1. Centro de Pesquisas de Energia Elétrica - CEPEL Autor/apresentador Área Título do trabalho Brazil´s Country Report 26th IEAHYDRO Exco Meeting Prague, Czech Republic 20-21 October 2011 20-21 October 2011 Albert C. G. Melo Director-General

2. Centro de Pesquisas de Energia Elétrica - CEPEL Sustainability "Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” "Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” World Commission on Environment and Development (WCED). Our common future. Oxford: Oxford University Press, 1987 p. 43. Social Sustainability Environmental Sustainability Economic Sustainability Sustainable Development - Triple-botton-line 1 Corporate Governance 1 John Elkington, 1998. Cannibals with forks: The triple bottom line of 21st century business

3. Centro de Pesquisas de Energia Elétrica - CEPEL Sustainable Development of Hydropower Social impacts Cost-effective Energy Production Environmental impacts Multiple uses of Water Find a balance

4. Centro de Pesquisas de Energia Elétrica - CEPEL Sustainability "Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” "Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” World Commission on Environment and Development (WCED). Our common future. Oxford: Oxford University Press, 1987 p. 43. Social Sustainability Environmental Sustainability Economic Sustainability Sustainable Development - Triple-botton-line 1 Corporate Governance 1 John Elkington, 1998. Cannibals with forks: The triple bottom line of 21st century business Quadruple-Bottom-Line? (Policy Framework)

5. Centro de Pesquisas de Energia Elétrica - CEPEL Stages Options assessment Site selection Project design & implementation Operation Decision-Making Process Policy Framework: sustainability and use of water PPAs Schemes

6. Centro de Pesquisas de Energia Elétrica - CEPEL Stages Options assessment Site selection Project design & implementation Operation Needs Do Planning Social & Environmental considerations Synergies between hydropower and river basin water resources Hydrological diversity among regions E.g., Public Auctions Decision-Making Process Policy Framework: sustainability and use of water PPAs Schemes

7. Centro de Pesquisas de Energia Elétrica - CEPEL (planning activities adapted to each country circumstances) Policy Framework: sustainability and use of water 1- option assessment: requires planning activities ranging from long-term expansion planning to short- term operational planning. The study horizons vary from 20-30 years ahead (long- term), 5-10 years ahead (mid- term) up to day ahead operational programming, involving different degrees of detail in system representation. Example:

8. Centro de Pesquisas de Energia Elétrica - CEPEL Policy Framework: sustainability and use of water

9. Centro de Pesquisas de Energia Elétrica - CEPEL Policy Framework: sustainability and use of water 2- site selection: formulation of alternatives for the partition of the total water head of a river basin, carried out in the inventory studies, considering sustainability criteria. In the hydroelectric inventory the decision is taken not only for a single project but for the whole set of projects that can be developed in a river basin. Development of methodologies that provide clear direction on how to minimize negative social and environmental impacts while maximizing the positive ones and also capturing synergies between hydropower development and the river basin water resources. Government to take responsibility for a broader assessment of sustainability ? Government is the natural carrier, not the entrepreneurs ?

10. Centro de Pesquisas de Energia Elétrica - CEPEL Policy Framework: sustainability and use of water 3- project design and implementation: (starts when the inventory studies are concluded) i.feasibility studies which should comprise Environmental Impact Assessment (EIA) reports which should also address social issues and must include water use rights. ii.basic project, which detailed studies also include the elaboration of the Environmental Basic Project report. iii.executive project phase all necessary measures related to the plant, including the implementation of socio-environmental programs are decided in order to get license for starting the filling of the reservoir for the beginning of the operation.

11. Centro de Pesquisas de Energia Elétrica - CEPEL Policy Framework: sustainability and use of water 3- project design and implementation: (starts when the inventory studies are concluded) i.feasibility studies which should comprise Environmental Impact Assessment (EIA) reports which should also address social issues and must include water use rights. ii.basic project, which detailed studies also include the elaboration of the Environmental Basic Project report. iii.executive project phase all necessary measures related to the plant, including the implementation of socio-environmental programs are decided in order to get license for starting the filling of the reservoir for the beginning of the operation.

12. Centro de Pesquisas de Energia Elétrica - CEPEL Policy Framework: sustainability and use of water 4 - integrated operation: coordinated operation with upstream and downstream hydropower plants in the same river basin, operation of the other power plants in the interconnected electrical power system and other water uses in the river basin. Provides gains in energy production by taking into account hydrological synergies among river basins

13. Centro de Pesquisas de Energia Elétrica - CEPEL Example: Policy Framework: sustainability and use of water 4 - integrated operation: coordinated operation with upstream and downstream hydropower plants in the same river basin, operation of the other power plants in the interconnected electrical power system and other water uses in the river basin. Provides gains in energy production by taking into account hydrological synergies among river basins

14. Centro de Pesquisas de Energia Elétrica - CEPEL Policy Framework: sustainability and use of water 5 - PPAs Schemes as part of an adequate policy framework The Brazilian current power sector model relies on: I.a combination of competition (with both private and government owned companies) and planning to guarantee supply adequacy and to provide a relatively predictable environment for attracting new investors; II.the energy distribution companies should ensure the attendance of all their forecasted energy demand acquiring energy through public auctions, thus celebrating long-term power purchase agreements. hydro projects - agreements are usually valid for 30 years thermal projects - agreements are usually valid for 15 years

15. Centro de Pesquisas de Energia Elétrica - CEPEL Policy Framework: sustainability and use of water 5 - PPAs Schemes – Example of the Brazilian Public Auction System State-owned and private companies operate side-by-side Electricity Generation Competition in the Market 15 Market Separation Transmission and Distribution Competition by the Market Centralized Dispatch optimized by the National Power System Operator CCEE: Financial and Energy Accounting Electricity Market

16. Centro de Pesquisas de Energia Elétrica - CEPEL Policy Framework: sustainability and use of water 5 - PPAs Schemes – Example of the Brazilian Public Auction System 16 Procurement Auctions for the lowest energy price Regulated Market (ACR) Procurement Auctions for the lowest energy price Free Market ACL Free Market ACL DD CLCLCC D = Distributors/ Eligible Consumers CL = Free Consumers (above3 MW) C = Energy Traders Competitio n 16 Freely Negotiated Prices Prices set by Procurement Auctions Generation Capacity Expansion 15 to 30-year PPA

17. Centro de Pesquisas de Energia Elétrica - CEPEL Brazilian Framework for Planning Sustainable Hydropower Development BRAZILIAN NATIONAL POWER SYSTEM EXPANSION PLANNING AND HYDROPOWER PLANNING LONG TERM PLANNING Horizon –30 years Updates – 4 years Hydropower planning Operation Executive Project Construction Basic Project Feasibility Studies Hydropower Inventory Studies AUCTION TEN-YEAR EXPANSION PLAN Annual Updates EXPANSION MONITORING Horizon – 5 Years Monthly Updates Recognition NATIONAL ENERGY POLICY CNPE Operating Env. License Installation Env. License Reserve Declaration of Water Availability Preliminary Env. License

18. Centro de Pesquisas de Energia Elétrica - CEPEL Policy Framework: sustainability and use of water 5 - PPAs Schemes – Example of the Brazilian Public Auction System 18 Demand: – Discos are responsible for load forecast carried out five/three years ahead of start of supply – five/three years ahead of start of supply: Regulated auctions for contracting new capacity – This allows auction winners enough time to build plants and to have project finance –15 to 30- year PPAs offered – Criterion for contracting in auctions is the smallest cost to consumers – they can pass through the contract costs to customers Supply – Government is committed to offer the largest possible number of new projects for auctions – Concessions for all new hydro projects will come with pre-approved environmental license – Any investor is free to offer alternative projects

19. Centro de Pesquisas de Energia Elétrica - CEPEL Policy Framework: sustainability and use of water Brazilian Auction Overview: each distribution company informs the amount of energy they will need; the individual energy demands are aggregated to constitute a single pool, which will purchase the sum of the amounts requested by all distribution companies; the generation projects are sorted in ascending order according to the bid price, until their aggregated supply fully meets the pool energy demand. The generators that offer the biggest discounts on the price cap are declared winners and celebrate a power purchase agreement with all distribution companies; the unitary costs arising from the total energy purchased are represented by a single weighted average cost of acquisition; each distributor pays this average price for their individual contracted amount of energy.

20. Centro de Pesquisas de Energia Elétrica - CEPEL Policy Framework: sustainability and use of water Brazilian Auction Overview: 1) For Power Distributors It socializes the gains of trade ensuring that all distributors may face exactly the same hiring costs per unit of energy, regardless the region of operation or production scale. Main Advantages 2) For Power Generators It reduces the risk of default since they sign a power purchase agreement with all distribution companies; It represents an opportunity of selling their energy by long- term future contracts, even before the construction of the power plant, thus reducing risks, uncertainties and costs of electricity generation.

21. Centro de Pesquisas de Energia Elétrica - CEPEL Policy Framework: sustainability and use of water Brazilian Auction Overview: Due to the large amounts of money involved in the deployment phase, and the usual long time needed for its construction, the achievement of funding for hydro generation may be a difficult task. In Brazil, BNDES has been the leading provider of long-term financing for infrastructure investments. For example, from January 2003 to June 2008, 142 power generation projects were supported by the bank, totaling about R$ 21.3 billion in financing, of which R$ 13.6 billion went to hydroelectric projects. Recently, the BNDES provided the necessary financial resources for the construction of Belo Monte hydro plant, with an installed capacity of 11,233.1 MW, which involved a total investment estimated at more than US$10 billion. The Role of BNDES Bank

22. Centro de Pesquisas de Energia Elétrica - CEPEL Policy Framework: sustainability and use of water Developing hydropower in a sustainable way enhance energy security, environmental sustainability and promote social and economical development, specially for local communities while offering important opportunities for poverty alleviation and access to electricity

23. Centro de Pesquisas de Energia Elétrica - CEPEL Espaço para agradecimentos Nome e endereço para contatos