Brazil estimated to need US$60bn to modernize electricity grid

Brazil needs investments of around 350bn reais (US$62bn) to modernize its power transmission and distribution grids, estimates Cyro Boccuzzi, managing partner of ECOEE, an engineering and consulting company focused on energy management and technology. 

The estimated capex for what he calls the “requalification of the grids” over a period of four years includes around 130bn reais to reinforce structures and modernize protection systems in the face of extreme weather events, which have been causing damage in large cities like São Paulo. 

Another 100bn reais is needed for flexibility services, provided by backup solutions such as batteries and reversible or thermal power plants, he says. 

In the area of smart meters and grids, Boccuzzi estimates 60bn reais are needed. 

For the optimization and integration of renewable generation (centralized and distributed) into the national grid, capex of approximately 40bn reais is required, he says. These contributions would go towards implementing more advanced control systems to improve the functioning of batteries and other storage systems and regulate intermittency.

In addition, the expert estimates that around 20bn reais would be needed to implement demand response programs for low-voltage consumers, rewarding those who reduce energy use at critical times. Today, there is an initiative of this type focused on large consumers (high voltage), which, however, have greater limitations in the long term due to impacts on production, in the case of industries, for example.    

Although he recognizes that additional investments could put further pressure on power rates, Boccuzzi argues that the contributions are necessary to preserve reasonable rates in the long term, in view of the expansion of intermittent sources and climate change.  

“Few remember that without the grid to connect all the new energy sources, we won't have the effect we expect. These are systemic needs, there's no escaping it,” he said, adding that Brazil is already being forced to make curtailments to regulate the dispatch of solar and wind generation. 

Boccuzzi said that in Florida, investments were made to reinforce the power grids in the face of stronger hurricanes.

“The hurricanes have increased in intensity, but the damage has been reduced. There’s knowledge and experience of best practices. It's not just a problem in Brazil,” he said. 

Boccuzzi said that burying the distribution grid is only recommended in situations when major urban works are carried out, through coordination between governments and electricity, telephone and water distribution companies. 

“If you leave it up to the power distribution utilities to invest, power rates will go up,” he said.  

These and other issues related to Brazil's electricity challenges will be debated at the 16th edition of the Latin American SmartGrid Forum, which takes place on October 28- 29 in São Paulo. The event, promoted by ECOEE, brings together authorities and the major players and suppliers in the electricity sector from various countries.

CONCESSIONS AND FREE MARKET

Boccuzzi believes that the option of extending energy distribution concessions in Brazil is important to prevent companies from reducing investments in the face of an uncertain future.

“Extending concessions will bring a certain amount of peace of mind for the financial market that finances the sector and for the distribution companies to pay for their investments,” he said. 

The consultant considers it essential to review the so-called legacy contracts of the concessionaires, which have historically purchased energy in watchdog Aneel’s auctions, to ensure that demand is met. However, the growing migration of customers to the free market and distributed generation have upset this balance. 

“We need to remove old contracts from the concessionaires. They will earn from the use of the cables [distribution infrastructure], not from the sale of energy, and will be remunerated by another model,” said the consultant.