Minerva 3 Nov 09

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Perspectivas do Setor Eletrico Brasileiro

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Minerva 3 Nov 09

  1. 1. Brazil&apos;s energy capacity and future needs<br />Fall 2009 Minerva Program<br />Luiz Maurer<br />The World Bank<br />Washington – November 13, 2009<br />V3.0<br />
  2. 2. This presentation will address the following topics<br />Power system in Brazil<br />The reform process – roller coaster? <br />Investments, competition, quality of service<br />Sustainability issues<br />Hydro licensing<br />Demand response<br />Final remarks<br />
  3. 3. Brazil has a large power system, heavily dependent on hydroelectricity<br />110 GW<br />400 TWh<br />85% Hydro<br />Estimated potential of 260 GW<br />Extensive network, four areas<br />
  4. 4. Starting in late 90’s, power sector has seen major institutional and regulatory reforms<br />Competition in generation and retail, with all concessions granted competitively<br />Energy auctions mandatory to captive markets<br />Most D assets privatized<br />Most new G and T assets built by private sector<br />Cost-recovery tariffs, via a structured review process<br />Attraction of private capital, the investor by default – domestic and foreign <br />
  5. 5. Over almost 15 years – roller-coaster or bumpy road?<br />Certainly the latter<br />Success of the reform due, inter alia, to a mechanism of adjustments, sometimes by trial and error<br />With some hiccups<br />FCH – Lei das Concessoes and new (now old) model in 1998<br />Second term of FHC – reforms stalled<br />Apagao in 2001 – but it never happened<br />Lula’s plan announcing radical changes and scaring investors<br />Followed by pragmatism and continuous improvements – not by ideology<br />
  6. 6. What makes us feel confident?<br />Has Brazil been able to increase investments?<br />And attract private capital?<br />Has the quality of service improved?<br />Has competition contributed to reduce costs?<br />Is the model sustainable?<br />Are lights still on?<br />What are the areas for improvement?<br />
  7. 7. Investments in generation and transmission increased in response to the first wave of reforms<br />
  8. 8. Quality of service exhibited remarkable improvement<br />
  9. 9. Brazil - able to attract largest share of private resources among developing countries<br />
  10. 10. For several years Brazil got the largest share of the pie …<br />
  11. 11. A perceived a good investment climate<br />
  12. 12. BOO in Transmission – a success<br />
  13. 13. Energy Auctions – a robust procurement mechanism<br />
  14. 14. Resulting in competitive prices<br />
  15. 15. Sustainability checklist<br />Ability to live with its own means<br />If tariffs are not cost reflective – sooner or later problems will emerge, system will fall apart, or public debt escalate<br />How to provide services to those with low ability to pay?<br />Subsidies for access and lifeline rates necessary, but others should be closely examined – e.g. subsidies that foster wasteful consumption <br />Sooner or later will hamper affordability and quality<br />Poor will be the first to suffer consequences<br />Subsidies in countries with low access – regressive taxation<br />Sustainability also encompasses consumption of natural resources and deterioration of the environment<br />
  16. 16. Wake up call – it has not been easy to tap into the cheap hydro potential<br />Clear manifestation - getting licenses for new hydro plants has become a “nightmare”<br />Long delays – averaging one year, but may be much longer<br />Uncertainty and subjective <br />Constraining hydro generation options for expansion<br />Gap has been bridged by expensive, polluting thermal generation – e.g. profile in the first energy auctions<br />
  17. 17. A recent World Bank study has revealed multiple layers of complexity<br />Inventory studies not up-to-date<br />Confusing institutional roles between players, states, Federal government agencies<br />Cumbersome, lengthy evaluation process by IBAMA - oftentimes biased by extremism<br />Excessive power from Public Prosecutor’s Office<br />Lack of policy trade-offs between environmental concerns and need for energy<br />Difficult to address in the absence of an efficient allocation process, grounded on economics <br />Projects examined individually – not strategically<br />
  18. 18. And recommended an integrated approach to enhance power sector planning<br />
  19. 19. Identifying clear opportunities to a more effective planning process<br />
  20. 20. The absolute cost of compliance is not a major hurdle – but uncertainty may scare investors in generation<br />Total Costs (US$ 130/kW)<br />Mitigation Costs (US$18/kW)<br />
  21. 21. A particular challenge is to develop hydro resources in the Amazon region<br />There is a baggage on poor developments in the region<br />Projects implemented without due concern for environmental aspects – e.g. Balbina Hydro (serving the city of Manaus)<br />Old project design only to maximize generation (e.g. Kararao, in the Xingu River)<br />Starting in the 80’s enhanced concerns, democratic process and sector capacity (Eletrobras) to deal with environmental and social issues<br />There are “good and bad projects”– a change in mindset has enabled the country to find (and improve) good ones<br />6 GW on Madeira River recently granted, very friendly<br />Project in the Xingu river completely revisited, much more friendly<br />Trade-offs between output and impact mastered by the private sector in the Uruguay river (Ita & Machadinho)<br />
  22. 22. What about the demand side? an oftentimes neglected part of the equation<br />We refer specifically to the use of energy efficiency and demand side management to make the system more …<br />Affordable – cheaper to bridge the supply demand gap<br />Reliable – helping the ONS build virtual reserves and deal with contingencies<br />This is an area where Brazil could do more – ongoing discussions by Aneel under the umbrella of smart grid, smart metering<br />
  23. 23. Demand side should be seen as a seamless part of the effort to bridge the supply demand gap<br />
  24. 24. The 2001 Power Rationing – a rich experience <br />
  25. 25. The 2001 Power Rationing is a best practice on the use of demand response <br />
  26. 26. Final remarks … <br />Brazil is blessed with hydro resources<br />Cheap, competitive, can be exploited in an environmentally friendly way<br />One of the few countries where the power sector is not one to blame for CO2 emissions<br />Reforms in the power sector have been successful<br />Achieved major goals<br />Continuous improvements<br />Has worked toward a healthy, contract sanctity environment<br />Capital, quality of service, competitiveness<br />What Brazil has achieved so far seems to be sustainable <br />Areas for improvement<br />Continuous examination of the pillars of sustainability, including commercial discipline<br />Cost reflective tariffs, as much as possible<br />Better alignment between environmental, social and energy policy goals, to unveil the hydro potential<br />Count (and use) the demand side of the equation to make energy more reliable and affordable<br />
  27. 27. And the Black Out – shall we change this presentation? No<br />

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