Investors in the free power market — a segment in which it is possible to choose your supplier — have increased their participation in new generation projects. This group accounts for 83% of the total 45 gigawatts (GW) of power plants under construction and scheduled to start operating by 2026, according to a survey by the Brazilian Association of Power Trading Companies (Abraceel).

Of the total R$183 billion that will be allocated to new plants by 2025, R$152 billion are in the free market. Among the types of sources, the biggest highlights are solar photovoltaic and wind generation, with an 82% share of the projects.

The numbers raised by the association confirm a trend already observed at the beginning of the Covid-19 pandemic, when the expansion of the energy supply started to be driven by the free market. Until then, this was the “regulated market’s” role, formed by the distribution companies, in which the consumer cannot choose who will supply his electricity and the cost of power is defined in the annual tariff hikes.

With the economy shutting down in 2020, the drop in consumption and the increase in defaults led to the temporary suspension of auctions to hire new power plants to meet the demand of the distribution companies.

It was then that the free market took the leading role in the expansion. Its participation in new projects rose to 72% in 2021 from 34% at the beginning of 2020, as published by Valor in February last year.

The increase of 45 GW in generation capacity in five years will make the system more robust. Today, the country has 183 GW available, according to data from the Brazilian Electricity Regulatory Agency (Aneel). Of this total, 56.3% are from large hydroelectric plants, 24.6% comes from thermoelectric plants, 11.8%, from wind power, 3% from small hydroelectric power plants (PCHs), 2.7% from solar farms, and 1% from nuclear plants.

Although the new ventures reinforce the renewable character of the power generation mix, the predominant investment in wind and solar power farms challenges the planning and operation of the system to deal with the intermittency of the two sources.

There are power oscillations caused by the variation in the intensity of the winds and sunlight throughout the day. This does not happen with hydroelectric plants, also considered a “clean” source, and with thermoelectric plants, which emit polluting gases and are more expensive.

Luiz Barroso, former president of the Energy Research Company (EPE) and currently head of consultancy PSR, assesses that Brazil has the advantage of being able to integrate renewables at a lower cost than that observed in other countries. For this, he defends that it is necessary to use the “abundant availability” of hydroelectric plants with reservoirs as batteries, capable of conferring greater stability.

Mr. Barroso considers that the transmission system, formed by the large high-voltage grids that cross the country, allows the use of the “complementarity” factor between the sources distributed in the different regions.

About the challenge of increasing the participation of intermittent sources, Mauricio Tolmasquim, also a former EPE president, pointed out that the system needs “flexible” gas thermoelectric power plants, which are on hand to operate when necessary.

“The big problem is that a good part of the existing thermoelectric plants were contracted by the regulated market. So, in moments of bad hydrology [little rain], the operation cost of these thermoelectric plants, which is very high, falls only on the captive consumer, through the payment of the tariff flags,” said Mr. Tolmasquim, professor at the Energy Planning Program at research institute Coppe, Federal University of Rio de Janeiro.

Today, only large energy consumers — such as industries, shopping malls, and large retailers, which account for 35% of demand in the country — can go to the free market.

Congress is expected to approve this year Bill 414/21, which defines a schedule for opening the market. This would guarantee, within 42 months, the right to choose the energy supplier for residential consumers and small and medium-sized companies.

For Abraceel’s president Rodrigo Ferreira, the bill also foresees a “balanced division” of expenses with thermoelectric plants, which provide more security to the system, between the free and captive markets. He predicts that the greater access to the free market, followed by increased competition, will make power cheaper.

“Bill 414 is the structural overhaul that will actually reduce the price of energy in Brazil, by empowering the consumer. Any very short-term measure does not address this issue and, on the contrary, creates regulatory instability,” said Mr. Ferreira, referring to the recent threat by the Chamber of Deputies to suspend tariff increases above the 20% approved this year by Aneel.

Source: Valor International

https://valorinternational.globo.com