BrazilianBrazilian ElectricityElectricity MarketMarket

4th ELAEE 4th ELAEE ConferenceConference

EnergyEnergy TrendsTrends andand DevelopmentDevelopment in in LatinLatin AmericaAmerica

Luciano Freire

CCEE - Electric Energy Commercialization Chamber

April 8, 2013

Montevideo, Uruguay

CCEE - Electric Energy Commercialization Chamber

MAIN FACTS AND FIGURES ABOUT BRAZIL

How big is it?

Main Figures and Facts about Brazil

Brazil

� Territorial Extension 8,514,876 km²

� Population (Aug 2012) 193.9 million

� GDP 2012* US$ 2.25 trillion

Electricity Sector

6th World Economy

� Installed capacity (Dec 2012) 121 GW

Hydro 66%

Thermal 27%

Others 7%

� Transmission lines 103,362 km

� Consumption (Dec 2012) 45 TWh

Captive Market: 75 %

Free Market: 25 %

* using the 2012 average exchange rate

3

Source: ONS

Main Figures and Facts about Brazil

Number of Market Participants

Total (Dez 2012): 2,461

4

Energy Auctions (from 2004 until now)

� Volume (energy TWh) 6,469.3

� Average Price (US$/MWh) 65

� Volume (US$ billion) 420

Contracts (2012)

� Number of Contracts/month 19,487

� Volume traded (Dec 2012) 59 TWh

Brazil’s Electricity Market at a Glance

Electricity Generation

Competition in the Market

Electricity Generation

Competition in the Market

Two Two

Transmission and Distribution

Natural Monopoly

Transmission and Distribution

Natural Monopoly25% of the

market

OTC and

Electronic Platform

Auctions & tariff

5

State-owned and private enterprises operating side-by-side

Two Two

MarketsMarkets

Centralized Dispatch optimized by the National Power System Operator

CCEE: Brazilian Market Operator

Regulated Free

DISTCO & captive consumers Traders & free consumers

CCEE Role as Brazilian Market Operator - Main Activities

Accountability & Settlement of

the Market

Spot Price Calculation

Registration of all Contracts

6

Auctions for Regulated Market

Metering

Analysis & Market DataMarket Surveillance

BRAZILIAN REGULATORY SCENARIO AT A GLANCE

What is new to the market?

Brazilian regulatory scenario

Ex-ante Nomination and

Price Transparency

Ministry of Mines and Energy directive

(MME nº 455, Aug/2012)

Objective: Improve default risk management and

enhance information symmetry

From July/13: Obligation to nominate the free

market bilateral contracts before the energy delivery

Federal Government Tariff Reduction

Initiative

(Bylaw 12,783, Jan/2013)

Objective: reduction in end-user tariffs around 20%

• Renewal of concessions in the electricity industry –

Generation, Transmission and Distribution

Conditions for renewal of generation concessions: market bilateral contracts before the energy delivery

(ex-ante), in a weekly basis

Obligation of reporting price information to CCEE,

allowing the creation of price references in the free

market (price indexes and forward curve)

Conditions for renewal of generation concessions:

Regulated prices (reduction estimation from US$

44.36 to US$ 14.79)

All the energy were allocated to distributors in long-

term contracts (regulated market)

What are we talking about?

Generation: 13% of the current installed capacity

(15,279 MW)

Transmission: 67% of the national interconnected

system

Distribution: 35% of the regulated market

• End or reduction of some charges of the electricity

industry

Comparison of Electricity Markets’ Churn Rates

Electricity Markets’ Churn Rates

Germany

Nord Pool

GB

4

6

8

10

9

Netherlands

France

0

2

4

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Brazil

Colombia

Source: OFGEM/CCEE

Liquidity αααα ( immediacy; resilience )

Liquidity in the Brazilian Electricity Market

Brazilian Liquidity in the Free Market

NCRE:Non-conventional (Renewable Energy)

TECHNICAL EXCHANGE CCEE – EPEXSPOT – ECC

White Paper

Technical Exchange CCEE – EPEXSPOT – ECC

CCEE has partnered with the European Power Exchange (EPEXSPOT) and the European

Commodity Clearing AG (ECC) for technical exchange formalized by a Memorandum of

Understanding (MoU) signed in February 2012

Deliverable Documents

� Feasibility study developed by CCEE – EPEXSPOT – ECC

Partners

12

Objectives

� Improving the collateralization methodology of the spot market

� Studying trading platform design and clearing solutions

� Enhancing quality in price formation

� White Paper with a prospective vision to be presented to the Brazilian authorities and stakeholders – launched in November 2012, in Salvador, Brazil

� Conceptual roadmap containing an indicative timeline to improve the Brazilian electricity market (under construction)

White Paper – Building a Smart Brazilian Electricity Market

CompetitiveFinancially secure

Sustainable

Transparent

Organized market place

benefits to the market

4. Clear separation of wholesale and retail market and

incorporating demand response

5. Organize market surveillance

act

and

chal

leng

ing!

–

path

13

Neutrality Symmetry ofinformation

Liquidity

• Find out complete version of the White Paper: www.ccee.org.br

the basis of a mature energy market

1. Get the PLD (spot price) closer to real-time operation

2. Develop products to smooth the market functioning

3. Implement clearing solutions

tions

A to

ugh

–an

d ch

alle

ngin

g!

ThankThank youyou!!

Luciano Freire

luciano.freire@ccee.org.br

CCEE - Electric Energy Commercialization Chamber

www.ccee.org.br

ThankThank youyou!!