Uncertainty for smart grids in Brazil


Geraldo Guimarães
Jr, VP Latin America,
Elster Integrated
By Geraldo Guimarães Jr, VP Latin America, Elster Integrated Solutions

Aneel, the Brazilian electricity agency, announced the minimum specifications for electricity metering systems in low voltage consumer units in early August 2012. Utilities, meter manufacturers and the metrology institute, Inmetro, have been given 18 months to start replacing current meters and begin offering a time-based tariff, known as the "white tariff."

I have already argued that this was a positive and significant milestone that would start the modernization of Brazil’s distribution system. However, what is needed now is a way forward that defines a feasible and financially viable model that doesn’t rely on funding from the consumer.

The implementation costs of Aneel’s smart grid specifications could be billions of dollars. So how can this investment be made without passing on increased costs to the consumer? What business model is required?

Across much of Europe and North America detailed mandates have been issued by regulators, providing a degree of certainty for the market. In Europe, France has made its own business case, which has delivered a positive result, but this has taken more than ten years. Finland and Denmark commenced their rollouts based on positive business cases for individual distribution companies. Sweden’s rollout is mandated, but is paid for by the distribution companies, and the Netherlands’ smart meter rollout will also be paid for by the distribution companies. Spain has a Royal decree that mandates smart metering, but a potential rate recovery is still under debate. In the United Kingdom, the retail companies are responsible for the metering, and smart meter deployment is mandated and paid for by them through including it in their electricity and gas prices. In Italy, where Enel has replaced all of its 30 million-plus meter units, the cost of upgrading has also been absorbed by the utility providers. In the United States, the Obama government has established a stimulus package that has boosted the market, financing smart meter projects previously submitted by utilities and after approval by a government organization.

However, in Brazil, this is not the case. Outside the few utilities that have developed their own models based on reduction of non-technical losses (i.e. losses resulting from fraud or theft of energy), the vast majority of the 60-plus Brazilian utilities cannot realistically begin any viable project under the current scenario, even with the new Aneel resolution.

Regardless of the business model that Brazil chooses, its make up should not depend on input from the regulator alone. A working group, active until the end of the administration of President Luiz Inácio Lula da Silva, included representatives from the Ministry of Mines and Energy, the energy research company Empresa de Pesquisa Energética, Cepel, Aneel, Inmetro and the national system operator ONS. It had one main objective: to precisely define a national business model for smart grids. The resurrection of this group or something similar could bring much needed clarity.

The creation of a Brazilian association for the smart grid industry, like those that already exist in other markets, where projects have already reached millions of meter points, would certainly be a welcome step to lead the plans for the Brazilian smart grid. At the moment there is no clear direction or a single coordinated plan.Instead multiple stakeholders are making their own plans and operating in information silos. For example in Europe the European Smart Metering Industry Group (ESMIG) was created, which is actively helping governments and regulators in setting technology standards and business models in the continent.

A similar initiative can succeed in Brazil, where the main focus would be to subsidize and support the work of Aneel and others in defining business models. This would help avoid delays in Brazil’s development compared with other neighboring countries such as Ecuador, Colombia and Mexico. In addition it will help avoid a situation where the consumer ends up paying the bill.