Brazil's Smart Meter Regulations Not A Binding Mandate, But Still Indicate Significant Smart Grid Market Potential

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Sep 05, 2012, 05:57 ET

WASHINGTON, Sept. 5, 2012 /PRNewswire/ -- Last month, Brazil's electricity regulator ANEEL announced long awaited regulations regarding the deployment of smart meters throughout the country. The new regulations were not the market catalyst – in the form of a binding mandate - many were anticipating, but nonetheless still provide for a very significant smart grid market to materialize in the country over the next decade.

Northeast Group, LLC today released a second volume of its earlier study Brazil Smart Grid: Market Forecast (2012-2022) that analyzes the market impacts of the new regulations announced in August 2012. The research firm found that Brazil is now expected to cumulatively spend $27.7 billion on total smart grid investments by 2022, as compared to the original forecast of $36.6 billion. These smart grid investments cover the transmission, distribution, metering and home energy management segments of the market. The largest reduction in the total forecast was found in the smart metering, or AMI, segment of the market. Distribution and transmission network investment forecasts remain largely unchanged.

"The August regulations were not the binding mandate that many had expected ANEEL to announce, calling for the replacement of all 63 million meters in Brazil," said Northeast Group. "As a result, we have revised downward our smart meter forecast for the country. At the same time, the regulation provides clarity for utilities and vendors and will help ensure that investment in this multi-billion dollar market will increase in the next few years. A recent wave of merger and acquisition activity in the Brazilian smart grid market shows that firms still see big opportunities in the country."

The recently announced regulations require all new meter installations to be smart meters by early 2014, but do not require the replacement of existing legacy meters. Instead, customers may "opt in" by requesting one of two types of smart meters: a free meter that enables time-of-use (TOU) pricing, or a more advanced smart meter (AMI) with additional functionality. Customers would need to cover the cost themselves of the more advanced smart meter. The additional functionality will include – among other things - net metering to boost distributed or micro generation in the country.

"Combined with a recent micro generation law, it is clear that Brazil is eagerly pursuing increased use of distributed generation," continued Northeast Group. "Brazilian residents now have access to the smart grid infrastructure and regulatory incentives they need to implement residential-level solar panels and other forms of distributed generation. Given Brazil's high transmission costs and high solar resource potential, this is a top priority."

In addition to updating its forecast, Brazil Smart Grid: Market Forecast (2012-2022) Volume II includes detailed analysis of the new regulations passed within the past six months, as well as information on recent smart meter deployments and new partnerships between Brazilian and international smart grid vendors. In the past several months, international vendors such as Elster, Itron, Sensus, Siemens, Silver Spring Networks, Trilliant and others have been active in either partnerships or merger and acquisition activity with Brazilian vendors, or have announced recent wins with utilities. The market has seen significant activity, which is a sign that large deployments are imminent.

Northeast Group has not altered its forecasts for distribution and transmission level investments, such as distribution automation and wide area measurement technologies in Brazil. These are expected to make up a significant portion of the total smart grid market in the country. Distribution automation technologies in particular will be critical in improving the reliability of Brazil's grid in the run-up to the 2014 World Cup and 2016 Summer Olympics.

Northeast Group expects many Brazilian utilities to continue to deploy smart meters to help combat non-technical losses, which are well above the levels seen in other parts of the world. The research firm added that, "even without a binding mandate, all Brazilian utilities will deploy AMI in some form, especially since five of the largest utility groups have non-technical losses above 14%. These utilities have found that AMI deployments can bring immediate savings by reducing theft; this alone justifies the business case. Several Brazilian utilities are even already experimenting with full-scale 'smart city' concepts that leverage a number of smart grid applications, such as distributed renewable generation and sophisticated home area networks."

Brazil Smart Grid: Market Forecast (2012-2022) Volume II forecasts 14 segments of the smart grid market in Brazil. These include market values for AMI segments (meter hardware, communications, IT, professional services and installation costs); distribution automation segments (substation automation; fault detection, isolation and restoration (FDIR); volt/VAR optimization (VVO); and grid monitoring and control); wide area measurement (synchrophasors), and home energy management segments (home area networks, electric vehicle supply equipment and smart solar inverters) through 2022. The report also provides a detailed overview of the electricity industry structure in Brazil and profiles the 12 consortia controlling 33 of the largest distribution utilities that make up more than 90% of the market. A smart grid vendor analysis in the report profiles those firms positioning themselves to win large smart grid contracts, including domestic Brazilian firms and international smart grid vendors.

The report is 134 pages long and includes over 65 charts, tables and graphics. Primary research was completed on the ground in Brazil, while secondary research used English and Portuguese sources. To order a copy of the report, please visit www.northeast-group.com or email Ben Gardner at: [email protected]

ABOUT: Northeast Group, LLC is a Washington, DC-based smart grid market intelligence firm. Our research is focused on the smart grid opportunity in emerging market countries.

Key questions addressed in this report:

How will new regulations affect near-term smart meter deployments?
How large will the smart grid market – including 14 segments – become over the next decade?
Which international vendors are already active in Brazil, which have won recent contracts and which have been engaged in M&A activity?
Which domestic vendors are poised to partner with international firms to exploit the growing smart grid market?
How will Brazilian utilities build their smart meter business cases?
Which utilities have already developed pilot projects and which technologies are they using?
Where in Brazil are distribution automation and home energy management likely to see large deployments?

Table of Contents

i. Executive Summary	1
i.i Updates in Volume II of this report	3
ii. Methodology	10
1. Introduction	13
2. Brazil smart grid snapshot	21
2.1 Current situation	21
2.2 Regional comparison	23
2.3 Electricity industry structure	27
2.4 Smart metering regulatory framework	32
2.5 Market drivers and barriers	38
3. Smart grid market forecast	50
3.1 Changes from the Volume I forecast	50
3.2 Deployment start date and pace	51
3.3 Cost estimates	54
3.4 Alternative scenario	55
4. Detailed smart grid market forecast and technology outlook	56
4.1 AMI	56
4.1.1 Meter hardware	57
4.1.2 Communications options	58
4.1.3 IT: meter data management and customer information systems	61
4.1.4 Professional services	62
4.1.5 Installation costs	62
4.1.6 Prepaid metering	63
4.2 Wide area measurement	64
4.3 Distribution automation	66
4.3.1 Overview of DA in Brazil	66
4.3.2 Distribution automation components	68
4.3.2.1 Substation automation and monitoring	68
4.3.2.2 FDIR	69
4.3.2.3 Volt/VAR optimization	70
4.3.2.4 Grid monitoring and control	71
4.3.3 Distribution automation activity in Brazil	72
4.4 Home energy management	74
4.4.1 Home area networks	75
4.4.2 Distributed generation: solar inverters with communication capability	75
4.4.3 Electric vehicle supply equipment	77
5. Utilities	80
5.1 AES	80
5.2 Iberdrola	84
5.1 CPFL	85
5.2 Light	87
5.1 Cemig	91
5.2 Endesa	93
5.1 Copel	96
5.2 Rede Energia	98
5.1 EDP	99
5.2 Eletrobras	100
5.1 Celesc	102
5.2 Cemar	103
6. Vendor activity	105
6.1 Domestic vendors	106
6.2 International vendors	111
6.2.1 International vendors in AMI projects	111
6.2.2 International vendors in distribution automation projects	116
6.2.3 International vendors poised to expand in Brazil	118
7. Conclusion	120
8. Appendix	121
8.1 Domestic electricity sector vendors in Brazil	121
8.2 List of companies mentioned in this report	125
8.3 List of acronyms	126

List of Figures, Boxes, and Tables

Updated vs. original smart grid forecast	4
Brazil smart grid: key takeaways	6
Brazil smart grid: leading indicators	7
Smart grid development at Brazilian utilities	8
Updated Brazil smart grid forecast data	9
Updated combined smart grid forecast	9
Figure 1.1: Smart grid value chain	13
Figure 1.2: Projected wind generation in Brazil	14
Figure 1.3: Smart grid model highlighting focus in Brazil	15
Table 1.1: Benefits of AMI in Brazil	16
Table 1.2: Demand response options	19
Figure 1.4: Solar and wind resources in Brazil	20
Table 2.1: Classification of meters by type	21
Table 2.2: Functionalities of electronic meters	22
Figure 2.1: Emerging markets smart meter potential	23
Figure 2.2: Current smart meter penetration rates in Latin America	24
Figure 2.3: Per-capita electricity consumption in emerging markets	25
Figure 2.4: Average residential consumption in Brazil	25
Figure 2.5: Global per-capita CO2 emissions	26
Figure 2.6: Actual and forecasted GDP growth in Latin America	26
Box 2.1: Smart grid throughout Latin America	27
Figure 2.7: Global residential electricity prices	28
Figure 2.8: Electricity generation mix in Brazil	29
Figure 2.9: Contracted and forecasted new generation	29
Figure 2.10: Utility ownership in Brazil	30
Box 2.2: Brazil political situation – the Dilma effect	31
Figure 2.11: Electricity regulatory structure in Brazil	32
Figure 2.12: Conventional and "white" tariffs	35
Table 2.3: Smart grid-related government action in Brazil	37
Figure 2.13: Global distribution losses	38
Box 2.3: Smart meter business case in Brazil – an analysis of loss reduction alone	39
Figure 2.14: Payback on AMI meter from loss reduction in average Brazilian home	39
Figure 2.15: Payback on average res/comm. AMI meter from loss reduction in two utilities	40
Figure 2.16: Aggregate cost savings from res/comm. non-technical loss reduction	41
Figure 2.17: Percent manufacturing sales lost to power outages	42
Figure 2.18: Electricity consumption growth in Brazil	42
Table 2.4: Percentage of customers who would alter habits if peak prices were to double	43
Table 2.5: Appliance ownership in Brazil	44
Table 2.6: Smart grid drivers and barriers in Brazil	45
Figure 2.19: Percentage renewable energy consumption in Latin America	47
Figure 3.1 Updated vs. original smart grid forecast	51
Figure 3.2: Timeline of smart grid development in Brazil	52
Figure 3.3: Combined smart grid forecast	53
Table 3.1: Brazil smart grid forecast data	53
Figure 3.4: Annual AMI deployments	54
Figure 3.5: Brazil smart meter penetration rate	54
Figure 3.6: Delayed deployment scenario	55
Figure 4.1: AMI cost breakdown	56
Table 4.1: AMI forecast data	57
Figure 4.2: Combined AMI forecast	58
Table 4.2: Communications technologies	59
Figure 4.3: Phasor measurement unit (PMU) forecast	64
Table 4.3 Distribution automation forecast data	65
Figure 4.4: Distribution automation forecast	65
Figure 4.5: Substation and distribution automation in Brazil	67
Table 4.4: Home energy management forecast data	74
Figure 4.6: Home energy management forecast	74
Figure 4.7: Electric vehicle forecast	77
Figure 4.8: EV incentives in Brazil	78
Figure 5.1: Smart grid development at Brazilian utilities	80
Table 5.1: Brazilian distribution utilities	81
Box 5.1: Light's Optimus program	88
Figure 5.2: Non-technical losses as a percentage of total sales in Brazilian utilities	89
Figure 5.3: "Smart city" projects in Brazil	92
Figure 6.1: Leading smart grid vendors in Brazil	105
Table 6.1: Leading smart metering vendors in Brazil	106
Table 7.1: The next steps and necessary actions	113
Table 8.1: Domestic electricity sector vendors in Brazil	120