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Brazilian Development BankBrazilian Development BankBNDESBNDESBNDES - Brazilian Development Bank BNDES - Brazilian Development Bank
1818thth World Energy Congress World Energy CongressBuenos Aires, October 24, 2001Buenos Aires, October 24, 2001
Francisco GrosFrancisco GrosPresident of BNDESPresident of BNDES
1818thth World Energy Congress World Energy CongressBuenos Aires, October 24, 2001Buenos Aires, October 24, 2001
Francisco GrosFrancisco GrosPresident of BNDESPresident of BNDES
Imperfections in the Energy Market:Imperfections in the Energy Market:The Brazilian Crisis and the Measures The Brazilian Crisis and the Measures
Adopted for Overcoming ItAdopted for Overcoming It
Imperfections in the Energy Market:Imperfections in the Energy Market:The Brazilian Crisis and the Measures The Brazilian Crisis and the Measures
Adopted for Overcoming ItAdopted for Overcoming It
gp / mls - jfca
Brazilian Development BankBrazilian Development BankBNDESBNDES
Brazilian Electricity Sector Basic Characteristics
Electricity Sector Model
2001 Crisis
Plan of Action
Brazilian Electricity Sector Basic Characteristics
Electricity Sector Model
2001 Crisis
Plan of Action
INDEX INDEX
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Brazilian Development BankBrazilian Development BankBNDESBNDES
Brazilian Electricity
Sector Basic Characteristics
Brazilian Electricity
Sector Basic Characteristics
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Brazilian Development BankBrazilian Development BankBNDESBNDES
Hydroelectric: 93.2 %
Conventional thermoelectric: 4.2 %
Nuclear: 1.6 %
Imported: 1 %
Hydroelectric: 93.2 %
Conventional thermoelectric: 4.2 %
Nuclear: 1.6 %
Imported: 1 %
Electricity sector basic
characteristics in Brazil
Electricity sector basic
characteristics in Brazil
SourcesSourcesSourcesSources
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Brazilian Development BankBrazilian Development BankBNDESBNDES
Present total generating capacity of 74,000 MW,
for an estimated demand of:
Before the crisis Today
44,000 MW (average) 33,000 MW (average)
56,000 MW (peak) 43,000 MW (peak)
Present total generating capacity of 74,000 MW,
for an estimated demand of:
Before the crisis Today
44,000 MW (average) 33,000 MW (average)
56,000 MW (peak) 43,000 MW (peak)
Electricity sector basic characteristics in BrazilElectricity sector basic characteristics in Brazil
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Brazilian Development BankBrazilian Development BankBNDESBNDES
19951995 20012001
98 %98 %
37 %37 %
Public sector participation
on distribution
Public sector participation
on distribution
Private Market for DistributionPrivate Market for Distribution
State with privatized distribution systemsState with privatized distribution systems
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Brazilian Development BankBrazilian Development BankBNDESBNDES
Public sector78 %
Public sector78 %
Private Sector22 %
Private Sector22 %
Present installed capacityPresent installed capacity
Generation: New Private Market Generation: New Private Market
Cesp Paranapanema
&Cesp Tietê
Cesp Paranapanema
&Cesp Tietê
Cachoeira DouradaCachoeira Dourada
GerasulGerasul
gp / mls - jfca
Brazilian Development BankBrazilian Development BankBNDESBNDES
Brazilian Electricity
Sector Model
Brazilian Electricity
Sector Model
gp / mls - jfca
Brazilian Development BankBrazilian Development BankBNDESBNDES
ELECTRICITY SECTOR MODEL (1995) ELECTRICITY SECTOR MODEL (1995)
Basic PrinciplesBasic Principles
ELECTRICITY SECTOR MODEL (1995) ELECTRICITY SECTOR MODEL (1995)
Basic PrinciplesBasic Principles
Market-based investments and privatizationMarket-based investments and privatization
Competition (generation and trade) and regulation (transmission and Competition (generation and trade) and regulation (transmission and
distribution)distribution)
Independent regulatory body to ensure adequate balance between Independent regulatory body to ensure adequate balance between
needs of utilities and consumers and high quality of services needs of utilities and consumers and high quality of services
Diversification of the energy matrixDiversification of the energy matrix
Market-based investments and privatizationMarket-based investments and privatization
Competition (generation and trade) and regulation (transmission and Competition (generation and trade) and regulation (transmission and
distribution)distribution)
Independent regulatory body to ensure adequate balance between Independent regulatory body to ensure adequate balance between
needs of utilities and consumers and high quality of services needs of utilities and consumers and high quality of services
Diversification of the energy matrixDiversification of the energy matrix
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Brazilian Development BankBrazilian Development BankBNDESBNDES
Transition
Regulation
Coordination
Transition
Regulation
Coordination
ELECTRICITY SECTOR MODEL
Risks
ELECTRICITY SECTOR MODEL
Risks
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Brazilian Development BankBrazilian Development BankBNDESBNDES
TransitionTransition
Long and not synchronized
Privatization not preceded by the implementation
of regulatory rules
Partial implementation of the privatization process
(on the generation side)
TransitionTransition Long and not synchronized
Privatization not preceded by the implementation
of regulatory rules
Partial implementation of the privatization process
(on the generation side)
ELECTRICITY SECTOR MODEL
Risks
ELECTRICITY SECTOR MODEL
Risks
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Brazilian Development BankBrazilian Development BankBNDESBNDES
RegulationRegulation Uncertainties associated with the regulatory
framework, e.g. environmental licenses
Non-enforcement of clauses of pass-through costs
Indefinition concerning methodology applicable to the
Ordinary Revision of the concession contracts
Difficulties on the operation of the wholesale market of
energy
RegulationRegulation Uncertainties associated with the regulatory
framework, e.g. environmental licenses
Non-enforcement of clauses of pass-through costs
Indefinition concerning methodology applicable to the
Ordinary Revision of the concession contracts
Difficulties on the operation of the wholesale market of
energy
ELECTRICITY SECTOR MODEL
Risks
ELECTRICITY SECTOR MODEL
Risks
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Brazilian Development BankBrazilian Development BankBNDESBNDES
CoordinationCoordination
Need to articulate the reform of the three main
segments of the energy sector: natural gas,
electricity and oil
CoordinationCoordination
Need to articulate the reform of the three main
segments of the energy sector: natural gas,
electricity and oil
ELECTRICITY SECTOR MODEL
Risks
ELECTRICITY SECTOR MODEL
Risks
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Brazilian Development BankBrazilian Development BankBNDESBNDES
2001 Crisis 2001 Crisis
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Brazilian Development BankBrazilian Development BankBNDESBNDES
Immediate cause: extremely unfavorable rainfall patterns in 2000/1
San Francisco River Basin: worst year since 1930
Grande River Basin: 4th worst year since 1930
Other causes:
Independent commission created to investigate the crisis’ origins
concluded that there were significant delays in implementing new and on-
going projects (41% of the storage capacity of Northeast, Southeast and
Midwest regions)
Immediate cause: extremely unfavorable rainfall patterns in 2000/1
San Francisco River Basin: worst year since 1930
Grande River Basin: 4th worst year since 1930
Other causes:
Independent commission created to investigate the crisis’ origins
concluded that there were significant delays in implementing new and on-
going projects (41% of the storage capacity of Northeast, Southeast and
Midwest regions)
2001 Crisis2001 Crisis
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Brazilian Development BankBrazilian Development BankBNDESBNDES
Reservoirs levels Southeast/Midwest and Northeast - 1997-2001
(% capacity)
Reservoirs levels Southeast/Midwest and Northeast - 1997-2001
(% capacity)
12,812,8
00
1010
2020
3030
4040
5050
6060
7070
8080
9090
100100
JanJan FebFeb MarMar AprApr MayMay JunJun JulJul AugAug SepSep OctOct NovNov DecDec
19971998199920002001
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Brazilian Development BankBrazilian Development BankBNDESBNDES
Other causes (cont.):
Insufficient private investments in generation due to the lack of
correct signaling
Complexity of the transition from the state-model to the competitive-
model
Lack of policy for maintaining safety back up capacity of generating
thermal plants
Other causes (cont.):
Insufficient private investments in generation due to the lack of
correct signaling
Complexity of the transition from the state-model to the competitive-
model
Lack of policy for maintaining safety back up capacity of generating
thermal plants
2001 Crisis2001 Crisis
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Brazilian Development BankBrazilian Development BankBNDESBNDES
Generation projects: Private sector x Public budget
Generation projects: Private sector x Public budget
ProjectsProjects
Installed Energy (MW)
Installed Energy (MW)
Private Private PublicPublic Cost Cost
US$ mmUS$ mm
US$/MW
US$/MW
US$ mmUS$ mm
US$/MW
US$/MW
Serra da Serra da MesaMesa
Serra da Serra da MesaMesa 1.2931.2931.2931.293 779779779779 603603603603 1.6901.6901.6901.690 1.3071.3071.3071.307 ––54%54%––54%54%
ItáItá ItáItá1.4501.4501.4501.450 620620620620 428428428428 1.3991.3991.3991.399 965965965965 ––56%56%––56%56%
MachadinhoMachadinho MachadinhoMachadinho 1.1401.1401.1401.140 514514514514 451451451451 1.4611.4611.4611.461 1.2821.2821.2821.282 ––65%65%––65%65%
TotalTotal
TotalTotal
1.9131.9131.9131.913
4.5504.5504.5504.550
––58%58%––58%58%Source: BNDES and Plano Decenal de Expansão/ELETROBRAS Source: BNDES and Plano Decenal de Expansão/ELETROBRAS
gp / mls - jfca
Brazilian Development BankBrazilian Development BankBNDESBNDES
Plan of Action for
Overcoming the Crisis
Plan of Action for
Overcoming the Crisis
gp / mls - jfca
Brazilian Development BankBrazilian Development BankBNDESBNDES
1) 20% reduction in consumption, as required by the National System
Operator
2) Emergency program for immediate increase in energy supplies
3) Structural program for more durable increase in energy supplies
4) Revitalization of the model for the electricity sector
5) Conservation and Rationalization
1) 20% reduction in consumption, as required by the National System
Operator
2) Emergency program for immediate increase in energy supplies
3) Structural program for more durable increase in energy supplies
4) Revitalization of the model for the electricity sector
5) Conservation and Rationalization
PLAN OF ACTIONPLAN OF ACTION
gp / mls - jfca
Brazilian Development BankBrazilian Development BankBNDESBNDES
20% reduction in consumption, in reference to May-July 2000 average,
as required by the National System Operator
Results:
Extraordinary enrollment of the population
Reservoirs accumulation above expectations (close to 8% above
the estimated levels in the Southeast)
Dealing of consumption rights reduced the economic impacts of
rationing
20% reduction in consumption, in reference to May-July 2000 average,
as required by the National System Operator
Results:
Extraordinary enrollment of the population
Reservoirs accumulation above expectations (close to 8% above
the estimated levels in the Southeast)
Dealing of consumption rights reduced the economic impacts of
rationing
1) Reduction of the Consumption1) Reduction of the Consumption
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Brazilian Development BankBrazilian Development BankBNDESBNDES
2) Emergency Supplies
Aims
2) Emergency Supplies
Aims Obtain additional energy supplies, mostly of foreign
origin, on a temporary basis
Set up a public energy trader to:
buy electricity from independent producers
lease or buy generating equipment
purchase the consumption rights of larger
consumers
Obtain additional energy supplies, mostly of foreign
origin, on a temporary basis
Set up a public energy trader to:
buy electricity from independent producers
lease or buy generating equipment
purchase the consumption rights of larger
consumers
gp / mls - jfca
Brazilian Development BankBrazilian Development BankBNDESBNDES
New energy sources: operating in 4 to 12 months
Mobile thermoelectric plants: ships, containers, trucks and other equipment
Fuel: oil and diesel
Cogeneration and biomass (gas)
2 to 3 year contracts : “ bridge” to return to normalcy
New energy sources: operating in 4 to 12 months
Mobile thermoelectric plants: ships, containers, trucks and other equipment
Fuel: oil and diesel
Cogeneration and biomass (gas)
2 to 3 year contracts : “ bridge” to return to normalcy
2) Emergency Supplies
Characteristics
2) Emergency Supplies
Characteristics
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Brazilian Development BankBrazilian Development BankBNDESBNDES
2001 2002 2003 Total
HYDROELECTRIC ( 22 ) HYDROELECTRIC ( 22 ) 1,0161,016 3,5133,513 3,1633,163 7,6927,692
THERMOELECTRIC ( 32 )THERMOELECTRIC ( 32 ) 1,6301,630 3,7683,768 5,4095,409 10,80710,807
COGENERATION COGENERATION 160160 300300 500500 960960
WIND / SOLAR WIND / SOLAR 5050 500500 500500 1,0501,050
IMPORTS ( 6 )IMPORTS ( 6 ) 1,0481,048 900900 800800 2,7482,748
TOTAL (MW) 3,951 9,381 10,772 24,104
TRANSMISSION LINES - Km TRANSMISSION LINES - Km 505 1,191 4,530 6,226
SUBSTATIONSUBSTATION 3,525 MVA 3,525 MVA
Supply IncreaseTYPE ( Projects )
SMALL PLANTSSMALL PLANTS 4747 400400 400400 847847847847
3) Program for Increasing Energy Supplies3) Program for Increasing Energy Supplies3) Program for Increasing Energy Supplies3) Program for Increasing Energy Supplies
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Brazilian Development BankBrazilian Development BankBNDESBNDES
Investment Forecast (2001 - 2003)Investment Forecast (2001 - 2003)Investment Forecast (2001 - 2003)Investment Forecast (2001 - 2003)
3) Program for Increasing Energy Supplies3) Program for Increasing Energy Supplies3) Program for Increasing Energy Supplies3) Program for Increasing Energy Supplies
Private
HYDROELECTRICHYDROELECTRICHYDROELECTRICHYDROELECTRICTHERMOELECTRICTHERMOELECTRICIMPORTED ENERGYIMPORTED ENERGYTRANSMISSION NETWORKTRANSMISSION NETWORKOTHER SOURCES (*)OTHER SOURCES (*)
TOTAL
ObsObs: : The above figures include work carried out and still to be performed under the Electicity Emergency Strategic Program The above figures include work carried out and still to be performed under the Electicity Emergency Strategic Program (*) Cogeneration, wind, solar and small hydro plants(*) Cogeneration, wind, solar and small hydro plants
Type of ProjectEstimated Value (2001 - 2003)
(US$ million)
2,7362,736 1,2431,243 3,9783,9784,5584,558 2,7552,755 7,3147,314
488488 -- 488488851851 432432 1,2841,284
2,1162,116 178178 2,2942,294
10,749 4,608 15,358
State Total
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Brazilian Development BankBrazilian Development BankBNDESBNDES
Economic cues to stimulate private investmentEconomic cues to stimulate private investment
Government management: eliminate overlaps and gray Government management: eliminate overlaps and gray zones among public agencieszones among public agencies
Action to correct market failuresAction to correct market failures
Clear and transparent rules of the gameClear and transparent rules of the game
Elimination of regulatory uncertaintiesElimination of regulatory uncertainties
Solution to pending issues (pre and post-crisis)Solution to pending issues (pre and post-crisis)
FOCUS
4) Committee for the Revitalization of the 4) Committee for the Revitalization of the
Electricity Sector ModelElectricity Sector Model
(under BNDES coordination)(under BNDES coordination)
4) Committee for the Revitalization of the 4) Committee for the Revitalization of the
Electricity Sector ModelElectricity Sector Model
(under BNDES coordination)(under BNDES coordination)
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Brazilian Development BankBrazilian Development BankBNDESBNDES
ObjectivesObjectives
Efficient allocation of energy resources / environmental Efficient allocation of energy resources / environmental
preservationpreservation
Establishment of maximum levels of specific Establishment of maximum levels of specific
consumption and minimum levels of energy efficiency consumption and minimum levels of energy efficiency
for machines and equipment for machines and equipment
FOCUS
5) 5) Conservation and Rationalization5) 5) Conservation and Rationalization
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Brazilian Development BankBrazilian Development BankBNDESBNDES
Specific Program for the support of small and medium Specific Program for the support of small and medium
enterprisesenterprises
InformationInformation
CapacitationCapacitation
Consultant servicesConsultant services
CreditCredit
Management and assessmentManagement and assessment
FOCUS
5) 5) Conservation and Rationalization5) 5) Conservation and Rationalization
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Brazilian Development BankBrazilian Development BankBNDESBNDES
www.bndes.gov.brwww.bndes.gov.br
BNDES BNDES – – Brazilian Development BankBrazilian Development Bank BNDES BNDES – – Brazilian Development BankBrazilian Development Bank
Presentation prepared by the Office of the President of BNDESPresentation prepared by the Office of the President of BNDES