feasibility of ami and smart grid in brazil - lessons learned - botelho chowdhury- final

“Brazilian Utility - Lessons Learned from Smart Grid Strategy and Business Case”Speakers: Ricardo Botelho – CEO, Energisa SAJohn Chowdhury – Utility Innovation

About the Speaker: Ricardo Botelho

• Chief Executive Officer and Member of Executive Board at Energisa S.A. since April 2008. A utility company with $1.4B USD in revenue with five different distribution companies in four states. He serves as the Vice Chairman of the Board of Directors of Energipe, SAELPA, CELB, Companhia Energetica da Borborema‐CELB and Energisa. – Mr. Botelho served as the Chief Executive Officer of Nova América S.A. – He serves as the Chairman of the Board of Cat‐Leo Cise. – He served as an Engineer at GTE Laboratories, and GTE Communications

Products ‐ Tempe, in Arizona (USA). – He served as the Development Team Chief ... of Micron Technology ‐

Signal Processing Group, Arizona (USA).

About the Speaker: John Chowdhury• Utility Innovation Practice

25‐year consulting career working with electric utility and telecom businesses to increase performance (including several years in Brazil and Latin America)

– Advised US/international energy entities on Smart Grid/AMI/distribution automation; business case development; CRM and telecom/wireless networks

– Architected first Smart Grid solution at Houston‐based CenterPoint Energy and first Smart Grid city in Brazil

– MBA – University of Texas at Dallas; BSBA/MIS – Tulsa University

Professional Background • Author and Frequent Speaker • Director and Vice President ‐ KEMA/DEKRA• Energy and Utilities Leader – North America – IBMGlobal Services

• President and CTO – NetKnowledge Technologies• Senior Manager ‐ Ernst & Young & Price WaterhouseUtility Consulting

Memberships• UTC Smart Networks Board Member• Advisor to Tulsa University Masters ofEnergy Program

• GridWise Architecture Council• IEEE‐Power Engineering Society• Advisor to National Rural ElectricAssociation ‐ TechAdvantage

• Utility Innovation Council – Board Member

Agenda

Energisa – Company BackgroundEnergisa – Company Background

Smart Grid Trends – Around the worldSmart Grid Trends – Around the world

Feasibility of Smart Grid in Brasil – Our findingsFeasibility of Smart Grid in Brasil – Our findings

Conclusion – What’s NextConclusion – What’s Next

Grupo Energisa 107 years old public traded investor owned utility

Distrib. PCH’s Eólicas Termelétricas

Total Energy Distributed – 8,708 GWh

Total Consumers : 2,453,410

# Substations/capacity (MVA): 141 / 2,573

HV Lines (69/138kV/230kV) (km): 4,231

MV and LV distribution lines (22/13.8/11. 4/ 0.38/0.22kV) (km): 123,355

Net revenues - US$ Million : 1,366

Yearly Investment US$ million = 165

2011 Distribution – 5 utilities

Operating SHP plants/capacity: (4)/ 35 MW

Under construction SHP (2013): (1)/8MW

Developing SHP plants (2017): (3)/50 MW

Operating Biomass Cogens plants/capacity: (2)/60 MW

Developing Biomass Cogens plants/capacity (2016): (2)/110MW

Wind Park under construction (2013): 150MW

Developing Wind Park (2017): 90 MW

Expected Total Energy production (operating and construction)- 2013: 532 GWh/year

Total Energy production (developing) 2016-2017: 361 GWh/year

Total Investment (2012-2017) : US$ 572 million

Renewable Generation Portfolio

Consol. Net Revenue US$ Milion: 1.448,6

Consolidated EBITDA US$ Million: 331,3

Net Income US$ Million : 126,6

2011 Consolidated Financial Highlights

O&M and Trading Services

Largest Independent O&M Service Operator of Hydroplants: 130 units

Total capacity under contract: 8,704 MW

Specialized eletrical contractor services for Industrial clients and utilities

Construction/Maintenance of Substations and Transmission lines

Net revenues US$ Million –36.4

Wholesale Electricity Traded– 78 MW avg

45 clients among largest industrial/commercial clients

Net Revenues – US$ Million – 63.4

O&

MTr

adin

g

Energisa Growth History in numbers

166 192233 259 279 313

1.9792.067

2.1672.253 2.338

2.453

2006 2007 2008 2009 2010 2011Rural Consumers Total Number Consumers

Total number of Consumers (000)

106.312113.502

121.344

134.357140.557 145.369

2.643 2.693 2.7362.930 3.054 3.181

2006 2007 2.008 2009 2010 2011

Distribution Transformers (Qty and Installed Capacity MVA)

Quantity Capacity Installed MV/LV (MVA)

1.931 2.042 2.187 2.353 2.593 2.765

6.966 7.280 7.629 7.8788.474 8.70996,8 98,0

100,7 104,2

110,5 113,3

2006 2007 2008 2009 2010 2011Residential Consumption (GWh) Total Energy Distributed (GWh)KWh/residential consumer/mo

Total Energy Distributed -Avg Residential Consumption/month

100,0 105,8 109,9 116,1121,6 123,4

57 55 57 57 59 59

20 20 20 19 19 20

2006 2007 2008 2009 2010 2011MV/LV lines (km ́ 000) MWh/Km Consumer/Km

MV/LV Lines Extension and Consumer/power density

Growth rate 4.4% p.a

Growth rate 6.5% p.a

Growth rate: 4.3% p.a

Growth Rate: 4.6% p.a

Growth Rate: 7.4% p.a

Energisa Performance Indicators

9,3% 8,9% 8,2% 8,2% 8,2% 8,3%

5,3% 5,5% 5,2% 4,8% 4,3% 2,8%

14,6% 14,5%13,4% 13,0% 12,5%

11,2%

16,7% 17,0% 17,0%

18,3%17,8%

2006 2007 2008 2009 2010 2011

Total Energy Losses Energisa vs Brazil average

Line Losses Commercial Losses

Brazil Avg

31,0 24,5 26,3

31,7

23,7 22,6

14,0 15,6 15,7 16,513,9 13,8

27,0 27,0 26,2 25,4 23,6

22,2 25,3 24,7 23,9 22,4

19,6 17,2

2006 2007 2008 2009 2010 2011

Energisa Target SAIDI/SAIFI (*) vs Actuals

SAIDI (hours) SAIFI (#) Target SAIDI Target SAIFI

266 284333 338 338 371

422 431478 494

Average 340

A B C D E F G H I ENERGISA

Consumer/Workforce employed vs Comparable IOUs

Companies Peer Group Avg (2010)

76,8 76,8 77,479,9

77,3 76,7

2006 2007 2008 2009 2010 2011

ABRADEE Customer Satisfaction Survey

EPB EBO ESE EMG ENF Brazil Average

Agenda





Smart Grid – Around The world

• Energy Efficiency• Operational Efficiencies• Improve Reliability• Renewable Integration

• Energy Efficiency• Operational Efficiencies• Improve Reliability• Renewable Integration • Energy Efficiency

• Operational Efficiencies• Improve Reliability• Improve Customer Service• Renewable Integration

• Energy Efficiency• Operational Efficiencies• Improve Reliability• Improve Customer Service• Renewable Integration

• Developing Intellectual property• Reducing usage by 10 percent• Lowering the average annual blackout

minutes per household from 15 minutes to nine

• Reduce line loss to 3 percent.• Capture 30 % of renewables• Create 50,000 annual jobs• US$43 billion in avoided energy imports • $3 billion in avoided power generation

costs.

• Developing Intellectual property• Reducing usage by 10 percent• Lowering the average annual blackout

minutes per household from 15 minutes to nine

• Reduce line loss to 3 percent.• Capture 30 % of renewables• Create 50,000 annual jobs• US$43 billion in avoided energy imports • $3 billion in avoided power generation

costs. • Ecological rationale is not a factor• Energy Efficiency• Develop Distributed Generation• Deploy 280 million smart meters by

2016. • Major generators and substations to be

equipped with smart sensors

• Ecological rationale is not a factor• Energy Efficiency• Develop Distributed Generation• Deploy 280 million smart meters by

2016. • Major generators and substations to be

equipped with smart sensors

• Vision 20-20-20• Smart grid efforts are a specific part of

a low carbon agenda • Sweden is the first country in the world

to hit 100-percent penetration for smart meters

• Vision 20-20-20• Smart grid efforts are a specific part of

a low carbon agenda • Sweden is the first country in the world

to hit 100-percent penetration for smart meters

South Korea

Australia

Europe and UK

China

USA

Smart Grid –Investment by Government in 2010

China is the leader in both categories, with $7.3 billion total investment, or $1,400 per $US million of GDP. As China builds out its modern grid to accommodate extraordinarily rapid growth

US Smart Grid Progress - Govt. Stimulus and Using Cost recovery methods

Observations

PGE Duke Con EdMost Often Used

Least Often Used

Comments

Trackers

Good means for focused recovery in lieu of full rate case process;

saves time; limits utility exposure with large unknowns

Balancing Accounts /Rate Base

Links these programs to normal rate case filing process

Customer Surcharge

Marginal Cost approach; Texas, Michigan, e.g. suggested

approach

State FundingCan be a Long Process would

require legislative action

Case Study Trend

Cost Recovery fall into one of the following categories regardless of state jurisdiction:

Cost Recovery fall into one of the following categories regardless of state jurisdiction:

Trackers: A mechanism that follows or “tracks” unpredictable costs that the utility incurs. Typically, trackers are determined at the end of the year and then recovered over a 12-month period.

Balancing Accounts/Rate Base: A balancing account is an accounting procedure developed by a utility commission to track and recover reasonable and prudent costs unrecovered through retail bills due to the application of applicable rate freezes or ceilings.

Customer Surcharge: A mechanism that has no standard statutory definition, but typically is a charge defined by the governing utility commission and imposed on customers to recover utility expenses.

State Funding: It varies state-by-state, but this approach includes funding for projects provided from existing or newly created state accounts.

Agenda





Sustentability Trilemma for the investor owned utilitybusiness in Brazil: Social Economic Sustentability

Taxes and several Tariff

Charges

45%Generationand Grid

Costs

31%

Distribution

24%

Resource allocation of Brazilian utility bill (2011)

19,813 8,7 7,8 7,1 8,5 7,1 5,8 5,5 4,5 4,3 3,7 3,9 2,7 2

35,6

31,9

26,1 25,7 25,1 23,0 22,922,5 21,5 21,518,8 18,018,0 17,8

11,68,9 7,2

5,1 5,0

Dan

em

ark

Ge

rman

y

No

rway

Ital

y

Swe

de

n

Bra

zil

Ch

ile

Ho

lan

d

Port

uga

l

Spai

n

UK

Pola

nd

Turk

ey

Fin

lan

d

USA

Russ

ia

Ch

ina

Arg

en

tina

Ind

ia

Average Residential Electricity Rate (US$c/KWh, 2010)

Taxes and other Rate Charges Total Rate

ENERGISA Retail Electricity Rates - 2011 (1US$ = 1,67 R$ )Segments US$c/KWh R$c/KWh

Residential 29,80 49,91Low Income residential (subsidized) 14,98 25,09

Industrial 19,96 33,44Commercial 27,41 45,91Rural 14,66 24,55Other segments 18,44 30,89Total 22,70 38,02

Year: 2011 Residencial Baixa RendaAverage Residential Monthly Bill (US$) 46,32 11,08Avg. Yearly Resid. Consumption (KWh) 1.359 889

• High growth markets needs to be bankable - i.e generate sufficient margins to meet growing investment needs;

• Pressure from regulator to lower rates to consumers by reducing the utility operators distribution margins are not sustainable in a long term;

• Regulator wants more reliability but doesn´t provided adequate economic signals;

• Utilities are compelled to increase efficiency and asset utilization with better service delivered in order to sustain profitability.

Sustentability Trilemma for the investorowned utility business in Brazil: InvestmentSustentability

1st 2nd Rate Case Cycle 3rd Rate Case Cycle

14.1

12.6

21.7

14.8

2007 2008 2009 2010 2011 2012 2013 2014 2015

Energisa Distribution Utilities ROCE and EBIT margins

ROCE (%) EBIT margin (%)

82.939

115.123

9.133

27.142

2.007

3.412

15.499

25.461

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Projected Installed Capacity by energy source (MW) PDE-2011 (2010-2020) - source:EPE

Hydros Other Renewables Nuclear Fossil Fuel Plants

• Brazil has one of the cleanestenergy supply matrix in theWorld – 82% renewable non-nuclear

• Challenge is to introducereliable renewable sources costeffectively for the long term(SHP, biomass, wind and solar)

Sustentability Trilemma for the investor owned utility business in Brazil: Environmentally Sustentable

Timeline

Smart Utility - Energisa

2008 2009 20112010 2012

AMI Largest Clients

Roadmap Smart Grid Business

Case

RoadmapUtility

Management Systems

ExpansionAutomatedReclosures

Pilot Case: Smart

Substation

Pilot Case: Self

Healing

Substitutionof SCADA

Substitutionof GIS

Pilot Case: Current

FaultIndicators

ReviewSmart GridBusiness

Case

Workforce AutomationSIGOD / LIS

AMR Pilot

Investments (USD Million) 2008 2009 2010 2011 2012 TOTAL

Distribution Investments 174,20 246,98 229,01 147,6 183,8 981,52 Smart Utility Investment 2,13 2,37 2,19 2,92 10,61 20,22 Percentage 1,2% 1,0% 1,0% 2,0% 5,8% 2,1%

Pathways to Smart Utility - Energisa

Our motivations and needs for a Smart Grid deployment and towards a Smart Utility are different than in USA and Europe;

USA/Europe: aging infrastructure, promote energyefficiency and lower CO2 footprint, tech & innovativeindustry drive Brasil : opt-in meter replacement (REN-502/12), continuous pressure to improve reliability and efficiencyand reduce commercial losses within a declining shareof the rates.

Our hurdles: High deployment costs and not perceivable positive NPV yet Low consumption per capita base Cost recovery mechanism that doesn´t burden consumers or investors anddeliveries benefits in short term No Time of Use rates for LV retail customers still not effective Lack of local manufacturing base or trained personnel Reliable telecom network for wireless data not available in rural and smaller t


-83%

AMI – Project Cost (full deployment at Energisa ) – from 2009 Business Case:

AMI – Main Benefits evaluated:

Results Investment :

623 Feeders

2,4 Millions

Meters

U$ 565 Million

Negative NPV in:

(U$ 467 Million)

Negative IRR in:

(8,51%)

57.0%

28.0%

10.0% 3.0%INVESTMENTS (%)

Meters

Shielding

Implementation

TI/Telecom

60.6%

22.5%

7.7%9.2%

BENEFITS (%)

Non Technical Losses

Reactive Energy

AMR+remote C&D

Others


Reduction of Commercial Losses – sometimes thesolution is simpler than we think!

Commercial Losses higher than US$ 180/residential customer/ year in higher concentrated commercial loss feeders utilize simplified smart meter (AMI)

Commercial losses lower than US$ 180/residential customers/year in dispersed areas utilize low cost alternatives of electronic meters with shielded cables and meter borne – Energisa patented : DLCB Energisa

Chastity Belt (DLCB )


Distribution Automation

Projects with NPV positive based on our 2009 business case: More stringent quality requirements and cost constraints Focus is to reduce penalties and improve reliability with add on Opex

Several Pilots currently being tested Smart Substation Current Fault Indicators Self Healing

Our Roadmap of Smart Utility also points to PoC in several other areas:DMS/OMSFault Detection isolation and restoration (FDIR) Volt-VAR optimization Treatment of large amount of Data Power Quality Management


Distributed Generation:

Very low penetration of Distributed Generation

In April 2012 federal regulator released rule REN 482/2012 introducing net metering scheme for DG and provided for the first time mechanism to introduce micro-mini generation (<1 MW) with net-metering. Surplus produced beyond consumption can be credited and used in 36 months. Parity to grid in some locations but economics are not favorable for mass deployment without subsidies.

With TOU and other liberalized movements on energy trading, DG could be potential disruptive business model for traditional utilities

Impact of Smart Grid in the Operating Environment

Pro

ject

M

anag

emen

tBu

sine

ss C

hang

eM

anag

emen

tC

ut-o

ver

Man

agem

ent

Syst

ems

Inte

grat

ion

Busi

ness

In

tellig

ence

Dat

a S

ervi

ceIn

tegr

atio

n S

ervi

ces

Tran

sfor

mat

ion

Serv

ices

IS In

frast

ruct

ure

Man

agem

ent

Oth

er S

ervi

ces

Telecom Planning &Operations

CustomerService

Demand Response Management

Customer Relationship Management

Metering and Billing Service Management

Network Planning Network Solutions & Planning

Network Management

Meter Data Management

Work Management

DistributionManagementSCADA Distribution Management Outage Management

InfrastructureSmart Home Infrastructure (Smart Thermostat, Load Control Devices, Gateways.)

AMI Infrastructure(Smart Meter, Data Concentrators, AMI head end)

SMART Grid Infrastructure (Sensors, Grid Control Devices, Grid head end)

Con

sulti

ng

(Roa

dmap

, St

rate

gy)

App

licat

ion

Dev

elop

men

t &

Mai

nten

ance

NetworkCommunications

Home Area Network (HAN) Local Area Network (LAN)

Wide Area Network (WAN) (Wireless, Fiber & Substation)

Customer Portal Management

Credit and Revenue Protection

DataCenter

Management

Data Center Communications / Failover

Cloud Management Storage Management

Secu

rity,

Sta

ndar

ds &

Inte

rope

rabi

lity

Smart Grid Requires Resilient Communications Systems - CTO’s Approach One multi-purpose Communications network to avoid the implementation of multiple single-purpose

networks A Communications network that can grow as functional requirements change and technology evolve Incorporating commercially available, non-proprietary solutions allowing for future-proofing against today’s

investments cycles and technology obsolescence timeliness Leverage industry standards thereby lowering the overall cost to implement and support Create capacity and infrastructure for secure and fault tolerant requirements

• Low Latency Network• QoS at the core layer• Secure and

Fault Tolerant

Utility Network

Innovation

Control & Protection Network

Control & Protection Network

Utility Operations Network- Data Center

- Voice, Video and Data

Utility Operations Network- Data Center

- Voice, Video and Data

Smart Grid Automation

Network

Smart Grid Automation

Network

• Comprehensive Coverage • Multi-protocol• Scalable and Future Proof

• Resilient Data Center Network

• QoS at the core layer• Secure and

Fault Tolerant

* DUKE Energy CTO Speech, 2010‐2011

Telecom Alternatives Considered

24

Wireless Option Application Pro ConRF Mesh: Bit rate up to 1 Mbps,

variable range, variable frequency

Smart meters, distribution

automation

Able to be customized for specific

deployments, self‐organizing, self‐

healing

Proprietary, lack economies of

scale, equipment can be expensive

GPRS: Bit rate at 20‐200 kbps,

frequency 700 MHz to 2.1 GHz

Smart meters (AMI), mobile work

force management

Able to leverage existing networks,

low upfront capital investment,

short time‐to‐market, low module

cost

Recurring cost per megabyte, lack

of direct utility control over

network

PLC and Broadband Over Power

Lines (BPL): Bit rate at 48 kbps to

10 Mbps, variable range, frequency

at 1.6 to 80 MHz electric carrier

Substations, smart meters,

monitoring/ control at customer

premise, distribution automation

Robust capabilities, integrated

communications throughout grid

and home area network

environments, low recurring costs

High capital costs, expensive chips

and equipment, not widely

adopted

WiMAX: Bit rate up to 3 Mbps,

range of 10‐15 miles, frequency

700 MHz to 2.3‐3.5 GHz

Smart meters, mobile work force

management, distribution

automation

Robust capabilities, integrated

communications throughout grid.

High bandwidth capabilities, low

latency

High equipment cost and initial

build out cost.

VSAT: Bit rate 14 Kbps‐1Mbps, Smart meters, mobile work force

management, distribution

automation

Low‐cost equipment, ubiquitous,

low latency

High latency for DA and limited

growth potential

Agenda





What’s Next- EnergisaProjects to be initiated in 2013 - 2015:

Our View of theFuture

1. Conclude upgrading Utility Management Systems as prescribed in our RoadMapPower Quality managementDigitalization: Protection and AutomationOMS / DMS Modelling Dispatch

1. Conclude upgrading Utility Management Systems as prescribed in our RoadMapPower Quality managementDigitalization: Protection and AutomationOMS / DMS Modelling Dispatch

3 . DG pilot case – handling distributed resources andotimizing dispach of DG solar power

3 . DG pilot case – handling distributed resources andotimizing dispach of DG solar power

4 . Evaluate low cost SG meters – REN-502/12 complaint4 . Evaluate low cost SG meters – REN-502/12 complaint

2 . Study on handling massive amount of data – BIG DATA analytics handling, storage and integrity

2 . Study on handling massive amount of data – BIG DATA analytics handling, storage and integrity

Thank you!Ricardo Botelho

[email protected]

John [email protected]

+1 214-213-6226