Free market drives power expansion but not reliability
Brazil's free market will be responsible for 83pc of the 45GW of power generation expansion the country expects to add to its matrix by 2026, with mostly renewable and intermittent sources.
An analysis by electricity resellers' association Abraceel determined that 97pc of investments in solar power are directed to the free market, while the regulated market is responsible for 89pc of investments in thermoelectric power.
The interest in investing in renewable power goes beyond promoting decarbonization, as the government also is offering a series of incentives, most notably discounts in transmission and distribution tariffs to those generators. That means free market clients will contract intermittent sources — which might be considered environmentally friendly but cannot generate power on a moment's notice as they depend on external factors such as sunlight and wind.
While the free market is not mainly investing in thermal plants, it is reaping the reliability benefits of thermal dispatch readiness and getting it at a discount. This is also making power more expensive for smaller consumers, who cannot access the open-market since there are minimum consumption thresholds, and must pay for reliability costs that the free market customers do not face. Furthermore, power distributors continue to open contracts for thermal generation that they will still be responsible for when their larger customers are able to transition to open-market contracts — adding even more costs to the remaining regulated power market customers.
Power sector modernization bill PL 414, which partially address the issue, is still stuck in the lower house, while congressional representatives cannot reach agreement on the cost-sharing of natural gas pipelines to serve thermal generators as determined by the law privatizing state-controlled Eletrobras.
There is widespread consensus among market participants that the costs to add thermal generation to the power system should be shared across regulated and free-market clients, according to University of Sao Paulo Polytechnic School professor Dorel Soares Ramos. For that to become a reality, the government would need to encourage investments in thermal power, through capacity power auctions or other incentive mechanisms.
Ramos added that there are technological solutions to improve renewable power growth reliability that the system needs, such as the development of wind plants with energy storage. But it must be economically feasible, and it must be determined when thermal power would be a more cost-effective alternative, he said.
Related news posts
New Zealand’s Genesis Energy to resume coal imports
New Zealand’s Genesis Energy to resume coal imports
Sydney, 8 May (Argus) — New Zealand's upstream firm and utility Genesis Energy plans to resume thermal coal imports later this year to feed its dual gas- and coal-fired Huntly power plant. The resumption was because of lower domestic gas production and rapidly declining coal stockpiles, and will mark the firm's first coal imports since 2022. Coal inventories at the 953MW Huntly plant, — New Zealand's largest power station by capacity and the country's only coal-fired facility — recently slipped below 500,000t, down from 624,000t at the end of March, and will fall below 350,000t by the end of the winter. This will trigger a need to purchase more coal to maintain a target operational stockpile of around 350,000t ahead of winters in 2025 and 2026, the company said on 8 May. Imports are currently the most efficient option for the quantity the company will need, with a delivery time of around three months, chief executive Malcolm Johns said. Genesis typically imports from Indonesia, the company told Argus . Gas production in New Zealand has dropped at a faster rate than expected, with major field production in April down by 33pc on the year, Genesis said. Lower gas availability typically leads to more coal burn, because the Huntly plant runs on gas and coal. This is in addition to an extended period of low hydropower inflows in recent months, which required higher thermal generation to ensure supply security. A prolonged outage at Huntly's unit 5 gas turbine between June 2023 and January 2024 also led to an even greater need for coal-fired generation, Genesis said. Biomass transition The company — which is 51pc owned by the state — is the second-largest power retailer in New Zealand, behind domestic utility Mercury, according to data from the Electricity Authority. It has a NZ$1.1bn ($659mn) programme for renewable power generation and grid-scale battery storage , which includes a potential replacement of coal with biomass at Huntly. But the transition to biomass "will take some years," Johns said. Genesis has successfully completed a biomass burn trial at Huntly last year and has collaboration agreements with potential New Zealand pellet suppliers, but there is currently no local source for the type of pellets needed for the plant. Genesis is hoping to move to formal agreements "as soon as counterparties are able". The company will not consider importing pellets, it told Argus . "We will only use biomass if we can secure a local New Zealand supply chain that is sustainable and cost-effective," it said. Domestic gas production New Zealand's three-party coalition government said separately on 8 May that the "material decline" in local gas production threatens energy security, blaming the previous Labour party-led government for "policy decisions which have disincentivised investment in gas production." The decisions — which were part of the former government's pledge to achieve a carbon-neutral economy by 2050 — led to a reduction in exploration for new gas resources since 2021, while suppressed maintenance drilling reduced production from existing gas fields, according to a joint release from energy minister Simeon Brown and resources minister Shane Jones. "Due to this significant reduction in gas production, the government has also been advised that some large gas consumers are expressing concern about their ability to secure gas contracts," the government said. Major industrial users such as Canada-based methanol producer Methanex have been forced to reduce production as a result, it noted. "We are working with the sector to increase production, and I will be introducing changes to the Crown Minerals Act to parliament this year that will revitalise the sector and increase production," Jones added. By Juan Weik Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Brazil state faces power outages after record flood
Brazil state faces power outages after record flood
Sao Paulo, 6 May (Argus) — Brazil's Rio Grande do Sul state is facing power outages following record floods that killed more than 80 people and forced over 130,000 people out of their homes. The extreme weather took three substations, 25 transmission lines, five hydroelectric plants and 11 power transformers off line, according to grid operator ONS. In response, ONS started importing power from neighboring Uruguay and requested that the 250MW hybrid natural gas and diesel Canoas and 345MW coal-fired Pampa Sul power plants increase power generation. Earlier today, an estimated 435,000 consumers did not have electricity. The rains affected 341 of the 497 cities in the state, where the government declared a state of emergency in 336 municipalities. The government is working to re-establish power to the state as quickly as possible, the mines and energy ministry said in a social media post. The ministry also held an emergency meeting early yesterday and today to guarantee fuel supplies in the state . State capital Porto Alegre is expected to receive more rain later this week, according to Rio Grande do Sul-based weather forecaster MetSul. Metsul warned that parts of the Porto Alegre metropolitan area could remain uninhabitable for weeks or months. Brazil's airline association Abear said that the Salgado Filho international airport will remain closed indefinitely, after the airport's runway flooded. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Brazil hydroelectric dam bursts under record rains
Brazil hydroelectric dam bursts under record rains
Sao Paulo, 3 May (Argus) — Brazilian power generation company Companhia Energetica Rio das Antas (Ceran) found a partial rupture in its 100MW 14 de Julho hydroelectric plant following record precipitation in Rio Grande do Sul state. Flooding from the record rains has left 37 dead and forced more than 23,000 people out of their homes, causing widespread damage across the state, including washed out bridges and roads across several cities. Ceran reported that the dam of the hydroelectric plant on the Antas River suffered a rupture under the heavy rains and the company implemented an emergency evacuation plan on 1 May. Ceran's 130MW Monte Claro and 130MW Castro Alves plants are under intense monitoring, the company said in a statement. Rio Grande do Sul state governor Eduardo Leite declared a state of emergency and the federal government promised to release funding for emergency disaster relief. Leite said the flooding will likely go down as the worst environmental disaster in the state's history. Brazil's southernmost state along the border with Argentina has been punished by record precipitation over the past year owing to the effects of the strong El Nino weather phenomenon, according to Rio Grande do Sul-based weather forecaster MetSul Meteorologia. Brazilian power company CPFL Energia controls Ceran with a 65pc equity stake. Energy company CEEE-GT, which is owned by steel manufacturer CSN, owns another 30pc, and Norway's Statkraft owns the remaining 5pc. The state had declared a state of emergency as recently as September 2023 because of unusually heavy rains that resulted in the death of more than 30 people. Weather forecasters expect El Nino conditions to abate in the coming months over the eastern Pacific. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Battery storage stands out in Japan clean power auction
Battery storage stands out in Japan clean power auction
Osaka, 2 May (Argus) — Japan's first auction for long-term zero emissions power capacity has attracted strong bidding interest with a plan to install battery storage, as investment in the power storage system is gaining momentum in line with expanded use of fluctuating renewable energy sources. Japan launched the clean power auction system from the April 2023-March 2024 fiscal year, aiming to spur investment in clean power sources by securing funding for fixed costs in advance to drive the country's decarbonisation by 2050. The first auction, which was held in January, has awarded 1.1GW capacity for battery storage, or 27pc of total contract capacity for clean power sources, excluding gas-fired generation that has been temporally included in the auction system to help ensure stable power supplies, nationwide transmission system operator Organisation for Cross-regional Co-ordination of Transmission Operator (Occto), which manages the auction, said on 26 April. Bidding capacity for battery storage totalled around 4.6GW, the highest volume among any other clean power sources. This means the contract ratio for storage batteries was 24pc compared with the 100pc ratio for ammonia co-firing, hydrogen co-firing , biomass dedicated and nuclear capacity, along with gas-fired capacity . Awarded capacity for battery storage as well as pumping-up electric power facilities reached 1.67GW, exceeding the 1GW sought by the auction. Japan has secured a total of 9.77GW of net zero capacity through the 2023-24 auction. Contract volumes covered 1.3GW of nuclear, 199MW biomass, 577MW of pumping-up electric power, 770MW for ammonia co-firing and 55.3MW hydrogen co-firing, as well as 1.1GW of battery storage. This also included 5.76GW of gas-fired projects. All winners under the auction can generally receive the money for 20 years through Occto, which collect money from the country's power retailers, although they need to refund 90pc of other revenue. The first auction saw total funding of ¥233.6bn/yr ($1.51bn) for decarbonisation power sources and ¥176.6bn/yr for gas-fired capacity. Japan's battery requirements are expected to continue rising, with uncertainty over future nuclear availability likely to spur Tokyo to accelerate the roll-out of renewable energy to meet a 46pc greenhouse gas emissions reduction by 2030-31 against 2013-14 levels — a target still far above the 23pc recorded in 2022-23. Japan will need to install 38-41GW of renewable capacity, nearly triple actual output of 14GW in 2019. Japan is looking to establish lithium-ion battery production capacity of 150GWh/yr domestically and 600GWh/yr globally by 2030. The trade and industry ministry projects the latter target will require 380,000 t/yr of lithium, 310,000 t/yr of nickel, 600,000 t/yr of graphite, 60,000 t/yr of cobalt and 50,000 t/yr of manganese. By Motoko Hasegawa Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more