Minerva 3 Nov 09
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Perspectivas do Setor Eletrico Brasileiro

Perspectivas do Setor Eletrico Brasileiro

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Minerva 3 Nov 09 Presentation Transcript

  • 1. Brazil's energy capacity and future needs
    Fall 2009 Minerva Program
    Luiz Maurer
    The World Bank
    Washington – November 13, 2009
    V3.0
  • 2. This presentation will address the following topics
    Power system in Brazil
    The reform process – roller coaster?
    Investments, competition, quality of service
    Sustainability issues
    Hydro licensing
    Demand response
    Final remarks
  • 3. Brazil has a large power system, heavily dependent on hydroelectricity
    110 GW
    400 TWh
    85% Hydro
    Estimated potential of 260 GW
    Extensive network, four areas
  • 4. Starting in late 90’s, power sector has seen major institutional and regulatory reforms
    Competition in generation and retail, with all concessions granted competitively
    Energy auctions mandatory to captive markets
    Most D assets privatized
    Most new G and T assets built by private sector
    Cost-recovery tariffs, via a structured review process
    Attraction of private capital, the investor by default – domestic and foreign
  • 5. Over almost 15 years – roller-coaster or bumpy road?
    Certainly the latter
    Success of the reform due, inter alia, to a mechanism of adjustments, sometimes by trial and error
    With some hiccups
    FCH – Lei das Concessoes and new (now old) model in 1998
    Second term of FHC – reforms stalled
    Apagao in 2001 – but it never happened
    Lula’s plan announcing radical changes and scaring investors
    Followed by pragmatism and continuous improvements – not by ideology
  • 6. 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?
  • 7. Investments in generation and transmission increased in response to the first wave of reforms
  • 8. Quality of service exhibited remarkable improvement
  • 9. Brazil - able to attract largest share of private resources among developing countries
  • 10. For several years Brazil got the largest share of the pie …
  • 11. A perceived a good investment climate
  • 12. BOO in Transmission – a success
  • 13. Energy Auctions – a robust procurement mechanism
  • 14. Resulting in competitive prices
  • 15. Sustainability checklist
    Ability to live with its own means
    If tariffs are not cost reflective – sooner or later problems will emerge, system will fall apart, or public debt escalate
    How 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 taxation
    Sustainability also encompasses consumption of natural resources and deterioration of the environment
  • 16. 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 longer
    Uncertainty 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
  • 17. A recent World Bank study has revealed multiple layers of complexity
    Inventory studies not up-to-date
    Confusing institutional roles between players, states, Federal government agencies
    Cumbersome, lengthy evaluation process by IBAMA - oftentimes biased by extremism
    Excessive power from Public Prosecutor’s Office
    Lack of policy trade-offs between environmental concerns and need for energy
    Difficult to address in the absence of an efficient allocation process, grounded on economics
    Projects examined individually – not strategically
  • 18. And recommended an integrated approach to enhance power sector planning
  • 19. Identifying clear opportunities to a more effective planning process
  • 20. 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)
  • 21. 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 issues
    There 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 friendly
    Project in the Xingu river completely revisited, much more friendly
    Trade-offs between output and impact mastered by the private sector in the Uruguay river (Ita & Machadinho)
  • 22. 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 gap
    Reliable – 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
  • 23. Demand side should be seen as a seamless part of the effort to bridge the supply demand gap
  • 24. The 2001 Power Rationing – a rich experience
  • 25. The 2001 Power Rationing is a best practice on the use of demand response
  • 26. Final remarks …
    Brazil is blessed with hydro resources
    Cheap, competitive, can be exploited in an environmentally friendly way
    One of the few countries where the power sector is not one to blame for CO2 emissions
    Reforms in the power sector have been successful
    Achieved major goals
    Continuous improvements
    Has worked toward a healthy, contract sanctity environment
    Capital, 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 discipline
    Cost reflective tariffs, as much as possible
    Better alignment between environmental, social and energy policy goals, to unveil the hydro potential
    Count (and use) the demand side of the equation to make energy more reliable and affordable
  • 27. And the Black Out – shall we change this presentation? No