Senior decision-makers come together to connect around strategies and business trends affecting utilities.

WARNING: SIGN-IN

You need to be a member of Energy Central to access some features and content. Please or register to continue.

Post

Electric power in Brazil: what's lacking?

image credit: Brazil is a laggard when it comes do USD/MWh of electric power

Electric power in Brazil: what's lacking?

When the metric is the cost of energy in USD/MWh, Brazil is the most expensive among the BRICS. And by far!

It is a situation that has been going on for many years. How to turn around this situation?

I dare to point out two factors: creativity and planning.

CREATIVITY

A list of programs has - for years - been implemented with great success in many countries. The big difference is that it is a win-win. Everyone benefits!

Here in Brazil, the principle of transferring everything to the costs paid by customers still prevails: subsidies, defaults, energy theft, etc., etc.

PLANNING

A capital-intensive sector - such as the electric - thrives competitively if it offers legal certainty, respect for contracts and predictability.

This set of conditions is met if there is a well-organized strategic plan and implemented with supervision.

When will we wake up to this reality?

Rafael Herzberg's picture

Thank Rafael for the Post!

Energy Central contributors share their experience and insights for the benefit of other Members (like you). Please show them your appreciation by leaving a comment, 'liking' this post, or following this Member.

Discussions

Bob Meinetz's picture
Bob Meinetz on Jul 20, 2020 2:34 pm GMT

"Here in Brazil, the principle of transferring everything to the costs paid by customers still prevails: subsidies, defaults, energy theft, etc., etc."

Rafael, BRICs are not unique. Everywhere, customers pay for everything related to electrical service, one way or the other.

Providers of electricity, like those of fresh water or sanitation, are monopolies. That there exists any kind of "competition" in electricity is a mirage, and the only way to keep prices down in is by transparent, effective regulation by governmental entities.

Rafael Herzberg's picture
Rafael Herzberg on Jul 20, 2020 4:26 pm GMT

Thanks Bob.In your opinion why then is Brazil the most expensive among the BRICS?

Bob Meinetz's picture
Bob Meinetz on Jul 20, 2020 6:02 pm GMT

I'm not familiar with how rates are determined in Brazil, but with all natural gas transmission provided by monopoly Petrobras, high prices for electricity could be expected.

Imported LNG and competition among fuel providers could, in theory, lower prices:

"In June, though, Brazil's National Energy Policy Council, or CNPE, approved regulations that will see the state-led company relinquish its ownership in Brazil's midstream markets by December 2021."

LNG imports are now fastest liberalizing sector of Brazil's gas market

To eliminate fuel competition in California, however, electricity utilities simply merged with their gas providers. After they close our last nuclear plant, they will have effectively eliminated competition for dispatchable electricity.

In the state which already has the highest electricity rates in the continental U.S., things will only get worse.

Dr. Amal Khashab's picture
Dr. Amal Khashab on Jul 20, 2020 11:16 pm GMT

Hi Rafael

Would you give a quick glance to my article about Brazilizn Electricity Sector (24/9/2019 on LinkedIn) :

https://www.linkedin.com/pulse/quick-glance-brazilian-electricity-sector-egyptian-experts-khashab/

 

Rafael Herzberg's picture
Rafael Herzberg on Jul 21, 2020 5:08 pm GMT

Hi Amal,

You for sure compiled a lot about the Brazilian power sector. That's great! Here in Brazil one of our most important challenges in the electric power sector is about "what's not written" but which has a strong influence on costs (USDS/MWh). For illustration purposes I will cite a few items in this respect.

1) Delinquency

The official power clearinghouse (CCEE) owes 1.5 USD Billion regarding settlements. Yes your read it correctly. USD 1.5 Billion! Bottom line: an energy user must find a power trader to sell excess power in a given month for a spread of course. It means around 20% above what it should.
2) Power theft

Is automatically passed on to tariffs without any real effort to reduce this situation that increases by 15% the country's power rates.

3) Demand Response

There is an official program since a couple of years ago. On paper. But it did not fly because it involved the power clearinghouse and therefore the commercial/industrial/institutional energy users would not dare to settle there (see item 1 above - delinquency). The end result is the country's "load factor" is way below what it should be and accordingly power prices (total bill cost divided by energy consumed) are way higher then our competitors

4) Feed in tariffs

PV solar energy that goes on roof top does not pay for using the grid's capacity (end of the day or cloudy skies). This cost is simply passed on to the "others" and is called a "subsidy".

5) Decisions about new power plants are not based on cost merit

If a competitive posture is there the country would choose according to competitive prices. Brazil has still great hydro potential, which is worldwide the cheapest cost in USD/MWh and also the most environmentally friendly according to international references. A lot of scams involving the 3 powers (legislative, executive, judiciary) were discovered by the Lava Jato investigations. The investments placed by official power companies were a lot higher than the market value and "conveniently" passed on to tariffs.

6) Official power companies are loosing money, always

The Brazilian people have to pay heavy taxes to compensate for these badly run companies who of course hire lots of "friends" for huge compensation packages with no parity with the private sector

7) The super complicated Brazilian system

The tax structure and all the associated requirements make the power business very difficult and expensive. Just to give you an example, a major USA power trading company asked me to consult for them and explore cooperation activities with local power traders. The USA trading company has 1/10 of the number of employees and 10 times the amount of USD transactions per year. The CEO of this USA company decided to drop any ideas regarding Brazil

The list goes on and on!

Brazil is very well know for its wonderful food, climate and women (not necessarily in this order!!!!!) but definitely not for a competitive, vigorous posture.

I hope this helps regarding you question at EC Please feel free to ask your questions about it writing or calling me!

Have a great week!

Rafael +55.11.99986 5563 (mobile/WhatsApp)

Dr. Amal Khashab's picture
Dr. Amal Khashab on Jul 23, 2020 8:49 pm GMT

That is great. Always there are ice mountains with narrow tips and huge hidden bodies.
Thanks for your elaboration.

Get Published - Build a Following

The Energy Central Power Industry Network is based on one core idea - power industry professionals helping each other and advancing the industry by sharing and learning from each other.

If you have an experience or insight to share or have learned something from a conference or seminar, your peers and colleagues on Energy Central want to hear about it. It's also easy to share a link to an article you've liked or an industry resource that you think would be helpful.

                 Learn more about posting on Energy Central »