Incentive policies for natural gas-fired cogeneration in Brazilʹs industrial sector — case studies: chemical plant and pulp mill

Although recent restructuring of Brazilʹs power sector has increased the stakes held by private enterprise in the sector, the role of combined heat and power generation (CHP) is still undefined. Currently, this generation alternative is used only in a few industrial plants, being faced with an unfavorable institutional panorama. Issues related to the buyback rate, backup energy contracts and transmission rates are just some of the main barriers to cogeneration development in Brazil. This article assesses the economic performance of three natural gas-fired cogeneration systems at two specific industrial plants, one in the chemical sector and the other in the pulp and paper sector. As shown by international experience, these two sectors make intensive use of self-produced power. The results show that small and medium-size units, less than 20 MWe, are feasible for electric-intensive industrial plants, due to the current high risk of power outages of the Brazilian electrical system. Large units are only feasible with the adoption of incentive policies for selling off surplus power generated by the self-producer.