Transcript The Current Status and Short Term Evolution of the Brazilian Power Sector: A Focus on Thermal Generation Expansion Xisto Vieira Filho Regulatory Affairs &

The Current Status and Short Term Evolution of the
Brazilian Power Sector:
A Focus on Thermal Generation Expansion
Xisto Vieira Filho
Regulatory Affairs & Planning
March, 2002
THE CURRENT STATUS OF THE BRAZILIAN POWER SECTOR:
A FOCUS ON THERMAL GENERATION EXPANSION
(1) PRESENT SITUATION
Total Generation
and Supply
Hydro
65821 MW
(88.4%)
Thermal
65.821 MW
74.412 MW
6.983 MW
Coal
Oil
Natural
Gas
Nuclear
1415 MW
(2.0%)
1862 MW
(2.5%)
1740 MW
(2.3%)
1966 MW
(2.6%)
Others
1.608 MW
1608 MW
(2.2%)
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(2) SHORT TERM/MEDIUM TERM POLICY FOR GENERATION
EXPANSION:
• Need to reduce strong dependence from hydrological conditions.
A bad “hydrological year”.
Difficulties to supply energy demand.
• Hydro potential to be explored still high.
 new hydro plants more and more distant from
main load centers.
 strong transmission requirements.
 environmental problems.
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• new hydro plants are adding smaller reservoir
capacity (storage capacity).
STORAGE CAPACITY BEHAVIOUR:
Storage Capacity / (Load - Thermal Capacity)
30
25
20
15
10
5
0
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
1973
1972
1971
1970
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26/11/2001
04/10/2001
12/08/2001
20/06/2001
28/04/2001
06/03/2001
12/01/2001
20/11/2000
28/09/2000
06/08/2000
14/06/2000
22/04/2000
29/02/2000
07/01/2000
15/11/1999
23/09/1999
01/08/1999
09/06/1999
17/04/1999
23/02/1999
01/01/1999
FURNAS RESERVOIR: ANNUAL INSTEAD OF
PLURI-ANNUAL REGULARIZATION
UHE FURNAS
Reservoir Level (% )
80
70
60
50
40
30
20
10
0
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“INSURANCE” AGAINST
CRITICAL
HYDROLOGICAL PERIODS
Storage
Capacity
OR
Thermal
Generation
 Being continuously reduced
 New Hydro Plants aggregate
small storage capacity (most
are run-of-river plants)
 Construction problems
“Need
for
thermal
Generation to Complement
the Predominantly Hydro
System”.
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ADOPTED STRATEGY:
• to develop a Priority Thermal Program (PPT) based
on gas-fired thermal plants.
• private investments.
• to continue hydro expansion, but incentivating
adequate thermal complementation.
Aggregated Energy to the Interconnected System (MW):

PPT plants (under construction)
(MW)
6.000
Hydro plants
5.000
3.448
4.090
4.000
3.000
2.829
1.693
2486
2.000
894
844
799
491
353
554
2004
2005
2001
554
962
1.261
2002
2003
1.000
0
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WHAT ARE THE DIFFICULTIES FOR THERMAL GENERATION
AGENTS?
• Power Sector Model IS based on competition in G.
•large state-owned G’s were not privatized.
•market for short term transactions is not working yet.
•market for long term transactions with difficulties –
uncertainties due to “Initial Contracts”.
•small amount of free consumers.
• Regulatory uncertainties.
•several present rules not “market oriented”.
•a strong concern of the Regulatory Agency to avoid
higher tariffs for captive consumers – short term basis.
•changes in rules (mainly during rationing).
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• Gas supply.
•gas price.
•take or pay and ship or pay contracts for a
predominantly hydro system.
•pipelines development and open access.
Government decided to prepare new measures to overcome
these difficulties and to enhance the competitive model.
• Government has established 1 TF for each one of the measures:
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(3) MAIN COMMENTS ABOUT THE MEASURES TO ENHANCE THE
SECTOR MODEL – PERSPECTIVES TO GAS FIRED THERMAL
GENERATION:
• The two big issues to solve:
•Market
Short Term Market
Medium / Long Term Market
•Gas supply
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(3.1) MAIN POINTS ABOUT THE SHORT TERM MARKET:
(a) THE WHOLESALE ENERGY MARKET (MAE) STRUCTURE:
PROBLEM: • MAE not working.
• DISCO’s and GENCO’s would seldom agree about measures/rules.
• a difficult and heavy structure.
PROPOSED
SOLUTION: • a light structure.
• rules established by ANEEL, after public hearings.
• 3 out of 5 Directors indicated by the Government.
• Arbitrage chamber established to avoid “external disputes”.
COMMENTS: • Still with a considerable intervention.
• Scheduled period for the intervention = 1 year.
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(b) SPOT PRICES:
PROBLEM: • determined by NEWAVE package.
• results strongly dependent on short term hydrological condition forecasts.
• results depend also on the perception of ANEEL and ONS about the
generation plan and about load behaviour.
•Computer Package should not be used to establish PRICES.
PROPOSED
SOLUTION: • to improve the computer package on a temporary basis.
• to implement an offer x demand system based on price (instead of cost)
declarations.
COMMENTS: • It is one of the most important measures – PRICES MUST BE FORMED
BY MARKET PERCEPTIONS.
• An actual development to the market.
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• Two different schemes to form prices:
Pspot
Computer Package
• perceptions of “official entities”.
Technical Parameters:
• hydrological conditions.
• new G evolution.
• maintainance program.
• load forescasts.
Pspot
Market
• different perceptions of each agent.
• Technical parameters.
• Estimation of other agents’ behavior.
• Estimation of Regulation evolution.
• Estimation of Macroeconomic Aspects.
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• Example: The influence of short term estimation of NEI (Natural Energy Inflow)
SE-CW Submarket
160.00
137.7
Current Storage Level 64%
140.00
Storage Level 30%
120.00
90.4
100.00
80.00
Price
(R$/MWh)
60.00
67.4
49.0
35.6
40.00
18.9
20.00
15.3
12.9
9.8
7.3
32.4
6.0
25.7
4.8
19.9
4.0
0.00
60%
70%
80%
90%
100% 110%
120% 130%
NEI Forecast (% Long Term Average)
• Price volatility with no market perceptions considered.
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(3.2) MAIN POINTS ABOUT THE LONG TERM MARKET:
(a) A GENERATION PRICE CAP ESTABLISHED FOR PASSTHROUGH
TO FINAL CONSUMERS:
~
PPA at a price p
~
~
T
DISCO
Pmax that a DISCO can pass through to its
captive consumers (based on VN).
Final Consumers (Captive)
• one typical spread sheet with data from an “average project”.
• VN considered not atractive to private investors.
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COMMENTS:
• VN avoids or minimizes possibilities of G competition in the long term market.
• 1 only VN for all the range of projects does not cover adequately several projects.
•VN x competitive market
free consumers.
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(b) INCENTIVES TO FREE CONSUMERS:
• Actual Competition in Generation:
Will only take place if a considerable part of the consumers are free.
• Free Consumers:
 less regulatory “constraints” dictated by ANEEL.
 possibility to actually choose their suppliers.
 currently
for PD 3MW.
 apparent protection given by ANEEL to captive consumers.
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• Measures that will be analyzed:
 to gradually reduce requirement to become free (PD 1 MW).
 establish tariffs to consumers that may become free and remain captive as
Max VN; Pspot
Other Examples of Incentives
 to allow free consumers to negotiate their required reliability (different prices).
 to allow free consumers to return to the status of captive consumers whenever
they want
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(c) REVISION OF THE AMOUNT OF ENERGY HYDRO GENERATORS
CAN SELL IN THE LONG TERM MARKET:
System Assured
Energy (AE).
• Energy that hydro plants can trade in the
long term market.
• Confidence level of 95%.
• Planning criterion: RD = 5%.
AE1
AE2
•
•
•
AE3
AE for each hydro plant
for a period of 5 years.
• works like a nameplate of
energy for hydro plants.
 Over estimated.
 Rationing occurred for conditions better than the 5% region of Risk
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To improve the issue of AE:
 A complete revision in the methodology.
 Thermal plants must be considered adequately in the methodology.
 Constraints must also be considered.
• Navigation.
• Environment.
• Security volume to avoid flood.
Very important measure to ensure the competitiveness of thermal generators.
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(3.3) MAIN ISSUES ABOUT GAS SUPPLY AND THERMAL PLANTS:
(a) CURRENT SITUATION OF GAS SUPPLY:
Bolivian Gas
National Gas
GT1
GT2
~
~•
•
•
Argentinean Gas
GTN
Thermal Plants
of PPT
~
• PPT = 15.000 MW.
• Gas Requirements for
PPT = 69 MMm3/day.
(until 2005)
CURRENT SUPPLY SITUATION
SUPPLY FROM
AMOUNT OF SUPPLY (MMm3/day)
BOLÍVIA
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ARGENTINE
2
BRAZIL
25
TOTAL
44
CONSTRAINTS
• Pipeline Capacity.
• Pipeline Capacity.
• Pipeline Capacity.
• Production.
30 MM m3/day for internal consumption.
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(b) WHAT IS NEEDED TO ENHANCE THE EXPANSION OF NG
THERMAL PLANTS:
(b.1) TO INCREASE THE PIPELINE CAPACITY:
Open Season for new capacity in the Existing Pipelines.
• Schedule for the end of June.
•PETROBRÁS will not be allowed to acquire more than 40%
of the new capacity
only if there are not other candidates.
• Compression stations and loops, basically.
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CURRENT PIPELINE STRUCTURE IN BRAZIL:
Coari
Fortaleza
Urucu
Pipelines: 8.071 km
Transpetro: 2.397 km
Bolívia-Brasil (in Brazil): 2.583 km
Salvador
Cáceres
Cuiabá
North Segment:
South Segment:
1.418 km
1.165 km
Rio Grande
Corumbá
Guararema
In Operation
Under Constrution
Refineries
UPGNs
Capitals
Paulínia
Campos Basin
Santos Basin
Uruguaiana
Uruguaiana-Porto Alegre: 615 km
Segment 1:
25 km
Segment 2:
565 km
Segment 3:
25 km
P. Alegre
Lateral Cuiabá (in Brazil): 267 km
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(b.2) HOW TO CONSIDER THE DISPATCH OF NG THERMAL
PLANTS IN THE BRAZILIAN PREDOMINANTLY HYDRO
POWER SYSTEM:
BRAZILIAN PREDOMINANTLY
HYDRO SYSTEM
GH1
GH2
~
~•
~G
~• G
~
~G
•
•
GHN
T1
T2
•
•
Tj
• system centrally dispatched.
• tight pool approach.
• ONS performs an optimization
process for dispatch.
OBJECTIVE FUNCTION
 to maximize overall available energy.
 to minimize the probability of spillage.
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 NG Thermal Plants Contracts.
• take or pay.
• ship or pay
NG GT DECLARATION
Totally Inflexible
Totally Flexible at a certain
variable cost.
FLEXIBILITY LEVEL DECLARATION TO ONS
CONSEQUENCES
• dispatched for any spot price.
• Increase spillage risks for hydro generators.
• dispatched only if declared cost < spot price.
• predominantly wet and “average” years.
• increase risk of flaring gas.
• A NEW PARADIGM NEEDED.
• TIGHT POOL
LOOSE POOL OFFER X DEMAND
PRICING SYSTEM.
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• The influence of creating/incentivating a “secondary market” for gas:
 New Trading Arrangements.
• industry.
• major free consumers of potential gas.
 Other types of use for gas.
• usage in cities.
• vehicle.
 Increase of storage capacity.
 “Green Taxes” for poluent fuels.
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(c) IMPROVEMENTS IN REGULATION:
 Unbundling of exploration, transportation in gas supply.
 Expansion of transportation structure and open access with adequate
pricing system.
 Taxes for gas must be re-analysed.
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 Gas price
GAS
PRICE
(US$/MMBTU)
COMMODITY
TRANSPORTATION
TOTAL
NATIONAL
2.04
0.25
2.29*
IMPORTED
1.57
1.6588
3.3488**
PPT Plants
___
___
2.581**
A MEASURE UNDER ANALYSIS:
TO SUBSIDIZE PART OF THE GAS PRICE FOR THERMAL PLANTS OF THE PPT.
Note:*In accordance with the administrative rule MF/MME 03/2000
** ANP Source
***In accordance with the administrative rule MF/MME 176/2001
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(3) CONCLUSIONS:
• A re-structuring process now happening in the Brazilian power sector.
• Importance of including NG Thermal Plants in the country’s Energy Matrix.
• Some challenges for enhancing the competitive model:
• State-owned G companies privatization.
• To minimize Government influence in the market.
• To incentivate consumers to be free.
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• Regulatory rules for the power sector
 to be improved.
 rules not to be changed.
A Recent Example:
RULES CONCERNING SPOT PRICESWERE CHANGED SEVERAL
TIMES DURING RATIONING
SPOT PRICE REDUCTION.
IT CAN BE PROVED THAT REGULATORY INTERVENTION IN THE
MARKET TO KEEP PRICES LOW LEADS TO FUTURE DEFICITS IN
GENERATION CAPACITY (RATIONING AND BLACKOUTS).
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 The need to improve gas supply and gas regulation.
 Need to change paradigms in a predominantly hydro system, with the
inclusion of NG Thermal Plants.
 Need to move from tight pool operation to loose pool.
Competitive process in the Brazilian system
will be improved during this year.
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