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in Brazil Nicholas Chang, Christian A. Oberst and Reinhard Madlener - - PowerPoint PPT Presentation

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Economic Policy Evaluation for the Deployment of Alternative Energy Sources in Brazil Nicholas Chang, Christian A. Oberst and Reinhard Madlener 15 th IAEE European Conference 2017 Vienna, Austria, September 3-6, 2017 Presentation Outline 1.

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Economic Policy Evaluation for the Deployment of Alternative Energy Sources in Brazil

Nicholas Chang, Christian A. Oberst and Reinhard Madlener

15th IAEE European Conference 2017 Vienna, Austria, September 3-6, 2017

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

Presentation Outline

  • 1. Research Aim and Scope
  • 2. The Brazilian electricity supply
  • 3. The Brazilian electricity market
  • 4. Modeling of the electricity market
  • 5. Conclusion
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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

  • 1. Research Aim and Scope
  • 1. Provide a comprehensive overview of the Brazilian electric system

and electricity market for interested researchers

  • 2. Derive policy recommendations for an efficient electricity market

design that supports the deployment

  • f

alternative sources for power generation in Brazil

  • More specifically, we model the Brazilian regulated electricity market

(ACR) for the period 2015-2019

  • We simulate several scenarios in order to investigate

 Strong increase in electricity demand  Cost trends of and differences in power generation (new hydro, alternative sources)  Capacity and bottlenecks for alternative sources  Horizontal integration

  • f

companies

  • r

extension

  • f

general business models  Energy policies and dchanges in the market or auction design  Potential market power

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

Presentation Outline

  • 1. Research Aim and Scope
  • 2. The Brazilian electricity supply
  • 3. The Brazilian electricity market
  • 4. Modeling of the electricity market
  • 5. Conclusion
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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

  • 2. Brazilian Electricity Supply System: Energy vs. Power Issue

POWER

  • Controllable primary energy inflow

(e.g. supply contracts of gas)

  • Synchrony between primary energy

inflow and demand

  • Meeting demand depends on sufficient

installed capacity (power)

  • Main question: enough GW?
  • Example: Germany (fossil fueled

based)

  • Non-controllable primary energy

inflow (e.g. renewable sources)

  • No synchrony between primary

energy inflow and demand

  • Meeting demand depends on storing

primary energy when availability is higher then demand

  • Main question: enough stored GWh?
  • Example: Brazil (hydropower based)

ENERGY

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

  • 2. Brazilian Electricity Supply System: Monopolistic Features in Brazil
  • System characteristics:

 91 GW hydropower (~67% of installed capacity)  Large hydropower plants with reservoirs  21 GW fossil-fueled thermal power plants as back-up (~15% of installed capacity)

  • Coordinated operation of power plants, reservoirs, and transmission network

results in synergetic gains of around 25% of energy availability

  • Positive externalities justify centralized (monopolistic) system operation
  • Long-term view on system operation requires centralized capacity expansion

planning

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

  • 2. Brazilian Electricity Supply System: Alternative Energy Sources
  • Limits of hydropower

 Depletion in 10-15 years  Increasing costs  Almost no new reservoir built in the last 20 years  shortage risks

  • Alternative sources: Wind, solar, biomass

and small hydropower

  • Complementary seasonal patterns
  • Due to immense storage capacity in Brazil,

intermittency/oscillations are not an issue

  • Great opportunity for green capacity

expansion

  • Planned expansion from 13% (2014) to

21% (2022)

50 100 150 200 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 GW

EVOLUTION OF INSTALLED CAPACITY

UHE EOL BIO PCH UTE UNE historical projection

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

Presentation Outline

  • 1. Research Aim and Scope
  • 2. The Brazilian electricity supply
  • 3. The Brazilian electricity market
  • 4. Modeling of the electricity market
  • 5. Conclusion
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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

  • 3. Brazilian Electricity Market: A Hybrid Market Structure
  • ACL (free market): full retail competition
  • ACR (regulated market): price pool /single-buyer system

Energy auctions (competition in the wholesales level)

Organized centrally by the regulation agency.

Market of certificates (decoupling from monopolistic system operation)

Future market (usually 5 to 2 years ahead of supply)

Tightly regulated long-term energy contracts (at least 10 years);

Source: Own representation based on MME (2003). Modelo Institucional do Setor Elétrico. Brasília: Ministério de Minas e Energia.

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

Presentation Outline

  • 1. Research Aim and Scope
  • 2. The Brazilian electricity supply
  • 3. The Brazilian electricity market
  • 4. Modeling of the electricity market
  • 5. Conclusion
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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

  • 4. Modeling: Methodology
  • Microeconomic models from industrial organization theory
  • Longevity of PPAs

 Market dynamics very slow  Observed period aggregated into one “super-auction”  Demand in “super-auction” is not inelastic (different to usual auction analysis)  Energy auction for demand expansion (additional energy)

Present model Future model

  • Auction results 2009-2014
  • Calibration of model parameters

(i.e. demand and cost functions)

  • Forecast for auctions 2015-2019
  • Derivation of energy policy

recommendations

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

  • 4. Modeling: Electricity Demand Function
  • Power function

 𝑧𝐸 𝑞 = 𝐿 ∙ 𝑞𝛾

  • Parameterization

 known point (price; output)  curvature (price elasticity)

Present model Future model

Output 𝑧𝐸 Contracted energy in energy auctions Forecasted demand expansion Price 𝑞 Highest price in energy auctions Assumed same as present model Price elasticity 𝛾 Literature Literature

y_present (auction results) y_future (official demand projection) p_future = p_present (auction results) 50 100 150 200 250 300 50000 100000 150000 200000 250000 Auction price [R$/MWh] Contracted Energy [GWh]

DEMAND CURVE IN ENERGY AUCTIONS

Present market model Contracted energy in auctions 2009-2014 Future market model Expected contracted energy in auctions 2015-2019

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

  • 4. Modeling: Marginal Costs (large hydropower)
  • Assumption of increasing costs (decreasing marginal productivity)

 best locations become exploited  distance to consumer centers increases  environmental legislation becomes more restrictive  opportunity costs of water rise

y = 0,0006x + 77,342 R² = 0,7773 0,00 50,00 100,00 150,00 200,00 250,00 20000 40000 60000 80000 100000 120000 Energy price in 2013 values (R$/MWh) Cumulated contracted energy (GWh/a)

LARGE HYDROPOWER: MARGINAL COSTS OF EXPANSION

Observed prices (2010-2014) Projection as of 2015 Long-term trend

Present model Future model

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

  • 4. Modeling: Marginal Costs (alternative sources)
  • Long-term component

 Decreasing (learning curve effects)

  • Short-term component

 Increasing (decreasing marginal productivity of supply-chain)

y = 13264x-0,481 0,00 50,00 100,00 150,00 200,00 250,00 50000 100000 Energy price in 2013 values (R$/MWh) Cumulated contracted energy (GWh/a)

ALTERNATIVE SOURCES: MARGINAL COSTS OF EXPANSION (LONG-TERM)

Observed prices: 2009- 2014 Estimated long-term component y = 0,001x R² = 0,7376 0,00 20,00 40,00 60,00 80,00 100,00 120,00 50000 100000 Energy price in 2013 values (R$/MWh) Cumulated contracted energy (GWh/a)

ALTERNATIVE SOURCES: MARGINAL COSTS OF EXPANSION (SHORT-TERM)

Observed prices: 2009- 2014 Projection: from 2015 (supply-chain stagnation) Projection: from 2015 (supply-chain expansion) Idealized short-term component in 2009-2014 50 100 150 200 250 50000 100000 Energy price in 2013 values (R$/MWh) Cumulated contracted energy (GWh/a)

ALTERNATIVE SOURCES: MARGINAL COSTS OF EXPANSION

Idealized marginal costs

  • f expansion: 2009-2014

Projection from 2015 (supply-chain stagnation) Projection from 2015 (supply-chain expansion) Estimated long-term component

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

  • 4. Modeling: Simulation Scenarios
  • Investigate the effects of:

 Potential market power by (state-owned) large hydropower plants (market concentration)  Different business models for alternative sourves: Independent producers vs. Portfolio expantion by large hydropower companies  Bottlenecks in the supply chain for alternative sources  Potential promotion mechanisms and changes in the market or auction design

Variable Market structure Business model Supply chain of alternative sources Energy policy and market design Possible values  full competition  partial monopoly  source segregation  horizontal integration  stagnation  expansion  no promotion mechanism  source-specific auctions  subvention

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

  • 4. Modeling: Market Simulations

50 100 150 200 250 300 50000 100000 150000 200000 250000 Energy tarif (TE) [R$/MWh] Contracted Energy [GWh]

FULL COMPETITION, SUPPLY-CHAIN STAGNATION

Demand in auctions 2015-2019 UHE marginal costs FA marginal costs UHE+FA marginal costs Market equilibrium UHE at equilibrium 50 100 150 200 250 300 50000 100000 150000 200000 250000 Energy tarif (TE) [R$/MWh] Contracted Energy [GWh]

FULL COMPETITION, SUPPLY-CHAIN EXPANSION

Demand in auctions 2015-2019 UHE marginal costs FA marginal costs UHE+FA marginal costs Marquet equilibrium UHE at equilibrium 50 100 150 200 250 300 50000 100000 150000 200000 Energy tarif (TE) [R$/MWh] Contracted Energy [GWh]

PRICE LEADERSHIP,SUPPLY-CHAIN EXPANSION, SOURCE SEGREGATION

Demand in auction 2015-2018 UHE marginal costs FA marginal costs UHE residual demand UHE marginal revenue Market equilibrium 50 100 150 200 250 300 50000 100000 150000 200000 Energy tarif (TE) [R$/MWh] Contracted Energy [GWh]

PRICE LEADERSHIP, SUPPLY-CHAIN EXPANSION, HORIZONTAL INTEGRATION

Demand in auctions 2015-2019 Marginal costs dominant firm UHE marginal costs FA marginal costs Dominant firm's residual demand Dominant firm's marginal revenue

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

Modeling: Simulation Results (Market Power)

100 120 140 160 180 200 220 Full competition Price leadership (source segregation) Price leadership (horizontal intgration) R$/MWh Market concentration (Market power)

PRICE

Equilibrium price (Stagnant supply chain) 20000 40000 60000 80000 100000 120000 140000 160000 180000 Full competition Price leadership (source segregation) Price leadership (horizontal intgration) GWh/a Market concentration (Market power)

CONTRACTED ENERGY

Total (Stagnant supply chain) FA (Stagnant supply chain) UHE (Stagnant supply chain) 0,0 5,0 10,0 15,0 20,0 25,0 30,0 Full competitionPrice leadership (source segregation) Price leadership (horizontal intgration) Billion R$ Market concentration (Market power)

SIMULATION RESULTS: SURPLUS AND WELFARE

Social welfare (Stagnant supply chain) Consumer surplus (Stagnant supply chain) Producer surplus (Stagnant supply chain)

  • Market power:

 increases energy price  increases participation of alternative sources, BUT  reduces contracted energy  reduces consumer surplus

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

Modeling: Simulation Results (Supply Chain)

  • Expansion of supply chain:

 reduces energy prices  increases contracted energy  increases participation of alternative sources  increases welfare and surplus

100 120 140 160 180 200 220 Full competition Price leadership (source segregation) Price leadership (horizontal intgration) R$/MWh Market concentration (Market power)

PRICE

Equilibrium price (Stagnant supply chain) Equilibrium price (Expanded supply chain) 20000 40000 60000 80000 100000 120000 140000 160000 180000 Full competition Price leadership (source segregation) Price leadership (horizontal intgration) GWh/a Market concentration (Market power)

CONTRACTED ENERGY

Total (Expanded supply chain) FA (Expanded supply chain) UHE (Expanded supply chain) Total (Stagnant supply chain) FA (Stagnant supply chain) UHE (Stagnant supply chain) 0,0 5,0 10,0 15,0 20,0 25,0 30,0 Full competitionPrice leadership (source segregation) Price leadership (horizontal intgration) Billion R$ Market concentration (Market power)

SIMULATION RESULTS: SURPLUS AND WELFARE

Social welfare (Expanded supply chainl) Consumer surplus (Expanded supply chain) Producer surplus (Expanded supply chain) Social welfare (Stagnant supply chain)

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

  • 4. Modeling: Market Simulations for Solar Energy

50 100 150 200 250 300 50000 100000 150000 200000 250000 Energy tarif (TE) [R$/MWh] Contracted Energy [GWh]

NO PROMOTION MECHANISM

Demand in auctions 2015-2019 UHE+UEE+BIO+PCH marginal costs UFV marginal costs Market equilibrium 50 100 150 200 250 300 50000 100000 150000 200000 250000 Energy tarif (TE) [R$/MWh] Contracted Energy [GWh]

DEDICATED SOLAR AUCTION

Demand in dedicated UFV auction (inelastic) UFV marginal costs Result of UFV dedicated auction 50 100 150 200 250 300 50000 100000 150000 200000 250000 Energy tarif (TE) [R$/MWh] Contracted Energy [GWh]

MIXED AUCTION (AFTER DEDICATED AUCTION)

Residual demand in auctions 2015-2019 Marginal costs (UHE+UEE+BIO+PCH) Marginal costs UFV Aggregated marginal costs (all sources) Market equilibrium UFV at equilibrium 50 100 150 200 250 300 50000 100000 150000 200000 250000 Energy tarif (TE) [R$/MWh] Contracted Energy [GWh]

SUBVENTION

Demand in auctions 2015-2019 Marginal costs (UHE+UEE+BIO+PCH) Marginal costs UFV Aggregated marginal costs (all sources) Market equilibrium UFV at equilibrium

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

  • 4. Modeling: Simulation Results (Promotion Mechanisms Solar)
  • Source-specific auctions are the superior

promotion instrument according to assessment framework for environmental policy:

 Economic efficiency

  • Cost efficiency
  • Incentive for innovation
  • Transaction costs
  • Political/social enforceability

130 135 140 145 150 155 160 165 None Source-specific auctions Subvention

R$/MWh Promotion mechanism

PRICE

20000 40000 60000 80000 100000 120000 140000 160000 None Source-specific auctions Subvention

GWh/a Promotion mechanism

CONTRACTED ENERGY

UFV Other sources Total 0,0 5,0 10,0 15,0 20,0 25,0 None Source-specific auctions Subvention

Billion R$ Promotion mechanism

SURPLUS AND WELFARE

Social welfare Consumer surplus Producer surplus

See also Feess, E. (2007). Umweltökonomie und Umweltpolitik (3rd. extended ed.). München: Vahlen, and Endres, A. (2013). Umweltökonomie (4th. extended ed.). Stuttgart, Berlin, Köln Kohlhammer Verlag.

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

Presentation Outline

  • 1. Research Aim and Scope
  • 2. The Brazilian electricity supply
  • 3. The Brazilian electricity market
  • 4. Models of the electricity market
  • 5. Conclusion
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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

Conclusion

  • Recommendations for energy policy

 Control instruments against collusion and abuse of market power  Monitoring and adequate expansion of the entire supply chain  Targeted market instruments for the initial deployment of new technologies  Source-specific auctions for photovoltaic energy

  • Future work

 Model market players that offer a generation portfolio of alternative sources  Analysis of a future market where large power plants serve exclusively as ancillary services providers

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

E.ON Energy Research Center Institute for Future Energy Consumer Needs and Behavior (FCN) Mathieustraße 10, 52074 Aachen Germany

  • Prof. Dr. Reinhard Madlener, Dr. Christian Oberst

T +49 241 80 49820, F +49 241 80 49829 RMadlener@eonerc.rwth-aachen.de Coberst@eonerc.rwth-aachen.de http://www.eonerc.rwth-aachen.de/fcn

Contact

Thank you for your kind attention! Questions?

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Back-up Slides

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

Monopolistic Features of System Operation

  • Coordinated operation of power

plants and transmission network results in synergetic gains of around 25% of energy availability

 Power plants along the same river can optimize their joint production and avoid water spillings  Long rivers (1000’s of km)  Complementary rain regimes between regions

Source: d'Araújo, R. P. (2009). Setor elétrico brasileiro - Uma aventura mercantil. Brasília: Confea.

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

Electric Energy Flow

Sourcce: EPE. (2013a). Balanço Energético Nacional 2013: Ano base 2012. Rio de Janeiro: EPE.

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

Centralized Activities

  • System operation
  • Expansion planning
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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

Deregulation and Liberalization

Source: Bhattacharyya, S. C. (2011). Energy Economics : Concepts, Issues, Markets and Governance: Springer.

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

Microeconomic Market Models

yD(p) MC1 MC2 yS(p) p* y*; p* y* y1* y2*

Price p Output y

FULL COMPETITION MODEL

Demand Marginal costs of Group 1 Marginal costs of Group 2 Supply Market equilibrium Group 1 at equilibrium Group 2 at equilibrium

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

Microeconomic Market Models

yD(p) MCM MRM p* y*; p* (Cournot point) y*

Price p Output y

MONOPOLY MODEL

Demand Monopolist's marginal costs Monopolist's marginal revenue Market equilibrium

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

Microeconomic Market Models

yD(p) yD,DF(p) MCDF MCF MRDF p* y*; p* y* yDF* Cournot point yF*

Price p Output y

PRICE LEADERSHIP MODEL

Demand Residual demand for dominant firm Marginal costs of dominant firm Marginal costs of fringe Marginal revenue of dominant firm Market equilibrium Dominant firm at equilibrium Fringe at equilibrium

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

Model Simulations

136852; 163 80700; 163 56152; 163 50 100 150 200 250 300 50000 100000 150000 200000 250000 Energy tarif (TE) [R$/MWh] Contracted Energy [GWh]

FULL COMPETITION, INDUSTRY STAGNATION

Demand in auctions 2015-2019 UHE marginal costs FA marginal costs UHE+FA marginal costs Market equilibrium UHE at equilibrium FA at equilibrium 144,5 145 50 100 150 200 250 300 50000 100000 150000 200000 250000 Energy tarif (TE) [R$/MWh] Contracted Energy [GWh]

FULL COMPETITION, INDUSTRY EXPANSION

Demand in auctions 2015-2019 UHE marginal costs FA marginal costs UHE+FA marginal costs Marquet equilibrium UHE at equilibrium FA at equilibrium 152 152 135 152 50 100 150 200 250 300 50000 100000 150000 200000 Energy tarif (TE) [R$/MWh] Contracted Energy [GWh]

PRICE LEADERSHIP,INDUSTRY EXPANSION, SOURCE SEGREGATION

Demand in auction 2015-2018 UHE marginal costs FA marginal costs UHE residual demand UHE marginal revenue Market equilibrium 175 175 126 50 100 150 200 250 300 50000 100000 150000 200000 Energy tarif (TE) [R$/MWh] Contracted Energy [GWh]

PRICE LEADERSHIP, INDUSTRY EXPANSION, HORIZONTAL INTEGRATION

Demand in auctions 2015-2019 Marginal costs dominant firm UHE marginal costs FA marginal costs Dominant firm's residual demand Dominant firm's marginal revenue

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

Marginal Costs (Photovoltaics)

y = 1165,2x-0,234 50 100 150 200 250 10000 20000 30000 40000 50000 60000 70000 80000 90000 100000 Energy price in 2013 values (R$/MWh) Cumulated contracted energy (GWh/a)

MARGINAL COSTS OF EXPANSION FOR UFV

Projected costs Long-term component (learning curve)

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

Simulation Results: Contracted Energy

20000 40000 60000 80000 100000 120000 140000 160000 180000 Full competition Price leadership (source segregation) Price leadership (horizontal intgration) GWh/a Market concentration (Market power)

SIMULATION RESULS: CONTRACTED ENERGY

Total (Expanded supply chain) FA (Expanded supply chain) UHE (Expanded supply chain) Total (Stagnant supply chain) FA (Stagnant supply chain) UHE (Stagnant supply chain)

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

Simulation Results: Surplus and Welfare

0,0 5,0 10,0 15,0 20,0 25,0 30,0 Full competition Price leadership (source segregation) Price leadership (horizontal intgration) Billion R$ Market concentration (Market power)

SIMULATION RESULTS: SURPLUS AND WELFARE

Social welfare (Expanded supply chainl) Consumer surplus (Expanded supply chain) Producer surplus (Expanded supply chain) Social welfare (Stagnant supply chain) Consumer surplus (Stagnant supply chain) Producer surplus (Stagnant supply chain)

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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

Assessment of Technology Promotion Mechanisms

Promotion instrument Effectiveness Cost efficiency Incentive for innovation Transaction costs Political/social enforceability Source-specific auctions + (contracted solar energy) + (consumer surplus/average price) ++ (social welfare) ++ ++ + + Subvention ++ (contracted solar energy) ++ (consumer surplus/average price) + (social welfare) + +

  • +
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Market Penetration of Alternative Energy Sources in Brazil | Chang N., C.A. Oberst, R. Madlener |

FCN | Institute for Future Energy Consumer Needs and Behavior

Market Concentration

AES Tietê 2652 GW 2% COPEL 4929 GW 4% CESP 6650 GW 5% CEMIG 6820 GW 5% TRACTEBEL 7321 GW 6% PETROBRÁS 6139 GW 5% ITAIPU 7000 GW 5% ELETRONORTE 9191 GW 7% FURNAS 9907 GW 7% CHESF 10615 GW 8% Others 60979 GW 46%

MAIN AGENTS OF THE GENERATION SECTOR

State-owned Private

54% of installed capacity by 10 companies