[03.11.2016] 20h55m / By Fabio Couto – Revista Brasil Energia

Even though it is at a pace considered below ideal by the segment, small hydroelectric plants (PCHs) are beginning to reverse the scenario of low business prospects that had been maintained over the last few years, with few plants under construction. Recent measures taken by the government, whose high point is the holding of the first reserve auction of the year, exclusively for SHPs and CGHs (hydroelectric generating plants, with a maximum capacity of 3 MW), in September, indicate that the segment has come out of the dead end and shifted into first gear. There is still a need to accelerate towards a scenario of higher business volume.

Almost 900 MW from 73 SHPs and 60 CGHs were registered for the auction and the ceiling price set was R$ 248/MWh. The result was the contracting of 30 plants located in 13 states, totaling an average of 95 MW of physical guarantee and approximately 180 MW of installed capacity, with investment perspectives of around R$ 1 billion.

Even before this result, some companies, such as GE and Andritz, were already predicting a scenario of few deals, but the simple execution of the tender was already a reason for celebration.

As was the case with Roberto Miranda, GE Hydro's commercial representative for Brazil, who celebrated the government's initiative to hold an exclusive auction, recalling that since 2008 nothing similar has been done.

Along these lines, GE formed a task force to update products that follow a concept of worldwide standardization, which brings advantages in terms of cost and implementation time. Maintenance and operation can also be included in the package depending on investors' plans.

In Andritz's strategy, on the other hand, there is a willingness to work on projects in a turnkey scheme, including construction in the package. The idea, even, reveals the president of Andritz, Sergio Parada, is to start working in Brazil with CGHs, but in distributed generation, as the company largely does in Europe.

The problem, explains the executive, is that this modality does not yet have the same tax benefits that wind and solar sources have.

Likewise, Cotesa, a company with three SHPs in operation, has its eye on contracts for the provision of operation & maintenance services for this segment.

The company even prepared for the auction, but bureaucratic disputes prevented the enabling of the 4.68 MW Nova Trento plant, says the vice president of Cotesa, Diomar Wechi.

Cotesa provides operation and maintenance services for SHPs and transmission lines and sees in the reserve auction an opportunity to expand the offer of services, especially after inaugurating its systems operations center, designed to serve plants that cannot rely on this type of structure.

“We expected more qualified plants, at least about 100”, says Wechi.

Adriana Coli, a partner at Coli & Lafuente Advocacia, specialized in infrastructure and the environment, highlights that the time for SHPs is full of opportunities, due to the change in the perception that the energy source has gained relevance that was not seen before. Because of the discussion about the construction of hydroelectric dams with reservoirs, SHPs were included in the discussion and ended up being penalized in the debate. “The entry of stronger wind generation brought an impulse to SHPs,” said Adriana.

Leonardo Sant’anna, president of the Brazilian Association for Clean Energy Generation (Abragel), considers the holding of the auction a positive sign, despite the low contracted volume. For the executive, attention is now turning to next year's A-5 new energy auction, when the entry of more plants may be higher, depending on the ceiling price that will be set.

Sant’anna pointed out that there is currently a stock of 2.5 GW ready to be auctioned, with the possibility of offering up to 1 GW per year in auctions, based on the new rules for granting concessions.

“We understand the government's effort to bring the SHPs back”, he highlighted. For him, the current situation, of energy overcontracting, may have interfered with the result of the bid, but the main focus ends up being the long term, especially based on the premise that the SHPs that eventually contract energy in the next A-5 will enter in operation in 2022, a horizon for which there are already forecasts of a more optimistic economic scenario.

Another entity that operates in the SHP market, Abrapch, released a letter right after the reserve auction according to which the sector was one of the most harmed by "misguided policies" in recent years and said it was frustrated with the result, but followed the same line as Abragel, when stating that it saw the effort of the Union to make the source viable. “The government could have contracted at least 35% more volume without any negative impact on the sector or levels of over-contracting,” the entity said.

rules flexíveis

The number of contracted plants is not so bad for the market, even with an installed capacity below that intended by the market, because in terms of equipment, especially turbines, the turnover already helps to maintain a certain activity, in a market that is already had been showing recovery in recent years.

The change in the scenario began to materialize in 2013, due to the higher hiring of SHPs compared to previous years. That year, with two A-3 auctions, 24 plants were contracted, totaling 481.3 MW of installed power.

Hiring did not maintain regularity in the following years, but when you look at a longer horizon, you can see that the market is already different.

Between 2013 and the 2016 A-5 auction (ie, not counting the plants in this year's reserve auction), 63 SHPs contracted energy in six auctions, for a total of 1,050.7 MW of installed capacity (see chart).

Before 2013, the year 2010 had a significant contracting, and the plants contracted that year are already in commercial operation, but in previous years, the scenario was of low purchase or dominance of fuel oil plants.

In addition to the growth in the supply of plants, a new milestone was set for the sector last year, when Aneel approved changes for the analysis of studies of SHPs, failing to approve the basic project and starting to certify the adequacy of an executive summary of the studies developed by the entrepreneur, through Normative Resolution 673/2015. The measure, in practice, makes the summary the main document for analysis at the agency, and streamlines the granting process.

Another measure taken by Aneel was the permission to reset the validity periods of the SHP grants that had delays in implementation due to an act of the government, in order to preserve the original term of 30 years.

A balance released in June by the regulator indicated that 176 SHPs had been analyzed by that date since the new rules came into effect, totaling 2,064 MW. Of the amount, 17 had already received the grant and another 159 plants were still awaiting authorization from Aneel.

Sant’anna, from Abragel, highlights the advantages of generation by SHPs compared to wind and solar, renewable plants that accelerated more strongly in recent years. One of the strengths of the water source, according to the executive, is the fact that a SHP has a useful life of over 100 years, against around 25 years for wind and solar power.

The offensive is justified by the fact that solar contracted already total about 2.6 GW, while wind farms have already surpassed 10 GW installed and another 8 GW, approximately, contracted in auctions.

In 2015, the installed capacity of SHPs was 5,671 MW, and the perspective is that it will reach 2020 with 6,619 MW of power, an average annual evolution of around 3.1%, according to data from Abragel itself.

Considering that Aneel did its part, changing rules to simplify registration and analysis, and that the MME started to resume hiring, the market expectation is for an increase in the pace, with more new plants entering the matrix and causing industry out of the usual inertia.