Economy
& Energy
Year IX -No
63:
August - September
2007
ISSN 1518-2932
No 63 Em Português
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Economy
& Energy |
Patrocínios: |
No 63 Em Português |
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Direct Impact of Nuclear Generation on GHE Gases Emissions in Brazil The bal_eec Program – User’s Manual Contained Carbon, Equivalent and Final Energy Auctions of New Energy: Vectors of Offer and Demand Crisis or Adjustment
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New Energy Auction: Vectors of Crisis or of Adjustment Berween Supply and Demand[1]
Nivalde J. de Castro[2] Daniel Bueno[3] Abstract The new power auctions set for July 2007 comprise two auctions of New Energy, in the A-3 (energy supply in 2010) and A-5 (2012) modes. These are the fourth and fifth auctions conducted by the MME since the beginning of the restructuring process of the Brazilian Electric Sector (SEB) in 2003. The use of auctions as a means of ensuring the energy supply expansion with low tariff is one of the fundamental bases of the current model. Data concerning undertaking offers for these next two auctions indicate predominance of non-renewable energy thermo power plants emitting GHE gases and with higher tariffs. The auction profile reflects the problems of an environmental legislation that has not yet been assimilated by society and the delay regarding studies of the hydroelectric potential of hydrological basins. Thus, the auctions are an important mechanism of adjustment between supply and demand in that it permits to incorporate to the energy matrix any type of energy to prevent crises like the "Blackout" Introduction Brazil structured an electrical sector with peculiar and unique characteristics as compared to other countries. The main differentiation factor is the predominance of hydroelectricity in its electric energy matrix, ensuring clean, renewable and cheaper energy relative to other energy sources. This feature gives comparative advantages to Brazil in a scenario of global instability and potential energy crisis but at the same time it imposes certain restrictions and attention regarding the dynamics of supply capacity expansion, mainly, among others, the need for higher investments, greater period of maturation, complex environmental studies and, therefore, an intrinsic need for long-term offer planning. Recently, some studies and articles, such as ENERGY ENTERPRISE COUNCIL (2006), TRANSPARENT ENERGY PROGRAM (2006) and DELFIM NETTO (2007, b) have shown with a certain insistence the possibility of a new supply crisis similar to the "Blackout Crisis" 2001-2002. The central assumption is the strong and consistent growth in electricity demand due to the GDP growth, in order to retake the "time lost" during the Blackout. However, the offer is not growing in the desired and necessary pace, an arithmetic average around 4,000 MW per year. This study aims at examining the possibility of a supply crisis, not based on statistical models, thereby avoiding probabilities parameters of complex behavior and modeling, particularly the rainfall indexes. The methodology chosen is that of scenarios, more qualitative, which also has its limitations and should be seriously considered by our readers. The analysis that follows is structured in three parts. It is the study of aggregated data concerning the two auctions of new energy-LEN - scheduled for July 2007, examining the aggregated composition separated by type and energy. In the second part the analysis is focused on the A-3 auction and the third part on the A-5 auction. In both cases we will try in particular to determine the causes and consequences of the composition of the offered undertakings by type of energy source, particularly thermoelectric energy. Finally, it is presented the conclusions that indicate the possibility of overcoming the crisis by adjusting the operation rules regarding the current model of the electricity sector. 1 – New Energy Auctions - aggregated analysis The Ministry of Mines and Energy prepares for July 2007 two auctions of Energy from New Undertakings. These are the fourth and fifth Auction of New Energy-LEN-made since the consolidation of the restructuring process of the electricity sector that was effected with the definition of the set of decrees signed in July 2004. This new legislation has given form to what can be called, according to CASTRO (2006), Model of Public-Private Strategic Partnership. This new model has as one of its main features the stimulus to the formation of partnerships and / or the division of private and state capital in the expansion process of the installed capacity of the Brazilian Electric System-SEB (see also Correia et al, 2005). The two auctions are scheduled in the A-3 and A-5 mode, namely the winners will have to start electric energy production in the years 2010 and 2012, respectively. These auctions are the conclusion of a long and complex planning task that included studies of the river basins potential, of hydroelectric plants, forecasts regarding electricity demand from studies made by the distribution companies and the government itself. The first instance environmental licensing is the last and decisive step in this long process, which ensures the inclusion (or not) of the undertakings in the LEN. From a set of studies and procedures a total of 106 power plants (hydro and thermo) were authorized by EPE and approved by ANEEL to be auctioned. These power plants total an offer of installed generating capacity equivalent to 16,022 MW for the A-3 (2010) and A-5 (2012) auctions. For an in-depth analysis of the undertakings put up for auction, it was necessary a cross section of the energy source composition. This information is relevant to the extent that it will indicate the energy vector that will have an impact on the energy matrix and consequently on the value of future tariffs. The results indicate that of a total of 106 plants registered, 61 undertakings use renewable energy sources, while 45 use non-renewable sources for power generation. According to the EPE, of the 61 renewable energy undertakings listed, 26 projects refer to hydraulic energy, 7 plants use wind power and 28 projects are for biomass. However, of the non-renewable sources undertakings 32 projects were approved for fuel oil and diesel thermal power plants. The EPE also listed 4 natural gas thermal projects, a low number that reflects limitation of access to natural gas by Petrobrás. Other 3 projects are bi-fuel (natural gas and diesel), 4 projects are coal fired. And two projects refer to coke thermal plants [4].[4] By comparing data of new undertakings from the perspective of installed generating capacity by type of source, one notes a reversal in relation to the current electric power matrix [5], since only 29.5% of the power plants using renewable energy sources - clean-energy - total 4,722 MW. In contrast, the non-renewable energy has a 70.5% share of the total, with 11,300 MW. All these data are consolidated and presented in Table 1.
Table n.º 1:
Source: GESEL- IE-UFRJ, based on EPE data What is notable in the supply potential composition is the presence and expressive majority of non-renewable energy to be generated by power plants that use as input diesel, coal, coke and to a lesser extent, natural gas. This predominance of non-renewable energy and more expensive power plants indicate a vector of growth that apparently is a cause for concern in two respects. The first regards environmental issues. These plants will increase the greenhouse effect, in contrast with hydroelectric plants that show significantly lower pollution levels, according to figures presented in a recent study by the European Commission (2007, p. 23) [6]. Accordingly, the predominant basis of hydroelectric energy ensures access to clean and less expensive energy. (See DELFIM NETTO 2007 to). The second aspect is the impact on the tariff. These two issues will be examined later. Another important analytical cross section regarding the present study is the distribution of undertakings between the A-3 and A-5 auctions, which will be object of analysis in the coming topics. For this purpose, it must be noted that there is a rule adopted by EPE in LEN: namely there is no impediment of an enterprise to be approved in A-3 and A-5 auctions. This rule was adopted because the amount of electrical power demand that will be negotiated in the LEN for the captive market (demand from distribution concessionaires) is only known by EPE. Thus, this procedure is intended to expand the supply of new power plants, seeking greater competitiveness in auctions, that is – low tariffs. Thus, a single plant can be listed in two auctions, and if it does not wins in the A-3 auction, it continues to compete in the A-5 one. Undertakings which have shorter duration for their construction are favored, that is thermoelectric plants and PCH's (small hydroelectric plants), wind power and biomass. For both auctions, 50 plants are listed, totaling 8,834 MW of installed capacity. 2 - The A-3 Auction -energy for 2010 About 91 undertakings were listed for LEN’s A-3 which means a total planned capacity of 12,078 MW to be supplied from 2010 on, as shown in Table No. 2. This amount is equivalent to about 75% of the total shown in Table 1, indicating a high concentration of supply for 2010. Of the 91 undertakings, 54 projects use renewable sources, while the other 37 power plants use non-renewable sources. However, in terms of source type, the renewable one represent only 37.1% of the total power listed by EPE, with 4,486 MW of the total planned capacity. Concerning the projects fueled by non-renewable sources they represent 62.9% of the capacity, namely 7593 MW.
Table nº. 2:
Source: GESEL- IE-UFRJ, based on EPE data Three points deserve emphasis in the examination of these data. The first one is that it was expected the largest composition in non-renewable generating plants, non-renewable and more expensive energy, due to the shorter time of start of operation, which favors the thermoelectric undertakings. The offer of 25 hydroelectric power plants with total capacity of 3,028 MW (average of 121 MW) indicates the opportunities for investment in PCH's, not only by the dynamics of auctions (figures for the most competitive MW) and construction time, but also the existence of increased financing capacity via the special BNDES credit lines and better conditions of the Brazilian capital market- debentures and FIDIC. (See BORGES & CASTRO, 2006). This is a recent and promising trend that positively affects the generating capacity expansion of electric power, energy matrix and low tariffs. The second point is the growth of biomass plants reversing the table presented in Proinfa, which failed to stimulate the renewable energy segment. Now, with the new internal and mainly external conditions regarding ethanol, the prospects for energy generation using biomass are much favorable, and this opens a new vector of supply growth with a more diversified matrix, corroborating the Brazilian differential in terms of renewable sources. The third point is the share of fuel oil and diesel thermo power plants that is the highest one in the A-3 LEN. This data reflects, in reality and foremost, the lack of alternatives for the generating capacity expansion in the short term, confirming the saying that it is better non renewable and expensive energy than no energy at all. The problems concerning expansion of electricity supply is due, basically, to two factors: First, the demand growth, which tends to be accentuated due to the Program for Growth Acceleration PAC (See CASTRO & BRANDÂO, 2007 a). Secondo, the imbalance determined by the insufficient production and significant industrial demand of natural gas. Here, the solution will only be possible by increasing NG supply from 2009 on through the production of new wells and the introduction of LNG in the Brazilian market. However, this is the critical aspect of the problem, because there is a current shortfall in supply, estimated to be about 4,000 MW, which will have to be met as the production increases in order to meet this repressed demand, according to the agreement reached between Petrobrás and Aneel. [7] .[5]
3 – The -A-5 auction -energy for 2012
In A-5
auction the composition by energy source has the same structure as that of
the LEN A-3, as shown in Table 2. Differences are due to the total number
of enterprises listed: 65, about 29% lower. This LEN A-5 composition
causes concern because renewable energy sources are only 29.7% of the
total power but they should be higher, since the deadline for start of
operation is more compatible with and appropriate for hydroelectric
undertakings. Finally, the decrease of biomass power plants share should not indicate a reversal of trend in that the LEN A-3 are more appropriate for this type of plant, since the construction time and the difficulty of predicting the market behavior of its primary product, namely sugar cane.
Table nº. 3:
Fonte: Elaboração do GESEL-IE-UFRJ, com dados da EPE The greatest concern in the composition of the LEN A-5 offer is the low participation of hydro power plants. In the case of an auction to supply energy only in 2012, it was expected a larger participation of this energy source. The data are disappointing and give rise to concern. The cause of this low share of UHE's (hydroelectric power plants) is the environmental legislation, which will be examined in a more systematic way in the next topic. As a result of the structure presented for the next two LEN, there is a reverse situation in the renewable energy and non-renewable ratio relative to the Brazilian electric power matrix, according to data in Table 4. Thus, the low offer of hydro power plants in the next two auctions is due to the reduced number of projects with inventories studies and integrated environmental assessment concluded. This problem is an inheritance, a liability, of the Pure Privatization Model. Another problem that has exacerbated the supply of hydroelectric power plants in the LEN is well defined and focused on the environmental issue. It is the slow pace of the Previous Environmental License issuance needed so that a hydroelectric power plant that has already completed the feasibility studies can be included in the auction. The most obvious and disturbing example of this type of restriction are the power plants of the Rio Madeira Complex. This environmental blocking can be examined and understood by two strands of problems. The first one is an environmental legislation that is still very diffuse and has not yet contributed to building up an environmental studies culture. However, there is a legal aspect namely to put the entire responsibility of the licensing studies on the technical expert that signs them, that generates a natural fear and consequently a delay in the final license.
Table n.º 4:
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