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The Brazilian Electricity Market:
Achievements and Challenges
The Brazilian Electricity Market:
Achievements and Challenges
8th APEx Annual ConferenceColombia
October 2003Colombia
October 2003
Celso Zanatto Jr.Superintendence of Market Studies
Celso Zanatto Jr.Superintendence of Market Studies
Historical View Historical View
The Brazilian Electricity Market The Brazilian Electricity Market
General and Regulatory Features General and Regulatory Features
Challenges Challenges
OutlineOutline
The Brazilian Power Industry The Brazilian Power Industry
Closing Remarks Closing Remarks
Achievements Achievements
ANEEL – Institucional Roles ANEEL – Institucional Roles
The Brazilian Power IndustryThe Brazilian Power Industry
Interconnected systemLong transmission linksHydro dominationPlants in cascadeHigh demand growth rateLong-term hydro
regularization
Interconnected systemLong transmission linksHydro dominationPlants in cascadeHigh demand growth rateLong-term hydro
regularization
Public utilitiesIndependent power producersSelf-producersCo-generationMerchants
Public utilitiesIndependent power producersSelf-producersCo-generationMerchants
Originally vertically integrated
Limited resources for expansion
Lack of incentives towards efficiency
Originally vertically integrated
Limited resources for expansion
Lack of incentives towards efficiency
Extra-large hydro unitsLarge thermal unitsSmall hydro unitsGreen energy
Law 9,074: Law 9,074: Concession of Concession of
electricity serviceselectricity services
Law 9,648 createsLaw 9,648 createsmarket operator and market operator and
system operatorsystem operator
J F M A M J J A S O N D
1988
J F M A M J J A S O N D
1995
J F M A M J J A S O N D
1996
J F M A M J J A S O N D
1997
J F M A M J J A S O N D
1998
......
Decree 2,335:Decree 2,335:ANEELANEEL
ANEEL is ANEEL is operationaloperational
Decree 2,655:Decree 2,655:Market operator; Market operator; System operatorSystem operator
J F M A M J J A S O N D
1999
J F M A M J J A S O N D
2000
Market Market Agreement Agreement
2001 2002
J FM A JJ J J JM MMF A AS SO ON ND DA
Initial RulesInitial RulesMAE self-regulated MAE self-regulated
Agents set rulesAgents set rulesANEEL ratify rulesANEEL ratify rules
Law 10,438Law 10,438
Law 9,427: Law 9,427: ANEELANEEL
Federal Federal ConstitutionConstitution
(art. 175) (art. 175)
Law 9,478:Law 9,478: CNPE and ANPCNPE and ANP
Law 10,433Law 10,433MAE regulated by ANEELMAE regulated by ANEEL
ANEEL set rulesANEEL set rulesMarket ConventionMarket Convention
Law 8,987: Law 8,987: Concession of public Concession of public
services services
J F M A M J J A S O N D
1993 ......
Law 8,631:Law 8,631:Fix Tariff levels;Fix Tariff levels;
extinguish the regime of extinguish the regime of guaranteed revenueguaranteed revenue
Partial clearing (50%) Partial clearing (50%) of accumulated 25 of accumulated 25
months of trademonths of trade
...... ..............................
......
Long period of MAE malfunctioningLong period of MAE malfunctioning scrutinizedscrutinized
Historical OverviewHistorical Overview
ANEEL - Institutional RolesANEEL - Institutional Roles
Policies and Directives: National Congress; National Energy Policy Council – CNPE; Ministry of Mines and Energy – MME.
Planning and warranty of the supply and delivery balance:
Ministry of Mines and Energy – MME.
Regulatory body and granting power delegate: Brazilian Electricity Regulatory Agency – ANEEL;
Supervision, control and operation of the system : National System Operator – ONS
Accountability and settlement: Wholesale Energy Market – MAE
Execution and sevice delivery: Agents G, T, D and C
Policies and Directives: National Congress; National Energy Policy Council – CNPE; Ministry of Mines and Energy – MME.
Planning and warranty of the supply and delivery balance:
Ministry of Mines and Energy – MME.
Regulatory body and granting power delegate: Brazilian Electricity Regulatory Agency – ANEEL;
Supervision, control and operation of the system : National System Operator – ONS
Accountability and settlement: Wholesale Energy Market – MAE
Execution and sevice delivery: Agents G, T, D and C
ANEELPrinciples and Competences ANEELPrinciples and Competences
Rule-making where necessary – under legal authorityRule-making where necessary – under legal authority
Dispute settlementDispute settlement
De
leg
ati
on
Gra
nti
ng
Po
we
rD
ele
ga
tio
n G
ran
tin
g P
ow
er
AUDITAUDITAUDITAUDIT
REGULATEREGULATEREGULATEREGULATE
Guide and Advise – enforce penalties when essentialGuide and Advise – enforce penalties when essential
MEDIATEMEDIATEMEDIATEMEDIATE
GRANTGRANT
PERMITPERMIT
AUTHORIZEAUTHORIZE
GRANTGRANT
PERMITPERMIT
AUTHORIZEAUTHORIZE
Concessions and authorizations auctionsConcessions and authorizations auctions
PublicPublicInterestInterestPublicPublic
InterestInterest
Guarantee Guarantee Consumers Consumers
Rights and the Rights and the Improvement in Improvement in
Q o SQ o S
Guarantee Guarantee Consumers Consumers
Rights and the Rights and the Improvement in Improvement in
Q o SQ o S
BalanceBalanceBalanceBalance
Stable Rules,Stable Rules,Compliance withCompliance with
Contracts andContracts andProper ServiceProper ServiceRemunerationRemuneration
Stable Rules,Stable Rules,Compliance withCompliance with
Contracts andContracts andProper ServiceProper ServiceRemunerationRemuneration
ANEELActions ANEELActions
Policy and guidelinesStrategic expansion planningGuarantee of supply
Policy and guidelinesStrategic expansion planningGuarantee of supply
RegulationConcessions Inspections Mediation
RegulationConcessions Inspections Mediation
System supervision, control and operation
Centralized Cost-based Scheduling and dispatch
Chain of optimization models
System supervision, control and operation
Centralized Cost-based Scheduling and dispatch
Chain of optimization models
Market operationEx-ante market pricesAccounting and clearingSurplus/deficit to
compensate/charge agents
Market operationEx-ante market pricesAccounting and clearingSurplus/deficit to
compensate/charge agents
The Brazilian Sub-marketsThe Brazilian Sub-markets
General FeaturesGeneral Features
Bilateral contracts are registered in MAE (only MWh):DISCOS have to bilaterally contract at least 95 % of their market
shareDISCOS can contract from GENCOS and from traders
Bilateral contracts are registered in MAE (only MWh):DISCOS have to bilaterally contract at least 95 % of their market
shareDISCOS can contract from GENCOS and from traders
Spot prices (PMAE) calculated by optimization modelsSpot prices (PMAE) calculated by optimization models
Energy Reallocation Mechanism – ERMMitigate hydrological risksMetered generation allocated generation
Energy Reallocation Mechanism – ERMMitigate hydrological risksMetered generation allocated generation
Mismatches contracted/allocated energy cleared via MAEMismatches contracted/allocated energy cleared via MAE
Contracts are cleared bilaterallyContracts are cleared bilaterally
Market rules and proceduresAgents or MAE can propose new rules and proceduresANEEL approves and issues new rulesTransparency: Public hearing
Market rules and proceduresAgents or MAE can propose new rules and proceduresANEEL approves and issues new rulesTransparency: Public hearing
Arbitrate ChamberDisputes between agents
Arbitrate ChamberDisputes between agents
Regulatory FeaturesRegulatory Features
Up-to-date Accounting and ClearingClearing of remaining of accumulated 25 months of tradeAuditing of accountability systemMediation
Up-to-date Accounting and ClearingClearing of remaining of accumulated 25 months of tradeAuditing of accountability systemMediation
AchievementsAchievements
Rules and regulations for energy auctions Initial Contracts reduced by 25% early from January 2003 Initial Contracts replaced with bilateral contracts or renewedPublic GENCOS can only contract via public auctionsDISCOS can only contract via public auctionsDifferent type of auctions
Rules and regulations for energy auctions Initial Contracts reduced by 25% early from January 2003 Initial Contracts replaced with bilateral contracts or renewedPublic GENCOS can only contract via public auctionsDISCOS can only contract via public auctionsDifferent type of auctions
New rules for cap and minimum spot pricesPublic hearing undergoing
New rules for cap and minimum spot pricesPublic hearing undergoing
Financial GuaranteesFor market clearing
Financial GuaranteesFor market clearing
Market adjustments Instructed by the Federal Government
Market adjustments Instructed by the Federal Government
ChallengesChallenges
Regulations for renewing Initial ContractsRegulations for renewing Initial Contracts
Reduce the difference between commercial (Market Operator) and operational dispatch (System Operator)
Reduce the difference between commercial (Market Operator) and operational dispatch (System Operator)
The Brazilian electricity market is facing emerging challenges that, once overcome, will considerable
improve the market framework
The Brazilian electricity market is facing emerging challenges that, once overcome, will considerable
improve the market framework
Closing RemarksClosing Remarks
ANEEL has a crucial role in the development of the Brazilian electricity market
ANEEL has a crucial role in the development of the Brazilian electricity market
http://www.aneel.gov.br
Telefone: 0800-61-2010
Fax: (61) 426-5705
http://www.aneel.gov.br
Telefone: 0800-61-2010
Fax: (61) 426-5705
[email protected]@aneel.gov.br
