Branching out: Itaipu Binacional looks to innovation and diversification

Itaipu Binacional, the entity that operates the 14GW Brazil-Paraguay Itaipu hydroelectric plant, is investing in innovation and also exploring joint renewable energy initiatives with Brazil’s state oil firm Petrobras.

André Pepitone, CFO of Itaipu Binacional, talked to BNamericas about the company's initiatives on the sidelines of the Energyear 2025 event in São Paulo.

Pepitone, who is a former head of Brazil's electric power watchdog Aneel, also discussed regulatory matters.

BNamericas: What motivated the recent partnership between Itaipu Binacional and Petrobras?

Pepitone: We share a common vision with Petrobras for the development of clean and renewable energy sources.

We are interested in and have potential in the development of biogas, and we have potential related to SAF [sustainable aviation fuel], where through Itaipu Parquetec we have already developed initiatives.

In addition, we’re interested in developing solutions related to cybersecurity, among other topics, so we see several areas where we can explore together, gaining synergies with Petrobras.

BNamericas: What are the main operational and financial initiatives of Itaipu Binacional for this year?

Pepitone: Itaipu is a [power] plant that had its debt paid off during 2023.

So the company is now going through a process of innovation. It’s a company where the plant was built in the 1980s. Given that, we are going through a large shift from analog systems to digital systems.

We’re investing nearly 5bn reais [US$863mn] in innovation measures and about 2bn reais in retrofitting our facilities, which take Itaipu’s energy to an important consumption center, São Paulo.

We are keeping a close eye on new initiatives. 

We just completed a bidding process and will sign a contract in the coming days for the installation of a floating solar plant in Itaipu's reservoir.

We see this as a new area of operation for the plant, where we can generate solar energy in the reservoir, since we already have the energy transport infrastructure in place there at the plant.

This initiative is an activity that comes with the innovation focus the company needs to have.

We’re also closely studying the rules that Aneel is assessing regarding including reversible plants. We can be an important player in that sense as well.

BNamericas: Is the floating solar plant in Itaipu's reservoir a unique initiative?

Pepitone: This is a pilot project, and we plan to scale it up.

This project I’m referring to is precisely to allow our team to learn. But we have discussions among the company's board to do this on a larger scale.

Our agenda focused on ESG aspects continues to be robust overall. We have a sharp focus on innovation, while always being mindful of environmental and social issues.

BNamericas: Within this innovation agenda, what are the big transformations you see in the Brazilian electricity sector?

Pepitone: The electricity sector will go through a transformation similar to what the telecommunications sector went through in Brazil in recent years.

Today, electricity meters are hidden in people’s homes. People only think about them when an electricity company employee comes to read the consumption.

Now, with all this innovation happening, where smart meters are gaining traction, people will have real-time access to their energy consumption, and this will create a revolution.

People will have more access to pricing, rates, and at the same time, consumers can quickly opt for ways to reduce their consumption, opening up space for interaction between consumers and the electricity system that didn’t exist before.

BNamericas: What do you see as the priority for the regulatory agenda in 2025?

Pepitone: We have two super-relevant topics for the 2025 agenda.

The first is the renewal of distribution contracts. If we consider energy load and consumers served, almost 50% of the distribution segment will need to have their concession contracts renewed.

So, we need to work well from the perspective of public policy and regulation to determine what the new terms of these distribution contracts will be.

This will be necessary to ensure that all the innovation happening in the sector is incorporated, while also being careful to establish the rate model.

We need to allocate costs efficiently, and consumers also need to have a fair rate. 

The fair rate is not a cheap rate, but at the same time, it allows consumers to pay and gives the energy concessionaire fair remuneration for the investments it makes.

This is an extremely important regulatory discussion for this year due to the scope of these contracts, which need to be renewed in a short period.

BNamericas: And what is the second topic?

Pepitone: A big challenge the sector is facing right now is the issue of excess energy generation.

In the northeast region, an area well-suited with resources from sun and wind, many power plants have been installed, and now we need infrastructure and consumption for the energy that is being produced.

We had groups that made investments, leveraged and financed, and now have their monthly debt obligations.

However, the adoption of curtailment has been affecting the financial health of these investors, so this is now a big challenge that needs involvement from everyone to address solutions.

The impact of curtailment has been discussed by the renewables industry since last year, and there is still a lot of frustration from these generators because this problem has worsened.

For example, there are plants that have 400MW installed and, on a given day, 300MW are curtailed. This has a significant impact on the operational and financial equation for any venture.

We will need to look at the financial health of those who invest here and ensure fair and adequate remuneration. This is what brings legal and regulatory certainty to the country, continuing to lead foreign investments in the renewable sector.