Get smart – Brazil’s telecommunications infrastructure

20 August 2014

Bob Moser examines how smart grid projects are progressing slowly in Brazil as distributors shoulder the telecoms burden and public policy lacks teeth.

Brazil's largest generators and distributors of electricity are making progress in the rollout of smart grid projects nationwide, but delays are common and costs are rising as companies realise they must develop telecommunications networks alone, and public policy isn't evolving to draw every player in.

Brazil should lead the South American market in investment and development for smart grid through 2020, according to a report earlier this year from GlobalData, a consultancy specialising in energy. With electricity losses exceeding 30% in some states, national distribution companies realise they must invest in smart meters to improve efficiency and curb theft.

GlobalData has projected the Brazilian smart grid market to post a composite annual growth rate of 43% through to the end of the decade, with revenue expected to rise from $36 million in 2013 to $432 million by 2020.

At least nine smart grid pilot projects are currently in varied stages of development in Brazil from operators such as AES, Amazonas Energia, Ampla, Celpe, Cemig, Coelce, Copel-D, EDP Energias do Brasil, Eletropaulo, Endesa and Light since Brazil's Ministry of Mines and Energy published a decree in April 2010 promoting future implementation of smart grids.

But little progress has been made in the field due to a lack of public policy requirements for investment in smart grid and telecommunication networks, or worthwhile incentives for smart meter purchases.

"Little progress has been made in the field due to a lack of public policy requirements for investment in smart grid and telecommunications networks, or worthwhile incentives for smart meter purchases."

"It was hoped that the National Agency for Electrical Energy (Aneel) would develop regulatory standards for smart meters, which would help the country achieve its goal of improving energy efficiency," says Sowmyavadhana Srinivasan, senior analyst at GlobalData. "However, the agency only set some regulations, that indirectly require deployment of this technology by distributors."

Brazil's infamous bureaucratic hurdles and lack of transparency have been highlighted by GlobalData as potential speed bumps, if not outright barriers, to the full realisation of smart grid potential in the country, and as threats to interested foreign investors.

Lacking incentives

The main challenge to smart grid rollout for Brazil and the rest of Latin America lies primarily in energy policy and regulation, says Jesse Berst, chairman of the Smart Cities Council.

"Many countries, and Brazil is one, haven't put the regulations or incentives in place to really make it easier to create a bona fide smart grid rollout," he says. "A year ago, Brazil created its smart meter mandate, but made it voluntary. That really doesn't help a utility very much because they'd have to maintain two systems with redundancy and costs, and still have a lack of accurate customer data. You don't get the ancillary benefits of a smart grid unless all customers are hooked up."

Most utilities in Latin America and Brazil are pumping 2-4% more energy to consumers than needed to be safe because they don't know how much is arriving and at what voltage level, resulting in a significant annual waste, Berst says. Revenue loss from energy theft in Brazil can be 30% or more for some operators, he added.

"Almost all the major smart grid players recognise Brazil as an important new market possibility," Berst says. "They are all standing by, and, if Brazil can clear these obstacles, it could proceed quite quickly. Countries that want to be at the forefront of economic development must get the energy issue solved. Brazil simply can't join the ranks of leading economies and attract the best companies in the world without solving the problem of reliable, affordable energy."

Conflicting agendas

The piecemeal development of smart grid projects has been due, in part, to an agenda in place between Brazil's federal government and electricity sector since 2004 that favours affordable tariffs, and smart grids don't necessarily promote affordable tariffs for operators, said Nelson Fonseca Leite, president of the Brazilian Association of Electrical Energy Distributors (Abradee), during a smart grid forum held in São Paulo in November 2013.

Brazil's current regulatory framework doesn't encourage distributors to invest in smart grid, and instead should offer different criteria for compensation and depreciation of IT and telecommunications equipment, Fonseca Leite said. Energy regulations in Brazil still haven't been updated to consider the true costs of smart meters and their useful lifespan.

"These devices are like computers. I challenge one person to tell me they have a computer that's 13 years old," said the Abradee president. "It doesn't exist. We need a system that will calculate the depreciation of these components in a more accelerated manner."

Greater clarity is also necessary in new smart grid regulation, with Fonseca Leite citing the different needs and financial constraints of energy companies in varied regions of the country. More concrete national mandates for smart grid implementation would help smaller distributors attract private investment.

Brazil's electricity sector includes 63 distributors, more than 72 million consumers, more than two million new connections made annually, gross annual revenue of R152 billion ($68.8 billion) and investments of R13 billion ($5.9 billion), according to 2012 data.

Telecoms needs

In the small city of Aparecida do Norte in São Paulo state, EDP Bandeirante, a power distributor for EDP Energias, launched its InovCity smart grid programme in October 2011, and has invested more than R10 million ($4.5 million) so far to install 13,500-plus smart meters for homeowners, with the company finally beginning to compile data on users in May.

However, the programme's complete rollout in Aparecida was delayed by ten months because EDP had to invest R800,000 ($362,000) to install its own Wi-Max network, in order to bring local telecommunications infrastructure up to snuff.

"Telecoms infrastructure is not just a problem in Brazil, but in the whole world," says Jeferson Marcondes, technology development director with EDP in Brazil. "With new technology like smart grid, the infrastructure of a decade ago is now outdated, so we must look at alternatives. One is to use the 3G or 4G networks being developed here, like they've done in the US, or Wi-Max like we are installing."

EDP Bandeirante says it has pioneered a new piece of equipment for use in Aparecida similar to advanced inverters, which is helping the distribution network better proportion and optimise efficiency by monitoring in real time the network and its tension control, Marcondes said.

Local subsidiary EDP Escelsa now plans to introduce the InovCity smart grid installation project to two towns in Espirito Santo state, with between 5,000 and 6,000 readers and a new telecoms system to be installed beginning in July, at a projected cost of R7 million ($3.2 million) this year.

Light battles loss

Rio de Janeiro-based energy distributor Light said in March 2014 that it was close to finalising the purchase or lease of a million electronic meters for its own smart grid plan, which it expects will help reduce energy loss and theft by 30% over five years. The company pledged last year to invest R2 billion ($905 million) in energy loss, primarily through advanced electronic readers

"Brazil’s electricity sector includes 63 distributors, more than 72 million consumers, more than two million new connections made annually and a gross annual revenue of $68.8 billion."

Light expects to have 1.6 million smart meters installed by the end of 2018, covering 40% of its client base in Rio. The company reduced its electricity losses by 3% last year, closing 2014 with a loss rate of 42%, while working toward a 40% loss rate by August 2015. Lost or stolen electricity has cost Light R2.5 billion ($1.1 billion) in potential revenue in recent years.

Eletropaulo delayed

Based in São Paulo, distributor AES Eletropaulo announced in April 2013 that it would have smart readers installed for 60,000 clients in the regional city of Barueri by 2015, with R72 million ($32.6 million) expected to be invested in the smart grid project. But as of May 2014, installation of readers hadn't started, and the company was already pushing back its deadline to 2017.

Part of that delay was attributed again to issues with telecommunications networks in the area, says Maria Tereza Vellano, regional director responsible for smart grid at Eletropaulo. The firm was also slow to finalise its bid terms for producers of smart readers to apply for a contract, and faced budget constraints due to company-wide financial issues in 2013.

"Our biggest challenge, in addition to financing, is the telecoms aspect for it all," says Vellano, who notes Eletropaulo has had to invest in its own Wi-Max infrastructure for the city. "This new smart grid scenario is all based on reliable telecommunications companies and networks. Our biggest worry is security for the movement of all this data in real time."

Eletropaulo began installing readers in May 2014 in low-income homes, should have a production supplier chosen by June, and could start a second round of home installation in January. Recovery of the R72 million in investment is still projected for within eight years, Vellano says.

"We need more clear public policies for this in the long term, but I understand that every government is evolving," she says. "Clearly, our telecoms companies aren't ready for this today, but we believe they're following it closely and evolving with us. But we're walking into uncharted territory here by entering the world of telecommunications (as an energy provider). We'll need the leadership of the Ministry of Mines and Energy."

InnovCity smart meter.

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