|Jirau, one of Brazil’s power houses: Upstream view, with flooded enclosures on left bank
Credit: Energia Sustentavel do Brasil
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It is June 2013, the Brazilian winter is on the doorstep and even though snow is not falling on the hills of Ipanema, the electricity sector here is once again facing a major upheaval.
|While sitting down with one of the most influential men in Brazil’s electricity sector, market uncertainties take centre stage. José da Costa Carvalho, President of Eletrobras, Brazil’s largest state-owned utility, which owns 56 per cent of the country’s transmission lines and 36 per cent of total generating capacity, is discussing the latest measures taken by the government to reduce electricity tariffs by 20 per cent. This has had the effect of significantly driving down the company’s revenues from $17 billion to $9 billion, and creating nothing short of an ‘earthquake’ in the sector.|
|José da Costa Carvalho
Humbly, Da Costa explains: “We need to get more from what we have”, emphasising that his company has to bring forward new technologies and boost operational efficiency to remain afloat in Brazil.
While reducing electricity tariffs is noble, especially in one of the most expensive countries for electricity in the world – Brazil is ranked third according to Bloomberg, with state and federal taxes accounting for a third of the energy price – clearly the industry is having difficulties adapting to the government’s agenda.
Brazil is the fifth largest country in the world with a population approaching 199 million and a GDP in 2012 of $2.25 trillion, according to the World Bank. This South American nation is also preparing to host the FIFA World Cup and next year’s presidential elections, followed by the Olympic Games in 2016. However, since 2010 Brazil has been experiencing an economic slowdown and in more recent times social unrest seems to be on the increase.
In this climate, several questions spring to mind in relation to this South American country’s power sector. Is Brazil making the right choice by focusing on renewable energies? Are these energies competitive and attractive for international investors? Is the country prepared to balance its federal and regional agendas given such high economic and social disparities between regions? How will it meet the yearly 5 per cent increases in energy demand?
Green rush on costly generation
Considering Brazil’s size and population, one would never imagine such a country being 64 per cent reliant on hydro for its electricity; this is according to the National Agency for Electric Energy (ANEEL). However, Brazil did make the choice to focus on renewable energies and capitalise on its natural resources.
This South American nation is home to the second largest hydroelectric dam in the world, Itaipu, with an installed capacity of 14 GW; although it is some way behind China’s Three Gorges dam, with its installed capacity of 22.5 GW.
Such large-scale projects, however, share one thing in common: they are reservoir-based. Reservoirs flood large areas of land and therefore are accompanied by an array of environmental and social issues, although they also serve a very important purpose in that they can store significant quantities of water that can be used to produce electricity in periods of drought.
|Participation of renewables in the energy mix
Credit: EPE, IEA
In Brazil, environmental organisations have severely criticised these traditional reservoir-based projects, so in response the government decided to focus more on run-of-the-river hydro facilities, which are more environmentally friendly but less reliable because of a highly limited or non-existent water storage capability.
|Eduardo de Melo Pinto, President director of Santo Antonio Energia, the company that operates the Santo Antonio hydroelectric dam, brings a technical perspective to this issue and discusses the challenges of locating non-reservoir based facilities in the lively waters of the Amazon.|
|Eduardo de Melo Pinto
President director of Santo Antonio Energia
“Although this new method [run-of-the-river] has a better environmental footprint, its power generating capacity is much more limited than traditional approaches, especially in the unpredictable Amazonian rivers, such as the Madeira River, where water flow can fluctuate anywhere between 4000 m3/s. and 38,000 m3/s; such variations demand great flexibility.”
|This is exactly the situation facing Belo Monte (11.2 GW), Jirau (3.75 GW) and Santo Antonio (3.5 GW), all of which are located in the Amazon region. Implementing such large-scale projects in the Amazon has always been a logistical nightmare. Duilio Diniz de Figueiredo, President of Norte Energia, the operator of Belo Monte, says: “To give a clear impression of the scale of this project, our two power plants are separated by 50 km. In order not to impinge on indigenous territory we built a channel and reservoir by the Xingu River to channel the water needed for smooth plant operations [this channel is 16 km long, 25 metres deep and 210 metres wide].|
|Duilio Diniz de Figueiredo
President, Norte Energia
“This region is logistically challenging, given that 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 help reduce the costs incurred by transporting goods over ground.”
While the installed capacity of these hydroelectric dams is remarkable, their physical output guarantee or the actual amount of electricity produced can oscillate between 40 per cent and 70 per cent of their installed capacity.
De Melo Pinto also raises an interesting point. “In terms of investments and power generating capacity, building one hydropower plant with a large reservoir can be less expensive and more productive than building two similar-sized run-of-the-river plants.”
Ultimately, by building more of these run-of-the-river plants to compensate for the lack of power generation, Brazil may not be making the right choice. Not only is it important to decide what kind of hydropower plant to construct, it is more crucial to understand how this influences other variables such as environment and cost.
|Albert C. Geber de Melo, General Director of Eletrobras’ Research Centre (Cepel) claims: “In 2007, we released the new manual of Hydropower Inventory Studies to correlate power generation potential and social and environmental impacts, as well as multiple uses of water.|
|Albert C. Geber de Melo
General Director Eletrobras Cepel
“Through this methodology we can assess, for example, the trade-off between constructing one hydro plant of 10 MW or five hydro plants of 2 MW, taking into account costs, efficiency rates, social and environmental impacts, to find the best option.”
Simultaneously, Brazil has been developing its arsenal of small hydroelectric power plants (SHPP). These power plants tend to have an installed capacity ranging from 1 MW to 30 MW. To-date, 462 of them are spread across the country, representing a total installed capacity of 4.6 GW, says ANEEL. Although they can be rapidly implemented because of their small size, obtaining environmental licenses still remains a burden similar to that for large hydroelectric facilities.
|Victor Paranhos, President Director of Energia Sustentavel do Brasil (ESBR), the operator of Jirau, clarifies: “I think environmental licensing should be simplified. A project like Jirau for instance, demands over 20 environmental licenses which need to be annually renewed. In Germany, only three licenses are needed for a hydro project. I believe we can keep the same amount of environmental and social protection without requiring so many licenses.”|
Engergia Sustentavel do Brasil
In addition to licensing, Paranhos highlights other issues. “Federal taxes in combination with state taxes such as Tax on Circulation of Merchandise and Services [ICMS] represent 50 per cent of the cost of Jirau’s energy. We need to implement stable and fixed rules from the beginning of a project and avoid changing existing measures that can cause significant increases in a project’s cost. For example, Jirau faced a new problem when the state government decided to change the ICMS tax rate, increasing our cost by $200 million.”
|SHPP also struggle to remain afloat. Valmor Alves, President Director of Electra Power explains: “being competitive at energy auctions and offering low-cost energy is a challenge that the sector has not been able to resolve. Currently, the price per MWh offered for SHPPs during an auction is $65. My perspective is that this price should be 15 per cent higher, to make us competitive.”|
President Director, Electra Power
The debate about having auctions by source and region to increase the competitiveness level of different energy sources has been taking place within the industry over the last few years. ANEEL and the National Operator of Electric Systems (ONS) are strongly in favour of it.
|“None of the non-conventional renewable sources alone will be the solution to accommodating the increasing electricity demand of the country. To resolve this issue we strongly recommend having energy auctions by source and region,” says Hermes J. Chipp, ONS’ General Director.|
|Hermes J. Chipp
General Director, ONS
|Similarly, Romeu Donizete Rufino, General Director of ANEEL stresses: “managing auctions in this manner is fundamental to the sustainability of our energy matrix”.|
|Romeu Donizete Rufino
General Director, ANEEL
On the performance side, Brazil has managed to build a high-level of technical expertise and safety in the hydro sector. Since every dam is unique, their designs are complex, however, several players have managed to excel in this field.
|Intertechne, a highly-specialized design company from Curitiba, has been heavily involved in the design of the majority of Brazil’s hydroelectric dams. Its Chief Executive Officer, Antonio Fernando Krempel, declares: “We participate in nine out of 16 projects under construction, which represents a 56 per cent market share. We are proud to be the design leaders of Brazil’s most significant projects such as Belo Monte, Santo Antonio and Teles Pires.”|
|Antonio Fernando Krempel
Intertechne’s success is not only a consequence of 25 years of experience in the field with the largest projects, but reflects the company’s unique technical expertise within Brazil. “Our projects are 100 per cent designed with 3D modelling software, while our competition is still limited to creating 2D plans. This makes our designs far more complete and valuable to our customers,” confirms Fernando Krempel.
Norte Energia’s Figueiredo also believes in Brazil’s capacity for innovation and claims: “At the beginning of my career, Brazil lagged behind, both in technology and innovation, but today I can proudly say that we have the most advanced technology and are capable of managing some of the most complex hydro projects civilisation has ever witnessed.”
|Nova Mutum Paraná – city built by Jirau HPP
Credit: Energia Sustentavel do Brasil
Let it rain
Predictability, security and reliability are necessary for Brazil, and as such this South American nation decided to also fuel its power sector by using thermal power plants as a backup system to its hydro backbone.
From that point on, nature and rainfall would not dictate energy dependency but thermal plants fueled by gas, coal, oil and even nuclear power would produce electricity at a constant rate, thereby making its production predictable and accurate.
The plan was to use thermal power plants during periods of drought. In anticipation of lack of sufficient energy generated from hydropower plants, the government opted to first rely on coal-fueled power plants. Coal is the least expensive of the fossil fuels, and is therefore prioritised. However, its use is limited by the number of power plants – Brazil only has five coal-fired power plants, located in the south of the country.
|Natural gas is used as the second main fuel source, but as Sergio Luiz da Silva, Director Vice President of Comgas, Brazil’s largest gas distributor, comments: “Since 2007 in Brazil, the balance between the supply and demand of gas has been tight. In fact, 40 per cent of the gas consumed in Brazil is imported from neighouring Bolivia.|
|Sergio Luiz da Silva
Director Vice President, Comgas
“Our national production of gas is around 4 million m3 per day, we receive from Bolivia around 30 million m3 per day, with the rest being LNG [liquefied natural gas].” Brazil’s dependence on gas naturally increase prices, and therefore making thermal power generation even more expensive.
Silva raises another interesting point: “The problem today is not about the potential of gas, or current resources, the real issue is infrastructure.”
However, the utilisation of thermal power plants during periods of drought has produced its own challenges. For example, last year, dispatching these thermal plants resulted in an unforeseen $3.5 billion cost. Furthermore, Brazil’s pollution indexes skyrocketed from using sources such as coal.
|To balance both sides of the equation, companies operating thermal power plants must ensure that their facilities are running at full availability and also use the best technologies to raise their efficiency levels and reduce their emissions. Patrick Simon, President Director of EDF Norte Fluminense, the Brazilian subsidiary of Électricité de France SA (EDF) shares this belief by saying: “Our thermal power plant operates at a 99 per cent rate of availability, which could be a world record. It is a perfect example of how EDF’s technology ensures our plant operates at optimal levels.”|
President Director, EDF Norte Fluminense
Brazil also needs to look into less-polluting solutions to fuel its thermal power generation, and perhaps the answer lies in biomass.This has been growing rapidly as a fuel source – it represents today 8.4 per cent of the country’s electricity mix, according to ANEEL. This growth has been primarily fueled by Brazil’s enormous sugar cane bagasse resource (82 per cent: ANEEL) and to a lesser extent by wood, biogas and other types of residual waste.
|Brazil is already an ethanol and sugar cane world leader, according to Brazil’s sugar cane industry assocation, UNICA. Andre Salgado, Managing Director at Areva Renewables, part of France’s Areva and a significant biomass investor in Brazil, clarifies: “Currently, hydro is not the best resource to invest in, due to the feed-in tariffs currently in place, and we feel that biomass holds much more promise.|
Managing Director, Areva Renewables
“With a power demand growing at a much faster rate than the country’s GDP, power generation is under intensive pressure and it is a priority to develop alternative sources like biomass to compensate for this additional demand. The government’s Decennial Plan for Energy [PDE] forecasts an average increase of 450 MW a year until 2021 for biomass.”
However, other generation technologies such as cogeneration, also known as combined heat and power, could also be an attractive alternative for industrial companies with a high-energy consumption or cities requiring energy centres to provide electricity inside buildings or shopping centres.
|Carlos Roberto Silvestrin, Executive Vice President at the Association of the Cogeneration Industry (Cogen) confirms: “Cogeneration is the best alternative to thermal power plants which today are supporting the hydropower sector. For example, if we use 1 million m3 of natural gas in a thermal power plant, its efficiency rate will be around 40 per cent; whereas the same volume of natural gas in a cogeneration system would produce an efficiency rate of 60-80 per cent. Overall, cogeneration has clear benefits and is much quicker to implement.”|
|Carlos Roberto Silvestrin
Executive Vice President, Cogen
Winds of change
While hydropower has only reached one third of its total exploitation potential, it is estimated that wind power alone has a potential capacity of 350 GW. However, the reality today is that wind represents only 2 per cent of the energy matrix, with solar power only taking its first steps.
|With the will to carry on and see a bright future ahead for the development of wind, Elbia Melo, Chief Executive Officer of the Brazilian Wind Association (ABEEolica) has been fighting to obtain 2 GW of contracted wind every year. As she comments: “Our unique wind as well as our technology makes us 30 per cent more competitive than any other country. Our capacity factors are the best in the world. In 2011, it was around 54 per cent, and even reached 71 per cent in Salvador de Bahia.”|
Chief Exectutive Officer, ABEEolica
From an industry point of view and to understand how local content affects the sector, Paulo Soares, General Manager of international wind player Vestas comments: “Local content policies tend to decrease competition, slow down innovation, retard economies of scale and raise costs by creating supply chain inefficiencies.
“Local content regulations create unnecessary barriers to lowering the cost of energy. And the employment effects of such policies have not been proven yet: the countries with the highest levels of wind jobs and investments in fact are those that have secured a free and open market place [such as Germany and the US].”
Nonetheless, IMPSA, an Argentinean wind and hydro equipment manufacturer, chose Brazil as its Latin American manufacturing platform and invested through BNDES in state- of-the-art facilities.
|Its Executive Vice President José Luis Menghini states: “We opted to develop our technology and products locally to meet standards and gain local expertise to adapt to the specific requirements of the market.”|
|José Luis Menghini
Executive Vice President, IMPSA
This company saw early on the potential in Brazil and has been investing locally for the past three decades. Like many large multinational companies, IMPSA decided to diversify its portfolio of activities by investing in other areas, establishing Brazil as its test laboratory.
Menghini clarifies: “We shall invest in power electronics, mostly focused in high-density drivers. We believe this will complete our solutions in smart grids, training, operation and maintenance [O&M] and create synergies between the different business units.”
Where investments are made, largely depends on what sources are competitive. While wind power is competitive at Brazilian energy auctions ($50 per MWh) – its price is pretty much double that in Europe – this is not the case for solar power, which is quoted to be at least three times more expensive. Simply, until solar attains a competitive level its influence is likely to remain minimal.
However, Chipp (ONS) remains optimisitc on solar, saying: “For the first time solar projects will be included in the next auction for future energy. If the prices continue to decrease in the near future, these projects could play an important role in the electricity matrix.”
Solar power could become as competitive as wind power, but today the market conditions do not allow it to grow in parallel.
Still, these renewable energies have the potential to grow and one method would be to combine them.
For instance, Andritz Hydro, Austrian world leader in hydro turbine manufacturing and its Brazilian subsidiary Andritz Hydro Inepar, propose an interesting vision for the future by highlighting the benefits of combining pump storage plants with wind and solar power.
|Its President, Sergio Parada, mentions: “this method enables us to store energy in the form of potential energy; shifting water to reservoirs to create the necessary power depending on energy demand. This specific hydroelectric power generation method is used in other countries and has been proven to be efficient when combined with wind turbines and solar panels. This approach could be highly useful to our energy matrix considering the potential and unique conditions for wind and solar power. My perspective is that in ten years a real market for pump storage power plants will exist.”|
President, Andritz Hydro Inepar
Of course, there is no doubt that Brazil is the perfect place to start these activities combining resources in wind, hydro and solar power, which can be found in its neighbours as well. Parada adds: “Brazil represents around 60 per cent of the Latin American market, which still leaves possibilities in other neighbouring countries. I truly believe in the potential of countries like Peru, Colombia and Panama, amongst others.”
Connecting the dots
Whatever the fuel source may be, all sources rely on one crucial element – Brazil’s Interconnected National Transmission Network (SIN). In such a large country and with resources spread across the country and not located in the main areas of demand, there are many challenges. While the country currently struggles to have all its existing lines connected to the grid and companies experience long delays in building transmission lines, the situation is now critical.
|As José Claudio Cardoso, President of the Association of Large Transmission Companies (ABRATE) points out: “Transmission auctions have been showing a bit of retreat on behalf of transmission companies, primarily because of environmental licenses, social manifestations and low project profitability.|
|José Claudio Cardoso
Obtaining environmental licenses has been a real headache and has caused project delays for new transmission lines. This whole process only slows down the country’s expansion and a large amount of companies are bearing these penalties and not meeting the deadlines.” To enable the safe development of hydro projects in the Amazon or wind projects in Bahia, as well as supply the southeast of the country, energy efficiency and innovative transmission solutions have become a priority.
Eletrobras has been collaborating with Cepel to develop innovative solutions and as Da Costa says: “In the transmission area we are studying new designs for more efficient lines, and higher supervision, control and data management of transmission systems. Indeed, Brazil’s transmission line systems are highly complex, especially because of distances and accessibility issues. Our aim will be to overcome these factors and improve the overall efficiency rates.”
Key international players have been capitalising on Brazil’s transmission line systems. One of them is ABB; a multinational corporation that specialises in power and automation technology.
|Rafael Paniagua, president of ABB in Brazil, states: “There are some issues raised in transmission to the principle point of consumption. In Brazil, this is represented by the large urban conurbations in the southeast. The key problems lie on what type of technology is required to supply electricity efficiently over these vast distances. One of the technologies leading this is high voltage direct current (HVDC). This technology is used on Brazil’s longest transmission line.”|
President, ABB Brazil
David versus Goliath
When assessing the validity of Brazil’s power model, cost of energy, transmission network or type of energy source, a fundamental element remains to unleash – regional integration. Regions across Brazil simply cannot grow at the same rate because access to electricity varies and different states have different needs. For Brazil to meet its annual increase in demand, the effort has to be shared.
Sao Paulo’s state alone represents a third of Brazil’s GDP, according to the Brazilian Institute of Geography and Statistics (IBGE). If we combine the regions of Sao Paulo, Rio de Janeiro and Minas Gerais, these account for half of GDP and 38 per cent of the population. Comparatively, the Amazon rainforest covers more than half of Brazil’s territory and even including all the remaining states in the north of the country, economically they represent a quarter of GDP.
|As Carlos Cavalcanti, Head of Infrastructure at the Federation of Industries of Sao Paulo (FIESP) comments: “Sao Paulo represents 80 per cent of Brazil’s industrial GDP.”|
Head of Infrastructure, FIESP
Ultimately, Sao Paulo needs electric power to keep up with its intense industrial activity, but this energy must also be competitive and clean for sustainable purposes. To achieve this, it will require investing in more efficient energy systems such as smart grids for instance, and it will also need to capitalise on its biomass resources (60 per cent of the country’s sugar cane resources are located in Sao Paulo , according to ANEEL).
Rio de Janeiro also will require electricity to fuel the FIFA World Cup, as well as its intensive oil and gas exploration. Notably, these strong and dynamic regions share different energy needs but have similar economic patterns.
This is not the case for most of the other regions, especially in the north. In many of these areas where the economy is weak and where poverty and low social status are the most visible, electricity can lead to economic development. Very poor areas and states like Piaui located in the northeast have been growing at double digits and greater access to electricity has been contributing to this.
The region of Bahia, which is one of the largest states in Brazil and the sixth largest economy, raises another interesting point. While Bahia’s main cities like Salvador hold almost all of the economic power in the state, the priority for development lies in the rural areas.
|Paulo Guimaraes, Superintendent for the Economic Development of the State of Bahia, stresses: “Bahia is one of the few states that has been capable of growing at a rate higher than 3 per cent since 2010, reaching 3.5 per cent today. Important investments, which previously targetted the capital (Salvador) or other urban areas, are now mainly focusing on rural areas (60 per cent).”|
Superintendent for the Economic Development of the State of Bahia
Bahia holds Brazil’s largest potential for wind and solar power, especially in its isolated rural areas. From the unique conditions these areas offer, they are attracting many international players, contributing to their economic development – bringing energy, hiring manpower and creating wealth for the state as a whole.
Brazil has a two-speed economy and such important social and economic discrepancies demand different energy priorities for its regions. Therefore federal and regional power agenda must align on how these regions integrate different sources, access energy and drive strong economic development and/or sustainable needs.
If the poorest regions grow taking advantage of their unique resources and the richest regions capitalise on more efficient ways to distribute and harness green and competitive energy, Brazil will grow faster, stronger and in a more sustainable way.
Once again the clock is ticking as EPE releases its Decennial Energy Plan for 2022 and the government announces a $130 billion investment in Brazil’s electricity sector – $100 billion for power generation and $30 billion for transmission.
It is through this investment that the government hopes to balance the country’s power system, raising it from the 120 GW of today to an impressive 180 GW by 2022. However, Brazil will have to wait to see whether or not this will be sufficient on a national level, as well as regionally.
A Fashionable Power Model?
|Mauricio Tiomno Tomalsquim, President of the Energy Research Company (EPE), an organisation dedicated to energy planning, has been an active player in Brazil’s energy reform process, proposing in 2004 a ‘hybrid’ power model.|
|Mauricio Tiomno Tomalsquim
“This model has significantly reduced environmental risks, and completely eliminated market risks for investors because contracts are predefined with inflation-adjusted revenue regardless of fluctuations on energy demand.”
It was a necessary response to the 2001 power crisis in Brazil, where dependency on hydroelectric power plunged the country into darkness because of severe drought and insufficient water levels in its reservoirs.
Not only did Brazil understand it could not rely solely on hydropower it also had to plan ahead. However, the latter would ultimately create tensions throughout the sector as the government and the industry took different viewpoints on what resources should be exploited and what the priorities should be. As Tomalsquim says: “EPE acts as a government and ministry advisor”; clearly, it meets the government’s agenda but what about the industry?
Thus, through this model the necessary mechanisms to allow the award of contracts at energy auctions, where companies compete for projects in generation, distribution and transmission, were defined. The company offering the most competitive price would be declared the winner and be awarded a power purchase agreement (PPA), which granted 30 years of operation for hydropower plants and 20 years for wind and thermal power plants.
Moreover, this power model is supported by the Brazilian Development Bank (BNDES), under the supervision of the Ministry of State for Development, Industry and Foreign Trade (MDIC). This government-owned corporation is the largest development bank in the world, with consolidated assets of $329 billion, and finances around 70 per cent of all energy projects in Brazil. This financial entity has supported this power model since its launch. Clearly, BNDES is omnipotent but could too much power and control over a market lead to pitfalls?
The Need for A Long-term Vision
Criticism around hydropower projects have flourished over the years, attracting large environmental organisations and well-known personalities to protest against the destruction of the Amazon’s natural habitat and the extinction of indigenous tribes.
While engaging in such large projects does alter the natural habitat, companies like Norte Energia are investing $1.8 billion in social and environmental programmes for the protection and reproduction of fauna and flora and the implementation of health, education, public safety and sanitation programs for the local communities.
Duilio Diniz de Figueiredo comments: “Norte Energia´s vision to improve the region has been combined with the government’s sustainable development plan for the regions, resulting in environmental and social compensations being spread out over time.” Providing electricity and investing in these programmes is the first step. Figueiredo wants to look ahead and says: “Norte Energia should not be seen only as an electricity generator. In five or six years, the region will be transformed and Belo Monte will be completely merged into the landscape.”
The vision behind these projects is to create a new living environment, worthy of attracting other communities, themselves willing to carry on the social and economic projects engaged by the investors. Norte Energia is not alone in deciding the fate of these communities and Figueiredo stresses: “stakeholders such as the federal and state government, city halls of the affected regions, environmental associations, local communities and companies involved are all represented.
“Norte Energia is one of 30 representatives with the right to vote. Given that we have one of 30 votes in this council, other stakeholders have key influence over the shaping of this project,” emphasies Figueiredo.
Focus Reports: From the outside Denge Engenharia seems to be prioritising small hydropower projects. In addition to them, what other projects is Denge Engenharia looking into?
|Marco Dopico: We are capable of working on any type of plant, from very small to very large projects. Although our internal resources and limited manpower restricts our capabilities, we are able to partner with other companies to complement the resources needed for larger projects.|
Founder and President Director,
Denge Engenharia e Consultoria
In the past, 80 per cent of our projects were concentrated on small hydro plants. Financially, working on medium to large hydro projects is better than small ones, as the equipment used on small hydro plants is similar to larger ones. More precisely, where the money lies is not on the engineering part, but on the fabrication and therefore this is our core interest.
Focus Reports: Regardless of which hydro will prevail in the future, one thing will remain – Brazil as a leader in hydro innovation and equipment. How do you rate Brazil’s innovation capacity?
Dopico: Brazil’s expertise and innovation in hydropower certainly stands out among other countries. All of our dams are supported by major manufacturers, service providers and equipment specialists, providing high-end solutions to our dams. Through collaboration, local expertise and heritage we can assist Brazil’s hydro in remaining at the edge of innovation for decades to come.
Focus Reports: What is your vision of the potential of hydropower?
Dopico: The future of hydropower in Brazil fundamentally depends on the tariffs set by the government. These projects have a long-term perspective with 30 years PPAs. Returns on investment, however, as well as environmental licenses, are difficult to retrieve and may take up to ten years. Therefore a 30-year concession contract may in reality only represent 20 years of profit. For this reason sometimes concessions are not renewed and the company loses a very large asset.
Focus Reports: From your expertise in hydro projects, where is Denge Engenharia going to invest in the next five years?
Dopico: We are looking into different markets, such as the marine sector and petrochemical industries. We have already contacted clients in these areas and are awaiting the conditions and requirements to start manufacturing and assembling equipment for them. It is our priority to invest in other sectors and our expertise allows us to be flexible to work in these new areas.
Creativity Drives Motivation
|EDF Norte Fluminenste’s plant
Traditionally arid, industrial spaces do not usually have any relationship with the Arts. However, far from fitting a conventional business operation scheme, EDF Norte Fluminense not only has undermined this premise, but it has also inaugurated a true open-air gallery in its thermoelectric power plant, in Macaé.
This initiative gives people a means to express themselves, and Patrick Simon, President Director of EDF Norte Fluminense, proudly states: “To maintain high levels of motivation, we have invested in renewing our equipment, control room and importantly, we have developed a new working environment. We recently started a new painting programme, providing the plant with new designs and paintings.”
Working in a pleasant context is a great way to improve employee motivation and performance. Employees and third parties recognise change and new initiatives. The original project of taking art to a plant is also a tool that helps to improve the company’s global performance.
Simon adds: “EDF carried out a worldwide survey (133,000 workers) to better know about working conditions and people satisfaction in all of the EDF Group companies. EDF Norte Fluminense ranked first with more than 90 per cent satisfaction rate. Even more so, 99 per cent expressed their pride to work for Norte Fluminense.”
Focus Reports: The Losses and Metering Management System (SGP+M) project is the creation of Landis & Gyr (L+G) Equipamentos de Medicão, which started in Brazil in 1994 and was the first electronic metering system to be approved by the National Institute of Meteorology, Quality and Technology (Inmetro). What were the challenges while introducing smart metering in Brazil?
|Alvaro Dias Junior: When we first arrived in Brazil in 1996, regulation in the smart metering market was non-existent. For instance SGP+M was developed to bring the metering systems outside of the users’ homes, which meant a new development and regulation issue for Brazil.|
|Alvaro Dias Junior
Executive Vice President and General Manager, South America, Landis & Gyr
Between 1997 and 1999, despite improvements in our metering systems, social protests against the system froze our initiatives. Inmetro only officially approved our metering systems in 2009.
Focus Reports: Implementing new efficient solutions in Brazil is key to become a recognised player in a very competitive market. How can efficiency prevail through the use of your systems?
Dias: Our smart metering systems, which are part of the global smart grid system, provide accurate information and will comply with different lines of electricity tariffs, such as the ‘white tariff’, which allow customers to pay less when they consume electric energy during the day. Until 2009, consumers were using only electro-mechanic meters whereas for the past four years digital meters and metering systems have revolutionised the market.
In 2011, when acquired by Toshiba Corporation, we were participating in a new project – smart city Buzios – in partnership with Enel and Endesa. This project is the first smart city project to spread its wings in Brazil.
Focus Reports: While becoming a more internationalised company under Toshiba’s flag, how do you advance in Brazil?
Dias: With the support of Toshiba, we gained access to new technologies and know-how which can complement and improve our specialised smart metering systems. In the US, for instance, where L+G produces around six million digital meters, we acquired different modules of communication. In Brazil, our systems could be adapted in the same way and this flexibility makes us very competitive in the market.
L+G defines itself as a system integrator and therefore we wish to collaborate on all types of projects and adapt to different power sources. For example, we have started a new project in solar metering systems with a local Brazilian client, trying to develop the potential for our systems. Only with time and resources will we be able to show our Brazilian citizens the full potential of our systems.
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