Power Transmission and Distribution in Brazil Seminar on Japanese Technologies on Urban Railway and Power Transmission and Distribution Ministry of Economy, Trade and Industry - Japan Power Transmission and Distribution in Brazil Carlos Eduardo Cabral Carvalho Advisor to the Board of Directors Brazilian Electricity Regulatory Agency - ANEEL São Paulo, 19/3/2015

Agenda ANEEL The Brazillian Interconected System – SIN Generation Transmission Distribution Smart Grid – Regulatory aspects Distributed Generarion – Regulatory aspects Technology - Reserch & Development

Electric Sector Institutional Framework National Congress Policies and directives National Council for Policies on Energy (Conselho Nacional de Política Energética - CNPE) Planning and assurance of Balance between supply and demand Ministry of Mines and Energy (Ministério de Minas e Energia - MME) Studies and Planning Energy Planning Company (Empresa de Pesquisa Energética - EPE) Regulation and oversight Brazilian Electric Power Agency (Agência Nacional de Energia Elétrica - ANEEL) Supervision, control and operation of the Interconnected Power Grid National System Operator (Operador Nacional do Sistema Elétrico - ONS) Scenario Assessment and Preventive Actions Regarding Supply Availability Monitoring Committee of the Electric Sector (Comitê de Monitoramento do Setor Elétrico - CMSE) Financial Clearing Clearance Chamber for Energy Transactions (Câmara de Comercialização de Energia Elétrica - CCEE)

ANEEL’s Organizational Structure Board of Directors Secretary-General Advisors Internal Audit Legal Advice Chief of Cabinet Superintendencies of organizational processes Regulatory Inspection Mediation Auctions/Grants Following the legal framework and specific policies Guide and advise – enforce penalties when unavoidable Dispute settlement Energy auctions, auctions for new enterprises (G/T), and authorizations Two hierarchical levels - Horizontal Structure - Process management Staff: 731 people; Third Party Contracts: 376 (IT, secretary, etc.) = Total: 1.107 people

Brazilian Electricity Regulatory Agency Regulates and oversees the entire Brazilian electric power sector ANEEL’s Mission To provide favorable conditions so the electricity market develops with balance between the utilities and benefiting society Consumers/Society Reasonable tariffs Quality of service Guarantee of rights Service Providers Government Adequate remuneration Contracts honored Predictable and clear rules Strategic interests Development Model Universalization

ANEEL’s main challenges To support and enhance energy policies, to identify improvements and to fill gaps Improve of the regulation model To guarantee the consumers rights and take care of the compliance of the obligations and the rights of agents Establish clear borders between the Agency, the Government and the Market Enhance the participation of society, the transparency tools and reduce asymmetry of information To strive for the reduction of charges and tariffs Regulations supporting the insertion of new technologies: smart grid, solar power, mini and micro-generation

Brazilian Interconnected System Generation Facilities in operation Type Quant Authorized Power (MW) % UHE - Hydro 197 82.645 63,18 UTE - Biomass 485 12.051 9,21 UTE - Fossil and others 1.377 25.355 19,38 PCH - Small Hydro * 467 4.677 3,58 UTN - Nuclear 2 1.990 1,52 EOL - Wind 178 3.782 2,89 CGH - Very small Hydro ** 288 0,22 UFV - Solar 21 10 0,008 UFV - Mini/Micro 143 0,002 Total 3.340 130.800 100,00% * 1MW ≤ Power ≥ 30MW ** Power ≤ 1MW BIG/ANEEL: August/2014 More than 75% of the electricity produced comes from renewables!

Renewable Generation in Brazil WIND HYDRO BIOMASS (Sugar cane) North: 9% 12,8 GW 26,4 TWh/year NE: 52% 75 GW 144,3 TWh/y North Potential: 111.396 MW Remaning: 64-66 % NE Potential: 26.268MW Remaning: 3-4 % CW: 2% 3,1GW 5,4 TWh/y SE / CW Potential: 78.716 MW Remaning: 2-3 % SE: 21% 29,7 GW 54,9 TWh/y Atlas Eólico Nacional 2003 – CEPEL/Eletrobras South: 16% 22,8GW 44,1 TWh/y S Potential: 42.030 MW Remaning: 21 % Atlas da Energia Elétrica, 2ª Ed, ANEEL (2005) Estimated potential: 144 GW Estimated potential: 260 GW

Renewable Generation in Brazil SOLAR POPULATION DISTRIBUTION Brazilian territory has high potential of solar energy - annual average between 1200 and 2400 kWh / m² / year global irradiation. The current costs of this technology are relatively high but they are decreasing.

Brazilian Interconnected System Transmission 107 Utilities, 110.000 Km

Brazilian Interconnected System Interligação Tucuruí - Macapá – Manaus Lote A: LT Tucuruí – Xingu – Jurupari 1.054 km 9/7/2013 Lote B: LT Oriximiná – Jurupari – Macapá 1.426 km 30/9/2013 Lote C: LT Oriximiná – Silves- Lechuga 1.172 km 9/7/2013

Brazilian Interconnected System Interligação Manaus – Boa Vista 500 kV Contrato de Concessão no 3/2012, de 25/1/12 Prazo de construção: 36 meses (entrada em 25/1/15) Investimento estimado: R$ 1,061 bilhões Receita Anual Permitida (RAP) = R$ 121,128 milhões

Brazilian Interconnected System Transmission Public auctions in which builders-to-be bid down on the “allowed annual income – RAP” cap pre-fixed by the government which covers for the implementation and operation of the transmission system - 30 year contract. Regulation 399/2009 – Quality of the transmission service. Regulation by incentive: economic signal to maximize service availability.

Brazilian Interconnected System Distribution 63 Distribution Utilities Tariffs differentiated by concession areas Distribution utilities of all sizes 1.200 a 3.900.000 MWh 2.800 a 7.500.000 Consumers Regional diversity 78.000.000 Consumers

Brazilian Interconnected System Competition and Regulation Generation and Transmission GENERATION (Competition): Public auctions in which sellers-to-be bid down from a price cap pre-fixed by the government. Energy Research and Planning Company (EPE) – plans the expansion of generation and transmission systems. Distribution companies declare the energy needed for supplying their market 3 and 5 years in advance. Ministry of Mines and Energy (MME) defines guidelines for auctions. ANEEL undertakes transmission and generation auctions. G TRANSMISSION (Competition for concessions): Public auctions in which builders-to-be bid down on the “allowed annual income – RAP” cap pre-fixed by the government which covers for the implementation and operation of the system. T DISTRIBUTION (Natural Monopoly): Tariffs determined by ANEEL on an yearly basis plus a periodic four-year general review. DISCOS declare energy needs every year and ANEEL carries out Public Auctions. D RETAIL (Competition): Free market transactions only for qualified consumers as determined by law. All DISCOs sign individual supply contracts with each selling GENCO R Distribution companies are allowed to buy energy from DG up to 10% of their own load.

Smart Grid – “A gigantic universe waiting to be explored in Brazil”

Smart grid deployment in Brazil Make traditional electricity grids: more efficient and reliable more adaptable to the consumer’s profile (Electricity can be used in a more rational, sustainable way) Clear regulatory guidelines Encourage consumers to be more interactive as regards their consumption

Smart grid deployment in Brazil Smart grid is much more than just the meter The entire structure serves to process and transfer data Without a communications system the data gathered by the meter serves no purpose The goal is: Get the regulations drawn up now so that industry can start manufacturing Once they’ve been manufactured, they’ll have to be certified by the metrology bodies, in this case by INMETRO Then they can be put on the market

Smart grid deployment in Brazil NOW FUTURE Meter (kWh) The meter reader checks the consumption The consumer pays the bill Meter (kWh) and complementary functions Communication Information available - consumer and distribution company Installation of smart metering in consumers connected in low voltage level (220 V – 127 V) 78 millions consumer Units Strike the right balance between modernity of service and reasonable tariffs Challenge 19

Potential impacts on the Grid Huge impact GENERATION - Small impact More information about the service and the consumption profile Consumption management Incentive to the rational use CONSUMERS DISTRIBUTION Big impact TRANSMISSION Tool for losses reduction Operating costs reduction Micro and mini distributed generation Real-time net information Moderated impact

Smart grid in Brazil – Key Drivers World Reduction of CO2 Reduction of energy consumption Reduction of Opex (economy efficiency) Brazil Grids more efficient and reliable Reduce energy losses Reduce peak load (time-of-use tariffs) We have to develop our own solution!!! Considerable diversity amongst distribution companies Balance between technological advance and affordable tariffs Aspects to be considered by ANEEL

Smart grid in Brazil – Key Drivers Energy consumption Source: Key World Energy Statistics, 2014 – International Energy Agency OECD - Organization for Economic Co-operation and Development http://www.iea.org/publications/freepublications/publication/KeyWorld2014.pdf

Key Drivers – Energy Quality DEC & FEC – BRAZIL http://www.aneel.gov.br/area.cfm?id_area=80 Compensation for violation of the quality indicators Year 2010 2011 2012 2013 2014 Total 360.797.553,60 397.832.749,46 437.468.898,42 375.082.019,25 374.922.474,12

32% 21% 20% 9% 18% 5% 20% 10% Key Drivers – Energy Losses 12% 3% Distribution losses Non-technical losses 5% 20% 10% 12% Non technical losses – estimated costs (ref. april/2010) Energy: R$ 2,2 Billion per year. T & D: R$ 3,8 Billion per year. Total without taxes: R$ 6,0 Billion per year. Total with taxes: R$ 8,1 Billion per year. 3%

Each regulation is an additional step towards smarter grids Regulation related to Smartgrid Each regulation is an additional step towards smarter grids Res. 610/14 Prepayment Res. 502/12 Electronic meters Micro and Mini distributed generation Res. 482/12 Res. 464/12 Time of use tariff – Low Voltage Res. 375/09 Power Line Communication – PLC Res. 345/08 Geographical Information System

Regulator’s perspective Goal to be achieved (not the technology to be used) Each regulation is an additional step towards smarter grids

Electronic Meters - Regulation 502/2012 2 types of meters Time-of-use tariff Consumer choice Specific comercial criteria Basic functions Ability of applying 4 tariff periods per day Identify the period Complementary functions Consumer interested in complementary functions Consumer pays for the meter Functions Information: Voltage, current, period of the day Quality Voltage Quality Output for data

Exemplo de relatividade entre postos da Tarifa Branca Time-of-use tariff – Low voltage To stimulate the reduction of peak load Tariff (R$/MWh): Peak, Intermediate e Off-Peak Peak/Off-Peak = 5 and Intermediate/Off-Peak = 3 Exemplo de relatividade entre postos da Tarifa Branca

Small scale DG (up to 1 MW) DG ≤1MW Biomass Hydro CHP Regulation ANEEL 482/2012. Consumer Procedures Request the access Install the equipments Request inspection Regularize tecnical aspects Operation Distribution Company Issue access authorization Inspection Inspection Report Approve the access point Connection 30 days* 30 days 15 days 7 days 82 days 60 days for mini GD

Small scale DG (up to 1 MW) – Net metering Consumption > Generation Consumption < Generation Consumption Generation Consumption Generation Consumer is billed by the difference between the consumed electricity and the generated electricity Electricity generated in a TOU rate X by a unit A of the consumer (expiration date: 36 months) (1st) Unit A (1st) TOU rate X (2nd) Different TOU rate (ratio between tariffs) (2nd) Different unit of the same consumer

Small scale DG (up to 1 MW)

Perspectives for small scale DG (up to 1 MW) DG is getting cheaper Electricity tariffs are increasing Consistent regulatory framework Source: ABRADEE, 2012

Smart grid and DG in Brazil Smart grids and DG There is no doubt that smart grids will be implemented in Brazil It is a natural process of technological evolution The question is not whether we need them, but how they will be implemented The way to operate the network has already changed Challenges Deal with the new reality Engage the consumer - show that the technology is for their benefit Ensure the implementation in a way to benefit the entire society

Research and Development

Brazilian’s Law for R&D Program in the Electric Energy Sector Federal Law nº 9,991 - July 24, 2000 Objective : Stimulate innovations to face the technological and market challenges of the Brazilian electric sector Establishes minimum percentages from Net Operating Income (NOI) for investing in R&D projects

R&D Program: Available Resources 2014 1% NOI G 0.40% FNDCT US$ 157Mi TOTAL R&D R&D 1% NOI T 0.40% ANEEL US$ 392,5Mi US$ 157Mi 1% NOI Net Operating Income 0,5% NOI D 0.20% MME US$ 78,5Mi NOI= US$ 58,43 Bi 1% NOI= US$ 58,43 Mi US$ 191,9Mi Noi(D) = US$ 38,34 Bi => (65,6% NOI) EE 0,5% NOI D TOTAL EE ANEEL US$ 191,9Mi *1 US$ = R$ 2,8649

R&D Program on Smart Grid There are about 270 projects in 10 subjects of Smart Grids in ANEEL’s R&D Program, with a total of US$ 380,5Mi in planned investments from 2008 to 2016. The four main subtopics of the projects are: Distribution automation, including oversight of electricity distribution networks; Distributed generation, micro generation and micro grids; Telecommunications for Smart Grid; and Intelligent electricity metering systems, including new models and tests of new features of electronic meters;

R&D Program on Transmission There are about 191 projects on Transmission in ANEEL’s R&D Program, with a total of US$ 254,7Mi in planned investments from 2008 to 2016. The four main subtopics of the projects are: Electric Power System Planning; Operation of Electricity System; Supervision, Control and Protection of Power Systems; and Quality and Reliability of Electricity Services.

SGAN – Quadra 603 – Módulos “I” e “J” Thank You! SGAN – Quadra 603 – Módulos “I” e “J” CEP: 70.830-030 /Brasília – DF Tel. 55 (61) 2192-8600 ccabral@aneel.gov.br