Brazil Country Market
Insights and Opportunities
Electrical Power Generation Sector
Overview: Brazil ranks 10th among the largest world power operators. Brazil’s electricity generation is largely in federal and state hands. The state-owned power company Eletrobras controls over 40% of installed generation capacity. State-owned energy companies control approximately 35%, while the remaining 25% has been privatized. Brazil has 2,030 operational power projects with 102,949 MW of installed capacity (excluding imports). Hydroelectricity, including imports, accounts for 77.1% of the total.
Considering a yearly GDP growth of 5%, by 2017 Brazil's electricity consumption should increase from 412.6 (terawatt-hour)TWh (2007) to 706.4 TWh, while the country’s installed capacity is expected to reach 143,086 MW. The recent global economic crisis, however, may affect these estimates.
The contribution of hydroelectricity should be reduced to 75.9%, while natural gas power plants may increase from 10.7% to 12%, and nuclear generation may reach 4 to 5%, if all of the eight planned plants or more come online.
Brazil has a total of 81 small hydropower plants (e.g. up to 30 MW) and another 159 under permit process. There are 21 hydro power plants above 30 MW under construction and 14 projects under permit process. As to thermal power plants, ANEEL’s data bank shows 23 projects under construction including natural gas, coal, and biomass plants (e.g. sugar cane bagasse). About 85 thermal power plants are listed as planned projects.
The 2009 estimate for Brazil’s power equipment market is US$8.47 billion of which US$630 million is imported globally with US$ 90 million coming from the United States. These figures are partially based on the Brazilian Electrical and Electronics Industry Association (ABINEE)’s statistics. Other power related trade associations do not release their local industry’s production figures. Likewise, the power companies’ associations do not publish their members’ consolidated equipment imports.
Recent ABINEE’s studies anticipate that Brazil’s GTD (power generation, transmission, and distribution) segments will grow between 5 and 7% in 2009 as a result of the Brazilian government’s growth acceleration program (“PAC”). More significant orders are expected to come from the Madeira hydropower complex and biomass cogeneration plants of Brazil’s sugarcane sector. New natural gas fields (e.g. Mexilhão) that will come online in 2009 are also expected to result in new thermal power plants in large industrial centers of Brazil. Orders in the power transmission segment should be connected to new transmission lines (e.g. Tucuruí-Manaus and the long line linking Porto Velho-Araraquara).
The 2008-2017 Power Expansion Plan, published by government-owned BPower Research Company (EPE), calls for US$65 billion investment during this period to bring an additional 34,620 MW to Brazil’s power generation capacity. Eletrobras estimates having invested US$ 3.2 billion in 2008. For 2009, Eletrobras plans to invest US$ 3.8 billion, and power generation will account for the bulk (US$3 billion) of its investments.
Opportunities: In the power generation subsector, in addition to the sale of equipment such as large power transformers, rectifiers, converters, inverters, electrical controls, heat recovery steam generators, power generation sets, heat exchangers, gas and steam turbines and parts, opportunities also exist in investing in power generation plants through power auctions.
The Brazilian Power Regulator ANEEL held two power generation auctions in 2006 and four in 2007. Adding to the December 2005 auction, a total of 13,477 MW of power have been contracted for delivery from 2008 to 2012. The December 2007 Santo Antonio power plant auction alone will call for investments of about US$4.5 billion. This 3,150 MW project was the first phase of the Madeira River Complex auction. Its second phase, for the 3,300 MW Jirau hydro plant, was held in May 2008. Investments to build this plant will be close to US$ 5 billion. Brazil’s national economic and social development bank (BNDES) is providing significant financing for these projects.
Additional power auctions were held in 2008, including one specifically for biomass plants which resulted in 2,379.4 MW contracted for delivery in 2009 and 2010, and two others that will call for 6,642 MW in 34 power plants by 2013. Future planned power auctions include one for wind power plants and the giant 11,100 MW Belo Monte hydro plant in the north region. Auction dates have not been released yet.
Public-private partnerships are expected to be the best means of market access for new-to-market US power companies.
Renewable Energy: A new ANEEL resolution, in effect since January 2008, allows consumers with a power demand of 500KW or higher to buy power from renewable sources in the non-regulated market. Incentives for these consumers include 50% discount in the power distribution tariff. This measure may expand the demand for renewable power plants.
Aside from hydro power plants, Brazil’s renewable plants include biomass and wind. Business opportunities in this subsector include the supply of equipment (e.g. wind power aero generators and parts, electronic controls) and participation as project sponsors.
Brazil currently has 20 wind power plants under construction and another 28 pending construction. The Brazilian government envisions wind power playing a greater (although still modest) role in Brazil’s future energy matrix.
Solar energy through photovoltaic technology (PV) is a competitive alternative to grid extension but is limited to remote areas of the country and in social interest applications. On the other hand, the use of solar water heaters in Brazil has increased rapidly in the last few years, with nearly 140 Brazilian manufacturers producing these products for residences, hotels, hospitals, and swimming pools. Estimates indicate that 5% to 10% of non-electrified domiciles could be supplied with PV systems, but technology is considered costly and maintenance services complex.
Transmission: Currently, Brazil has 88,939 km of power transmission lines, and about 60 million power consumers. Like the power generation subsector, business opportunities in the transmission segment include bidding for new transmission line concessions through annual auctions. The most recent one was from the hydroelectric complex of Rio Madeira, held on November 26, 2008. The transmission lines that will connect Madeira to the integrated power grid will be 2,375 km- long.
Brazil's transmission industry will need to invest approximately US$1.3billion in 2009-13 to build 2,500km of transmission lines and 22 substations included in the government power transmission plan.
Best equipment sales prospects include: electrical switches to open circuits, circuit breakers, capacitor banks, relays, and electrical protection panels.
Distribution: Recent studies released by the Acende Brasil Institute suggest that the power distribution segment will call for US$1.2 billion in annual investments over the next decade.
The “Light for All” rural electrification program is one of this sub sector’s most important programs launched in 2004. Over the last few years, US$4 billion has been invested with 3.2 million installed poles, 480,356 transformers, 257,000 km of high tension distribution lines, and 60,000 km of low tension lines. The goal is to bring electricity to all rural communities (12 million people) by 2010. In addition to this program, power distributors will continue to invest in power distribution system upgrades to make their companies more competitive, meet Brazil’s regulations concerning client satisfaction, and reduce technical and commercial losses. Additionally, Brazilian legislation mandates that power distributors invest 0.5% of their annual net revenues in energy efficiency and R&D programs. From 1998 to 2007, they invested about US$600 million in these programs.
Best prospects in this subsector include lightning arresters, relays, insulated electric conductors, surge suppressors, and innovative technologies to reduce technical and commercial losses.
US investment in Brazil’s energy sector is concentrated in power distribution and generation as a result of the country’s privatization process in 1996. US companies such as El Paso, Duke, AES, and Ashmore Energy International (AEI) compete with Spanish (Iberdrola, Abengoa), French (EDF, Suez) and Portuguese (EDP) companies. US companies Earth Tech and MDU Resources operate in the power transmission segment. The strongest competition for US GTD equipment suppliers are locally established multinationals (mostly European and Japanese).