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I recently spoke at the Smart Grid Latin America Forum, hosted in Sao Paulo, Brazil. While there, I learned a great deal about this country and its true potential for smart grid implementation and success. Brazil is a country rich in natural resources with a rapidly expanding economy. The population is growing while simultaneously expanding its standards of living. All of which has major implications for Brazil’s grid. Today, Brazil benefits from a very cost effective electric infrastructure, with more than 80% of its electricity coming from hydroelectric. The demand profile is relatively flat, but is expected to change rapidly in the coming years as consumers spend a portion of their increasing prosperity on appliances, air conditioning and other home comforts like flat screen televisions.
In fact, from 2007 to 2017, energy consumption in Brazil is expected to increase by approximately 60 percent. Latin America, and particularly Brazil, is growing, with projected GDP growth between 2010 and 2013 exceeding the US, Canada, the European Union, and Russia. With this growth will also come increased consumption, which often parallels growth in GDP. This anticipated consumption will result in new demands for electricity.
Next-generation of hydroelectric power plants will require major new investments in both dam construction and transmission at costs substantially higher than today’s legacy costs. Brazil will also need to make more investments in peaking power generation – generation brought on only during times of highest electricity demand – as the country’s demand profile continues to migrate towards those found in more mature market places (i.e. demand spikes in the afternoon and early evening as people make their way home and begin using electronics within the home).
Much of Brazil’s hydroelectric is transported from remote locations in the interior of the country to the major coastal cities, like Sao Paulo. This represents one of the challenges that Brazil will be interested in addressing with smart grid technology: line losses (or, inefficiency and waste on the power lines). The top three energy distribution companies in Latin American have $1 billion in annual energy losses. These losses are a result of technical losses, particularly during long transmission paths from hydro-generating sources to areas of use, and through energy theft.
Reliability will continue to be a major concern for Brazil. Brazil, in addition to being a global leader in raw materials, continues to demonstrate its ability in the area of manufacturing. Reliable electricity is a corner stone to any economy based on manufacturing. While in Brazil, I actually experienced an approximate 6-hour nighttime power outage that knocked out large parts of southern Brazil and Paraguay, which only served to reinforce concerns around grid reliability. Acende Brasil, a Brazilian electricity-industry body, predicts a 28-32% chance of blackouts by 2012 if the economy grows at 4.8% a year (the government's forecast is 5%).
Additionally, while Brazil has a growing renewable energy sector, the aging infrastructure has made incorporating renewables difficult. Renewable energy, like hydro, biomass and wind will account for between 16 and 34% of new generation adds over the next few years. While this may be viewed as an opportunity, integrating these renewables into the distribution grid will also present challenges, as the grid was initially designed for one-way power flow, from a central generating facility to the consumer. A smarter grid will be needed to help integrate this renewable power into the grid.
While facing serious energy issues, the Brazilian government and the country’s utilities are taking steps to integrate smarter grid technologies, which will help deliver greater productivity and efficiencies, enabling utilities and consumers do more with less; optimize renewable energy sources like wind, solar and biogas; and empower consumers with information to manage their energy usage and make choices that could save money without compromising their lifestyle.
Brazil will serve as host for both the World Cup in 2014 and the Olympics in 2016, which provides an opportunity to focus smart grid development. Already the Brazilian government is instituting additional incentives for the “greening” of the network, to include more solar on rooftops. Brazil and other Latin American countries are focusing fiscal stimulus dollars (also called counter-cyclical measures) on energy and infrastructure. Brazil’s combination of $3.6 billion in fiscal stimulus and $123 billion in PAC (program for accelerated growth) funding will have a focus on energy, infrastructure and oil and gas.
Brazil has also focused R&D dollars allocated for efficiency programs to help meet the significant challenges around energy losses. Every utility puts one percent of their revenue into a regulated fund each year, of which at least 25 percent must be spent on efficiency measures. The Agência Nacional de Energia Elétrica or ANEEL, the agency which regulates Brazilian utilities, has recently begun focusing on smart metering (with a proposed mandate for 62 million smart meters across Brazil) and time-of-use rates, which will not only help manage growing demand, but will also help give consumers choice and control over how they use and pay for power.
Smart meters and time-of-use rates would also help support the integration of plug-in hybrid electric vehicles, which were also discussed in great length at the Smart Grid Forum. PHEVs hold promise for Brazil’s increasingly urban populations. Brazil has affordable electricity to support these vehicles. The urban areas have traffic congestion and electric cars are very economic for this type of environment, given they only use energy when they are moving, unlike their gasoline/diesel counterparts that consume energy even at a standstill. Lastly, these cars have significant benefits to urban areas with less automobile noise and substantially reduced emissions that would address urban smog.
I see smart grid having great potential in this country, and I predict it will be one to watch.
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