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The Sectorial Institutions

The Brazilian electricity sector is currently structured in several organizations, each with its responsibility to meet the various obligations related to electric energy. The main institutions of this important sector focused on the country’s development are listed below.
The Ministry of Mines and Energy (MME) is the agency that represents the Union as the Granting Authority and it is responsible for conducting the country’s energy policies. Its main obligations include formulating and implementing policies for the energy sector, in accordance with the guidelines established by the National Energy Policy Council (CNPE).

The CNPE is a agency chaired by the Minister of State for Mines and Energy, with the function of advising the Presidency of the Republic on the formulation of energy policies and guidelines that ensure the supply of energy inputs throughout the national territory.

The National Electric Energy Agency (ANEEL) is an autonomous entity under a special regime linked to the Ministry of Mines and Energy, whose responsibility is to regulate the Brazilian electric sector, as well as oversee the activities of production, transmission, distribution and commercialization of electric energy. ANEEL ensures the quality of services rendered, including establishing tariffs for final consumers with economic and financial balance of agents, as well as the promotion of auctions for the contracting of electric energy for the regulated environment.

The National Electric System Operator – ONS is the agent responsible for operating, supervising and controlling the electric power generation in the National Integrated System – SIN and also for managing the basic electric power transmission network in Brazil. The ONS coordinates compliance with the load requirements, cost optimization and reliability assurance of the SIN.

The Electric Energy Trading Chamber – CCEE is responsible for the operationalization and clearence of the electricity market in the SIN, acting under authorization from the Granting Authority and ANEEL’s regulation and inspection. The CCEE makes possible the purchase and sale of energy in all sub-markets, highlighting the activities of accounting and financial settlement for agents, implementation and disclosure of trading rules and the calculation and disclosure of the Settlement Price of Differences (Preço de Liquidação de Diferenças).

The Energy Research Company – EPE is an state institution linked to the MME, with the responsibility of providing services in the area of studies and research aimed at subsidizing the planning of the energy sector, especially those related to the Brazilian energy matrix, expansion planning generation and transmission of electricity, as well as the technical-economic and socio-environmental feasibility of electric power projects.
The Electric Sector Monitoring Council (CMSE) is a body coordinated by the MME and has the purpose of monitoring and evaluating the continuity and security of electricity supply throughout the country.

It should be noted that the Sector is governed by specific laws and regulations constituted by laws, decrees, resolutions of ANEEL, resolutions of the CNPE, ordinances of the MME, among others.

The National Interconnected System – SIN

The SIN comprises a complex dedicated to the production and transmission of electric energy, characterized as a hydrothermal system with predominance of hydroelectric plants. In recent years, however, the strong expansion of wind power generation has increased the importance of this source to the market.

The SIN is constituted by four subsystems: South, Southeast / Center-West, Northeast and North. According to the ONS, the interconnection of these subsystems facilitates the transfer of energy, allowing the achievement of synergistic gains and exploitation of diversity between basin hydrological regimes. The integration of the generation and transmission resources allows the market to be attended safely and economically.

Generation Capacity

The total installed capacity in Brazil in September 2017 is 154 Gigawatts (GW) of installed capacity produced by approximately 4,700 projects in operation, according to information from ANEEL. In the coming years, 24 additional GW are expected to be added in the country’s generation capacity, coming from about 250 projects under construction, in addition to more than 500 projects with construction not yet started.

For the projects in operation, 65% of the installed power comes from hydroelectric plants, with almost 4% coming from Small Hydroelectric Plants – PCHs and Hydropower Generation Plants – CGH. Thermal power plants account for 28% of installed capacity, while wind power plants account for 7%.

In the Ten Year Energy Expansion Plan – PDE 2026, as made available in a public consultation by EPE, the results of sectoral planning studies are presented for the 10-year horizon, with emphasis on the expected expansion of the SIN 64.1 GW, with half of this increase occurring through the expansion of biomass, wind and solar sources. Regarding the transmission of electricity, PDE 2026 foresees an increase of 62 thousand km in transmission lines, and an increase of 199 GVA in transfering capacity.

Electricity Consumption in Brazil

According to PDE 2026, total electricity consumption in Brazil will jump from 516 TWh in 2016 to 741 TWh in 2026, indicating an average annual growth of 3.7%. This increase in consumption is based on forecasts of economic and population growth, as well as factors related to energy efficiency.

Accordingly, consumption in the residential class network corresponding to 28.9% of participation in 2016 is expected to increase to 29.7% in 2026, with an average growth of 3.9% per year. The commercial class is also expected to grow 3.9% annually in the same period. The industrial class tends to grow relatively less, about 2.9% per year. The agricultural sector is expected to increase its share of consumption from 16.3% to 17.0% in the same period.

Regarding the energy load in the SIN, the PDE 2026 forecasts an increase from the average 64,636 MW of 2016 to 91,160 average MW in 2026, resulting in a 3.5% annual average consumption increase. The Southeast / Center-West subsystem is expected to grow by 3.2% per year during the aforementioned 10-year period, jumping from 37,752 MW to 51,640 average MW by 2026.

Energy Market in Brazil

The current sectoral model, implemented in 2004, is the result of an improvement of the Brazilian Electricity Sector Restructuring Project – RE-SEB Project, started in 1998.

The commercialization of electricity has been divided into two negotiation environments: the Regulated Contracting Environment (ACR), composed of agents of generation and distribution of energy, and the Free Contracting Environment (ACL), with generators, importers and exporters, in addition to free and special consumers.

The adjustment between contracted volumes and measured energy volumes is carried out in the so-called short-term market of the CCEE, or market of differences, which uses the PLD (spot Price) to price the energy.

The energy auctions carried out by CCEE, by delegation of ANEEL, use the lowest tariff criterion, aiming at reducing the cost of acquisition by distributors of electric energy to be passed on to captive consumers.

Furthermore, Laws 10,847 and 10,848, dated March 15, 2004, and Decree No. 5,163, dated July 30, 2004, determine the contracting of the total energy demand by distributors and free consumers, the calculation of the ballast for sale of generation, the contracting of hydroelectric and thermoelectric plants in order to ensure the best balance between guarantee and cost of supply, as well as the permanent monitoring of security of supply.

Concessions

The concession agreements for electricity transmission and distribution services define the rules, rights and obligations regarding tariff, regularity, continuity, security, penalties and quality of services and the service provided to consumers. The concession contracts for generation services also define the rules, rights and obligations of some of these matters, as applicable to the respective concession.

Generation concessions are currently granted through a bidding procedure for up to 35 years, and may be extended once, as the case may be and the provisions of Laws 8,987 / 95 and 9,074 / 95.

In addition to the Concessions Law, electric power concessionaires must also comply with the regulations issued by ANEEL and MME.

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