How does the electricity market in Brazil work?

When, in 1879, Dom Pedro II hired Thomas Edison to develop the use of electricity in Brazil, perhaps he did not imagine that a house in Rio Grande do Sul would be lit by energy generated by a hydroelectric plant in northern Brazil. The history of energy in our country begins in the same year as the invention of the light bulb, made by the American, but in the last 130 years technology has changed a lot.

The first public lighting took place just two years later, in Praça da República, in Rio de Janeiro, and was generated by steam from wood-fired boilers, but currently Brazilian energy is generated through five types of plants: hydroelectric, thermal, nuclear , solar and wind power.

The Brazilian electricity sector is divided into four segments: generation, transmission, distribution and commercialization. Below, we will detail how each of these points works.

 

Power generation

O Brasil possui mais de 9 mil usinas geradoras em operação, de acordo com a ANEEL referente a dados de novembro de 2020. Todos esses ativos somados tem uma capacidade instalada de 174,7 GW geração de energia elétrica, sendo predominantemente por intermédio das usinas hidrelétricas. Confira no gráfico abaixo a participação de cada matriz energética, segundo anuário da Empresa de Pesquisa Energética de 2021, relativo a dados de 2020:

Regardless of the type of plant, the energy generation method is similar and performed through the variation of electric current through an electromagnetic system. At the Hydroelectric Power Plant, it is made by the flow of water and the slope of the hydrographic basin to generate kinetic energy, with the water being dammed and directed to the turbines. These are the turbine blades, which generate kinetic energy when moved by the flow of water, which are connected to the electric generator.

With the generation of energy carried out, it is necessary to distribute it to reach industries and homes. In this way, we differentiate between centralized and distributed generation.

Centralized

When energy is generated by larger plants and then transmitted and distributed to the consumer by larger, higher, high-voltage transmission cables, all the way to the distribution networks.

Distributed

Several small power generating units supply the local grid by connecting directly to distribution lines, reducing transmission costs.

 

Curiosities

The five largest power plants are all hydroelectric and together have a capacity of 45 GW: Itaipu, Belo Monte, São Luiz do Tapajós, Tucuruí and Santo Antônio HPPs.

Five states have basically half the installed capacity in Brazil. Pará (11.7%), São Paulo (11.6%), Paraná (10.4%), Minas Gerais (9%) and Bahia (6.8%) correspond to 49.5%, while the other 21 States and the Federal District have the remaining 50.5%.

 

Energy Transmission and Distribution

For you to turn on the light in your living room, this energy must have traveled thousands of kilometers through the Transmission Lines that cross the North to the South of the country. But, effectively, what needs to be done for energy to be transmitted and distributed to Brazilian homes?

The energy generation and transmission assets are connected by the National Interconnected System (SIN) through high voltage lines. To distribute energy to all corners of the country, around 150 thousand km of Transmission Lines are used. After all, of the ten largest generating plants, eight are in the North and Northeast regions and only two in the Southeast.

Large plants such as Itaipu and Belo Monte are connected in networks of 500kV or more. The high voltage for the transmission is necessary to avoid the accumulation of losses and to make it possible to travel long distances. When the network connects with the distribution networks, the voltage is reduced to 13.8kV and reaches homes at 127V or 220V.

It is up to the National Electric System Operator (ONS) to organize the shipment of energy according to the demands of consumer centers. The agency controls the operation in real time through its five Centers, through a modern telecommunications infrastructure, and makes energy available to consumer units.

 

Commercialization

Since 2004, the commercialization of electricity in Brazil has been divided into two trading environments: Regulated Contracting (ACR) and Free Contracting (ACL). All acts are registered with the Electric Energy Commercialization Chamber (CCEE), responsible for the electric energy market in Brazil.

Regulated Contracting Environment

The contracts for the purchase and sale of energy in this medium are carried out through auctions promoted by the Government, requiring the formalization and execution of contracts between generators and distributors. The criterion of the lowest tariff is adopted to ensure a reduction in the cost of acquiring electricity when passing it on to consumers.

Auctions are carried out and regulated by the CCEE, based on Aneel's rules. Contracts can be modified, as long as they are in common agreement, and have specific regulation for important items, such as energy price, supply term and contract registration submarket.

Free Contracting Environment

The famous Free Energy Market, where there is freedom for the actors involved (generators, traders, importers and exporters of energy and free and special consumers) to negotiate prices and quantity of energy purchase and sale.

In January 2021, the Hourly Differences Settlement Price (PLD) came into effect, a value determined for each load level based on the Marginal Operating Cost, limited by a maximum and minimum price in force for each calculation period and for each submarket. The number of PLD values jumped from 48 monthly to 2880, reducing the differences between the projection and the real operation of the system.

In this way, actors will have greater precision of the times when energy is more expensive or cheaper., encouraging consumers to make energy use more flexible and reducing the load in more expensive periods.