to gain strengths in that field. This process started when German wind player Multibrid was acquired in 2007, creating AREVA Wind. Shortly after Koblitz, a local Brazilian biomass player became part of the group joining the Bioenergies Business Unit; finally in 2010, an American solar company named Ausra, now AREVA Wind, completed AREVA’s diversified portfolio of renewable companies. These investments were to strengthen the company in offshore wind, bioenergy, and solar power.
Last year, to reinforce our portfolio, AREVA acquired a bioenergy company specialized in torrefaction. This technology basically enables the production of bio-coal, which produces plant fuel from biomass, a perfect solution to replace fossil coal used for thermal generation. Through this investment we plan to have an industrial scale plant operating in the north of France by the end of the year.
Looking at AREVA’s global renewable business units, biomass only accounts for 20 percent of the total renewable energy revenues whereas wind capitalizes 67 percent. Considering that Brazil has a unique wind potential of 350 GW, why didn’t AREVA invest in wind power locally?
AREVA’s technology and expertise specifically meets the need of offshore wind projects rather than onshore: these represent two different business niches, and since Brazil’s wind market for the moment only allows onshore projects, the conditions do not apply. The biggest opportunities for offshore wind are located in the northeast of the USA and in Europe, mostly in the North Sea and the UK. It is clear that Brazil will not have an offshore wind market in the near future considering Brazil’s onshore wind capacity.
AREVA globally has revenues of USD nine billion, and North and South America account for 20 percent of this figure. What does Brazil alone represent today? How do you plan to reinforce your local operations?
Around 94 percent of the group’s revenues are based on nuclear energy and the rest is allocated to renewable energies. Therefore, Brazil should represent a small percentage of the group’s revenues.
To grow our revenues in Brazil we have dedicated a special support to our client base, assisting them with consultancy, helping them define the best long-term economic feasibility study and resolve issues with environmental licensing and project financing. Our engineering consultancy business generates a very small part of our revenues as our business model and revenue basis lies in our construction capabilities. We define ourselves as a full EPC player, bringing turnkey solutions to our customers across Brazil and Latin America.
Which competitive technologies do you bring for the development of your biomass projects?
Brazil’s main biomass market is based on the sugar and ethanol segment. Therefore, what we use for power generation is the residual part of the sugar cane process called bagasse. Biomass generation has a rather simple transformation process that does not necessitate advanced, state-of-the-art technologies. Brazil is a specialist in sugar cane bagasse and has been developing its own series of technologies that perform extremely well.
Nonetheless, AREVA has a biomass technology center in Bordeaux (France). This center has developed new technologies, especially in the field of torrefaction and energy efficiency. We expect this technology to make a notable difference in Brazil and give us a competitive advantage over the local competition.
Besides biomass, AREVA is also a hydro EPC contractor with four small hydropower plants and a relatively large 374 MW hydro plant—Santo Antonio do Jari. Is this a means to diversify your portfolio?
We hold great expertise in hydro project developments, as already in 2003 during PROINFA (incentive program for the development of renewable energies in Brazil), we were already undertaking 30 small hydropower plant projects. Santo Antonio do Jari is our only ongoing project as the other four have been completed. Hydro is not our core market but our experience in construction would allow us to participate. Currently, hydro is not the best resource to invest in due to the feed-in tariffs currently in place, and we feel that biomass holds much more promising prospects, especially with the free market and also on the auctions, what was proved in the latest A-5 Auction held in August.
Looking ahead with Brazil’s great energy challenges and major international events, it is clear that being an active player and investing in the market is necessary. What defines AREVA’s vision for the future here? Shall we see a shift to nuclear?
With a power demand growing at a much faster rate than the country’s GDP, power generation is under intensive stress and it is a priority to develop alternative sources like biomass to compensate this additional demand. The PDE (Government Decennial Plan for Energy) forecasts for biomass an average increase of 450 MW a year until 2021. Also, as new energy auctions separate wind from biomass and the other sources, the perspectives for new biomass power plants are appealing. There is no doubt that the achievement of 650 MW contracted biomass power plants at the last energy auction is the simple result of adapting energy auctions by source. We expect these projects to be assigned at the beginning of 2014 and our forecasted growth should be in the line of 15 to 20 percent a year.
Besides biomass, hydro and thermal will play a major part, and nuclear should also take a step further in Brazil as Angra 3 nuclear power plant will soon be ready. Many challenges await our country, but at AREVA Renewables in Brazil we hold faith in biomass—a great complementary and clean source for power generation.