remaining renewable and clean: some regulatory challenges ... · current mechanism: considers all...

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Current mechanism: Considers all tariff components. Possible mechanisms: Different combinations of tariff components. In case of interest, please contact: [email protected]; [email protected]; [email protected] Remaining R enewable and C lean: S ome R egulatory C hallenges o f the E lectrical E nergy S ector in Brazil Wadaed Uturbey, Ana Lopes, Heinz Ahn Reference Materials NREL-2017 “Next-Generation Performance-Based Regulation, Emphasizing Utility Performance to Unleash Power Sector Innovation” Technical Report NREL/TP-6A50-68512, September 2017 BRASIL-2018 and 2019, ANEEL, Avaliações de Impacto e Resultado Regulatório, Technical notes nº 27/SRM/SGT/SPE/SRD-2019/ANEEL and nº 0004/2018-SRD/SCG/SMA/ANEEL Keywords Regulation, electricity sector, energy transition, operational costs, quality of service, Brazil Acknowledgement Gefördert vom DAAD aus Mitteln des Bundesministeriums für Bildung und Forschung (BMBF) Financed in part by the Coordenação de Aperfeiçoamento de Pessoal de Nível Superior - Brasil (CAPES) BRAZILIAN ELECTRICITY MATRIX TODAY More than 165 GW of installed generation capacity. High proportion of renewables: Hydroelectric 63%, biomass 9%, wind 9% and solar PV 1.2%. However : Environmental requirements prevent the utilization of most of the remaining hydro potential. Peak resources: Not clearly specified in the report; the demand management pilot project implemented in 2017-2018 failed to contract demand reductions to cope with wind variability in the northeast region, and thermal generators were used. Possible consequences, if not appropriately managed: More expensive energy and decrease of the quality of service. Official projection for the participation of each generation source (EPE: PDE-2027) Hydro Thermal Small hydro + Wind + Bio + PV Peak resources DISTRIBUTED ENERGY RESOURCES Net metering mechanism available since 2012; applied only for grid-connected generation in consumers’ facilities and without storage (DG). >> More than 120,000 engaged consumers and more than 1 GW of installed distributed generation. The future of net-metering: Proposal to modify low voltage tariffs. The monomial tariff will be gradually transformed to binomial or trinomial. Compensation by net metering will consider only volumetric components. Therefore, the attractivity of distributed generation will significantly decrease. Tariff composition: Network + Energy (includes some system charges) + System charges + Levies Projection of Installed DG under different mechanisms of tariff compensation in net metering (ANEEL 2018) TRANSMISSION AND DISTRIBUTION Regulated monopolies, but different regulatory environments >> TSOs operate in a less risky environment than DSOs. In both segments, incentive regulation by benchmarking models (DEA) is applied to evaluate the operational costs efficiency. The quality of the service is one of the aspects included in the benchmarking models that is neither completely understood nor well represented. Quality of service – Distribution (source: ANEEL 2019) Quality of service – Transmission (source: Brazilian ISO at www.ons.org.br) THE DISCUSSION The analysis evidenced: important regulatory modifications should be carried out to attain the challenges imposed by distributed resources and alternative renewables and, simultaneously, improving (or, at least, maintaining) the quality of service. Flexibility requirements: Under the (yet quite small) presence of wind generation, they are not clearly understood. Further growth of solar is expected, increasing the challenge. DERs: Net metering will be a barrier for deployment. Distribution: Quality of service has improved in the average, but many operators have worsened. Transmission: The north and northeast regions perform worst in quality of service. Those are regions with low demand and significant renewable generation potential not yet developed. 0 0,5 1 1,5 2 2,5 2013 2014 2015 2016 2017 2018 Frequency of interruptions System SE/CO South Northeast North 0 50 100 150 200 250 2013 2014 2015 2016 2017 2018 Duration of interruptions Number of installed DG (Millions) SAIDI SAIFI SAIDI-limit SAIFI-limit Aggregated quality indexes and the regulatory maximum limits Operators performance Eventual regulatory barriers to the development of the sector and the possibility of effectively unlocking the expected grow of distributed resources and alternative renewable energies.

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Page 1: Remaining Renewable and Clean: Some Regulatory Challenges ... · Current mechanism: Considers all tariff components. Possible mechanisms: Different combinations of tariff components

Current mechanism:

Considers all tariff

components.

Possible mechanisms:

Different

combinations of tariff

components.

In case of interest, please contact:

[email protected]; [email protected]; [email protected]

Remaining Renewable and Clean:

Some Regulatory Challenges

of the Electrical Energy Sector in BrazilWadaed Uturbey, Ana Lopes, Heinz Ahn

Reference Materials• NREL-2017 “Next-Generation Performance-Based Regulation, Emphasizing

Utility Performance to Unleash Power Sector Innovation” Technical Report

NREL/TP-6A50-68512, September 2017

• BRASIL-2018 and 2019, ANEEL, Avaliações de Impacto e Resultado

Regulatório, Technical notes nº 27/SRM/SGT/SPE/SRD-2019/ANEEL and

nº 0004/2018-SRD/SCG/SMA/ANEEL

KeywordsRegulation, electricity

sector, energy transition,

operational costs, quality

of service, Brazil

AcknowledgementGefördert vom DAAD aus Mitteln des

Bundesministeriums für Bildung und

Forschung (BMBF)

Financed in part by the Coordenação

de Aperfeiçoamento de Pessoal de

Nível Superior - Brasil (CAPES)

BRAZILIAN ELECTRICITY MATRIX TODAY

More than 165 GW of installed generation capacity.

High proportion of renewables: Hydroelectric 63%, biomass 9%,

wind 9% and solar PV 1.2%.

However: Environmental requirements prevent the utilization of

most of the remaining hydro potential.

Peak resources: Not clearly specified in the report; the demand

management pilot project implemented in 2017-2018 failed to

contract demand reductions to cope with wind variability in the

northeast region, and thermal generators were used.

Possible consequences, if not appropriately managed:

More expensive energy and decrease of the quality of service.

Official projection for the

participation of each

generation source

(EPE: PDE-2027)

Hydro

Thermal

Small hydro + Wind

+ Bio + PV

Peak resources

DISTRIBUTED ENERGY RESOURCES

Net metering mechanism available since 2012; applied only for

grid-connected generation in consumers’ facilities and without

storage (DG).

>> More than 120,000 engaged consumers and more than 1 GW

of installed distributed generation.

The future of net-metering: Proposal to modify low voltage tariffs.

The monomial tariff will be gradually transformed to binomial or

trinomial. Compensation by net metering will consider only

volumetric components. Therefore, the attractivity of distributed

generation will significantly decrease.

Tariff composition: Network + Energy (includes some system

charges) + System charges + Levies

Projection of Installed DG under different mechanisms of tariff compensation in net

metering (ANEEL 2018)

TRANSMISSION AND DISTRIBUTION

Regulated monopolies, but different regulatory environments

>> TSOs operate in a less risky environment than DSOs.

In both segments, incentive regulation by benchmarking models (DEA) is

applied to evaluate the operational costs efficiency.

The quality of the service is one of the aspects included in the benchmarking

models that is neither completely understood nor well represented.

Quality of service – Distribution (source: ANEEL 2019)

Quality of service – Transmission (source: Brazilian ISO at www.ons.org.br)

THE DISCUSSION

The analysis evidenced: important regulatory

modifications should be carried out to attain the

challenges imposed by distributed resources and

alternative renewables and, simultaneously, improving

(or, at least, maintaining) the quality of service.

▪ Flexibility requirements: Under the (yet quite small)

presence of wind generation, they are not clearly

understood. Further growth of solar is expected,

increasing the challenge.

▪ DERs: Net metering will be a barrier for deployment.

▪ Distribution: Quality of service has improved in the

average, but many operators have worsened.

▪ Transmission: The north and northeast regions

perform worst in quality of service. Those are regions

with low demand and significant renewable

generation potential not yet developed.0

0,5

1

1,5

2

2,5

2013 2014 2015 2016 2017 2018

Frequency of interruptions

System

SE/CO

South

Northeast

North

0

50

100

150

200

250

2013 2014 2015 2016 2017 2018

Duration of interruptions

Number of installed DG (Millions)

SAIDI SAIFI SAIDI-limit SAIFI-limit

Aggregated quality indexes and the regulatory

maximum limitsOperators performance

Eventual regulatory barriers to the

development of the sector and the possibility

of effectively unlocking the expected grow of

distributed resources and alternative

renewable energies.