Brazil's electricity transmission sector facing a 'good challenge'

Auctions and upgrade works should attract investments of around 60bn reais (US$11.8bn) to Brazil’s electric power transmission market this year, according to the president of the local association of transmission companies (Abrate), Mário Miranda. 

In this interview with BNamericas, he analyzes the challenges for the sector, which is racing to keep up with the rapid expansion of renewable energy generation sources across in the country, as well as discussing the Linhão de Tucuruí project and energy storage proposed by ISA CTEEP. 

BNamericas: Today, in Brazil, there's a queue of renewable energy projects waiting for authorization to access the energy transmission system. What is Abrate's view on that?

Miranda: Energy planning considers the consumer's needs. Therefore, the energy distributors send the EPE [federal energy research company] their demands for market growth and the traditional planning is done from there. 

The transmission lines always ran parallel to this perspective, considering the expansion of the hydroelectric plants whose implementation deadlines were sufficient for the transmission grid to accompany the growth. 

However, the implementation deadlines for wind and solar plants are much shorter, giving the transmission grid less time to meet the requirements, while in the case of the free [non-regulated] market, energy planning no longer goes through the distributors. The traditional planning control is therefore bypassed in order to find out the need for the expansion of transmission. 

And, due to the legal incentives that were given, with the discounts of the TUST [tax of use of the transmission system] and TUSD [tax on the distribution system], the requests for the contracts for the utilization of the transmission grid have intensified. 

The point is that planning should not be done by those who intend to supply energy, but by those who have a contract. Otherwise, consumers will be paying for an expansion of transmission that may not materialize later. 

BNamericas: What are the prospects for growth and investments in the transmission segment?

Miranda: We have a good challenge ahead of us. The EPE is indicating that an intermediate auction will be held in October or November, in direct current. And this is right because the participants are distinct in this case. It will involve the line that will connect Graça Aranha in Maranhão to Silvânia in Goiás and then interconnect with Bahia. 

This way, we’re working with the probability of auctions that will attract investments of around 50bn reais [as two other auctions are scheduled for 2023]. 

In addition, there are the upgrade works, which are obligatory according to the concession contracts identified by the [national system operator] ONS. For example, if a distributor understands that it needs to expand the capacity of a substation, it’s up to the transmission company to do it. And there are the improvement works that must also be done. With this, we should reach close to 60bn reais in investments. 

These are challenging amounts. So, under the leadership of ISA-CTEEP and other energy transmission companies, a study was promoted to evaluate the capacity of the market to meet this challenge. We intend to present it to the MME [mines and energy ministry] soon. We’re waiting for the formation of the ministry's team to do this. 

BNamericas: Do you believe that the works on the Linhão do Tucuruí transmission line will advance, despite the indigenous issue?

Miranda: The works are already underway. The consortium formed by Alupar and Eletronorte is fully following up on the project. This is very important because Roraima is the last state in Brazil not connected to the SIN [national interconnected grid] and the new line will allow a drastic reduction in the expenses for fuel used in thermoelectric plants in the region, which are paid by all consumers through the CDE [energy development account]. 

BNamericas: Is it possible that Roraima will be supplied with electricity from Venezuela again via transmission lines now that the new Brazilian government is reestablishing diplomatic ties with the country?

Miranda: Energy exchange between the countries would be praiseworthy, as it translates into efficiency gains. We can exemplify that with the Brazilian case: Until the early 1970s, in Brazil, the southeast region was separate from the northeast, which in turn was separate from the north. 

So when there was an unfavorable hydrological situation in the São Francisco River basin, the northeast would collapse. Then, when there was integration to the north, the Tucuruí [hydro plant] helped reduce water shortages, and more recently renewable energy is flowing from the northeast to the southeast via Belo Monte. The more interconnection between regions, the more energy security you have. And the transmission lines are what provide this energy security. 

On the northern side of the Amazon River, above the equator, there is a different hydrological regime than in southeast Brazil. The rains start in May, so it’s a great source of hydroelectric supply. However, we already noted the difficulty that Venezuela had to supply Brazil with electric energy. If there's a recovery in Venezuela's hydroelectric park, the exchange of energy would be natural, as Brazil does with Argentina and Uruguay, for example. 

BNamericas: What are the main regulatory challenges ahead?

Miranda: We’ll present the MME with the main challenges and issues that the power transmission firms will face. We made a presentation to Aneel last October. 

Transmission was the latest concession segment, after generation and distribution. And it was decided to bet on investments by lots in auctions. This model has been successful. Lots of speculators were driven away. Those who are serious about this environment remained. 

We recommend that there should always be strict factors to admit investors – they have to be serious and not just win the auction lots. After that, it’s a 30-year marriage of service provision, with availability of the equipment. And we have an availability index of 99.9%, with a great culture of service provision. 

BNamericas: Last November, ISA CTEEP put into operation the first large-scale battery energy storage project in the Brazilian transmission system, on the southern coast of São Paulo state. Is this a trend in the transmission area?

Miranda: It is, yes. The MME is conducting a public consultation about ancillary services, and one of the possibilities is to store energy. 

We’re following the performance of the ISA-CTEEP project to verify whether this is another possibility to be offered for short- and long-term planning. 

Because it can happen that, in a dynamic environment, the correlation between supply and demand isn't kept to plan. 

ISA-CTEEP's project happened because of the vacation period [when there is a strong increase in energy consumption in the region]. It’s worth looking at this initiative to be able to include it as an economic variable and appropriate technical response.