Perspectives of Smart Grid in the Brazilian
Electricity Market
L. M. Freire1, E. M. A. Neves2, L. I. Tsunechiro3, D. Capetta4
Abstract-The objective of the Smart Grid (SG) is to provide
technology and systems in order to allow consumers to make
intelligent choices about how and when to use energy more
efficiently. The implementation of SG has advanced in several
parts of the world guided by different motivations. Brazil has
been following this trend motivated by the benefits that SG can
bring about services improvement, system reliability, power
quality enhancement and energy waste reduction. From the
commercial point of view, the SG contributes for the free market
expansion and emphasizes the importance of adoption of market
mechanisms on both supply and demand side. The aim of this
paper is to describe market solution to encourage the effective
participation of small producers and consumers in the Brazilian
Electricity Market. Also is presented the first steps to format the
Brazilian Program of Smart Grid by the Ministry of Mines and
Energy (MME).
Index Terms—Brazilian Electricity Market, Brazilian Smart
Grid Program, Distributed Generation, Free Contracting
Environment, Market Solution, Renewable Energy, Smart Grid
I. INTRODUCTION
The global infrastructure of production and distribution of
electric energy has been undergoing a revolution with the
advent of Smart Grid. The SG allows the integration of energy
by the telecommunication and information technology,
ensuring two-way interactive communication and the flow of
electricity and information between suppliers and consumers
of energy in real time.
The SG provides automation throughout the grid, from
generation to end consumers, enabling integration of the
following benefits:
a) Generation and consumption information by monitoring
and controlling systems in real time
b) Improvement of energy quality and reduction of energy
supply interruption
c) Reduction of technical and commercial losses
d) More effective management of consumption and
optimization of the supply system (energy efficiency)
e) Use of smart meters and application of differentiated
1
L. M. Freire works as a board member at CCEE - Chamber of Electricity
Energy Commercialization in Brazil (e-mail: luciano.freire@ccee.org.br)
2
E.M.A. Neves works as board advisor (e-mail: evelina.neves@ccee.org.br)
3
L.I. Tsunechiro works as board advisor at CCEE (e-mail:
leandro.tsunechiro@ccee.org.br)
4
D. Capetta works as coordinator of metering engineering at CCEE (e-mail:
dalmir.capetta@ccee.org.br)
978-1-4577-1801-4/11/$26.00 ©2011 IEEE
tariffs at certain periods to encourage, for example, the
consumption in periods of lower tariff, promoting the cost
optimization
f) Emergence of new products and more efficient and
intelligent services for low voltage consumers (residential and
industrial)
g) Investment in technology of generation and storage with
less environmental impact. Alternative of small distributed
generation (solar panels and mini wind turbines) to the load
centers supply with low cost of transmission.
h) More active participation of consumers
i) More dynamic electric power market, with the expansion
of activities related to energy trading through the sale of
surplus generation by consumers to the distribution network.
The implementation of SG has advanced in several parts of
the world especially the United States and Europe. One of the
main motivating factors for the implementation of SG in
Europe is the adoption of energy efficiency programs, long-
term sustainable development and use of distributed and
renewable energy sources. U.S. motivation was mainly due to
the level of the obsolescence of the infrastructure, the system
vulnerability and job creation needs, among other factors.
Brazil has been following this global trend, initially
motivated by the benefits that SG could bring about services
improvement, system reliability, power quality enhancement
and energy waste reduction.
Currently, Brazil has an infrastructure for generation,
transmission and distribution that have undergone from a
technical and commercial energy losses increasingly higher
due to the obsolescence of the network. According to the
National Electric Power Agency – ANEEL [1], the
commercial losses account for about 8.7% of the domestically
produced energy, that is equivalent to the output of the Power
Plant of Santo Antonio. The Ten Year Plan for Expansion of
Energy - PDE 2019 provides an increase in electricity demand
by approximately 54% between 2010 and 2019. As an
additional benefit, the implementation of energy efficiency
programs and the incentive for distributed generation
associated to SG can improve the utilization of the installed
capacity and postpone the need for investment in the
expansion of the Brazilian electrical system.
Besides, the development of SG in Brazil can set a new
milestone for the electric industry and can make the energy
market more dynamic through new forms of actions of market
players, which includes the opportunity for users to operate
both as energy producers and consumers - so-called

"prosumers" [2].
From the commercial point of view this fact contributes for
the free market expansion and emphasizes the importance of
the adoption of market mechanisms on both the supply and
demand side to encourage the effective participation of small
agents - producers and consumers.
The objective of this paper is to discuss market solution to
encourage the effective participation of producers and
consumers. In this context, section II presents an overview of
regulatory mechanism to enable the expansion of small
Distributed Generation from renewable sources in the
distribution network; section III discusses how could be
improved the participation of small agents in the Free
Contracting Environment in the Brazilian Electricity Market
that is administrated by CCEE (Chamber of Electricity Energy
Commercialization); section IV presents conclusions about
this work and emphasizes the role of the government policy to
support the development the Brazilian Program of Smart Grid.
II. SMALL DISTRIBUTED GENERATION FROM RENEWABLE
SOURCES IN THE DISTRIBUTION NETWORK
The generation from alternative energy sources is a global
trend, with emphasis on wind power, solar power and
biomass, directly connected to distribution networks
(Distributed Generation). As a way of enabling the expansion
of such sources there are several legal and regulatory
mechanisms, among which the most commonly used are:
Feed-in Tariff, Quota, Net Metering, Energy Certificates and
Energy Auctions [3].
• In the feed system the entrepreneur has revenue
warranties from the generation set using pre-determined price
(linked to the generation cost and not to the captive
consumer’s energy tariffs) based on to long-term power
purchase agreement (15 to 20 years). This incentive was
implemented by governments in several European countries,
especially in Germany and now is on the U.S. agenda.
• The quota policy requires that distribution companies
compulsorily purchase certain amount of energy from
renewable sources. The US. system, known as Renewable
Portfolio Standard (RPS), it is used in 29 states. Most RPS
requires a quota about 10 to 25% in the total contract
portfolio. In Brazil, this mechanism is similar to PROINFA
(Incentive Program for Alternative Energy Sources).
• The renewable energy certificates are securities (financial
mechanisms) traded in two markets: compulsory and
voluntary. Market compulsory certificates may be used to
meet quotas. In the voluntary market because of high
environmental concern, there is an increasingly growth of
certificate trading involving large corporations, government
entities and universities.
• The net metering mechanism (energy surplus trading) is
the net value between the energy injected into the consumer
network and the energy consumed, creating opportunities for
consumers to obtain credit on energy or a decreasing payment
on your next bill (usually the value of the captive energy
tariff).
• Auctions of both alternative energy sources and energy
2
reserve have become important modalities of investments in
Brazil.
In Brazil, the supply of distributed generation from
alternative energy sources (wind, solar, biomass with an
installed capacity below 30 MW) has a low attractiveness to
distribution companies. Under the current rules the distributed
generation should be restricted to 10% of its load limited in
the concession area of the local distribution company, with the
impossibility of selling to other distributors. Moreover, there
is a reference value (VR) that limits the pass through to the
captive consumer tariff.
The small distributed generation (installed capacity below 1
MW), is usually connected to the low voltage network and
presents technical, regulatory and legal barriers to the power
trading, making the projects economically unfeasible.
Thus, in 2010 ANEEL opened the public consultation nº 15
in order to receive contributions to reduce barriers and
facilitate the entry of small distributed generation in Brazil.
The Agency must hold a public hearing in 2011 to raise
proposals to create new rules.
Distributed generation is directly related to the
development of Smart Grids, the replacement of
electromechanical meters by electronic meters with intelligent
features for metering in four quadrants (two-way flow of
energy), and communication with the operation center. In this
context, it is pertinent a formulation of a directed policy to
small distributed generation in line with the advances in the
studies of Smart Grid implementation.
III. PARTICIPATION OF SMALL AGENTS IN THE FREE
COMMERCIALIZATION ENVIRONMENT
In Brazil, the Free Contracting Environment is comprised
of free consumers who have the right to choose their
electricity supplier paying a rate for using the distribution or
transmission system. The current criteria to be a free consumer
is restricted to consumers with a contracted demand load of 3
MW or more. There are also the called “special consumers”
with a contracted demand from 500 kW to 3 MW who are
allowed to buy electricity from: a) incentive sources i.e.
supplied from small hydroelectric plants, solar or biomass
with power injected to the grid below 30 MW or from other
plants with installed capacity equal or lower than 1 MW. In
this case there is a discount in the transmission or distribution
rate; b) conventional energy sources associated to
hydroelectric, solar, wind, thermal and biomass sources from
30 to 50 MW, in this case without a discount in the
distribution or transmission rate.
The strong expansion of market players has been occurring
in Brazil at an accelerated pace, mainly due to the consumer
option to migrate to the free market. The highlight is the
significant growth of “special consumers”, which rose 97% in
the access to the free market in 2010 compared to 2009. This
growth is imminent and represents a new niche in the
Brazilian electricity market. Currently, the Free Contracting
Environment consumption (composed of free and special
consumers and self-producers) represents approximately 25%
of the total consumption of the National Interconnected

System (SIN). Currently, special consumers represent about
2% of total load, but this index has almost doubled in 2010.
A market projection points out that the special consumers have
a potential to reach 20% of the total load of the SIN.
Currently, despite the small agents, both from generator
and consumer categories claim about the high costs to
maintain an adequate infrastructure to the free market, not
only with regard to the need of installing billing metering, but
also the complexity of the adhesion and asset modeling
processes and of the commercialization rules and procedures.
Fig. 1. illustrates a possibility of new market agents entrance
in a context of a higher market opening.
Trader CCEE
Self
Producer
c c
Independent
Producer
Special
Consumer
Retailer
Trader
“Retailer”
GENCO
DISCO
c c c c g
c c
Small Consumers and Generators
Captive Consumers
Fig. 1. Market Opening – Possibility of New Market Agents Entrance
In January 2011, CCEE presented to the market agents a
proposal to improve the adhesion and representation of small
agents in order to simplify and speed up the procedures and to
promote market expansion on both the supply and demand.
This proposal allows these agents to have the option to be
considered at CCEE as a simplified membership under the
responsibility of a new category "Retailer Trader".
Thus, the retailer trader would represent the consumer's
asset in accounting and would be responsible for every
operation, from the representation of energy metering,
adhesion process, accounting, settlement, payment of penalty
to the contribution of financial security, among others
obligations.
IV. CONCLUSIONS
To reach a sustainable growth in the pursuit of becoming a
country of prominence in the international scenario, the
demand for electricity in Brazil, must also take into account
with responsibility and environmental sustainability.
With the expectation of having new technology available at
attractive costs for the deployment of Smart Grid it will be
possible to increase the automation process of the grid, to
implement smart metering, to provide communication to all
points of the networks, to obtain information and data to
provide greater dynamism in the energy services and trading,
as well as to encourage more efficient control of resources and
energy consumption.
Within the electricity sector, this phenomenon is
fundamental for establishing new scenario for the process of
3
electricity commercialization, with a possible increase in the
participation of new users with the option of buying energy on
the open market.
The opening of electricity markets in a comprehensive
manner to all consumers has already been a reality in several
countries. On the other hand, in the Brazilian context, to
enable the expansion for the market and take the first steps
towards market opening, there are still several aspects that
need improvement. Energy prices should be attractive on the
open market, thus stimulating competition, while also
promoting the emergence of new generation projects,
including those using renewable sources. It also must be
mentioned the possibility for end consumers to produce their
own energy and to sell the surplus for distribution networks, as
it has already happened in European countries.
Exchange
The projects developed in different countries had different
motivations: modernization of electrical, feasibility of
c c c ...... c deployment of microgeneration, reduction of technical and
Agents commercial losses, expansion of renewable energy, energy
Free efficiency, efficiency of distribution processes and economic
Consumer
development, among others. The Brazilian program should
meet clarity about its motivation and develop the necessary
policies for its implementation, considering an alignment and
harmonization among infrastructure e regulation and market,
as shown in Fig. 2.
c c c
SMART
Infrastruture Regulation
GRID
Physical Network  New Tariffs
Industries  New Services
Metering  Market Openness
Equipments  New Players
Telecom / TI 
Automation 
Suppliers  Market COMPETITION
New Rules
New Procedures
Fig. 2. Market Challenges
The Ministry of Mines and Energy (MME) through the
issuance of Decree No. 440 as of April 2010, has started the
format of the Brazilian Program of Smart Grid through the
creation of a working group with the aim of analyzing and
identifying ways to establish policies for implementing new
technologies of Smart Grid. Fig. 3. presents a proposal of
Governance Structure of Smart Grid. It must be emphasized
that government policy is the main base that will support the
development of the program with setting guidelines. For the
effective implementation of the Brazilian Program of Smart
Grid other issues must be considered: regulation and
investment funding, infrastructure update, development of
business chain, services revolution and impacts on the market
and users. It is significant to create a permanent forum for
discussing the issue and for promoting continuous monitoring
of technological developments which should count on
participation of the government agencies, representative
bodies of the electricity sector, universities, equipment
manufacturers and solution providers. It is noteworthy that the
 4

establishment and routing technology issues must permeate Leandro Tsunechiro graduated from the
the business and regulatory issues. Polytechnic School of the University of São Paulo
(USP) in Electrical Engineering and post-
graduated from Fundação Getúlio Vargas (FGV)
in Business Administration. Participated in the
Valuations & Business Risk Analysis Program at
MARKET
University of Virginia Darden School of Business.
USERS From 2002 to 2007, he worked at AES Eletropaulo
(largest electricity distribution company in Latin
SERVICES REVOLUTION America) as Specialist Business Analyst in the
Energy Supply Risk Management Department.
BUSINESS CHAIN EVOLUTION Currently he supports the Board of Directors at
CCEE as Technical and Economy Advisor.
INFRASTRUTURE

FINANCING REGULATION Dalmir Capetta graduated in 1993 from the

College São Paulo. Master in Power Systems from
GOVERNMENT POLICY the Polytechnic School of the University of São
(Guidelines, Government Plan) Paulo (USP) and works since 1984 in the Brazilian
Power Sector. Worked at AES Eletropaulo (largest
Fig. 3. Governance Structure of Smart Grid electricity distribution company in Latin America)
by 16 (sixteen) years in the department of sale of
electricity and got the position of Division
V. REFERENCES Manager of Metering Systems. He worked at
Technical Reports: Paranapanema in the supply specifying and
purchasing of metering equipment and
[1] P&D Projeto Estratégico: “Programa Brasileiro de Rede Elétrica
communication. Currently, he is Coordinator of Metering Engineering at
Inteligente”, Chamada N° 011/2010 - SPE/ANEEL, July 2010
CCEE.
[2] J C.V. Boccuzzi, J.C.O. Mello “A energia do Futuro – Mercados de
Atacado e Varejo se Fundindo”, XX SNPTEE Grupo VI, Nov. 2009.
[3] Technical Note N° 43/2010, Public Consult N° 15/2010-SRD/ANEEL,
Sep. 2010.

VI. BIOGRAPHIES

Luciano Freire graduated from PUC University

Minas Gerais, Brazil, in Civil Engineering and post-
graduated from Unicamp in Power System Control.
He has 17-year experience professional in electricity
sector. He initiated his career in distributor
companies in Brazil (operation planning and
electricity studies and development of softwares to
control centers). He had worked on the most
important companies of electric sector in Brazil.
From September 2003 to December 2007, he worked
at AES Group in Brazil. First He worked at AES
Eletropaulo (a distributor arm of group) as Corporate Manager, and later at
AES Infoenergy as General Director. He worked at Enertrade (a trading
company of EDP Group in Brazil) as Risk Analyst (from April 2001 through
February 2002) and General Manager (From February 2002 through August
2003).Currently, Mr. Freire integrates CCEE Board.

Evelina Neves graduated from the National Institute

of Telecommunications (INATEL) in Electrical
Engineering, emphasis in Electronics and
Telecommunications. Master in Electrical
Engineering and Ph.D. in Computational Physics
from the University of São Paulo. Since 2000 she has
worked in the Brazilian Electricity Market in the
sector of Short-Term market Price, New Projects
Development, Market Rules and Market Monitoring.
Currently, Mrs. Neves supports the Board of
Directors at CCEE in the Coordination of the Technical and Economy
Advisory.