Brazil - Electrical Power SystemsBrazil - Electrical Power Systems
Brazil is the largest electricity market in Latin America and the third largest in the Americas, behind only the United States and Canada.
According to the Brazilian Development Bank (BNDES), the Electrical Power Sector is expected to receive investments of approximately US$65 billion between 2015 and 2018. This estimate is based on the generation and transmission auctions that have already taken place, as well as studies conducted by the Brazilian Energy Planning Agency (EPE). The large majority of these investments are in generation (US$40 billion), of which US$18 billion are forecast for hydropower projects.
The estimated 2016 market for Brazil’s Electrical Power Systems Sector, which encompasses generation, transmission, and distribution (GTD) equipment, is projected to have reached US$5.5 billion and expected to grow three percent in 2017. Imports are estimated to have amounted to US$993 million in 2016, with about ten percent being from the United States.
Brazil’s electricity market is regulated by the National Electricity Agency (ANEEL), while the Ministry of Mines and Energy (MME) leads energy policy developments. ANEEL regulates public tenders for electricity sold to distribution utilities, sets tariffs for residential consumers in the regulated market, and is responsible for maintaining an economic balance that enables distributors to cover operating costs and recover an adequate return on investment. Meanwhile, a liberalized and unregulated system governs the trade of electricity between independent energy suppliers, and industrial consumers have the option of purchasing from the unregulated market.
Despite the long-standing goal of nationwide deployment, Brazil’s smart meter market has experienced a number of false starts and the regulatory environment has not developed favorably to drive deployment. In 2012, ANEEL approved a long-awaited resolution establishing requirements for smart meters, but the regulator limited the classes of consumers for the rollout. The smart grid market is still eagerly awaiting additional technical regulations from both ANEEL and Brazil’s lead standards body, INMETRO, that will finally kick-off deployment.
Brazil’s Energy Efficiency Program (EEP) mandates distribution utility spending in energy efficiency, requiring about US$250 million to be invested annually. Restrictive program requirements, however, have limited the effectiveness of spending, and the wider energy efficiency market in Brazil has been stifled by a high cost of capital for financing deals.
At the end of 2016, the National Electric Energy Regulator (ANEEL) recorded installed generating capacity of 151 gigawatts (GW), representing a nine GW expansion from 2015.
Renewable energy has long held a significant role in Brazil’s energy matrix, with hydropower as the overwhelmingly dominant source of power generation. Due to devastating droughts in the last five years, the government and energy regulators have set out on an ambitious plan to increase and diversify its energy mix, with goals to invest approximately US$235 billion and install 36 GW of hydropower, 12 GW of biomass, and 11 GW of wind over the following ten years.
Brazil has highlighted its intention to remain a clean energy leader by directing the matrix diversification towards other renewable energy sources such as wind and solar power rather than fossil fuels or nuclear.
Brazil’s energy matrix in 2016 shows the country still relying heavily on hydropower:
- Hydro: 65.1%
- Coal & Oil: 9.8%
- Biomass: 9.4%
- Natural Gas: 8.8%
- Wind: 5.4%
- Nuclear: 1.4%
- Solar: 0.01%
Brazil is credited as the first country to successfully hold reverse energy auctions, in which bidders submit lowest-cost bids in a blind auction. These auctions, which provide bidders three and five year terms to develop their projects, are conducted by the Electric Energy Trade Chamber (CEEE) on behalf of ANEEL and form the biggest source of energy generation contracting in Brazil. Reverse auctions are credited with contributing to increased competition and lower electricity prices in Brazil.
As well as ANEEL regulated auctions in Brazil, power purchase agreements (PPAs) are being negotiated on the fast growing spot market. The spot market is an unregulated space, where consumers negotiate PPAs directly with generators and traders. The spot market currently accounts for just under one third of total energy sold; some analysts posit that it will expand by 30 percent this year.
In December 2015, then-Minister of Mines and Energy (MME) Eduardo Braga launched a multi-agency distributed generation initiative (Pro-GD) that hoped to attract $25 billion in investment by 2030. This included the announcement of installing 2.7 million solar units to help increase Brazil’s non-hydropower renewables share from 13 to 23 percent by 2030. The initiative was expected to lower CO2 emissions by 29 million tons as to contribute to Brazil’s goals of cutting greenhouse gas emissions.
Transmission and Distribution (T&D)
Brazil now requires that projects involved in energy auctions prove that they have transmission lines secured prior to participating in the auctions. This will reduce the problems of delays associated with insufficient transmission infrastructure, while helping to drive the market for T&D equipment.
In addition to transmission shortages, poor energy efficiency and average electricity losses in excess of 15 percent also affect Brazil’s market. Challenges include aging transmission lines that lose efficiency as they deliver power over long distances and rampant electricity theft in segments of the distribution network. The Brazilian government recognizes the need to upgrade power sector infrastructure, but a lack of finance and an uncertain investment climate have made attracting investments difficult.
Brazil’s electricity needs and investment in large infrastructure projects through the 2013 period of economic growth have been important growth drivers for U.S. suppliers of grid modernization equipment and services. In 2013, U.S. T&D equipment exports to Brazil more than doubled to over US$94 million in revenue. Imports, however, dropped to resume modest growth in 2014 and decreased to $40.9 million in 2015.
Beginning with the Lula administration, Brazil set ambitious goals for its national smart grid deployment, but the market has been slow to develop. The smart grid regulatory and business environment has fallen short of expectations. Once the technical hurdles are overcome, the market expects significant investment in smart distribution solutions that can solve the problem of electricity theft. While the smart meter market is likely to be limited to an estimated US$500 million in the near-term, some of the larger, urban utilities with higher-income consumer footprints will require advanced smart grid solutions to a range of power management challenges.
Sustained opportunities for U.S. suppliers of GTD (Generation, Transmission and Distribution) infrastructure are expected in Brazil. U.S. exports of generation, transmission and distribution equipment have grown substantially in recent years and investment in Brazil’s power infrastructure will need to continue in order to meet projected future electricity demand, particularly in urban centers far from traditional hydropower sources.
In the power generation subsector, best sales prospect opportunities include supply of control and supervision equipment, rectifiers, converters, inverters, solar trackers, high efficiency solar panels, and energy storage solutions.
U.S. suppliers continue to find export success in Brazil’s T&D sector, where projects are continuing apace though economic and political issues pose a threat to future growth. Opportunities exist for transmission to connect areas of energy supply growth, with an emphasis on wind projects to growing demand centers. Transmission build-outs and solutions to ensure supply/demand balance show good potential in Brazil.
As the distributed generation and integration of new power sources moves forward, many Brazilian utilities will require more advanced power management solutions. Electricity delivery and demand side management solutions as smart grid deployments are expected to advance in 2017.
- EPE (Empresa de Pesquisas Energéticas)
- National Grid Operator (ONS)
- National Electrical Energy Agency
- Top Market Reports on Smart Grids
Key Local Trade Associations
- Brazilian Power Distribution Associaton (ABRADEE)
- Brazilian Power Transmission Association (ABRATE)
- Brazilian Power Generation Association
- Brazilian Association of Independent Power Producers
Key Trade Shows in Brazil
Key Trade Shows in the United States
The U.S. Commercial Service — Your Global Business Partner
With its network of offices across the United States and in more than 80 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting our site.
For more information about export opportunities in this sector, contact U.S. Commercial Service Industry Specialist: Igly.Serafim@trade.gov
Brazil Electricity Infrastructure Trade Development and Promotion