Equatorial Energia: 'We will be a major provider of infrastructure for 5G'

Equatorial Energia ranks among the most diversified power groups in Brazil, operating in six states – Alagoas, Amapá, Maranhão, Pará, Piauí and Rio Grande do Sul – and serving over 10mn clients in the distribution segment.

In July, Equatorial, which operates in the transmission, distributed generation, clean energy and distribution areas, will make its debut in sanitation, following its acquisition of Amapá’s state water and sanitation utility CSA.

To handle the current and new business fronts, the company is accelerating the automation of processes and stepping up innovation among its 20,000 employees, Marcelo Fernandes, Equatorial Energia’s digital and innovation head, tells BNamericas.

The company also envisions a new revenue stream as a fiber provider to telcos and ISPs, Fernandes said.

In this interview, the executive talks about all that and Equatorial’s investments in cloud, smart grids, private networks and digital twins, among others.

BNamericas: What is Grupo Equatorial Energia doing in digital transformation? What are the priority areas and technologies?

Fernandes: Innovation and digital transformation are part of the holding's strategic planning. It was out of this that our area created strategic and support objectives in technology and innovation.

The strategic objectives related to innovation are basically three: to create solutions to improve operational indicators, consolidate the company's brand and expand the services portfolio.

This strategy permeates all the businesses of the Equatorial group. Not just [electric power] distribution.

Obviously, distribution is the core business, with the highest revenue. But we are a multi-service company, with renewable energy generation, distributed generation, transmission. We are equally in telecommunications [with the Equatorial Telecom unit], among others. Now in July, for example, we’ll launch our sanitation operation.

Innovation for the Equatorial group is not an area, but a business survival necessity. And this year we’ll step it up, spreading the culture of innovation across the organization.

BNamericas: How can these digital and innovation objectives be detailed? For example, what’s the focus on the operational part?

Fernandes: To improve performance by reducing costs, obviously, avoiding unnecessary expenses related to overtime, interest, fines.

But innovation and digital transformation help sustain the group's growth. We are growing a lot, buying companies. We recently bought the power distribution concession in Rio Grande do Sul, CEE, the concession in Amapá, also the sanitation company in Amapá. We recently acquired Echoenergia in renewables.

Process automation helps with all of this. We have more than 80 robots in robotic process automation [RPA] format on several fronts, in addition to other well-built and structuring automation initiatives that we’re developing and are in the testing phase.

By the way, we didn't fire anyone on this journey. Automation doesn’t replace anyone. When we automate a specific, repetitive function within an area, the professional who used to take care of it starts to perform another, complementary function within that area, further improving operational rates.

BNamericas: Going specifically into technology, what is the cloud strategy? Who are your suppliers?

Fernandes: We have some Microsoft Azure services, some more technical infrastructure things in AWS.

We’ve had a lot of conversations with Google regarding Google Cloud Platform. A few weeks ago we were at the Google office in São Paulo to get to know the tools better. Soon we’ll make another visit to delve deeper into the matter.

In the digital channels, we rely on IBM Watson, which is also cloud.

A part of our digital channels is on premise. Another is in the cloud, supported by dedicated machines, depending on the type of application.

In short, it’s a hybrid and multi-cloud model. The Equatorial group doesn’t plan to migrate everything to the cloud or a single platform.

BNamericas: How are the smart grids and smart metering processes advancing?

Fernandes: We recently had a meeting with Abradee [the Brazilian association of power distributors] to better discuss the topic of smart metering. Because the concept is rather... vague. [Power regulator] Aneel even asked the distributors what they consider smart metering is exactly.

But we have almost 500,000 meters with remote communication. These are meters able to remotely perform the cutting off [of power service], its reconnection, and reading [of consumption].

BNamericas: And they represent how much of the total meter base?

Fernandes: 500,000 out of 10mn meters. This percentage is still small. It’s not a big base yet. In part because our strategy has been to use them in areas where non-technical power loss rates are higher.

BNamericas: In areas where tampering and fraud rates are higher?

Fernandes: Exactly. To prevent the customer from having access to the meter. The vast majority of these meters are in what we call a centralized measurement system: boxes that stay on top of poles and concentrate all the electronics.

So I “take down” to the customer only the consumption display.

Consequently, by reducing losses, I’m able to improve collection in these places.

Within those 500,000, we also have about 5,000 meters in a more advanced concept of smart metering.

These include information on electrical quantities of current, of voltage. I can know exactly and almost instantly the type of consumption. I can offer more analytical services, guidance on consumption. This is a newer plan under the strategic planning agenda.

BNamericas: What is part of the plan? Expanding that more advanced metering base?

Fernandes: Yes. It’s an R&D project [approved] by Aneel, which is now going to its third phase, and executed in partnership with us by Nepen [Núcleo de Estudos e Pesquisas do Nordeste].

We developed the communication modem, a meter data collector [MDC], and the software that connects to this modem [MDM].

The idea is that the three components have a minimum of interoperability, so that I can install them on meters from different manufacturers, such as Nansein, Landis, Elektra, etc.

This is also associated with a telecom master plan by Equatorial group.

BNamericas: What is this master plan?

Fernandes: We got funding from the USTDA and hired the [wireless global solutions] company CelPlan to do this plan. 

Will our network be LoRa? Private LTE, 4G, 5G? This is the telecom master plan. We're working on it.

BNamericas: What is it pointing to? Is there a priority technology?

Fernandes: Our master plan points to a mix of technologies, depending on the location and application. In many places we'll go with LoRa, for example, in others we’ll tend to go with satellite.

Furthermore, we in the Equatorial group will most likely have a private LTE network.

Our telecom arm, Equatorial Telecom, is responsible for conducting all this, because it has an anchor contract with the other companies in the group.

BNamericas: For private LTE, is the strategy to have spectrum and a private network license within [telecom regulator] Anatel or to partner with operators?

Fernandes: We’re discussing if we’re going to become a kind of virtual operator, renting infrastructure from other companies, or if we’re going to have our own frequency spectrum, which implies higher costs and duties, together with Anatel. We’re discussing which is the best model for the group.

BNamericas: When would you decide on this?

Fernandes: I would say that over the next two years this should be well defined.

And we’re also eyeing the opening of the free energy market, because this will also leverage the use of smart metering.

BNamericas: In what way?

Fernandes: Every customer who’s connected to the free market basically already has a smart meter. And over the next few years, the expected power reduction [from high voltage to low-voltage] of customers who can migrate to the free market will boost this metering base.

But we want to take it easy with this roll-out of smart meters within our strategic plan.

BNamericas: Why?

Fernandes: Because if we go with a strong roll-out, with a very large investment, especially in smart meters that have a shorter lifecycle, we might raise the rates for customers. Something we don't want to do. 

We operate in many municipalities that have some of the lowest HDIs [human development indexes] in Brazil.

That means our investment in smart metering has to be more “surgical.” And that's what our master plan is suggesting.

But almost 100% of our substations, for example, are already automated. 

All my circuits are monitored, have automatic opening, integrated monitoring, all seen by our operations center. We have a very strong level of network automation, right down to the substation. What we’re advancing now in the smart grid is in the rest of the network, along the networks.

BNamericas: How about 5G?

Fernandes: 5G, due to the lower latency, should help a lot in the self-healing part of the company's equipment. 

Equatorial will not be an operator, but we will be a major provider of infrastructure for 5G.

We have many kilometers of optical fiber deployed in our concession areas, in our sub-transmission and distribution lines.

BNamericas: Do you want to be a neutral fiber connectivity supplier then?

Fernandes: That's right. We’re going to be an infrastructure provider so that 5G works at the edge, for those who won the tenders, for the telcos, the ISPs.

BNamericas: What is Equatorial doing on digital twins?

Fernandes: We've already done two pilots, on two different fronts. One was for the construction of networks and substations, for high voltage works.

We did a pilot, and from that we’re evaluating two proposals from two different suppliers to roll out and incorporate that into our routine. We’ve seen that there are important advantages of having the digital twin for building a substation.

Another pilot, carried out last year, was aimed at the vegetation management in our network.

We operate in areas with large vegetation cover. It is our biggest challenge, perhaps the main cause of lack of energy. So we created a virtual replica to identify our georeferenced network and vegetation using satellite imagery. A triangulated image of three different satellites.

We designed this project in partnership with BCG [Boston Consulting Group], a consultancy that is helping us with strategic planning.

The virtual twin pilot was carried out in an area of 100km of grids and demonstrated a very good accuracy for visualizing the vegetation in our network. We’re studying the roll-out of that as well.

BNamericas: Finally, how much have you invested and intend to invest in technology?

Fernandes: I cannot give future guidance. We have two sources of funding. One is the Aneel R&D program and the other is the capex of the group itself. 

In the last years we’ve been investing 40mn reais [about US$8mn] annually in R&D resources from the Aneel program. In the last seven years, the Equatorial group has invested 205mn reais in R&D, innovation, and digital transformation projects. 

Another 18mn reais in the last three years, in digital transformation, came from our own capex.