Expansion plan for the coming years includes two bidding processes in 2024, with investments of R$24.7bn

01/11/2024

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Thiago Prado — Foto: Wenderson Araujo/Valor

Investments in new transmission lines could reach R$56.2 billion in the coming years. The estimate is part of the Transmission Expansion Program (PET) and the Long-Term Expansion Plan (PELP) for the second half of 2023, according to studies by the Energy Research Office (EPE), linked to the Ministry of Mines and Energy (MME). Of this total, R$24.7 billion are investments in assets that will be offered in the two transmission line auctions scheduled for this year, in March and September.

The new projects’ goals are to increase the flow margin of renewable generation to consumption centers, improve regional service in states, improve energy supply reliability in some regions, and provide solutions for overload.

Thiago Prado, president of EPE, told Valor that, together with the Brazilian Electricity Regulatory Agency (Aneel) and the MME, the company has been working to secure funding for projects with BNDES, in addition to assessing the industrial sector capacity to meet the demand expected to arise with the new projects.

Last year alone, R$37.5 billion in projects were contracted with the main purpose of expanding the transmission capacity of wind and solar energy generated in the Northeast region to supply consumption centers in the Southeast and South. The 2024 bidding processes will follow a similar logic. In the future, the sector will focus on the North of Brazil.

“Investments are well distributed among the Southeast/Central-West, Northeast, and South, with some R$15 billion to R$18 billion for the regions, which shows the distribution of construction work is leveled in terms of demand and supply. For the North region, we have submitted a proposal to the MME involving a work plan for transmission studies and the idea is to advance the Manaus and Boa Vista interconnections to increase reliability,” he said.

Mr. Prado added that the implementation of a new circuit in the North region will lead to a reduction in local thermal generation, which could substantially reduce tariffs. As a result, in the next planning cycle, the North region should receive more investments, according to him. Due to the environmental sensitivity of the areas, the studies are being discussed in collaboration with the federal environmental agency Ibama.

The study includes a new high voltage direct current (HVDC) line that will connect the Northeast to the South. The report should be completed in October, but the auction is expected to be held in 2025 or 2026, with operations starting in 72 months, according to him.

“Another question is the integration of hydrogen plants. Those are very large units using electrolysis and consuming 2 gigawatts (GW). We have a database of hydrogen projects; in the Northeast region the records total 30 GW,” he said.

Despite the outstanding figures, Mr. Prado is wary, noting that projects will not get off the drawing board without long-term contracts such as PPAs. Mr. Prado expects busy bidding processes with strong discounts in the future.

That is because transmission concessions are considered to be the safest in the electricity sector: it is a fully regulated market, in which the winner signs a 30-year contract adjusted to the benchmark inflation index and with no default risk. Those who manage to bring forward the necessary construction works also receive extra allowed annual revenues (RAP).

Georges Almeida, managing partner for Energy and Infrastructure at German consultancy Roland Berger, said that the sector has increased its capacity by some 80% over the last decade with auctions revealing consistency, competitiveness, strong discounts, and players with strong investment potential. In his opinion, the announcement of further investments to boost and increase capacity is a positive sign, since that is crucial for the sector in the short term.

On the other hand, he said there is still room to increase redundancy and alternative paths in case of failure at critical points. “Therefore, from a structural point of view, it is arguable to think the construction of more transmission lines will be the cure to bring the chances of major blackouts to zero, to say the least,” he said.

Edvaldo Santana, a former director at Aneel, said the transmission sector will have a leading role in the electricity sector. However, he highlighted the importance of Capacity Reserve Auctions, a mechanism used to ensure enough generation capacity to meet consumer demand in times of strong consumption growth in a short time frame.

“Plants that are capable of adding energy quickly, especially between 2 pm and 6 pm, when the load increases and, after 4 pm, when solar energy generation stops. In other words, not to add energy to the system, but to ensure reliability,” he added.

*Por Robson Rodrigues — São Paulo

Source: Valor International

https://valorinternational.globo.com/