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Jose Claudio Cardoso, President, ABRATE Brazil

17.12.2013 / Energyboardroom

Jose Claudio Cardoso, President of ABRATE speaks about Brazil’s growing renewable energy sector, the increasing need for fair energy policies, and the pros and cons of Brazil’s new hybrid power model.

ABRATE works in close collaboration with ONS and ANEEL, promoting Brazil’s main transmission companies. What have been the main points ABRATE accomplished for the transmission sector in the past 10 years?

In 1999, Brazil’s major regulatory change in the electricity sector started and two years later, the country suffered from a heavy energy rationing in the Southeast and Northern regions. In 2004, the regulatory framework was again adapted to resolve the challenges at hand and currently we are still under modification to resolve reservoir and cost issues.

ABRATE portrays 10 associate companies which are all part of Brazil’s SIN—National Interconnected System—and throughout these last 10 critical years, ABRATE has been representing these companies and helping the sector embrace these new policies. We work hand in hand with the Ministry of Mining and Energy and ANEEL—Brazil’s electricity regulatory agency—to first understand the real issues and second to resolve and improve Brazil’s need for modernization and fair energy policies.

What has been the industry’s reception of Brazil’s new hybrid power model? What needs to improve?

Precisely for transmission lines, our experience in Brazil’s immense territory is extensive. Brazil’s SIN has been operational for such a long time and this new model has been setting a better framework for energy transportation and operational issues. The year 2001, when the energy rationing occurred, the south part of Brazil did not have the necessary transmission lines to transport energy to the rest of the country. This was a terrible year, and we knew this scenario could not take place again, so we worked towards improving the transmission lines systems.

Brazil’s hybrid power model supports Brazil’s energy value chain in order to meet the country’s thirst for energy. This model has shown a wide array of improvements, and not only for our transmission systems. Today, we maintain our position to promote the usage of hydraulic power plants in combination with reservoirs, as this is fundamental for our renewable energy sustainability. For instance, Belo Monte has an 11,000 MW capacity, but in reality is only producing on average 4,000 MW because of reservoir variations caused by climate instability. This large difference of energy generation is a problem since originally transmission lines were created to support this 11,000 MW capacity.

We truly believe in the value of reservoirs to take advantage of the capacity our country has available. Moreover, reservoirs have a real social benefit, bringing new hospitals, schools and infrastructure for the local communities. For instance, when Tucurui dam was built, nothing was available there for the locals. Today, a city exists all around it, and other relevant examples like Ilha Solteira or Iguaçu Falls testify of such local development; attracting tourists and bringing life to these areas.

According to EPE, the government will have to contract an additional 5,000 km every year of installed transmission line capacity on the interconnected system by 2020. How realizable is this objective?

In reference to EPE’s 10-year energy plan, from 101,000 km of transmission lines available in 2011, the plan predicts a reach of 149,000 km by 2021. This figure represents as you mentioned an availability of around 5,000 additional kilometers every year.

Last week transmission auctions showed a bit of retreat on behalf of transmission companies, primarily caused by environmental licenses, social manifestations, and low project profitability. Obtaining environmental licenses has been a real headache and has caused large project delays for new transmission lines. When companies take the risk of starting the project without the initial license, most of the time deadlines are not respected and consequently, these companies suffer from heavy penalties. This whole process only slows down the country’s expansion and a large amount of companies are bearing these penalties and not meeting the deadlines.

ANEEL has been supporting companies to help them bring forward better reports to the environmental community. However, a critical factor has not been resolved and this applies for leading companies which have not been able to meet several deadlines and therefore have been banned from participating in the auction bids. These restrictions that companies suffer to enter the bids are a real loss of competition and therefore proper development opportunities for new transmission lines.

What are the main challenges faced by the companies that ABRATE represents?

The challenges are constant and our objective is to prepare our companies to face them in the best possible way. The industry and authorities need to work hand in hand and maintain large investments in maintenance, supervision, and human resources to improve our transmission line system. The problem is that our SIN is highly complex and demands not just companies, but authorities, agencies and government to align on the solutions available and work towards the same goal which is to make our transmission lines more efficient and reliable throughout the entire Brazilian territory.

Unfortunately, currently the industry is under pressure and with the renovation of concessions and the new law that was enforced on the first of January of 2013, transmission companies have lost up to 70 percent of their revenues. This is causing large groups like Eletrobras to restructure their activities and reduce a large amount of their staff. These are terrible consequences, which we must monitor closely.

Brazil is under severe restructuring of its energy system, and the industry is really having difficulties coping with the new regulations and suffering large financial losses. We need to be very alert and find ways to define long term plans which will reinforce our energy system and benefit the industry and consumers at the same time. This will take time but I have confidence in our ability as a country to achieve great results.


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