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Brazil's Smart Meter Regulations Not A Binding Mandate, But Still Indicate Significant Smart Grid Market PotentialWASHINGTON, Sept. 5, 2012 /PRNewswire via COMTEX/ -- 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 Companies covered in this report ABB (Sui) AES (US) Alstom (Fra) BPL (Fra) Celesc (Bra) Cemar (Bra) Cemig (Bra) CESP (Bra) Choice (Bra) Copel (Bra) CPFL (Bra) CTEEP (Bra) Echelon (US) Ecil (Bra) Eletra Energy (Bra) Eletrobras (Bra) Elipse (Bra) ELO (Bra) Elster (Ger) Elucid (Bra) eMeter (US) Endesa (Esp) Enel (Ita) EDP (Por) Gamesa (Esp) GDF Suez (Fra) Iberdrola (Esp) IBM (US) Impsa (Arg) ISA (Col) Itron (US) Landis+Gyr (Sui) Light (Bra) Logica (Ned) Nansen (Bra) Rede Energia (Bra) S&C Electric (US) Schneider Electric (Fra) SEL (Ger) Sensus (US) Siemens (Ger) Silver Spring (US) Telvent (Esp) Terna (Ita) TIM (Ita) Tractebel Energia (Bra) Treetech (Bra) Trilliant (US) V2Com (Bra) Way2 (Bra) Wobben (Ger) SOURCE Northeast Group, LLC |