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During the review period, Brazil's biodiesel output grew steadily from 2.7 million m3 (2012) to 3.9 million m3 (2015), inter alia, supported by the increase of the biodiesel use mandate (see below). In 2015, Brazil remained the world's second-largest producer of biodiesel after the United States. As at December 2016, Brazil had 48 plants authorized to produce biodiesel and their capacity represented approximately 1.9 times the mandatory biodiesel production to be blended in mineral diesel; PETROBRAS' four plants accounted for 6.8% of total installed capacity.

The 2004 National Biodiesel Production Programme (PNPB) remains in place. Its aim is to promote domestic biodiesel production, reduce petroleum import dependency, lower pollutant emissions and health-related costs, generate jobs and income, and alleviate regional economic disparities by passing on benefits to family farmers. It is implemented through blending requirements and auctions promoted by ANP. Buyers in auctions are mineral diesel producers and importers, and PETROBRAS has a significant presence. Biodiesel producers holding a Social Fuel Seal Certificate sell first in these auctions (see below and Section 4.2.3.1.3).

Since 2014, the mandatory blending ratio of biodiesel has been raised, and it is set to rise further. It rose from 5% (January 2010) to 6% (July 2014), and then 7% (November 2014). The mandatory biodiesel-use ratio is to continue rising, to 8% in March 2017, 9% in March 2018, and 10% in March 2019. As of January 2016, a voluntary biodiesel blending ratio above the mandatory 7% level for several heavy duty fleets like long haul trucks, buses, rail transportation, and agricultural machinery was authorized; however, if requested by the end users, the MME has the authority not only to authorize but also set the actual voluntary blend to be used by the fleet. Furthermore, in 2016, the National Congress set the need to conduct tests in diesel engines over a period of 12 to 36 months to verify the feasibility of a 10% and 15% blending ratio; if results are positive, up to 15% biodiesel mandate could be an option by March 2019.

Similarly to ethanol, biodiesel benefits from cross-subsidization through federal tax exemptions and incentives for PIS/PASEP and COFINS taxes depending on the nature of the raw material, size of producer and region of production, in order to encourage the production of biodiesel and to promote social inclusion.

The domestic biodiesel market remains regulated by the Government through an ANP operated electronic auction system (reverse auctions), which gives preference to producers certified with the Social Fuel Seal. [103] The ANP sets the volume of government purchases and a maximum price that suppliers must underbid. The distributors are responsible for the commercialization of biodiesel. PETROBRAS operates as a system administrator and has no interference with the volumes to be acquired by distributors. Biodiesel prices received by producers are determined by the auction system. At auctions held between June 2014 and October 2016, average prices followed an overall rising trend and ranged from R$1,884.15 per m3 (June 2014) to R$2,855.10 per m3 (October 2016).

[103] To obtain this certification, biodiesel producers must purchase a minimum share of raw materials from family farmers registered under the PRONAF (Section 4.2.4.3). Minimum shares differ by region: 15% in the north and mid-west; 30% in the south-east, north-east and the semiarid area; and 35% in the south. In the 2014/2015 harvest biodiesel producers purchases stood at approximately R$ 4 billion.

Between 2011 and 2015, Brazil's installed capacity and power generation continued to grow faster than electricity consumption. In 2015, Brazil had 140.6 GW of installed capacity for electricity generation, generated 581.5 TWh of electricity, and consumed 522.8 TWh; these figures represented annual increases of 20.1%, 9.3% and 8.9% respectively compared to 2011 levels. Hydroelectric sources accounted for 64% (70.4% in 2011) of installed capacity, followed by thermal (30.2%), wind (3.5%) and, nuclear (2.4%) sources. [108] Brazil's electricity imports in 2014 accounted for 5.7% of domestic supply, down from 7.4% in 2012; the drop in the hydropower share due to Brazil's exceptional drought in 2015 and 2016 was compensated by the output of thermal power plants which increased the cost of energy. Electricity produced by the Itaipu plant and imported from Paraguay continues to account for most of Brazil's imports. In 2015, Brazil imported 33,651.5 GWh from Paraguay and 913.2 GWh from the Bolivarian Republic of Venezuela, and exported 219 GWh to Argentina and 0.4 GWh to Uruguay. Although under the Ten Year Plan for Energy Expansion 2024 (Section 4.2.2), the share of hydropower capacity is to rise and a number of auctions have been conducted, construction of several hydroelectric plants is behind schedule. The main power consumption groups consist of manufacturing (37.6%), residential consumers (25.1%), service activities (17.5%) and agriculture (5.1%).

[108] There are two operational nuclear reactors in Brazil; a third reactor was due to come online by January 2016 but construction of the plant has become paralysed due to investigations by federal prosecutors into corruption.

ELETROBRAS continues to play a major role in the electricity sector; as at March 2017, the Federal Government owned 40.99% of its common shares, BNDES/BNDESPAR 15.99%, Brazilian Government funds 3.44%, and others 19.94%; in addition, its preferred shares, i.e. those with a higher claim on its assets and earnings than common stock, are owned by BNDES/BNDESPAR (2.73 %) and others funds (16.89%). [112] (...)

[112] ELETROBRAS consists of the following 14 companies: Holding, CGTEE, Chesf, Eletronorte, Eletronuclear, Eletrosul, Furnas, Amazonas Energia, Amazonas Geração e Transmissão, Distribuição Acre, Distribuição Alagoas, Distribuição Piauí, Distribuição Rondônia, Distribuição Roraima, and it owns half of Itaipu Binacional. ELETROBRAS had 50.93% of the shares of the company Celg Distribuição S.A. (CELG) an energy distribution company operating in the Brazilian state of Goiás until November 2016 when Enel Brasil S.A. (subsidiary of the Italian Enel S.P.A.) acquired 94.6% of CELG's shares in a public tender. Moreover, the ELETROBRAS holding controls the Electric Energy Research Center (Eletrobras Cepel), and Eletropar Participações S.A. (Eletrobras Eletropar). It owns 47 hydroelectric power plants, 121 thermal power plants, 2 nuclear power plants, 60 wind farms, and 1 solar power plant. ELETROBRAS (2016), Annual and Sustainability Report 2015. Viewed at: http://www.eletrobras.com/elb/main.asp?Team={D00A1456-A64A-40DC-B7D8-BB2E23A8FACE}; ELETROBRAS online information. Viewed at: http://ri.eletrobras.com/pt/ri/Paginas/Capital-Social.aspx; ENEL online information. Viewed at: https://www.enel.com/content/dam/enel-common/press/en/1666524-1_PDF-1.pdf; and Investopedia online information. Viewed at: http://www.investopedia.com/terms/p/preferredstock.asp.

During the review period, the main regulatory framework of the electricity sector remained virtually unchanged. Law No. 12,783 of 11 January 2013, which governs electricity generation, transmission, and distribution concessions, was amended by Law No. 13.203 of 8 December 2015, which provides for the renegotiation of the hydrological risk of electricity generation and establishes the bonus for the granting of a concession.

The National Agency for Electrical Energy (ANEEL) grants concessions for electricity generation, transmission, and distribution through authorizations or public tender procedures; the latter may involve auctions, which are organized by the ANEEL and carried out by the CCEE. The generation concessions granted for hydropower may be extended at the discretion of the Government, only once, for up to 30 years, in order to ensure the continuity and efficiency of the service provided as well as low electricity tariffs. The extension is contingent upon the generator's acceptance of certain conditions set by the ANEEL, including the remuneration tariffs to be applied, a guaranteed supply quota allocation, and quality standards. Quotas are allocated through contracts and they are revised periodically by ANEEL. Regarding self-generation of hydropower, concessions for up to 50MW may be extended once for up to 30 years; generators may sell any non-consumed surplus in the spot market and those not linked to the National Interconnected Grid (SIN) are not bound by the 50MW threshold. In the case of thermo-electric power generation, the renewal of concessions is allowed for up to 20 years and must be requested by the concessionary at least 24 months prior to the expiration of the concession.

Setting-up thermoelectric plants with a capacity of more than 5 MW requires ANEEL authorization; the same applies to hydroelectric plants with a capacity greater than 1 MW but equal to or lower than 50 MW. Hydroelectric projects with capacity greater than 50 MW require public-provider concessions in order to trade part of their electricity via auctions. Authorizations for building and operating new thermoelectric generators and certain hydropower plants are granted for 30 years, non-renewable. A renewable period of 35 years is envisaged for new hydroelectric generators. Concessions for building hydropower plants with a capacity greater than 50 MW are granted for 35 years, non-renewable. In 2015, legislation in this area was modified to include the possibility of undertaking existing hydropower plants auctions as a means of collecting a bonus for the concession (a payment for the concession right); two MME ordinances were issued to define the possible bidding evaluation criteria, i.e. through the offering of the lowest tariff (2015) and the additional possibility of bidding by offering the largest payment of bonus (2017). On 25 November 2015, Brazil held one auction under the new regulatory framework that led to the concession of 29 existing hydropower plants, totalling 6 GW of installed power, representing a R$17 billion bonus payment for these concessions. As of March 2017, no auctions have been held under the 2017 alternative criterion.