minerva 3 nov 09
DESCRIPTION
Perspectivas do Setor Eletrico BrasileiroTRANSCRIPT
Fall 2009 Minerva Program
Luiz Maurer
The World BankWashington – November 13, 2009
V3.0
Brazil's energy capacity and future needs
This presentation will address the following topics
Power system in BrazilThe reform process – roller coaster? Investments, competition, quality of serviceSustainability issuesHydro licensingDemand responseFinal remarks
Brazil has a large power system, heavily dependent on hydroelectricity
110 GW400 TWh85% HydroEstimated potential of 260 GWExtensive network, four areas
SIS TE M A INTERLIG A D OSU D ESTE/C .O E STE
SIS TE M A INTERLIG A D ON O R TE
SIS TE M A INTERLIG A D ON O R D E STE
SIS TE M A INTERLIG A D OSU L
TU C U R U Í
V. C O N D E
IMPERATRIZB . E SP E R A N Ç A S . J . P IA U Í
M A R A B Á
M IR A C E M A
GU R U PI
P. D U T R A
P. A F ON S OL. G ON ZA GAX IN GÓ
S OB R A D IN H O
INTERLIG AÇÃONO RTE-NORDESTE
INTERLIG AÇÃOSUL-SUDESTE
S . ME S AS A M A MB A IA
T. M A R IA S
S . SIM Ã O
I. S OLT EIR AJU P IÁ
S .LU IS
FO R TA L EZ A
ITU M B IA R A
A . V ER M E LH A
T. P R E TO
ITA IP U
F. IG U A Ç U
IVA IPO R Ã
ITÁ
GR AVATA Í
A R E IA
C A M P OS N OV OS
S .SA N T IA GO
ITA B ER Á
IB IU N A
R. PARANAÍBA
R. TOCANTINS
R. S. FRANCISCO
R. GRANDE
R. PARANÁ
R. IGUAÇU
R. URUGUAI
ON S - 1999 - 0029n
INTERLIG AÇÃONO RTE-SUL
C O LIN A S
345 kV
440 kV
550 kV
750 kV
LEGENDA
Argentina1.000 MW
Starting in late 90’s, power sector has seen major institutional and regulatory reforms
Competition in generation and retail, with all concessions granted competitivelyEnergy auctions mandatory to captive marketsMost D assets privatizedMost new G and T assets built by private sectorCost-recovery tariffs, via a structured review processAttraction of private capital, the investor by default – domestic and foreign
Over almost 15 years – roller-coaster or bumpy road?
Certainly the latterSuccess of the reform due, inter alia, to a mechanism of adjustments, sometimes by trial and errorWith some hiccups
FCH – Lei das Concessoes and new (now old) model in 1998Second term of FHC – reforms stalledApagao in 2001 – but it never happenedLula’s plan announcing radical changes and scaring investorsFollowed by pragmatism and continuous improvements – not by ideology
What makes us feel confident?Has Brazil been able to increase investments?And attract private capital?Has the quality of service improved?Has competition contributed to reduce costs?Is the model sustainable?Are lights still on?What are the areas for improvement?
Investments in generation and transmission increased in response to the first wave of reforms
Quality of service exhibited remarkable improvement
Brazil - able to attract largest share of private resources among developing countries
For several years Brazil got the largest share of the pie …
Ranking of the Largest Private Capital Recipients in the Electric + Gas Distribution Sectors
Country/Year
Brazil 3 4 3 8 2 1 1 1 1 1 1 2 2 1 2 3 3India 1 9 7 9 8 10 9 3 5 10 9 1 9 1 2 1China 2 2 4 6 10 3 2 3 2 8 5 4 1 3 3 5 6Russian Federation 5 10 3 1 2Argentina 1 1 2 3 5 5 2 4 4 6 4Philippines 3 2 4 5 4 2 7 8 7 6 10 8 8 4 7Indonesia 5 7 1 1 6 10 5 9 5Thailand 10 9 6 4 7 7 7 4 4 6Malaysia 3 6 1 8 2 3 4 5Turkey 2 5 2 4 5 4Chile 1 1 6 8 9 9 5 5 9 10Mexico 8 8 3 2 5 6 6Morocco 3 3 6 8Pakistan 10 3 4 6 7 10Colombia 9 7 10 4Peru 10 10 9 8 10
Yearly Top 5 Recipients
A perceived a good investment climate
BOO in Transmission – a success
Energy Auctions – a robust procurement mechanism
Resulting in competitive prices
148
135 134
83
73
146 144
138
69
81
9497
109
60
70
80
90
100
110
120
130
140
150
160
2005 2006 2007 2008 2009 2010 2011 2012 2013
R$/
MW
h
Alternative Energy New Energy Existing Energy Sto Antônio Jirau
Sustainability checklistAbility to live with its own meansIf tariffs are not cost reflective – sooner or later problems will emerge, system will fall apart, or public debt escalateHow to provide services to those with low ability to pay?Subsidies for access and lifeline rates necessary, but others should be closely examined – e.g. subsidies that foster wasteful consumption • Sooner or later will hamper affordability and quality• Poor will be the first to suffer consequences
Subsidies in countries with low access – regressive taxationSustainability also encompasses consumption of natural resources and deterioration of the environment
Wake up call – it has not been easy to tap into the cheap hydro potential
Clear manifestation - getting licenses for new hydro plants has become a “nightmare”
Long delays – averaging one year, but may be much longerUncertainty and subjective Constraining hydro generation options for expansion
Gap has been bridged by expensive, polluting thermal
generation – e.g. profile in the first energy auctions
A recent World Bank study has revealed multiple layers of complexity
Inventory studies not up-to-dateConfusing institutional roles between players, states, Federal government agenciesCumbersome, lengthy evaluation process by IBAMA - oftentimes biased by extremismExcessive power from Public Prosecutor’s OfficeLack of policy trade-offs between environmental concerns and need for energyDifficult to address in the absence of an efficient allocation process, grounded on economics Projects examined individually – not strategically
And recommended an integrated approach to enhance power sector planning
Identifying clear opportunities to a more effective planning process
The absolute cost of compliance is not a major hurdle – but uncertainty may scare investors in generation
Total Costs (US$ 130/kW)Mitigation Costs (US$18/kW)
Flora
Fauna
Degraded Areas
Water Quality
Reservoir Cleaning
Others
Property
Resettlement
Management
Social
Mitigation
A particular challenge is to develop hydro resources in the Amazon region
There is a baggage on poor developments in the region
Projects implemented without due concern for environmental aspects – e.g. Balbina Hydro (serving the city of Manaus)Old project design only to maximize generation (e.g. Kararao, in the Xingu River)
Starting in the 80’s enhanced concerns, democratic process and sector capacity (Eletrobras) to deal with environmental and social issuesThere are “good and bad projects” – a change in mindset has enabled the country to find (and improve) good ones
6 GW on Madeira River recently granted, very friendlyProject in the Xingu river completely revisited, much more friendlyTrade-offs between output and impact mastered by the private sector in the Uruguay river (Ita & Machadinho)
What about the demand side? an oftentimes neglected part of the equation
We refer specifically to the use of energy efficiency and demand side management to make the system more …
Affordable – cheaper to bridge the supply demand gapReliable – helping the ONS build virtual reserves and deal with contingencies
This is an area where Brazil could do more – ongoing discussions by Aneel under the umbrella of smart grid, smart metering
Demand side should be seen as a seamless part of the effort to bridge the supply demand gap
The 2001 Power Rationing – a rich experience
The 2001 Power Rationing is a best practice on the use of demand response
Final remarks … Brazil is blessed with hydro resources
Cheap, competitive, can be exploited in an environmentally friendly wayOne of the few countries where the power sector is not one to blame for CO2 emissions
Reforms in the power sector have been successfulAchieved major goalsContinuous improvementsHas worked toward a healthy, contract sanctity environmentCapital, quality of service, competitiveness
What Brazil has achieved so far seems to be sustainable Areas for improvement
Continuous examination of the pillars of sustainability, including commercial disciplineCost reflective tariffs, as much as possibleBetter alignment between environmental, social and energy policy goals, to unveil the hydro potentialCount (and use) the demand side of the equation to make energy more reliable and affordable
And the Black Out – shall we change this presentation? No