Overview of distributed generation and behind-the-meter storage in Brazil. We also propose a market framework to enable the efficient and sustainable insertion of Distributed Energy Resources.

1. Beyond Net-Metering
The future of Distributed Energy Resources
Gabriel Konzen
Rio de Janeiro, RJ
26th July 2019

2. Federal office part of the structure
of the Ministry of Mines and Energy
We develop studies and data/statistics
to support formulation,
implementation and evaluation of
energy policies
www.epe.gov.br
Member of the Board of the
National Council for Energy Policy (CNPE)
About EPE – Energy Research Office

3. The number of micro and mini DG systems
is skyrocketing in Brazil
Source: ANEEL. July 22, 2019

4. We hit the 1 GW mark recently
References: EPE and ANEEL

5. This is no longer a small industry
Annual MMDG Installed Capacity (MW)
2013 2
2014 3
2015 12
2016 70
2017 182
2018 429
2019 417
Total 1,121
Installed Capacity in 2018 (MW)
Micro and Mini DG 429
Small Hydro 138
Sugarcane Bagasse 210
Natural Gas 436
Coal -466
3x Small Hydro
2x Sugarcane Bagasse
1x Natural Gas
MMDG in 2018:
• 422 MW
• More than R$ 2 bi in investments
• More than 6000 companies
Source: ANEEL and EPE – Brazilian
Energy Balance 2019

6. The net metering scheme in Brazil is one of
the most generator friendly in the world
Set by ANEEL in 2012 (REN 482)
Updated by REN 687/2015
Updated by REN 786/2017
Up to
5 MW
Any renewable source
+ cogeneration
Generator Consumer
Distribution Grid

7. Many configurations are possible within
the net metering scheme
Local
Generation
Remote
Generation
Single owner Multiple Owners
75% of
the capacity
23% of the
capacity

8. These rules can lead us to huge numbers in
the next years
0
5,000
10,000
15,000
20,000
25,000
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
InstalledCapacity(MW)
Current Rules - Full Net Metering
21 GW
About 2,7 million consumers
with DG in 2027 Source: EPE (2018)

9. Behind-the-Meter
Energy Storage

10. Today, in which cases can batteries add
value to the customer?
Business Model
Consumer
Voltage
Possible?
1 Save withToU tariffs LV ✔
2 Peak-shaving (replace diesel generators) MV ✔
3 Peak-shaving LV ✘ (No demand charges in LV)
4 Increase PV self-cosumption
LV
✘ Injection and consumption
rates are equal
Power reliability, power quality
(hard to quantify the benefits)

11. Case #1: How much can we save
moving to time-of-use tariffs in Brazil?
Concept
Move toToU, pay a
lower tariff in off-
peak times, and use
the battery to
consume during
peak hours
-
50.00
100.00
150.00
200.00
250.00
300.00
HIDROPAN
SULGIPE
EFLUL
UHENPAL
CEMIG-D
RGE
DEMEI
EMG
EPB
RGESul
ELFSM
CEA
CEAL
CELPE
COSERN
EDPES
ELETROPAULO
CERON
R$/MWh
Delta between conventional tariffs and ToU
off-peak rates for each distribution company

12. ToU is far from being an enabler for battery
investments in Brazil
-35,000
-30,000
-25,000
-20,000
-15,000
-10,000
-5,000
0
5,000
10,000
4,000 3,800 3,600 3,400 3,200 3,000 2,800 2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400
NPV[R$]
Battery Price (R$/kWh)
Battery Price in
2019 in Brazil
Break-even
Preliminary Analysis
for ENEL – RJ

13. Case #2: We expect that only after 2026 the battery
investment NPV will be higher than diesel investment for
medium-voltage peak-shaving
0.00
50,000.00
100,000.00
150,000.00
200,000.00
250,000.00
300,000.00
350,000.00
400,000.00
450,000.00
NPV[R$]
2026 2027 2028 2029
Difference between
battery and diesel NPV
Preliminary
Analysis

14. Weak economic signals + high battery costs hinder
investments in behind-the-meter Energy storage in Brazil
Business Model
Consumer
Voltage
Possible?
Economic
viable?
1 Save withToU tariffs LV ✔ ✘
2 Peak-shaving (replace diesel
generators)
MV
✔ ✘
3 Peak-shaving LV ✘ (No demand charges in LV) ✘
4 Increase PV self-cosumption
LV
✘ Injection and consumption
rates are equal
✘

15. The need for improvements
in our market rules

16. Volumetric tariffs are not cost reflective
Distribution Utility Cost
Variable Fixed
Bill
Variable
(kWh)
Fixed
Simplified representation of bills and costs

17. Distribution Utility Cost
Fixed
Bill
Fixed
Volumetric tariffs + net metering +
distributed generation = cross subsidies
Fixed costs shared
among other customers

18. Is DG PV value 10x greater than utility scale PV?
Source: PVTECH, Jun 28, 2019
US$ 220/MWh
as remote DG
In Energy
Auctions
Note: Retail tariff for commercial
customer in Minas Gerais

19. It is not just distributed generation that is
demanding changes in our market rules
Innovative technologies will demand innovative rules

20. What environment do we propose?
(up for discussion)

21. #1. DER allowed to compete in electric power markets;
also, reduce subsidies to all sources

22. # 2. Create capacity and ancillary services markets and
allow DER to participate in it

23. #3. Set two-part and dynamic tariffs for consumers

24. #4. Energy exported to the grid is sold in the free market.
Allow peer-to-peer trading

25. # 5. Set hourly and nodal prices in the spot market to
better remunerate the sources

26. # 6. Enable the activity of aggregators to facilitate the
participation of DER in the markets and reduce
transaction costs

27. # 7. Rollout of smart meters to enable communication
between DER and the grid

28. Avenida Rio Branco, 1 - 11o andar
20090-003 - Centro - Rio de Janeiro
www.epe.gov.br
/epe.brasil @epe_brasilepe_brasil /EPEBrasil
Obrigado
• Gabriel Konzen
• Energy Analyst