Generation Capacity Expansion

The expected increase in the per capita income, the population growth and a higher electricity participation in economic and social activities in Brazil are the most important fundamentals driving the expected increase in the consumption of electricity in the long term. As a result, the expansion of generation capacity is expected to be strong in the coming years in Brazil. However, the speed and intensity with which these factors unfold are unclear, introducing uncertainty in the energy planning studies. On the supply side, the country has a diversified portfolio of candidate energy resources for the power generation expansion, such as hydropower, new renewables, fossil fuels, nuclear as well as decentralized generation (such as demand response and distributed generation). In the future, new technologies, such as distributed storage (batteries), including electric cars, should also be part of the portfolio of candidate energy resources.

The challenge of planning the expansion of the power generation capacity is to ensure the existence of resources in the system that can meet the total expected demand over the planning horizon at the lowest possible cost, considering the uncertainties underlying the main trends (such as changes on the demand profile and its growth, generation supply, equipment outage) to fulfil the security of supply requirements.

In technical terms, planning studies aim to ensure the adequacy and the firmness of resources to meet total demand. Adequacy involves the search for investments in physical assets to ensure, in terms of volume and profile, that the products and services that the electrical system will need to operate reliably will be available when needed. Firmness involves the search for the guarantee that operational planning activities of the already installed capactiy provide the products and services that the system will need to operate reliably. The adequacy is primarily related to investments in the expansion of the system, while firmness is related to the operation planning of the system. Operational security (defined as the readiness of existing generation capacity to provide products and services that the electrical system needs in the short term, even under disturbances) is related to the short-term system operation.

There are two separated power trading environments in Brazil:  The Regulated Trading Environment (ACR in the Portuguese acronym) for captive consumers and the Free Trading Environment (ACL) for free consumers.  In ACR, power contracts are established in competitive auctions and organized by the Granting Authority (The Ministry of Mines and Energy - MME). In ACL, generator and consumer bilaterally set the contract terms and the trading is completely independent of the actions of the Granting Authority.

EPE carries out a series of studies on the expansion of generation capacity, in particular the long-term studies - such as the Ten-Year Energy Expansion Plan (PDE) and the National Energy Plan (PNE) - presenting alternatives for the expansion of the generation capacity, in order to support the economic agents' decision-making in power generation investments