Electricity sector in Brazil
Encyclopedia
Brazil
has the largest electricity
market in South America, with a power consumption that is more than double the combined consumption of Argentina
, Bolivia
, Chile
and Uruguay. Its installed capacity is comparable to that of Italy and the United Kingdom, although with a much larger transmission network. The country has the largest capacity for water storage in the world, being highly dependent on hydroelectricity
generation capacity, which meets over 80% of its electricity demand. This reduces the country's generation costs relative to countries with more diverse supply mixes. However, this dependence on hydropower also makes Brazil especially vulnerable to power supply shortages in drought years, as was demonstrated by the 2001-2002 energy crisis.
The National Interconnected System (SIN) comprises the electricity companies in the South, South-East, Center-West, North-East and part of the North region. Only 3.4% of the country's electricity production is located outside the SIN, in small isolated systems located mainly in the Amazonian region
.
, which account for 77% of total installed capacity, with 24 plants above 1,000 MW
. About 88 percent of the electricity fed into the national grid is estimated to come from hydroelectric generation, with over 25% coming from a single hydropower plant, the massive 14 GW
Itaipu dam facility, located between Brazil and Paraguay
on the Paraná River
. Natural gas generation is second in importance, representing about 10% of total capacity, close to the 12% goal for 2010 established in 1993 by the Ministry of Energy and Mines.
This reliance on abundant hydroelectric resources is beneficial for Brazil as this reduces the overall generation costs. However, this large dependence on hydropower makes the country especially vulnerable to supply shortages in low-rainfall years (See The 2001-2002 crisis below).
Brazil is still a net importer of electricity (mostly from Argentina), but import reliance is falling. In January 2007, the break-down of generation by source was:
Source: Ministry of Energy and Mines, 2007
As summarized in the table above, Brazil has two nuclear power plants, Angra 1
(657 MW
) and Angra 2
(1,350 MW
), both of them owned by Eletronuclear
, a subsidiary of the state-owned Eletrobrás
.
. The three largest projects studied, Jirau, Santo Antônio and Belo Monte, are already beyond the feasibility phase: In 2007, Ibama
, the environmental agency, gave approval for the construction of two new dams, Jirau (3,300 MW
) and Santo Antônio (3,150 MW
), on the Madeira River
in the state of Rondônia
. The bid for the Santo Antônio plant was awarded in December 2007 to Madeira Energy, with a 39% participation from state-owned Furnas
, while the bid for the Jirau plant will be launched in May 2008. The government is also pursuing development of the controversial 11,000 MW
Belo Monte Dam
in the state of Pará
, on the Xingu River
. IBAMA
approved Belo Monte's provisional environmental license in February 2010 despite internal uproar from technicians over incomplete data.
plant, and is currently in the process of selecting a site for a fourth nuclear power plant.
and to participate in a new energy auction (See Energy auctions below). In order to counter the risk of unavailability of gas supplies, Brazil is in the initial stages of planning to build two LNG terminals that would likely come on-stream around 2010. However, in the meantime, several thermoelectric plants are converting their machinery to dual-fuel capacity (oil and gas).
Electricity demand is expected to grow an average of 3.6% in the next few years, leading to total estimated consumption of 504 TWh and average per capita consumption of 2,527 kWh (around 18% of that of the United States and 45% of that in the United Kingdom).
at above unity. Between 1980 and 2000, electricity demand increased on average by 5.4 per cent per year while GDP grew by 2.4 per cent on average per year. Investment is therefore needed to boost generation and transmission capacity because there is limited excess supply, despite the reduction in demand following the energy rationing
programme implemented in 2001 in response to the energy crisis.
region. In 2005, the average number of interruptions per subscriber was 12.5, while duration of interruptions per subscriber was 16.5 hours. The weighted averages
for LAC
were 13 interruptions and 14 hours respectively.
region but about double that of an OECD country such as the Great Britain
, with 7% distribution losses.
The Operator of the National Electricity System (ONS) is a non-profit private entity created in August 1998 that is responsible for the coordination and control of the generation and transmission installations in the National Interconnected System (SIN). The ONS is under ANEEL's control and regulation.
The Power Commercialization Chamber (CCEE), successor of MAE (Mercado Atacadista de Energia Electrica), is the operator of the commercial market. The initial role of the operator was to create a single, integrated commercial electricity market, to be regulated under published rules. This role has become more active since now CCEE is in charge of the auction system. The rules and commercialization procedures that regulate CCEE's activities are approved by ANEEL.
Finally, the Power Research Company (EPE) was created in 2004 with the specific mission of developing an integrated long-term planning for the power sector in Brazil. Its mission is to carry out studies and research services in the planning of the energy sector in areas such as power, oil and natural gas and its derivates, coal, renewable energy resources and energy efficiency, among others. Its work serves as input for the planning and implementation of actions by the Ministry of Energy and Mines in the formulation of the national energy policy
The Brazilian electricity model is fully deregulated, which allows generators to sell all of their "assured energy" via freely negotiated contracts with consumers above 3MW
or via energy auctions administered by CCEE (See energy auctions below). . Under this model, distributors are required to contract 100% of their expected demand. Currently, Brazilian generation supply can be sold under four types of markets:
(*The government identifies two types of generation capacity, "old energy" and "new energy". Old energy represents existing plants that were already contracted in the 1990s, while new energy refers to that energy produced by plants that have not yet been built, or by existing plants that meet certain criteria.)
and Copel controlling 8%, 7% and 5% of generation capacity respectively.
Generation capacity is shared among the different companies as follows:
Source: Eletrobrás, CESP, Cemig, Copel, Tractebel Energia, AES Tiete
, Ministry of Energy and Mines
(1) Considering 6,300MW of Iguaçú
Currently, about 27 percent of the generation assets are in the hands of private investors. Considering the plants under construction, as well as the concessions and licenses already granted by ANEEL, this figure is expected to grow up to 31 percent in the medium term and to reach almost 44 percent over 5–6 years. Private capital participation in the generation business will likely represent 50 percent of the installed capacity in the years to come
Transmission has remained almost exclusively under government control through both federal (Electrobras) and state companies (mainly Sao-Paulo-CTEEP, Minas Gerais-Cemig, and Parana-Copel) until recently. However, under the new sector regulatory model, there are about 40 transmission concessions in Brazil. Most of them are still controlled by the government, with subsidiaries under federal company Electrobras holding 69% of total transmission lines.
Source: Bear Stearns 2007
Source: Bear Stearns, 2007
potential of the country, is still unexploited.
Apart from biomass, which accounts for about 3.5% of total generation capacity, no other renewable energy source besides hydroelectricity
plays a relevant role in the energy mix. However, the potential for wind energy, which is concentrated in the Northeast, is very large (about 140GW, which exceeds current installed capacity), second only to Argentina in the LAC
region. There are projects for the development of biomass, solar and wind energy, but these are still on a relatively small scale.
to carry out a substantial reform of the Brazilian electricity sector. The first reforms introduced in the power sector were aimed to allow the participation of private capital and also to improve its economic situation.
. The objective of the reform was to build a more competitive power sector with the creation of a level playing field for private sector participation. In addition, state-owned utilities and assets were privatized. Although transmission assets were not privatized, most of the expansion of the transmission network has been carried out by private capital. This reform also led to the creation, in 1996, of ANEEL (Brazil's National Electricity Regulatory Agency), a quasi-independent regulatory body in charge of overseeing the electricity sector. However, the main restructuring steps were taken with the enactment of the 1998 Law (Law 9648/98). Those steps included the creation of an independent operator of the national transmission system (ONS) and an operator of the commercial market (MAE), which did not become operational until 2001.
As a result of the reforms of the power sector, new capital was attracted, both in terms of privatization and greenfield project
s. Some of the state-owned generation capacity was acquired by foreign investors such as Tractebel, AES
, Prisma Energy
, El Paso and Duke
, which became significant producers. In addition, local investors such as industrial groups, large customers, utilities and pension funds also invested heavily in the national generation sector. Other companies such as EdF (Électricité de France
), Endesa
and Chilectra focused on the distribution segment, a segment in which privatization brought improved quality of service and a reduction of theft, non-payments and technical losses.
However, the reforms were not successful in preventing the energy crisis that was to unfold in 2001. Installed capacity expanded by only 28 per cent during 1990-99, whereas electricity demand increased by 45 per cent. In 1999, as the power shortage was already foreseen, the President Cardoso
Administration made efforts to increase private investment in the electricity sector through a Priority Thermal Power Program (PPT) that aimed at the expeditious construction of more than 40 gas-fired thermal plants. Unfortunately, the needed investment did not materialize and the crisis became unavoidable.
generation capacity. Additionally, several delays in the commissioning of new generation plants and transmission problems in the third circuit from the Itaipu hydropower plant accounted for a third of the energy deficit. Reservoir levels reached such low levels that supply could not be ensured for more than four months.
It was soon clear that strict demand reduction programs would be needed to avoid widespread blackouts. In June 2001, the government created the Crisis Management Board (CGE), chaired by President Cardoso
himself. The CGE received special powers among which was the authority to set up special tariffs, implement compulsory rationing and blackouts, and bypass normal bidding procedures of the purchase of new plant equipment. Instead of resorting to rolling blackout
s, the government chose to apply a quota system. Quotas were established for all the consumers based on historical and target consumption level, applying bonuses for consumption well below the prescribed level, penalties for over-consumption and some freedom for the large users to trade their quotas in a secondary market
. The government's goal of reducing historical consumption levels by at least 20% for an eight-month period was successfully achieved, with the government having to pay over US$200 million in bonuses to residential, industrial, and commercial customers. This achievement allowed the system to overcome that long period without blackouts and brownouts and proved the potential of demand-side management and energy efficiency efforts, which were able to create a virtual capacity of 4,000MW
, helping the country to bridge the supply demand gap in a very economic way. In addition, the government launched a program for contracting emergency generation capacity, with bids for a total of 2,100MW
of new thermal capacity accepted.
However, the crisis affected numerous actors. Generators and distributors experienced a 20% reduction in their revenues due to the contraction in consumption. This situation was eventually addressed by an increase of tariffs approved by the government. The financial situation of distributors was also damaged, with customers also suffering from the increase in electricity prices (140% in nominal terms between 1995 and 2002).
took over among criticism of the reforms introduced in the electricity sector by the administration of President Cardoso
, supporting a model in which the system should be fully regulated. The pending privatizations of three generation subsidiaries of the large state-owned utility, Eletrobrás, were stopped. However, despite initial expectations, the new administration opted for a model that clearly aims to attract long-term private investment to the sector and that heavily relies on competition. In addition, the existing institutions were preserved and in some cases strengthened, with a new company, EPE, created with the specific mission of developing an integrated long-term planning for the power sector in Brazil.
The new legislative framework was defined by Law 10,848/2004, which established clear, stable and transparent rules aimed at ensuring supply and the continuous expansions of the intrinsic sector activities (generation, transmission and distribution). The expansion was linked to a fair return on investments and to universal service access, together with tariff adjustments. Decree 5,081/2004 approved the regulatory framework for the power sector, specifying specific provisions to achieve the objectives of the reform.
One of the defining elements of the model adopted by the new administration is the establishment of energy auctions as the main procurement mechanism for distribution companies to acquire energy to serve their captive consumers. This initiative assisted in the introduction of competition in the power sector and also helped to address some of the existing market imperfections
. Under this system, auctions of capacity from new generation projects will be held three to five years in advance of delivery dates. The Ministry of Mines and Energy wants to ensure that the totality of future expansion needs is met and that plants are only built once they have won bids in energy auction
s and are guaranteed long-term contracts. The first auction was held in December 2004, with contracts for a total of about 40GW
traded.
The investment required in power generation over the next 10 years is R$
40 billion or around US$24.2 billion (April 29, 2008). This high investment will only be realized if the government succeeds in attracting greater private-sector investment.
Transmission, it has remained almost exclusively under government control through both federal (Electrobras) and state companies (mainly Sao-Paulo-CTEEP, Minas Gerais-Cemig, and Parana-Copel) until recently. However, under the new sector regulatory model, there are about 40 transmission As for distribution, there are 49 utilities with distribution concessions and about 64% of distribution assets are controlled by private sector companies.
Brazil
Brazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people...
has the largest electricity
Electricity
Electricity is a general term encompassing a variety of phenomena resulting from the presence and flow of electric charge. These include many easily recognizable phenomena, such as lightning, static electricity, and the flow of electrical current in an electrical wire...
market in South America, with a power consumption that is more than double the combined consumption of Argentina
Electricity sector in Argentina
The electricity sector in Argentina constitutes the third largest power market in Latin America. It relies mostly on thermal generation and hydropower generation , with new renewable energy technologies barely exploited. The country still has a large untapped hydroelectric potential...
, Bolivia
Electricity sector in Bolivia
The electricity sector in Bolivia was privatized in the early 1990s and was unbundled into generation, transmission and distribution. The supply is dominated by thermal generation , while hydropower has a smaller share in its generation mix compared to other South American countries The...
, Chile
Electricity sector in Chile
The electricity sector in Chile relies predominantly on thermal and hydro power generation. Faced with natural gas shortages, Chile began in 2007 to build its first liquefied natural gas terminal and re-gasification plant at Quintero near the capital city of Santiago to secure supply for its...
and Uruguay. Its installed capacity is comparable to that of Italy and the United Kingdom, although with a much larger transmission network. The country has the largest capacity for water storage in the world, being highly dependent on hydroelectricity
Hydroelectricity
Hydroelectricity is the term referring to electricity generated by hydropower; the production of electrical power through the use of the gravitational force of falling or flowing water. It is the most widely used form of renewable energy...
generation capacity, which meets over 80% of its electricity demand. This reduces the country's generation costs relative to countries with more diverse supply mixes. However, this dependence on hydropower also makes Brazil especially vulnerable to power supply shortages in drought years, as was demonstrated by the 2001-2002 energy crisis.
The National Interconnected System (SIN) comprises the electricity companies in the South, South-East, Center-West, North-East and part of the North region. Only 3.4% of the country's electricity production is located outside the SIN, in small isolated systems located mainly in the Amazonian region
Amazon Rainforest
The Amazon Rainforest , also known in English as Amazonia or the Amazon Jungle, is a moist broadleaf forest that covers most of the Amazon Basin of South America...
.
Installed capacity
Generation capacity in Brazil is dominated by hydroelectric plantsHydroelectricity
Hydroelectricity is the term referring to electricity generated by hydropower; the production of electrical power through the use of the gravitational force of falling or flowing water. It is the most widely used form of renewable energy...
, which account for 77% of total installed capacity, with 24 plants above 1,000 MW
WATT
WATT is a radio station broadcasting a news-talk-sports format. Licensed to Cadillac, Michigan, it first began broadcasting in 1945.-External links:...
. About 88 percent of the electricity fed into the national grid is estimated to come from hydroelectric generation, with over 25% coming from a single hydropower plant, the massive 14 GW
WATT
WATT is a radio station broadcasting a news-talk-sports format. Licensed to Cadillac, Michigan, it first began broadcasting in 1945.-External links:...
Itaipu dam facility, located between Brazil and Paraguay
Paraguay
Paraguay , officially the Republic of Paraguay , is a landlocked country in South America. It is bordered by Argentina to the south and southwest, Brazil to the east and northeast, and Bolivia to the northwest. Paraguay lies on both banks of the Paraguay River, which runs through the center of the...
on the Paraná River
Paraná River
The Paraná River is a river in south Central South America, running through Brazil, Paraguay and Argentina for some . It is second in length only to the Amazon River among South American rivers. The name Paraná is an abbreviation of the phrase "para rehe onáva", which comes from the Tupi language...
. Natural gas generation is second in importance, representing about 10% of total capacity, close to the 12% goal for 2010 established in 1993 by the Ministry of Energy and Mines.
This reliance on abundant hydroelectric resources is beneficial for Brazil as this reduces the overall generation costs. However, this large dependence on hydropower makes the country especially vulnerable to supply shortages in low-rainfall years (See The 2001-2002 crisis below).
Brazil is still a net importer of electricity (mostly from Argentina), but import reliance is falling. In January 2007, the break-down of generation by source was:
| Source | Number of plants | Installed capacity (MW WATT WATT is a radio station broadcasting a news-talk-sports format. Licensed to Cadillac, Michigan, it first began broadcasting in 1945.-External links:... ) |
% Total |
|---|---|---|---|
| Hydroelectricity | 633 | 73,678 | 72.1% |
| Gas | 101 | 10,798 | 10.6% |
| Oil | 568 | 4,446 | 4.4% |
| Biomass | 269 | 3,693 | 3.6% |
| Nuclear | 2 | 2,007 | 2% |
| Coal | 7 | 1,415 | 1.4% |
| Wind | 15 | 237 | 0.2% |
| Total installed capacity | 1,595 | 96,294 | 94.3% |
| Contracted imports | 5,850 | 5.7% | |
| Available power | 102,144 | 100% | |
Source: Ministry of Energy and Mines, 2007
As summarized in the table above, Brazil has two nuclear power plants, Angra 1
Angra Nuclear Power Plant
Angra Nuclear Power Plant is Brazil's sole nuclear power plant. It is located at the Central Nuclear Almirante Álvaro Alberto on the Itaorna Beach in Angra dos Reis, Rio de Janeiro, Brazil...
(657 MW
WATT
WATT is a radio station broadcasting a news-talk-sports format. Licensed to Cadillac, Michigan, it first began broadcasting in 1945.-External links:...
) and Angra 2
Angra Nuclear Power Plant
Angra Nuclear Power Plant is Brazil's sole nuclear power plant. It is located at the Central Nuclear Almirante Álvaro Alberto on the Itaorna Beach in Angra dos Reis, Rio de Janeiro, Brazil...
(1,350 MW
WATT
WATT is a radio station broadcasting a news-talk-sports format. Licensed to Cadillac, Michigan, it first began broadcasting in 1945.-External links:...
), both of them owned by Eletronuclear
Eletronuclear
Eletronuclear is a nuclear power company, which was established in 1997 in Brazil. It operates Angra Nuclear Power Plant. Eletronuclear is a wholly owned subsidiary of Eletrobrás....
, a subsidiary of the state-owned Eletrobrás
Eletrobrás
Eletrobras is a major Brazilian power utility. It's also Latin America's biggest power utility company, tenth largest in the world and is also the fourth largest clean energy company in the world. It is currently expanding its operations in the continent, as well as in Africa. The company's full...
.
Hydroelectric plants
The National Agency for Electricity (ANEEL) has commissioned feasibility studies for several hydroelectric plants (small, medium and large) in the period 2006-2008. These studies correspond to a total potential capacity of 31,000MWWATT
WATT is a radio station broadcasting a news-talk-sports format. Licensed to Cadillac, Michigan, it first began broadcasting in 1945.-External links:...
. The three largest projects studied, Jirau, Santo Antônio and Belo Monte, are already beyond the feasibility phase: In 2007, Ibama
Ibama
Brazilian Institute of Environment and Renewable Natural Resources is the Brazilian Ministry of the Environment's enforcement agency...
, the environmental agency, gave approval for the construction of two new dams, Jirau (3,300 MW
WATT
WATT is a radio station broadcasting a news-talk-sports format. Licensed to Cadillac, Michigan, it first began broadcasting in 1945.-External links:...
) and Santo Antônio (3,150 MW
WATT
WATT is a radio station broadcasting a news-talk-sports format. Licensed to Cadillac, Michigan, it first began broadcasting in 1945.-External links:...
), on the Madeira River
Madeira River
The Madeira River is a major waterway in South America, approximately 3,250 km miles long The Madeira is the biggest tributary of the Amazon...
in the state of Rondônia
Rondônia
Rondônia is a state in Brazil, located in the north-western part of the country. To the west is a short border with the state of Acre, to the north is the state of Amazonas, in the east is Mato Grosso, and in the south is Bolivia. Its capital is Porto Velho. The state was named after Candido Rondon...
. The bid for the Santo Antônio plant was awarded in December 2007 to Madeira Energy, with a 39% participation from state-owned Furnas
Furnas
Furnas is a civil parish in the municipality of Povoação on the island of São Miguel in the Azores. The population in 2001 was 1,541, its density is 44.76/km² and the area is 34.43 km². The parish is one of the largest in the island and in the Azores...
, while the bid for the Jirau plant will be launched in May 2008. The government is also pursuing development of the controversial 11,000 MW
WATT
WATT is a radio station broadcasting a news-talk-sports format. Licensed to Cadillac, Michigan, it first began broadcasting in 1945.-External links:...
Belo Monte Dam
Belo Monte Dam
The Belo Monte Dam is a proposed hydroelectric dam complex on the Xingu River in the state of Pará, Brazil...
in the state of Pará
Pará
Pará is a state in the north of Brazil. It borders the Brazilian states of Amapá, Maranhão, Tocantins, Mato Grosso, Amazonas and Roraima. To the northwest it also borders Guyana and Suriname, and to the northeast it borders the Atlantic Ocean. The capital is Belém.Pará is the most populous state...
, on the Xingu River
Xingu River
The Xingu River , also called Rio Xingu, is a 1,230-mile long, river in north Brazil; it is a southeast tributary of the Amazon River.-Description and history:...
. IBAMA
Ibama
Brazilian Institute of Environment and Renewable Natural Resources is the Brazilian Ministry of the Environment's enforcement agency...
approved Belo Monte's provisional environmental license in February 2010 despite internal uproar from technicians over incomplete data.
Nuclear plants
Also in 2007, Electronuclear was granted permission to resume construction of Angra 3, a 1,350 MWWATT
WATT is a radio station broadcasting a news-talk-sports format. Licensed to Cadillac, Michigan, it first began broadcasting in 1945.-External links:...
plant, and is currently in the process of selecting a site for a fourth nuclear power plant.
Thermoelectric plants
Currently, the development of gas-fired thermoelectric power is somewhat jeopardized by the lack of secure gas supplies. In fact, having a secure gas contract is a prerequisite to build a new thermoelectric plantThermal power station
A thermal power station is a power plant in which the prime mover is steam driven. Water is heated, turns into steam and spins a steam turbine which drives an electrical generator. After it passes through the turbine, the steam is condensed in a condenser and recycled to where it was heated; this...
and to participate in a new energy auction (See Energy auctions below). In order to counter the risk of unavailability of gas supplies, Brazil is in the initial stages of planning to build two LNG terminals that would likely come on-stream around 2010. However, in the meantime, several thermoelectric plants are converting their machinery to dual-fuel capacity (oil and gas).
Demand
Total electricity consumed in 2007 was 410 TWh, while annual consumption per capita for the same year averaged 2,166 kWh) (compare with 12,300 kWh per capita for the United States). The share of consumption by sector was as follows:- Residential: 40% (including 6% for the rural sector)
- Industrial: 25%
- Commercial: 22%
- Rural: 6%
- Public: 13%
Electricity demand is expected to grow an average of 3.6% in the next few years, leading to total estimated consumption of 504 TWh and average per capita consumption of 2,527 kWh (around 18% of that of the United States and 45% of that in the United Kingdom).
Supply vs. demand
In Brazil, capacity addition traditionally lagged behind demand growth. Electricity demand is expected to continue to grow at a quick pace. The income elasticity of demand for electricity is estimated by EletrobrasEletrobrás
Eletrobras is a major Brazilian power utility. It's also Latin America's biggest power utility company, tenth largest in the world and is also the fourth largest clean energy company in the world. It is currently expanding its operations in the continent, as well as in Africa. The company's full...
at above unity. Between 1980 and 2000, electricity demand increased on average by 5.4 per cent per year while GDP grew by 2.4 per cent on average per year. Investment is therefore needed to boost generation and transmission capacity because there is limited excess supply, despite the reduction in demand following the energy rationing
Energy rationing
Energy rationing primarily involves measures that are designed to force energy conservation as an alternative to price mechanisms in energy markets...
programme implemented in 2001 in response to the energy crisis.
Access to electricity
Brazil, together with Chile, is the country with the highest access rate in Latin America. The power sector in Brazil serves more than 50 million customers, which corresponds to about 97% of the country's households, who have access to reliable electricity.Interruption frequency and duration
Interruption frequency and duration are very close to the averages for the LACLatin America
Latin America is a region of the Americas where Romance languages – particularly Spanish and Portuguese, and variably French – are primarily spoken. Latin America has an area of approximately 21,069,500 km² , almost 3.9% of the Earth's surface or 14.1% of its land surface area...
region. In 2005, the average number of interruptions per subscriber was 12.5, while duration of interruptions per subscriber was 16.5 hours. The weighted averages
Weighted mean
The weighted mean is similar to an arithmetic mean , where instead of each of the data points contributing equally to the final average, some data points contribute more than others...
for LAC
Latin America
Latin America is a region of the Americas where Romance languages – particularly Spanish and Portuguese, and variably French – are primarily spoken. Latin America has an area of approximately 21,069,500 km² , almost 3.9% of the Earth's surface or 14.1% of its land surface area...
were 13 interruptions and 14 hours respectively.
Distribution losses
Distribution losses in 2005 were 14%, well in line with the 13.5% average for the LACLatin America
Latin America is a region of the Americas where Romance languages – particularly Spanish and Portuguese, and variably French – are primarily spoken. Latin America has an area of approximately 21,069,500 km² , almost 3.9% of the Earth's surface or 14.1% of its land surface area...
region but about double that of an OECD country such as the Great Britain
Great Britain
Great Britain or Britain is an island situated to the northwest of Continental Europe. It is the ninth largest island in the world, and the largest European island, as well as the largest of the British Isles...
, with 7% distribution losses.
Policy and Regulation
The Ministry of Energy and Mines (MME) has the overall responsibility for policy setting in the electricity sector while ANEEL, which is linked to the Ministry of Mines and Energy, is the Brazilian Electricity Regulatory Agency created in 1996 by Law 9427. ANEEL's function is to regulate and control the generation, transmission and distribution of power in compliance with the existing legislation and with the directives and policies dictated by the Central Government. The National Council for Energy Policies (CNPE), is an advisory body to the MME in charge of approving supply criteria and "structural" projects while the Electricity Industry Monitoring Committee (CMSE) monitors supply continuity and security.The Operator of the National Electricity System (ONS) is a non-profit private entity created in August 1998 that is responsible for the coordination and control of the generation and transmission installations in the National Interconnected System (SIN). The ONS is under ANEEL's control and regulation.
The Power Commercialization Chamber (CCEE), successor of MAE (Mercado Atacadista de Energia Electrica), is the operator of the commercial market. The initial role of the operator was to create a single, integrated commercial electricity market, to be regulated under published rules. This role has become more active since now CCEE is in charge of the auction system. The rules and commercialization procedures that regulate CCEE's activities are approved by ANEEL.
Finally, the Power Research Company (EPE) was created in 2004 with the specific mission of developing an integrated long-term planning for the power sector in Brazil. Its mission is to carry out studies and research services in the planning of the energy sector in areas such as power, oil and natural gas and its derivates, coal, renewable energy resources and energy efficiency, among others. Its work serves as input for the planning and implementation of actions by the Ministry of Energy and Mines in the formulation of the national energy policy
The Brazilian electricity model is fully deregulated, which allows generators to sell all of their "assured energy" via freely negotiated contracts with consumers above 3MW
WATT
WATT is a radio station broadcasting a news-talk-sports format. Licensed to Cadillac, Michigan, it first began broadcasting in 1945.-External links:...
or via energy auctions administered by CCEE (See energy auctions below). . Under this model, distributors are required to contract 100% of their expected demand. Currently, Brazilian generation supply can be sold under four types of markets:
- "Old energy"* auction contracts (long term): approximately 41% of the 2006 market
- "New energy"* auction contracts (long term):delivery starts in 2008
- Free-market contracts (long term): approximately 27% of 2006 market
- Spot Market Sales (size uncertain)
(*The government identifies two types of generation capacity, "old energy" and "new energy". Old energy represents existing plants that were already contracted in the 1990s, while new energy refers to that energy produced by plants that have not yet been built, or by existing plants that meet certain criteria.)
Generation
In Brazil, large government-controlled companies dominate the electricity sector. Federally-owned Eletrobrás holds about 40% of capacity (including 50% of the Itaipu dam), with state-companies CESP, CemigCEMIG
CEMIG is a Brazilian power company headquartered in Belo Horizonte capital of Minas Gerais. The company is one of the largest power generator and distributor in Brazil being responsible for 12% of the national distribution....
and Copel controlling 8%, 7% and 5% of generation capacity respectively.
Generation capacity is shared among the different companies as follows:
| Company | Controlling shareholder | Installed capacity (MW WATT WATT is a radio station broadcasting a news-talk-sports format. Licensed to Cadillac, Michigan, it first began broadcasting in 1945.-External links:... ) |
% Total |
|---|---|---|---|
| Eletrobrás (1) | Federal Gvt. | 38,111 | 40% |
| CESP | SP State Gvt. | 7,451 | 8% |
| Cemig | MG State Gvt. | 6,692 | 7% |
| Copel | PR State Gvt. | 4,550 | 5% |
| Tractebel Energia Tractebel Energia Tractebel Energia is a major Brazilian utility company, headquartered in Florianópolis, Santa Catarina. It is the largest private electricity producer in Brazil. Its 11 plants, six of them hydroelectric and the remainder thermal, have an installed capacity of 6,977 MW in operations ave an... |
GDF Suez GDF Suez GDF Suez S.A. is a French multinational energy company which operates in the fields of electricity generation and distribution, natural gas and renewable energy. The world's largest utility after taking control of Britain's International Power, the company was initially formed by the merger of Gaz... |
6,870 | 7% |
| AES Tiete | AES Corp. | 2,651 | 3% |
| Others | Mostly private sector | 29,969 | 31% |
| Brazil Total | 96,294 | 100% |
Source: Eletrobrás, CESP, Cemig, Copel, Tractebel Energia, AES Tiete
AES Corporation
AES Corporation is a Fortune 500 company that generates and distributes electrical power. The company was founded on January 28, 1981, as Applied Energy Services by Roger Sant from the US Federal Energy Administration and Dennis Bakke from the Office of Management and Budget. AES Corporation is...
, Ministry of Energy and Mines
(1) Considering 6,300MW of Iguaçú
Currently, about 27 percent of the generation assets are in the hands of private investors. Considering the plants under construction, as well as the concessions and licenses already granted by ANEEL, this figure is expected to grow up to 31 percent in the medium term and to reach almost 44 percent over 5–6 years. Private capital participation in the generation business will likely represent 50 percent of the installed capacity in the years to come
Transmission
Brazil's transmission system is gaining growing importance since adequate transmission capacity is essential to manage the effects regional droughts, allowing to move power from areas where rainfall is plentiful. As a matter of fact, the rationing that occurred in Brazil during 2001-2002 (See The 2001-2002 crisis below), could have largely been averted if there had been adequate transmission capacity between the south (excess supply) and the southeast (severe deficit).Transmission has remained almost exclusively under government control through both federal (Electrobras) and state companies (mainly Sao-Paulo-CTEEP, Minas Gerais-Cemig, and Parana-Copel) until recently. However, under the new sector regulatory model, there are about 40 transmission concessions in Brazil. Most of them are still controlled by the government, with subsidiaries under federal company Electrobras holding 69% of total transmission lines.
| Company | Controlling shareholder | Concession area | Transmission lines (km) |
|---|---|---|---|
| Pure transmission companies | |||
| CTEEP | ISA (Colombia) | São Paulo State | 11,837 |
| Terna Participacoes | Terna (Italy) Terna (company) Terna S.p.A. - Rete Elettrica Nazionale is a company based in Rome which owns and operates around 98% of the Italian high-voltage power transmission grid. Formerly a wholly owned subsidiary of Enel, the company was IPO-ed in 2004. Enel continues to hold around 5% of the firm, with the major... |
Goias, Bahia, Brazilian, Maranhao | 2,447 |
| Companies with significant transmission operations | |||
| Cemig | State of MG | Minas Gerais | 21,184 |
| Copel | State of Parana | Parana | 7,045 |
| Electrosul, Furans, Electronorte, Chesf | Electrobras | Throughout Brazil | 56,384 |
Source: Bear Stearns 2007
Distribution
In Brazil, there are 49 utilities with distribution concessions and about 64% of Brazilian distribution assets are controlled by private sector companies. The following table lists Brazil's most important distribution companies:| Company | Controlling shareholder | Concession area | Sales (GWh) | Sales (%) |
|---|---|---|---|---|
| Cemig | MG State Govt | Minas Gerais | 20,221 | 8.0% |
| Eletropaulo | AES Corp. | São Paulo city | 31,642 | 12.5% |
| CPFL | VBC Group | São Paulo State outside São Paulo city | 36,135 | 14.3% |
| Copel | PR State Govt. | Parana | 17,524 | 6.9% |
| Energias do Brasil | EDP Energias de Portugal EDP - Energias de Portugal ranks among Europe's major electricity operators, as well as being one of Portugal's largest business groups.... |
São Paulo, Rio Grande do Sul | 15,863 | 6.3% |
| Celesc | SC State Gvt | Santa Catarina | 15,157 | 6.0% |
| Light | EDF Électricité de France Électricité de France S.A. is the second largest French utility company. Headquartered in Paris, France, with €65.2 billion in revenues in 2010, EDF operates a diverse portfolio of 120,000+ megawatts of generation capacity in Europe, Latin America, Asia, the Middle East and Africa.EDF is one of... |
Río de Janeiro City | 19,139 | 7.6% |
| Equatorial (Cemar) | GP Investimentos/Pactual | Maranhao | 2,793 | 1.1% |
| Ampla (Cerj) | Enersis | Rio de Janeiro | 6,832 | 2.7% |
| Others | Mostly private sector | 87,594 | 34.6% | |
| Brazil Total | 252,900 | 100.0% |
Source: Bear Stearns, 2007
Renewable energy resources
In Brazil, hydroelectricity supplies about 77% of total electricity demand. It is estimated that about 70% of the overall hydroelectricityHydroelectricity
Hydroelectricity is the term referring to electricity generated by hydropower; the production of electrical power through the use of the gravitational force of falling or flowing water. It is the most widely used form of renewable energy...
potential of the country, is still unexploited.
Apart from biomass, which accounts for about 3.5% of total generation capacity, no other renewable energy source besides hydroelectricity
Hydroelectricity
Hydroelectricity is the term referring to electricity generated by hydropower; the production of electrical power through the use of the gravitational force of falling or flowing water. It is the most widely used form of renewable energy...
plays a relevant role in the energy mix. However, the potential for wind energy, which is concentrated in the Northeast, is very large (about 140GW, which exceeds current installed capacity), second only to Argentina in the LAC
LAC
-Places:* Los Angeles County in California* La Crescenta, California, unincorporated area in Los Angeles County* California State Prison, Los Angeles County...
region. There are projects for the development of biomass, solar and wind energy, but these are still on a relatively small scale.
PROINFA
In 2002, the government of Brazil created a Program to Foster Alternative Sources of Electric Power (PROINFA). The program aims to increase the participation of wind power sources, biomass sources and small hydropower systems in the supply of the Brazilian grid system through Autonomous Independent Producers (PIA). The medium to long-term objective (i.e. 20 years) of the program is that the defined sources supply 15% of the annual market growth until they reach 10% of the nation's annual electric power demand/total consumption.The situation prior to the reforms: the state-dominated model
The power sector in Brazil was essentially in government's hands until the early 1990s. The sector had seen remarkable development in the 1970s. However, by the late 1980s, the state-ownership model was on the verge of collapse. This delicate situation was the result of heavily subsidized tariffs and a revenue shortfall in the sector of about US$35 billion, which led to the delay in the construction of about 15 large hydro plants due to lack of funds for investment. Efforts to address the deterioration of the sector were not successful, a situation that further intensified the need for deep reforms. A major commitment was made by President CardosoFernando Henrique Cardoso
Fernando Henrique Cardoso – also known by his initials FHC – was the 34th President of the Federative Republic of Brazil for two terms from January 1, 1995 to December 31, 2002. He is an accomplished sociologist, professor and politician...
to carry out a substantial reform of the Brazilian electricity sector. The first reforms introduced in the power sector were aimed to allow the participation of private capital and also to improve its economic situation.
The 1990s reforms
The Project for Restructuring the Brazilian Electric Sector, RESEB, which laid down the first steps for the implementation of the power sector reform, was initiated in 1996 during the administration of President CardosoFernando Henrique Cardoso
Fernando Henrique Cardoso – also known by his initials FHC – was the 34th President of the Federative Republic of Brazil for two terms from January 1, 1995 to December 31, 2002. He is an accomplished sociologist, professor and politician...
. The objective of the reform was to build a more competitive power sector with the creation of a level playing field for private sector participation. In addition, state-owned utilities and assets were privatized. Although transmission assets were not privatized, most of the expansion of the transmission network has been carried out by private capital. This reform also led to the creation, in 1996, of ANEEL (Brazil's National Electricity Regulatory Agency), a quasi-independent regulatory body in charge of overseeing the electricity sector. However, the main restructuring steps were taken with the enactment of the 1998 Law (Law 9648/98). Those steps included the creation of an independent operator of the national transmission system (ONS) and an operator of the commercial market (MAE), which did not become operational until 2001.
As a result of the reforms of the power sector, new capital was attracted, both in terms of privatization and greenfield project
Greenfield project
In many disciplines a greenfield is a project that lacks any constraints imposed by prior work. The analogy is to that of construction on greenfield land where there is no need to remodel or demolish an existing structure...
s. Some of the state-owned generation capacity was acquired by foreign investors such as Tractebel, AES
AES Corporation
AES Corporation is a Fortune 500 company that generates and distributes electrical power. The company was founded on January 28, 1981, as Applied Energy Services by Roger Sant from the US Federal Energy Administration and Dennis Bakke from the Office of Management and Budget. AES Corporation is...
, Prisma Energy
Prisma Energy International
Prisma Energy International Inc., was a former subsidiary of Enron Corporation, formed in 2003 to own and manage the majority of Enron's overseas assets, formerly known as "Enron International". Prior to its official organization, Prisma was referred to within Enron as "InternationalCo"...
, El Paso and Duke
Duke Energy
Duke Energy , headquartered in Charlotte, North Carolina, is an energy company with assets in the United States, Canada and Latin America.-Overview:...
, which became significant producers. In addition, local investors such as industrial groups, large customers, utilities and pension funds also invested heavily in the national generation sector. Other companies such as EdF (Électricité de France
Électricité de France
Électricité de France S.A. is the second largest French utility company. Headquartered in Paris, France, with €65.2 billion in revenues in 2010, EDF operates a diverse portfolio of 120,000+ megawatts of generation capacity in Europe, Latin America, Asia, the Middle East and Africa.EDF is one of...
), Endesa
Endesa (Spain)
Endesa, S.A. is the largest electric utility company in Spain. The firm, a majority-owned subsidiary of the Italian utility company Enel, has 10 million customers in Spain, with domestic annual generation of over 97,600 GWh from nuclear, fossil-fueled, hydroelectric, and renewable resource power...
and Chilectra focused on the distribution segment, a segment in which privatization brought improved quality of service and a reduction of theft, non-payments and technical losses.
However, the reforms were not successful in preventing the energy crisis that was to unfold in 2001. Installed capacity expanded by only 28 per cent during 1990-99, whereas electricity demand increased by 45 per cent. In 1999, as the power shortage was already foreseen, the President Cardoso
Fernando Henrique Cardoso
Fernando Henrique Cardoso – also known by his initials FHC – was the 34th President of the Federative Republic of Brazil for two terms from January 1, 1995 to December 31, 2002. He is an accomplished sociologist, professor and politician...
Administration made efforts to increase private investment in the electricity sector through a Priority Thermal Power Program (PPT) that aimed at the expeditious construction of more than 40 gas-fired thermal plants. Unfortunately, the needed investment did not materialize and the crisis became unavoidable.
The 2001-2002 crisis and the government's response
Brazil was faced with one of the most serious energy crises in its history in 2001-2002. The crisis was the direct result of a sequence of a few years drier than average in a country with over 80% of hydroelectricHydroelectricity
Hydroelectricity is the term referring to electricity generated by hydropower; the production of electrical power through the use of the gravitational force of falling or flowing water. It is the most widely used form of renewable energy...
generation capacity. Additionally, several delays in the commissioning of new generation plants and transmission problems in the third circuit from the Itaipu hydropower plant accounted for a third of the energy deficit. Reservoir levels reached such low levels that supply could not be ensured for more than four months.
It was soon clear that strict demand reduction programs would be needed to avoid widespread blackouts. In June 2001, the government created the Crisis Management Board (CGE), chaired by President Cardoso
Fernando Henrique Cardoso
Fernando Henrique Cardoso – also known by his initials FHC – was the 34th President of the Federative Republic of Brazil for two terms from January 1, 1995 to December 31, 2002. He is an accomplished sociologist, professor and politician...
himself. The CGE received special powers among which was the authority to set up special tariffs, implement compulsory rationing and blackouts, and bypass normal bidding procedures of the purchase of new plant equipment. Instead of resorting to rolling blackout
Rolling blackout
A rolling blackout, also referred to as load shedding, is an intentionally-engineered electrical power outage where electricity delivery is stopped for non-overlapping periods of time over geographical regions. Rolling blackouts are a last-resort measure used by an electric utility company in order...
s, the government chose to apply a quota system. Quotas were established for all the consumers based on historical and target consumption level, applying bonuses for consumption well below the prescribed level, penalties for over-consumption and some freedom for the large users to trade their quotas in a secondary market
Secondary market
The page applies to the finanical term; For the merchandising concept, see Aftermarket .The secondary market, also called aftermarket, is the financial market where previously issued securities and financial instruments such as stock, bonds, options, and futures are bought and sold....
. The government's goal of reducing historical consumption levels by at least 20% for an eight-month period was successfully achieved, with the government having to pay over US$200 million in bonuses to residential, industrial, and commercial customers. This achievement allowed the system to overcome that long period without blackouts and brownouts and proved the potential of demand-side management and energy efficiency efforts, which were able to create a virtual capacity of 4,000MW
WATT
WATT is a radio station broadcasting a news-talk-sports format. Licensed to Cadillac, Michigan, it first began broadcasting in 1945.-External links:...
, helping the country to bridge the supply demand gap in a very economic way. In addition, the government launched a program for contracting emergency generation capacity, with bids for a total of 2,100MW
WATT
WATT is a radio station broadcasting a news-talk-sports format. Licensed to Cadillac, Michigan, it first began broadcasting in 1945.-External links:...
of new thermal capacity accepted.
However, the crisis affected numerous actors. Generators and distributors experienced a 20% reduction in their revenues due to the contraction in consumption. This situation was eventually addressed by an increase of tariffs approved by the government. The financial situation of distributors was also damaged, with customers also suffering from the increase in electricity prices (140% in nominal terms between 1995 and 2002).
The 2003-2004 reforms: energy auctions
In January 2003, the new administration led by Luiz Inácio Lula da SilvaLuiz Inácio Lula da Silva
Luiz Inácio Lula da Silva , known popularly as Lula, served as the 35th President of Brazil from 2003 to 2010.A founding member of the Workers' Party , he ran for President three times unsuccessfully, first in the 1989 election. Lula achieved victory in the 2002 election, and was inaugurated as...
took over among criticism of the reforms introduced in the electricity sector by the administration of President Cardoso
Fernando Henrique Cardoso
Fernando Henrique Cardoso – also known by his initials FHC – was the 34th President of the Federative Republic of Brazil for two terms from January 1, 1995 to December 31, 2002. He is an accomplished sociologist, professor and politician...
, supporting a model in which the system should be fully regulated. The pending privatizations of three generation subsidiaries of the large state-owned utility, Eletrobrás, were stopped. However, despite initial expectations, the new administration opted for a model that clearly aims to attract long-term private investment to the sector and that heavily relies on competition. In addition, the existing institutions were preserved and in some cases strengthened, with a new company, EPE, created with the specific mission of developing an integrated long-term planning for the power sector in Brazil.
The new legislative framework was defined by Law 10,848/2004, which established clear, stable and transparent rules aimed at ensuring supply and the continuous expansions of the intrinsic sector activities (generation, transmission and distribution). The expansion was linked to a fair return on investments and to universal service access, together with tariff adjustments. Decree 5,081/2004 approved the regulatory framework for the power sector, specifying specific provisions to achieve the objectives of the reform.
One of the defining elements of the model adopted by the new administration is the establishment of energy auctions as the main procurement mechanism for distribution companies to acquire energy to serve their captive consumers. This initiative assisted in the introduction of competition in the power sector and also helped to address some of the existing market imperfections
Market failure
Market failure is a concept within economic theory wherein the allocation of goods and services by a free market is not efficient. That is, there exists another conceivable outcome where a market participant may be made better-off without making someone else worse-off...
. Under this system, auctions of capacity from new generation projects will be held three to five years in advance of delivery dates. The Ministry of Mines and Energy wants to ensure that the totality of future expansion needs is met and that plants are only built once they have won bids in energy auction
Auction
An auction is a process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder...
s and are guaranteed long-term contracts. The first auction was held in December 2004, with contracts for a total of about 40GW
WATT
WATT is a radio station broadcasting a news-talk-sports format. Licensed to Cadillac, Michigan, it first began broadcasting in 1945.-External links:...
traded.
Tariffs
Average electricity tariffs for the different sectors in 2007 were as follows:- Residential: 15.3 US¢/kWh
- Industrial: 11.3 US¢/kWh
- Commercial: 14.2 US¢/kWh
- Rural: 9.1 US¢/kWh
Investment and financing
In the last 20 years, Brazil has been one of the main recipients of private capital investment in its power sector. Total investment by private actors in the power sector between 1994 and 2006 amounted to US$ 56,586 million in 124 projects. However, despite Brazil's deregulation and higher tariffs in the "new energy" auction system, investment, particularly in generation, has slowed significantly. This situation is not considered to be the result of concerns about the regulatory model or auction pricing caps, but it reflects the lack of available projects. The existing delays in granting environmental licenses and the uncertainties on the Bolivian gas supply, explain to a great extent the lack of hydroelectric and gas-fired thermoelectric projects respectively.The investment required in power generation over the next 10 years is R$
Brazilian real
The real is the present-day currency of Brazil. Its sign is R$ and its ISO code is BRL. It is subdivided into 100 centavos ....
40 billion or around US$24.2 billion (April 29, 2008). This high investment will only be realized if the government succeeds in attracting greater private-sector investment.
Summary of private participation in the electricity sector
In Brazil, large government-controlled companies dominate the electricity sector. Federally-owned Eletrobrás holds about 40% of capacity (including 50% of Itaipú), with state-companies CESP, Cemig and Copel controlling 8%, 7% and 5% of generation capacity respectively. About 27% of generation assets are currently in the hands of private investors.Transmission, it has remained almost exclusively under government control through both federal (Electrobras) and state companies (mainly Sao-Paulo-CTEEP, Minas Gerais-Cemig, and Parana-Copel) until recently. However, under the new sector regulatory model, there are about 40 transmission As for distribution, there are 49 utilities with distribution concessions and about 64% of distribution assets are controlled by private sector companies.
| OLADE (Latin American Energy Association) estimated that CO2 emissions from electricity production in 2003 were 20 million tons of CO2, which corresponds to less than 7% of total emissions from the energy sector. This low contribution to emissions from electricity production in comparison with other countries in the region is due to the high share of hydroelectric Hydroelectricity Hydroelectricity is the term referring to electricity generated by hydropower; the production of electrical power through the use of the gravitational force of falling or flowing water. It is the most widely used form of renewable energy... generation. CDM projects in electricityBrazil is host to the largest number of CDMClean Development Mechanism The Clean Development Mechanism is one of the "flexibility" mechanisms defined in the Kyoto Protocol . It is defined in Article 12 of the Protocol, and is intended to meet two objectives: to assist parties not included in Annex I in achieving sustainable development and in contributing to the... projects in the Latin America region. Registered projects represent 40% of the total in the region and account for 45% of Certified Emission Reduction Certified Emission Reduction Certified Emission Reductions are a type of emissions unit issued by the Clean Development Mechanism Executive Board for emission reductions achieved by CDM projects and verified by a DOE under the rules of the Kyoto Protocol... s (CERs) (up to 2012). As for the power sector, there were 91 projects registered in March 2008, adding up to an estimated total of 9 million ton Ton The ton is a unit of measure. It has a long history and has acquired a number of meanings and uses over the years. It is used principally as a unit of weight, and as a unit of volume. It can also be used as a measure of energy, for truck classification, or as a colloquial term.It is derived from... s of CO2 per year. The distribution of projects by category is as follows:
Source: UNFCCC Inter-American Development BankThe Inter-American Development BankInter-American Development Bank The Inter-American Development Bank is the largest source of development financing for Latin America and the Caribbean... (IDB) is currently (April 2008) supporting several projects and contributing to various technical assistance initiatives in the power sector in Brazil. The most relevant projects with financing from the IDB are:
World BankThe World BankWorld Bank The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty... is currently (April 2008) supporting three rural poverty reduction projects that include the provision of access to electricity services:
Sources
See also
External links
The source of this article is wikipedia, the free encyclopedia. The text of this article is licensed under the GFDL.
|
|---|