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Insight > Transmission & distribution
Get smart
Bob Moser examines how smart grid projects are progressing slowly in Brazil as distributors
shoulder the telecom burden and the public policy lacks teeth.
B
razils largest generators and
distributors of electricity are
making progress in the rollout of
smart grid projects nationwide, but delays
are common and costs are rising as
companies realise they must develop
telecommunications networks alone,
and public policy isnt evolving to draw
every player in.
Brazil should lead the South American
market in investment and development
for smart grid through 2020, according to
a report earlier this year from GlobalData, a
consultancy specialising in energy. With
electricity losses exceeding 30% in some
states, national distribution companies
realise they must invest in smart meters
to improve efficiency and curb theft.
GlobalData has projected the Brazilian
smart grid market to post a composite
annual growth rate of 43% through to
the end of the decade, with revenue
expected to rise from $36 million in 2013
to $432 million by 2020.
At least nine smart grid pilot projects
are currently in varied stages of
development in Brazil from operators
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such as AES, Amazonas Energia,
Ampla, Celpe, Cemig, Coelce, Copel-D,
EDP Energias do Brasil, Eletropaulo,
Endesa and Light since Brazils
Ministry of Mines and Energy
published a decree in April 2010
promoting future implementation
of smart grids.
But little progress has been made
in the field due to a lack of public
policy requirements for investment
in smart grid and telecommunication
networks, or worthwhile incentives
for smart meter purchases.
It was hoped that the National
Agency for Electrical Energy (Aneel)
would develop regulatory standards
for smart meters, which would
help the country achieve its goal of
improving energy efficiency, says
Sowmyavadhana Srinivasan, senior
analyst at GlobalData. However,
the agency only set some regulations,
that indirectly require deployment of
this technology by distributors.
Brazils infamous bureaucratic
hurdles and lack of transparency
have been highlighted by GlobalData
as potential speed bumps, if
not outright barriers, to the full
realisation of smart grid potential
in the country, and as threats to
interested foreign investors.
Lacking incentives
The main challenge to smart grid
rollout for Brazil and the rest of Latin
America lies primarily in energy policy
and regulation, says Jesse Berst,
chairman of the Smart Cities Council.
Many countries, and Brazil is
one, havent put the regulations or
incentives in place to really make it
easier to create a bona fide smart grid
rollout, he says. A year ago, Brazil
created its smart meter mandate, but
made it voluntary. That really doesnt
help a utility very much because
theyd have to maintain two systems
with redundancy and costs, and still
have a lack of accurate customer data.
You dont get the ancillary benefits of
a smart grid unless all customers are
hooked up.
Most utilities in Latin America and
Brazil are pumping 24% more energy
to consumers than needed to be safe
because they dont know how much
is arriving and at what voltage level,
resulting in a significant annual waste,
Berst says. Revenue loss from energy
theft in Brazil can be 30% or more for
some operators, he added.
Almost all the major smart grid
players recognise Brazil as an
important new market possibility,
Berst says. They are all standing by,
and, if Brazil can clear these obstacles,
it could proceed quite quickly.
Countries that want to be at the
forefront of economic development
must get the energy issue solved.
Brazil simply cant join the ranks
of leading economies and attract
the best companies in the world
without solving the problem of
reliable, affordable energy.
Conflicting agendas
The piecemeal development of smart
grid projects has been due, in part, to
an agenda in place between Brazils
federal government and electricity
sector since 2004 that favours
affordable tariffs, and smart grids
dont necessarily promote affordable
tariffs for operators, said Nelson
Fonseca Leite, president of the
Brazilian Association of Electrical
Energy Distributors (Abradee), during
a smart grid forum held in So Paulo
in November 2013.
Brazils current regulatory
framework doesnt encourage
distributors to invest in smart
grid, and instead should offer
different criteria for compensation
and depreciation of IT and
telecommunications equipment,
Fonseca Leite said. Energy regulations
in Brazil still havent been updated
to consider the true costs of smart
meters and their useful lifespan.
These devices are like computers.
I challenge one person to tell me
they have a computer thats 13 years
old, said the Abradee president.
It doesnt exist. We need a system
that will calculate the depreciation
of these components in a more
accelerated manner.
Greater clarity is also necessary
in new smart grid regulation, with
Fonseca Leite citing the different
needs and financial constraints of
energy companies in varied regions
of the country. More concrete
national mandates for smart grid
implementation would help smaller
distributors attract private investment.
Brazils electricity sector includes
63 distributors, more than 72 million
consumers, more than two million
new connections made annually, gross
annual revenue of R152 billion
($68.8 billion) and investments of
R13 billion ($5.9 billion), according
to 2012 data.
Telecoms needs
In the small city of Aparecida do
Norte in So Paulo state, EDP
Bandeirante, a power distributor
for EDP Energias, launched its
InovCity smart grid programme
in October 2011, and has invested
more than R10 million ($4.5 million) so
far to install 13,500-plus smart meters
for homeowners, with the company
finally beginning to compile data on
users in May.
However, the programmes complete
rollout in Aparecida was delayed by
ten months because EDP had to invest
R800,000 ($362,000) to install its own
Wi-Max network, in order to bring
Little progress has been made in the
field due to a lack of public policy
requirements for investment in smart grid and
telecommunications networks, or worthwhile
incentives for smart meter purchases.
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local telecommunications
infrastructure up to snuff.
Telecoms infrastructure is not just
a problem in Brazil, but in the whole
world, says Jeferson Marcondes,
technology development director
with EDP in Brazil. With new
technology like smart grid, the
infrastructure of a decade ago is
now outdated, so we must look at
alternatives. One is to use the 3G
or 4G networks being developed here,
like theyve done in the US, or Wi-Max
like we are installing.
EDP Bandeirante says it has
pioneered a new piece of equipment
for use in Aparecida similar to
advanced inverters, which is helping
the distribution network better
proportion and optimise efficiency
by monitoring in real time the
network and its tension control,
Marcondes said.
Local subsidiary EDP Escelsa now
plans to introduce the InovCity smart
grid installation project to two towns
in Espirito Santo state, with between
5,000 and 6,000 readers and a new
Brazils electricity sector includes 63
distributors, more than 72 million consumers,
more than two million new connections
made annually and a gross annual revenue
of $68.8 billion.
telecoms system to be installed
beginning in July, at a projected
cost of R7 million ($3.2 million)
this year.
Light battles loss
Rio de Janeiro-based energy
distributor Light said in March
2014 that it was close to finalising
the purchase or lease of a million
electronic meters for its own smart
grid plan, which it expects will help
reduce energy loss and theft by 30%
over five years. The company pledged
last year to invest R2 billion
($905 million) in energy loss, primarily
through advanced electronic readers.
Light expects to have 1.6 million
smart meters installed by the end of
2018, covering 40% of its client base
in Rio. The company reduced its
electricity losses by 3% last year,
closing 2014 with a loss rate of 42%,
while working toward a 40% loss
rate by August 2015. Lost or
stolen electricity has cost Light
R2.5 billion ($1.1 billion) in potential
revenue in recent years.
Eletropaulo delayed
Based in So Paulo, distributor AES
Eletropaulo announced in April 2013
that it would have smart readers
installed for 60,000 clients in the
regional city of Barueri by 2015,
with R72 million ($32.6 million)
expected to be invested in the smart
grid project. But as of May 2014,
installation of readers hadnt started,
and the company was already
pushing back its deadline to 2017.
Part of that delay was
attributed again to issues with
telecommunications networks in
the area, says Maria Tereza Vellano,
regional director responsible for
smart grid at Eletropaulo. The firm
was also slow to finalise its bid
terms for producers of smart readers
to apply for a contract, and faced
budget constraints due to company-
wide financial issues in 2013.
Our biggest challenge, in addition
to financing, is the telecoms aspect
for it all, says Vellano, who notes
Eletropaulo has had to invest
in its own Wi-Max infrastructure
for the city. This new smart grid
scenario is all based on reliable
telecommunications companies
and networks. Our biggest worry
is security for the movement of all
this data in real time.
Eletropaulo began installing
readers in May 2014 in low-income
homes, should have a production
supplier chosen by June, and
could start a second round of home
installation in January. Recovery of
the R72 million in investment is
still projected for within eight years,
Vellano says.
We need more clear public
policies for this in the long term, but
I understand that every government
is evolving, she says. Clearly, our
telecoms companies arent ready for
this today, but we believe theyre
following it closely and evolving
with us. But were walking into
uncharted territory here by entering
the world of telecommunications (as
an energy provider). Well need the
leadership of the Ministry of Mines
and Energy.
InnovCity smart meter.