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Wind Power Africa 2010

Conference and Renewable Energy Exhibition


12 to 14 of May of 2010, Cape Town, South Africa

Policies, Financing
Issues and Industrial
Trends to Wind
Energy Generation in
Brazil
Milthon S. Silva, Bruno B. Anunciao
Federal University of Sergipe UFS
milthons@ufs.br, brunoanunciacao@hotmail.com
Andr P. Nobrega
Brazilian Electricity Regulatory Agency ANEEL
nobrega@aneel.gov.br
Abstract - Brazil's economic growth, which
enhanced the need for more energy, combined with
economic and environmental restrictions on fossil
fuel use, shows how renewable energy resources are
an indispensable pillar for meeting energy demand.
The legal process for offering more economically
attractive benefits for building Renewable Energy
plants in Brazil began in 1995, when its government
approved Federal Law n. 9,074, which granted costfree authorizations for SHPs to exploit the
countrys hydro power potential. Later on, a series
of laws were passed granting incentives and benefits
to all types of renewable energy, such as sugarcane
and wind power.
Nowadays, renewable generation enjoys many
incentives from auctions for energy reserve.
The purpose of this working paper is to analyze
the main elements that will condition the adoption
of wind power arrangements in the domestic grid to
support the growth of renewable energy install
capacity in the country.
Keywords:
Renewable
Energy,
Regulatory
Frameworks, Wind Generation Policies.

I. INTRODUCTION
Including renewable energy in the energy matrix
has become a governmental policy objective in various
countries, given increasing concerns with climate
change and their population's higher awareness of the
need to preserve the environment.
In response to these issues, the Brazilian
Government adopted legal incentives to expand the

country's electricity-generating capacity through


renewable sources.
As compared to traditional
hydroelectric generation, these sources have the
advantage of not depending on hydrologic regimes
(except for SHPs) and, as compared to traditional
thermal sources, the advantage of being clean energy.
These projects are intended to meet demands close
to loading centers, in peripheral areas around the
transmission system and in agricultural expansion
areas, allowing for energy to be produced in a
distributed fashion, that is, on a small scale, thus
relieving the load on transmission and distribution
grids.
However, some alternative generation approaches
entail non-competitive costs as compared to
conventional schemes, as the technologies involved are
still under development. Among others options, wind
electricity has emerged as a major alternative for
diversifying the Brazilian energy matrix. The use of
wind power to generate electricity is still very incipient
in Brazil. Until late in March 2009, installed generating
capacity amounted to a mere 709 MW, while the wind
potential is estimated at about 143 GW.
This paper focuses on the use of wind electricity in
the Brazilian electricity industry. It is intended to
make a brief analysis of the main elements that will
condition the adoption of this important power supply
alternative in the Brazilian energy matrix.

II. REGULATORY INCENTIVES


Law n. 8,987 of February 13, 1995 put an end to the
state monopoly over electricity generation in Brazil,
enabling private corporations to operate in the energy
generation market. In the wake of this change, the
federal administration created, in 1996, inspired by the
British model, the Brazilian Electricity Regulatory
Agency (ANEEL) to regulate and inspect the
electricity industry, providing economic-financial
incentives to both domestic and foreign private
investors.
The federal government has developed policies
designed to lessen the incremental financial costs of
implementing renewable energy systems. Initially,
these benefits were only available for setting up Small
Hydro Power Plants (SHPs) very likely due to
Brazil's hydric features but later on they were
extended to all other technologies used in connection
with renewable energy sources. These incentives are
begging to be implemented progressively. Federal Law
n. 9,074, which provides for independent electricity

Wind Power Africa 2010


Conference and Renewable Energy Exhibition
12 to 14 of May of 2010, Cape Town, South Africa

production - an important modality for generating


energy from renewable sources - and for cost-free
authorization for SHPs to exploit the country's
hydropower potential, was a major landmark.
Later on, Federal Law n. 9,427 of December 26,
1996 provided for other incentives to promote the use
of these sources. This law can be referred to as the
Renewable Standard law. A series of laws that
followed amended Federal Law n. 9,427, expanding
the benefits that will be described below.
Special mention should be made of a reduction of
no less than 50% in charges for using the transmission
and distribution grids, of the free sale of energy to
consumers of 500-kW loads or more, and of the
exemption of the obligation to pay a financial
compensation for using water resources in small hydro
plants (SHPs) to cities that may have part of their
territory flooded by the reservoirs of hydroelectric
power plants, with only hydroelectric power plants
with an installed power in excess of 30 MW being
required to pay the financial compensation. [11]
In 2002, Federal Law n. 10,438 extended the 50%
discount for using the grids to biomass (sugarcane)
plants and wind energy parks.
Special mention should be made of the fact that, in
2002, the discount for using the wire was also extended
to consumers who buy energy from alternative sources.
Therefore, a large industrial or commercial consumer
buying energy from an encouraged source will pay
50% less for using the wire, proportionally to the
energy bought from those sources.
Later on, in 2007, Federal Law n. 11,488 changed
this benefit. Instead of a plant's installed power of 30
MW, the power injected into the transmission or
distribution systems at a level of 30 MW or less began
to be used.
Renewable electricity sources in Brazil are
authorized to operate by the government, through
powers delegated to ANEEL today, to be implemented
and explored for a period of thirty years. In principle,
this period is considered sufficient for the plants to
have a return on their investments.
The process for authorizing the operation of these
plants has been simplified. No tender is involved, and
all that is required is the submission of documents
describing the technical features of the plant and
confirming the legal and fiscal qualification and
financial capacity of the company wishing to operate
the plant.

The company must also obtain environmental


licenses from the competent environmental agency for
operating SHPs and establish procedures for multiple
water use and water availability with the competent
water management agency.
A new drive for using alternative electricitygenerating sources and technologies in the market was
provided by Law n. 9,991 of July 24, 2000, which
made it compulsory for concessionaires, permitholders and companies authorized to operate in the
electricity industry to invest a minimum amount in
energy efficiency and technological research and
development. Alternative sources began to enjoy a
two-fold benefit. The first one is that these resources
are partly earmarked for research and development of
alternative sources and technologies 1. The second one
is that companies that generate electricity exclusively
from such sources are exempted from the obligation to
pay this contribution.
On a still small and experimental scale, regulatory
incentives were created for producing energy from
burning urban garbage and from methane produced
from swine manure. Both projects are in tune with
environmental sustainability requirements, as they
eliminate pollution in cities and rivers in the process of
generating electricity.
It should be highlighted that, according to the
Brazilian Constitution of 1988, electricity is to be
regulated by the federal administration, meaning that,
as opposed to other countries, all policies designed to
encourage the development and deployment of
renewable energy sources in Brazil are established in
federal laws and applied to all the states of the
federation. No distinction is made in incentives
provided to States, except in tax incentives granted by
state governments in their own jurisdictions.

III. FINANCING POLICY


Inspired by successful experiences in various
countries and regions, particularly in Europe, and for
the purpose of substantially increasing the participation
of alternative sources in electricity generation, the
Brazilian Government created, in 2002, the Incentive
Program for Alternative Electric Energy Sources
(PROINFA) with the main goal of installing 3.3 GW in
the domestic matrix generated from wind plants and
1

In 2000-2001 cycle, about R$ 214 million were invested


in research and technological development, 7.5% of
which in alternative renewable sources.

Wind Power Africa 2010


Conference and Renewable Energy Exhibition
12 to 14 of May of 2010, Cape Town, South Africa

small hydro and biomass plants to be set up by


December 2008.
IV.
The PROINFA defines at least three key elements
for increasing the participation of three important
alternative electricity sources in the domestic energy
matrix: i) minimum quotas for the participation of
these sources; ii) assured purchase of the energy
generated under contracts for 20 years by Eletrobrs,
an enterprise established by the Federal Government in
1962 to invest in expanding the domestic grid; and iii)
a mechanism to compensate the costs of the energy
generated from these sources. The sharing of costs and
electricity under the PROINFA program will involve
the agents of the National Interconnected System (SIN)
that sell electricity to end consumers.

TRENDS IN WIND ELECTRICITY IN


BRAZIL

Brazil is a country of continental dimensions with a


great wind potential, estimated at 143 GW, as
illustrated.

Law 10,762/2003 amended Law 10,438/2002 to


ensure that more states would participate in the
PROINFA program, to provide incentives to the
domestic industry (70% of all wind generators
manufactured in Brazil), and to exclude low-income
consumers from the group sharing the costs for
purchasing new energy.
Through administrative rulings, the Ministry of
Mines and Energy created auctions to buy energy from
wind plants and wind energy parks to be held in 2009
and 2010. The first wind electricity auction in Brazil
was held in December 2009 and made it possible for
1,805.7 MW to be built.
The Federal Government established contracts to
buy this energy at an average price of R$ 148.38/MW,
which is similar to the prices of energy from biomass
plants and other conventional sources. The contracts to
be signed by the companies involved will be effective
for 20 years and will be based on the quantity
modality, meaning that the plants will enter the base of
the system and will always generate energy. The
financial resources contemplated in the contracts
amount to almost R$ 20 billion. The auction made it
possible to build 71 new wind generation facilities in
five states in the northeast and south regions that will
begin to operate in July 2012 according to the table
below:
Table 1 Result of the First Auction of Wind Energy

Source: EPE Empresa de Pesquisa Energtica

Figure 1: Brazilian Wind Potential [6]

Projections from previous years until today


suggested that wind electricity use would grow in
Brazil, and it did grow indeed. In 2005, the country had
a 29-MW installed capacity. With the incentives
provided by the PROINFA program, this number
increased to 247 MW (2007), 341 MW (2008) and 605
MW (2009) and 709 MW will have been installed in
the first quarter of 2010, according to ANEEL. In Latin
America, Brazil is a leader in the use of wind
electricity. According to the Global Wind Energy
Council (GWEC), the domestic installed potential
represents approximately 50% of that of Latin
America, but only 0.38% of the world total, meaning

Wind Power Africa 2010


Conference and Renewable Energy Exhibition
12 to 14 of May of 2010, Cape Town, South Africa

that using wind to generate electricity is still a very


incipient activity in Brazil.

Atlantic subtropical anticyclone systems and a lowpressure system in the equatorial depression belt.

Today, given the regulatory framework being


implemented in the country, investing in alternative
generation sources has become much more attractive
for private enterprises. Before the PROINFA program
was launched, there were few guarantees that such
investments would bear fruit. Uncertainties were high
and there was no assured return on them, since there
was no guarantee that the energy would be bought.
This is a phase referred to by experts as the prePROINFA phase. Currently, there are 09 factories of
aerogenerators, towers, blades and accessories in
Brazil. After last year's auction, GE, Siemens,
Fuhrlnder and Alstom decided to set up factories in
Brazil.

The general atmospheric circulation profile varies


significantly on the mesoscale and microscale as a
result of differences in surface properties such as
terrain geometry and altitude, vegetation, and land and
water surface distribution. These factors that operate on
smaller scales can result in local wind conditions that
are significantly different from the general large-scale
profile of atmospheric circulation.

The year 2009 was very important for the Brazilian


wind market, as it was the year in which a reserve
auction exclusively focused on wind electricity was
held for the first time in the country. It involved 441
projects, of which 339 were implemented in different
states: Cear, Rio Grande do Norte, Rio Grande do Sul,
Sergipe, Bahia, Esprito Santo, Santa Catarina and
Piau. The resulting contracts for buying and selling
electricity will be effective for 20 years as of 2012.
Reserve auctions are held for contracts for energy that
is additional to the one produced in the National
Interconnected System. In the wind energy auction
held in 2009, contracts for 1,805.7 MW were signed.
This figure is three times higher than the one calculated
for all the wind energy park in operation in the country
then (602 MW generated in 36 plants) and it entails
investments in the order of R$ 9.4 billion.
The Federal Government will hold two other
auctions before 2010 is over: one for Biomass for
Isolated Systems and another one for Energy Reserve
Contracts, with a focus on biomass and wind energy.
These two auctions will be held in the first half of
2010. [8] [10]
Some incentives for expanding electricity
generation from renewable sources are beginning to be
granted, such as the possibility of free consumers
investing in generation and becoming independent
producers enjoying discounts in some of the system's
rates. [3]

V.

Brazil's northeast region is characterized by a good


wind regime and is located between the NorthNortheast and Northeast-Southeast Shore Zones. The
first one is located between the north shore of the state
of Amap and Cape So Roque in the state of Rio
Grande do Norte. In this region, winds are controlled
by east trade winds and light terrestrial and ocean
winds. This combination of light daytime winds and
east trade winds results in mean annual winds of 5 m/s
and 7.5 m/s in the north part of the region (shores of
Amap and Par states) and of 6-9 m/s in the south part
(shores of Maranho, Piau, Cear and Rio Grande do
Norte states).
In the Northeast-Southeast Zone, between Cape So
Roque (Rio Grande do Norte) and close to the state of
Rio de Janeiro, mean annual wind speeds decrease
from 8-9 m/s in the north part (Rio Grande do Norte) to
3.5-6 m/s on most of the shore extending to the
southeast. [5]

VI. WIND ENERGY PARKS IN BRAZIL


The wind plants hired by PROINFA to supply
electricity to the Brazilian electric system have the
following main features:

Large installed power for some points of the grid;


They operate in low load density regions;
Their main purpose is to produce electricity
independently, superseding the local market in
many situations;
They are connected to the transmission or
distribution grid through long electrical lines;
They use distribution lines and in some locations
they invert the flow in transmission lines.

WIND CHARACTERISTICS IN BRAZIL

Table 2 Wind plants distribution in Brazil


Plant

The distribution of winds in Brazil is determined by


general aspects of the planetary circulation of the
atmosphere: high-pressure South Atlantic and North

Wind

Faixa

BR

NE

(MW)

10 <

25.125

5.5

9,725

3.3

284,3

61.8

284,3

96.7

150

32.7

10
To
<50
50

(MW)

(MW)

SUL
(MW)

16,9

SE
(MW)

10.1

100

150

89.9

Wind Power Africa 2010


Conference and Renewable Energy Exhibition
12 to 14 of May of 2010, Cape Town, South Africa

A good example of the Brazilian Wind Energy Park


is the Osrio Plant, located in the city of Osrio, state
of Rio Grande do Sul, Brazil. It is made up of 75 E-70 /
2000 kW Wobben Windpower - Enercon towers and
generates 150 MW (enough energy for 700,000
people). This park's capacity factor is 37% and it is the
largest wind energy park in Latin America. The project
entailed investments in the order of R$ 670 million.

Figure 2: Price of each energy source [12]

fuels. However, it has been often criticized by


lobbyists for conventional energy sources. Those who
are against it argue that it is still expensive, which is
not true in the light of the concrete results of the
Auction held in 2009, which showed that it no longer
belongs to an exotic and marginal market and that its
price can be competitive.
In wind plants, implementation costs are the highest
ones and maintenance costs are much lower than those
of a thermal plant. In the Brazilian case, wind plants
play an important complementary role in energy
generation, as Brazil's electricity-generating complex is
marked by a strong prevalence of hydroelectric power
plants, but studies suggest that the most intense winds
occur in less rainy months, namely, in the dry season.
Therefore, wind plants can increase the storing
capacity of hydroelectric power plants without the need
to build new physical reservoirs.
Apart from diversifying the country's matrix, the
introduction of this energy source is promoting the
development of the domestic industry and creating new
jobs in states where they are hard to come by,
generating foreign currency.
Although it is rational and captivating in the
medium and long term, fostering wind energy use is
not without problems. There is great potential for wind
electricity generation in remote locations in the
northeast and north regions and investments in
transmission are required to realize this potential.
Infrastructure items such as roads are also required to
transport the 30-meter blades and 90-meter towers of
the generators in large trucks and special cranes.

Figure 3: Wind Plant of Osrio (RS)

As opposed to what is observed in the PROINFA


program, the Auction held in 2009 suggests that the
installed capacity of the plants is low, amounting to
10.6 MW per plant in average.

VII. CONCLUSIONS AND RECOMMENDATIONS


Wind electricity is clean and renewable, apart from
being one of the most promising types of energy for
the future. Its use reduces the consumption of fossil

Brazil is a country that still needs more detailed


studies on its potential to generate wind electricity. It is
important to carry out a full mapping for each State to
identify the best areas for implementing wind plants, as
there are no such plants in many areas and the potential
for energy generation in the future is high. Some states
have carried out studies, like Alagoas, which published
two atlases on its wind and solarimetric potential,
prepared by Eletrobrs.
Another initiative is one taken by the state of
Sergipe, which is preparing a state wind atlas under a
partnership between the Federal University of Sergipe
and the state government.
Apart from this mapping, there are still concerns
with the stability of the electric grid, particularly with
transmission lines, due to variations in wind speed and
to the rapid growth of new complexes in the electric
grid.

Wind Power Africa 2010


Conference and Renewable Energy Exhibition
12 to 14 of May of 2010, Cape Town, South Africa

The challenge facing Brazil today is one of


continuing to set up new wind energy parks at a pace
of 1 GW/year.
VIII. REFERNCIAS
[1] ANEEL Agncia Nacional de Energia Eltrica (Brasil)
Available in http://www.aneel.gov.br/
[2] ALDAB, R.; Energia Elica. So Paulo: Artliber Editora,
2002.
[3] ALQUERS, J.L., Vireira, X. F., Veiga, M. and Born, P.,
Regulatory issues and their influence in the generation
expansion of the brazilian system, Conseil International des
Grands Reseaux Electrique CIGR (Bienal Paris 2008),
2008
[4] ABEELICA - Associao Brasileira de Energia Elica Available in
http://www.abeeolica.org.br/zpublisher/secoes/home.asp
[5] ATLAS OF WIND POWER IN BRAZIL
[6] CRESESB Centro de Referncia para Energia Solar e
Elica Srgio de Salvo Brito Available in
http://www.cresesb.cepel.br/
[7] ELETROBRS Available in http://www.eletrobras.com/
[8] EPE Empresa de Pesquisa Energtica Available in
http://www.epe.gov.br;
http://www.epe.gov.br/imprensa/PressReleases/20091214_1.
pdf
[9] GWEC Global Wind Energy Council Available in
http://www.gwec.net/
[10] MME Ministrio de Minas e Energia (Brasil) Available
in http://www.mme.gov.br/
[11] NBREGA, A. P., How Federal Legislation provided
incentives and benefits for Renewable Energy in Brazil, VI
Conferencia Internacional de Energa Renovable, Ahorro de
Enrga y Educacin Energtica (CIER 2009 Cuba), 2009.
[12]REVISTA
VEJA.COM

Available
in
http://veja.abril.com.br/011008/p_132.shtml
[13] SIQUEIRA, G. A. and Silva, M. S., Integracin de la
Energa Elica en El Nordeste Brasileo, 6 Congreso
Internacional en Innovacin y Desarrollo Tecnolgico
(CIINDET 2008 - Mxico), 2009

IX. BIOGRAPHY
Milthon Serna Silva, Electrical
Engineer graduated at UNSAAC
University - Peru. MSc and PhD at the
Polytechnic School of Sao Paulo
University - Brazil. Post-Doctoral at
Brandenburg Technological University
- Germany. Worked in construction
and monitoring of substation high voltage systems projects
including renewable energy integration by GyM S.A., GAGTD
and Siemens. At present he is professor at the Department of
Electrical Engineering in the Federal University of Sergipe
Brazil teaching Renewables Energies and Transmission and
Distribution of Power . He works in the Integration of
Renewable Energies project to the Brazilian government.

Member of CIGRE Brazilian work Group SC13.23 and Member


of LatinAmerica IEEE.
Bruno Barretto Anunciao electrical
engineering student at Federal
University of Sergipe Brazil.
Scholar of Institutional Program for
Scientific Initiation Scholarships of
the National Council for Scientific
and Technological Development
CNPq (Portuguese), a Brazilian
Federal Government entity , at the
period of de August/2009 to July/2010.
Nbrega joined Brazilian
Electricity Regulatory Agency ANEEL as an Advisor to the board of
directors in august 2006. He is a Senior
Power Market Regulation Specialist
and occupied different position at
ANEEL as technical advisor in the
Superintendency of Economic Studies of the Market (SEM),
since 2002, and manager of the authorization team to renewable
energy, since 2000. His main research interests include energy
policies for renewables, modeling paths toward sustainable
energy systems, liberalization of energy markets. Andre is a
civil engineering graduate from Universidade de Brasilia UnB
and holds specialization in Theory and Operation of a Modern
National Economy from George Washington University. He
also attended the Eleventh International Training Program on
Utility Regulation and Strategy at Warrington College of
Business, in University of Florida.
Andr