the liberalization of the brazilian electricity system and its effects on the environment

ELECTRICITY LIBERALIZATION IN BRAZIL & ENVIRONMENT GRENELEM PROJECT - WP 1 Santiago de Chile, 10-11th September 2001

The liberalization of the Brazilian electricity system and its effects on the environment

Ivan Dionysio Aronne – [email protected] Maria Feliciano Jacomino – [email protected]

Comissão Nacional de Energia Nuclear - CNEN

Centro de Desenvolvimento da Tecnologia Nuclear - CDTNBelo Horizonte, MG

Brazil


The Electricity Generation in Brazil

Option for the Hydro



Hydro Electric Capacity Installed in Brazil



Hydro Electric Potential in Brazil

1999 2004 2009

For considerable part of the projects the cost of electricity is cheaper than those of other options.



Hydro Electric Potential in Brazil

For considerable part of the projects the cost of electricity is cheaper than those of other options.



The Hydro and the Electric Systems



The Hydro ConditionsThe system was planned to go through 5 dry years



335.580,70 21.007,30

59.627,60 6.129,50

If we consider just the interconnected system this effect is even more explicit.

The share of energy generated by the thermal PP is lower than their capacity share.

Thermal Power has played a complementary role.


The Electricity Sector Organization before Liberalization

MINES AND ENERGY MINISTRY: formulated the national energetic polices

NATIONAL DEPARTMENT OF WATER AND ELECTRIC POWER (DNAEE): acted as regulator of the sectorial activities

ELETROBRÁS-Centrais Elétricas Brasileiras S.A: a Federal Holding company. It was responsible for the execution of the electric energy government policies

ELETROBRÁS, as holding of federal companies and utilities, actuated together with state companies through several committees and polices

-Manual of studies of environmental effects of the electric systems

-Plan for protection and improvement of the environment in the works and services of the electric sector (i PDMA):

-Advisory committee of environment of ELETROBRÁS (CCMA):

-Coordinating committee environment activities of the electric sector (COMASE)



BUNDLED SYSTEM (Generation – Transmission - Distribution)

ELETROBRÁS AS HOLDING OF FEDERAL COMPANIES AND UTILITIES ACTUATED TOGETHER WITH STATE

COMPANIESIN

PLANNINGFINANCING

CONSTRUCTIONOPERATION


The Liberalization

This restructuring was undertaken with the following objectives:

• to increase the competition;

• to guarantee the efficiency of the system;

• to motivate new investments, above all private;

• to assure the improvement of the quality of the services;

• to provide fairer prices to the consumer;

• to implement the diversification of the electricity generating matrix,

as well as,

· to privatize the generating (15%) and distributing companies of

electricity (75%);

· to reduce the State participation in the electricity market, and

· to produce a cash flow for the government.


The Liberalization

- Dismembering large and bundled state power companies;- Privatization of the electric power sector;-The introduction of a competitive market;-The introduction of large-scale thermal generation into a

hydro-dominated matrix;-Incentives for cogeneration programs, small hydro stations,

distributed generation and alternative energy;-The gradual opening of the gas and petroleum sectors to

competition;


The Electricity Sector Organization after Liberalization

COUNCIL & SENATE

STATESTATEAGENCIESAGENCIES

MMAMMACONAMACONAMA

PROCONSPROCONS((ConsumersConsumers

Protection BodyProtection Body))

CONSUMERSCONSUMERSBOARDBOARD

SDESDECADE - SEAECADE - SEAE

PRESIDENCYPRESIDENCY

ConsumersConsumers

CNPE/MMECNPE/MME SEN - MMESEN - MME

ANEELANEELANPANP

GG

MAE ONS

BNDES PLANNING AGENT P&D

TT

DD

CC

Electric Sector - Institucional Structure

Policy

Regulation &Fiscalization

Market

InstitutionalAgents


The Environmental Legislation in Brazil

Attention, Alert and Emergency Pollutants Concentration Levels POLLUTANTS CONCENTRATION LEVELS, g/m3 ATTENTIVE ALERT EMERGENCY Sulfur Dioxide (SO2) - 24h average 800 1,600 2,100 Total Suspended Particulates (TSP) - 24h average 375 625 875 SO2 x TSP (both in g/m3) - 24h average (65,000) (261,000) (393,000) Carbon Monoxide (CO) - 8h average 17,000* 34,000** 46,000*** Ozone - 1h average 400 800 1,000 Inhalable Particulates (PM-10) - 24h average 250 420 500 Smog - 24h average 250 420 500 Nitrogen Dioxide (NO2) - 1h average 1,130 2,260 3,000

*15 ppm; ** 30 ppm; *** 40 ppm. Source: Resolução CONAMA No. 003, 28.06.90.


The Environmental Legislation in Brazil

AREAS TOTAL PARTICULATE

CALORIMETRIC DENSITY,

%

SULFUR DIOXIDE

g/106 kcal

g/kWh g/106 kcal

g/kWh

Areas Class II and Class III

120 for fuel oil800 for mineral

coal

0.103 for fuel oil0.69 for mineral coal

max. 20 2,000 1.72

Areas Class I Installation of new stationary sources of this size not allowed


Environmental Impacts of Fossil PP in Brazil

EXTERNALITIES FROM A GAS PLANT

0,00

0,02

0,04

0,06

0,08

0,10

0,12

0,14

0,16

Cuiabá

PLANT

US

ce

nts

/kW

h

mortality ppp Brazil

morbidity ppp Brazil

Crops

EXTERNALITIES FROM FUEL OIL PLANTS

-5

0

5

10

15

20

25

Ale

gret

e

Cam

pos

Car

ioba

Igar

apé

Nut

epa

Pira

tinin

ga

San

ta C

ruz

São

Ger

aldo

PLANTS

US

ce

nts

/kW

h



Crops

EXTERNALITIES FROM COAL PLANTS

0

1

2

3

4

5

6

7

8

P.M

édic

i

Cha

rque

adas

Figu

eira

Jorg

e La

cerd

a

São

Jer

ônim

o

PLANTS

US

ce

nts

/kW

h



Crops


Status and Immediate Consequences of Liberalization in Brazil

Privatization: 15% of Generators and 75% of Distribution

Organizations already defined but regulamentation still needs improvements and changes

Investors have spent most financial resources in privatization instead of in expansion

This evolution associated with a drought lead to a electricity supply crises where it was established a goal of 20% reduction in the consumption.


Status and Immediate Consequences of Liberalization in Brazil

Scenarios for Rationing Constraint Levels in Regions SE e NE Impacts Units 5.0% 10.0% 15.0% 20.0% 25.0%

Billions R$ -3.65 -7.30 -10.95 -14.60 -18.25

% related to previous

scenario (*)

-0.4 -0.7 -1.1 -1.5 -1.9 GDP

% 3.1 2.8 2.4 2.0 1.6 Jobs Thousand

Positions -214 -428 -642 -856 -1071

Productivity % -0.4 -0.8 -1.1 -1.5 -1.9 Costs % 0.4 0.8 1.1 1.5 1.9

Commercial Balance

Billions US$ -0.4 -0.8 -1.2 -1.6 -2.0

Billions R$ -1.6 -3.3 -4.9 -6.6 -8.2 TAX

% -1.1 -2.3 -3.4 -4.5 -5.7 Billions R$ -0.8 -1.0 -1.6 -2.1 -2.6

GOODS TAX % -1.0 -1.3 -1.9 -2.5 -3.2


Liberalization and Environment in Brazil

The liberalization of the electricity sector was not accompanied by big changes in the related environmental polices and legislation, except by the new regulation concerning the use of water, which introduced the following main ideas impacting the hydroelectricity generation:

payer-polluter, watershed management with local committees, pay for the use of the water.

COGENERATION



1. ECONOMY X FINANCE: The private investor is risk averse,. The immediate consequence of this change is that the hydro and nuclear projects are not competitive with the gas option under this criterion. In relation to the environment the impacts will change their nature from a no significant atmospheric emission scenario to one with Greenhouse gases (CO2 and CH4) and NOxx emissions.

2. STATE X PRIVATE COMPANIES: The former agents of the electricity system were government companies which were subjected to the political and social pressures leading to a higher commitment with the social environment issues, going in some cases beyond the raw limits of the legislation. On the other hand the private companies are committed with the profitability to the shareholders and limit their actions in the environment protection to attend the legislation.



Brazil is moving from

a green electricity country to an

atmospheric pollutant electricity one

the liberalization of the brazilian electricity system and its effects on the environment

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