11.3 GW Belo Monte hydroelectric dam
The construction of the 11.3 GW Belo Monte hydroelectric dam in the Amazon is in full swing
Credit: R. Santos/Norte Energia

The electricity sector in Brazil is undoubtedly one of the most exciting and dynamic in world, yet it is also one of the most challenging. We get an insider’s view of the sector from its regulator, the company leading the controversial Belo Monte hydroelectric dam project and the national grid operator.

As one of the BRIC nations, Brazil is a major emerging economy in the world. It is also the largest economy in the Latin Amercian region. However, more recently conerns have been raised over its continued economic growth.

According to a recent forecast from its cental bank, the economy is only expected to grow 2.2 per cent this year, with a slight rise to 2.6 per cent next year, although Guido Mantega, Brazil’s finance minister, gave a positive signal last month, reporting that economic growth accelerated in the second quarter from the beginning of the year.

Like most countries, its electricity sector will play a fundamental role in helping Brazil’s continue its economic development. Here, on our behalf, Focus Reports spoke to key stakeholders in the sector: ANEEL, the regulator of the electricity sector, Norte Energia, which heads up the consortium building the 11.3 GW Belo Monte dam in the Amazon, and ONS, which operates the national grid.

Romeu Rufino, President, ANEEL

Romeu Rufino   ANEEL’s hydro development vision indicates a bright future for hydro, but what about the exploitation of other renewable sources?

Brazil is one of the best places on earth to invest in renewable and green energies, and our mission is to achieve this goal. In addition to our unique hydro resource we have great potential to utilise other renewables.

PROINFA – a renewable energy incentive programme – was established because of the government’s fundamental desire to grow these energies. It has been very successful, enabling wind, solar and biomass to all become more competitive in energy auctions.

Recent work by EPE – the state-owned energy research company – show that wind power has the potential to generate close to 350 GW, which represents nearly three times the current total level of power generation in Brazil. Wind auctions to date have shown real promise, so it is only a matter of time before success for the wind industry is realised.

Solar energy is still at an early stage in its development, yet it has incredible potential. Our country, particularly in the north, has a fantastic solar potential all year round. Investing in solar plants in these areas undoubtedly represents a secure investment. We just need to provide the appropriate regulation to develop this market.

Biomass is already strong here. Brazil is a big producer of sugarcane, so biomass derived from this industry – bagasse – is a source of power that reflects our cultural roots. It will grow along with thermal plants as they look for alternative sources to fuel their turbines.

Overall, renewable energies will grow in the future. I believe we will soon conduct auctions by source and by region, which will enable these energies to flourish rapidly. Managing auctions in this manner is fundamental to the sustainability of our energy matrix.

ANEEL has many responsibilities. Nonetheless, one of its most important roles is to establish electricity tariffs. How is this done?

ANEEL’s role in determining electricity tariffs is highly transparent. A large part of establishing a tariff focuses on the concession contract and defining the time of concession granted for the company winning the auction, as well as the tariffs applied across this period.

For instance, the last tariff introduced for distribution companies took a year. We consulted with all stakeholders to assess which regulation improvements should be applied to the tariffs. This regulation provides the basis for the tariffs. When dealing with specific companies, tariff readjustments are made when consumers need to be compensated or to avoid price variations over time.

In the end, we at ANEEL are the guardians of the regulations developed by governmental bodies to consolidate and establish fair rules for the sector. Regulatory stability is our priority.

Brazil is recognised as having one of the highest electricity tariffs in the world. Can these tariffs be reduced?

It is clear that our electric power tariffs are too high, particularly given the tax burden on consumers. In this sense, one third of the final electricity tariff represents the cost of state and federal taxes: ICMS taxes on the circulation of merchandises and services; COFINS [social security contribution] and the PIS Program for social integration. Another third corresponds to the actual cost of generating the electricity, and the final third corresponds to transmission and distribution costs.

Brazil has 63 distribution companies covering very different geographical areas. For instance, Brasilia is one concession area that is extremely privileged – its market is highly concentrated, with a high per-capita consumption but a small transmission area. Therefore tariffs there are below average. In contrast, if we take Celpa, in the Para region, it has a diffuse population, resulting in a large transmission area. This, and its low per-capita consumption, increases tariffs substantially.

In real numbers, the best concession area has half the cost of the worst. In some states, the ICMS reaches up to 42 per cent of the total electricity price. We must, therefore,work towards reducing these taxes as much as possible because in the end it is our citizens who suffer.

With so many decisions to be taken in regard to the future of Brazil’s electric power mix, what will ANEEL be focusing on over the next five years?

Brazil still lacks good electricity supply services, and it must be our priority to improve this situation. Other countries have invested in underground electrical lines, bringing safety and reliability, as well as reducing the system’s environmental burden. We must work to accomplish similar results and show the rest of the world why Brazil is the sixth largest economy in the world.

In addition to this goal, ANEEL will remain a strong regulatory agency, implementing the government directives, ensuring that new regulations are adhered to and providing a fair electric power market for all stakeholders, including all our citizens.

We shall remain the guardians of Brazil’s energy policy and collaborate with other government and non-government bodies to focus on improving the sector. This is ANEEL’s key aim.

Duilio Diniz de Figueiredo, President, Norte Energia

Duilio Diniz de Figueiredo   How is your wealth of industry experience helping to ensure that Belo Monte’s starts operations on schedule?

In my 42 years of experience in the power sector, I have seen first-hand the reforms and adaptations that our industry and Brazil have gone through. At the beginning of my career, Brazil was behind in technology and innovation, but today I can proudly say that we have some of the most advanced technology and are capable of managing some of the most complex hydro projects ever seen.

Belo Monte defines my appetite for new challenges and I am honoured to be part of such a marvelous project, which is a momentous part of Brazil’s legacy for future generations.

With a capacity of 11.3 GW, Belo Monte will be the third largest hydroelectric dam in the world. What does it represent for Brazil?

Belo Monte is in the Para region, which in fact is bigger than many European countries. Our municipal area – Altamira – is almost as big as Portugal.

Even though 90 per cent of the construction work for Belo Monte takes place in Victoria de Xingu, which has 10 000 inhabitants, it is the Altamira area, which has seen the biggest changes. Prior to our arrival, Altamira had 100 000 inhabitants.

However, this region is logistically challenging because the river does not have a linear shape and is surrounded by dense tropical forest. To ease the movement of materials, we constructed a port to reduce the costs incurred by transporting goods by land.

New laws for hydropower projects and Norte Energia’s vision to improve the region go hand-in-hand with the government’s sustainable development plan for the regions, resulting in environmental and social compensations being awarded over time.

Because of this a council was established – the Regional Plan for Sustainable Development of the Xingu – where all stakeholders, including federal and state government and local communities are represented. Norte Energia is one out of 30 representatives with the right to vote. Given we have one of 30 votes in this council, other stakeholders have key influence over the shaping of this project.

Could you outline the above-mentioned compensations to elaborate on the social and environmental benefits of Belo Monte?

Compensation for the communities and funding for environmental protection are significant, and cover health, education, public safety, sanitation and housing, as well as the local flora and fauna.

In terms of health, Altamira will receive a modern 100-bed hospital. We will also make improvements to the local hospital at Sao Rafael, transforming it into a maternity hospital. Norte Energia also donated 11 ambulances and four rescue boat teams, which will provide a fast response to communities living along the river. Furthermore, malaria is a serious threat in this region, so our health teams have been involved in addressing this problem. From January to June this year, malaria incidents fell by 77 per cent, compared to the same period in 2011.

With regard to our education plan, 44 schools have been built and 22 are under construction. These new facilities, built to national standards, will give 8500 students the chance to have a solid education.

Since 2010, Norte Energia has established new job location services helping communities find a position on the construction site. This has helped to register over 25 000 people, out of which only 6000 are migrants.

Our participation has also improved the regions sanitary conditions and infrastructure. Around $250 million will be invested in water and sewage networks connecting Altamira to Vitoria do Xingu. New neighbourhoods have also been constructed. By 2014, this will total 4100 living units.

One key component of our activities in this region is our local support for indigenous tribes. We have put real emphasis and priority on the matter of preserving these communities, their cultural identity, ethnic development, and protection of their land. We will assist them with a tailor-made programme, covering health, education, environmental protection, infrastructure and territorial management. We are fully aware of their expectations and are doing our best efforts to meet their land, culture and freedom requirements.

Norte Energia has also invested in 14 environmental programmes to protect the region’s unique wildlife and plants. Beyond species protection, we are undertaking a number of scientific studies, with the aim of taking real steps forwards in terms of our understanding. This will help further protect the future of the natural fauna and flora. We have, for example, undertaken a fish biotelemetry project, using combined acoustic and radio telemetry, to learn more about their migration and behavioral patterns before and after Belo Monte was initiated.

Overall these actions highlight Norte Energia’s care for local communities, which is underpined by our belief that hydropower is a powerful source of multilateral development for a region.

If we were to meet again in five years’ time, how would you like us to view Norte Energia?

Norte Energia should not be seen only as a generator of electricity. It is also a social development tool, promoting education, health, public sanitation, public safety and environmental development. We have invested more than $500 million in environmental and social projects in the area, as well as supporting neighbouring communities. By the end of the Belo Monte project, the investment is expected to reach $1.8 billion. Our investments are a testimony to our belief in the development potential of this region.

In five or six years, the region will be transformed and Belo Monte will be part of the landscape. Hence, the biggest transformation will be social, granting families’ dignity, and for the first time will give locals better opportunities in life.

Hermes Chipp, General Director, ONS

Hermes Chipp   A country’s electricity transmission network represents its backbone, ensuring supply and sustainability. What are your views on the Brazilian transmission system?

In Brazil, the transmission grid does not simply connect generation sites to load centres: rather it is a fundamental tool to enable us to take advantage of the diversity of hydrological behavior of the country’s river basins, and thereby maximise the use of available hydro resources.

The expansion of new hydro projects in the Amazon region brought with them the challenge of transporting their power over a distance of 2500 km to the major load centres, located in the southeast and northeast of the country. Therefore, HVDC technology was the obvious solution. Our engineering capabilities, technology used and expertise in high-voltage transmission make Brazil highly competitive in this domain.

In recent years, the country has achieved landmarks in the integration of electric power systems. The states of Acre and Rondonia were integrated into the grid in 2009 and, this year, we will complete the interconnection of Amazonas and Amapa. We expect to integrate the last remaining state, Roraima, by 2016.

Innovation is a fundamental part of being able to establish a highly-efficient and reliable power system. What is the status of technology developments in this area?

Due to the unique characteristics of the Brazilian power system, it was necessary to develop our own solutions to manage the country’s energy resources. CEPEL, the electric power research centre, together with our major universities, play an important role in the development of tools to achieve optimisation.

The Brazilian power sector closely follows the international development of technologies for control centres and grid management, and many fruitful national and international partnerships have helped us to reach a high standard in power system operation.

Controlling the operations of generation and transmission companies is a very challenging task. How has ONS been successful in this initiative, and what are the measures that need to be taken to assist these companies?

ONS is pleased to be a member of the GO 15 ‘Reliable and Sustainable Power Grids’, comprising major grid operators from rigth across the globe. The main aim of this special association is to discuss the necessary transition and adaptation of power systems to make grids more efficient through new technologies and to discuss the future of energy markets.

Together these operators represent more than 70 per cent of the world’s electricity demand and are discussing above all else what reforms need to happen to increase the participation of renewable energies for the sustainability of their own energy models.

What we are observing today is that operators that own their grid have total control over what their equipment achieves. Here, in Brazil, this is not the situation. Nowadays we rely on 25 grid codes and our objective is always to build on and improve these procedures, in order to help us control and coordinate our complex grid.

Collaboration is a must in any industry and should be embraced to enable the sharing of experience, and even assets. This is exactly what GO 15 aims to do. These representatives are CEOs with clear ideas about the necessary reforms that need to be put in place to improve grid reliability right across the globe.

Therefore bilateral agreements have been signed and currently we are in an agreement process with Spain for wind technology transfer in return for our expertsie in HVDC.

In conclusion, what would you say are the future priorities and ambitions of ONS?

Our first priority is to achieve our institutional mission, which is to guarantee the economic and reliable supply of power to all consumers, taking into account the increasing operational complexity of the power system because of the diversity of energy resources and the continental size of the transmission grid.

Secondly, our ambition is to be up to date with new technological advances in power system operation, such as smart grids, demand-side management, solar panels and electrical vehicles. All these issues will very soon become part of ONS’ day-to-day reality.

In partnership with Focus Reports, we will be publishing an in-depth report on the Brazilian electricity sector this year – scheduled for the November issue. For more information on Focus Reports, visit www.focusreports.net

More Power Engineering International Issue Articles
Power Engineering International Archives
View Power Generation Articles on PennEnergy.com