NAE Case Study: Brazil, Luz para Todos (Light for All)

Description

The Luz para Todos programme was created in 2003 and initially planned for completion in 2014 (subsequently extended to 2018).  The Government mandated & funded the  programme, which obligated grid distribution concessionaires to provide electricity access to previously un-electrified households.  The programme was coordinated by the Ministry of Mines and Energy and managed by Eletrobrás.  It was implemented by distribution companies under the control of Eletrobrás and privatised and federal power supply companies. The cost of the programme was US$5.7 billion, of which US$4.2 billion was paid by the Federal Government.  The remaining cost was generally divided equally between the federal states and municipalities (US$750m), and the power supply companies (US$750m). Where initial electrification rates were very low, up to 90% of the supply company's total investment was subsidised through national funds. Electricity consumers did not have to pay for any network expansions.  In this way, new connections were financed from the public sector budget, with the State government contracting Eletrobras to provide the required service for end-users.  Priority targets for implementation were those zones with a low Human Development Index (HDI), inhabited by families with low purchasing power.

Context

Brazil has a generation capacity of about 145GW, with ~65% of installed capacity based on hydropower. Thermopower plants account for 28%, wind power for 6%, nuclear power for 1.5% and solar power for only 0.02%.  Therefore Brazil has more than 70% of its power generation based on renewable sources (cf the world average of 80% power from fossil fuels).  Currently, 99% of the population is connected to an electricity supply, and Brazil rates as the world's ninth largest energy consumer.  Before the Light for All programme (starting in 2003), electricity connections were based on market demand with infrastructure costs being recovered from the fees charged to end-users as well as some general taxes.  A previous market-driven programme (Light in the Countryside), launched in 1999, had little impact because poor rural families were unable to afford the associated costs (these end-user charges eventually constituted critical barriers to universal access to electricity).  With Light for All, the State funds the entire programme through subsidies (from general taxation), which was justified by the aims to increase national development, generate opportunities, and promote citizenship.

Objectives

The original goal of the programme was to guarantee access to energy in all rural zones in 2008, with an intermediate objective of 90% in 2006. This was expected to involve  2 million rural connections, together with associated internal appliance kits (plugs lamps etc), at no cost to the end-user .  Broader aims were the socio-economic development and poverty reduction expected to result from the provision of free access to electricity infrastructure.

Legal Basis

Luz para Todos was created as a government programme by Decreto Nº 4.873, November 11th 2003. It was implemented by a range of distribution companies that included operators controlled by Eletrobras, federal power supply companies, and private co-operatives.  These companies were contracted as concessionaires by the Government (MME), allocated specific target communities, provided with the necessary budget, and set target completion dates; their progress was then overseen by the Electricity Regulator (ANEEL) and by regional committees.

Institutions, Roles and Responsibilities

The Ministry of Energy and Mines (MME) has the overall responsibility for policy setting in the electricity sector while ANEEL, which is linked to MME, is the Electricity Regulatory Agency created in 1996. ANEEL's function is to regulate and control the generation, transmission and distribution of power. The National Council for Energy Policies (CNPE), is an advisory body to the MME in charge of approving supply criteria and "structural" projects while the Electricity Industry Monitoring Committee (CMSE) monitors supply continuity and security. The Operator of the National Electricity System (ONS) is a non-profit private entity created in 1998 that is responsible for the coordination and control of the generation and transmission installations in the National Interconnected System (SIN). The ONS is under ANEEL's control and regulation.  The Power Commercialization Chamber (CCEE), successor of MAE (Mercado Atacadista de Energia Electrica), is the operator of the commercial market. The initial role of the operator was to create a single, integrated commercial electricity market, to be regulated under published rules. This role has become more active since now CCEE is in charge of the auction system. The rules and commercialization procedures that regulate CCEE's activities are approved by ANEEL.  Finally, the Power Research Company (EPE) was created in 2004 with the specific mission of developing an integrated long-term planning for the power sector in Brazil. Its mission is to carry out studies and research services in the planning of the energy sector in areas such as power, oil and natural gas and its derivatives, coal, renewable energy resources and energy efficiency, among others.  The Light for All programme is coordinated by MME in association with ANEEL, and is managed by the national state-owned utility, Eletrobrás.   The distribution concessions are owned privately, by the state or by cooperatives, but overseen by Eletrobrás, which owns much of the generation and transmission, and some distribution.  ANEEL authorises concessions and sets targets. Eletrobrás manages programme implementation and oversees the concession contracts between MME and the distributors. Funding is provided by federal and state governments.

Interventions

The programme involved provision of energy to remote communities through grid extension, decentralised grids, and stand-alone systems.  The local electric utilities in the target regions were requested by Government to prepare Annual Programs for Service Expansion.  The distribution concessionaires (which included public sector operators linked to Electobras, private suppliers, and co-operatives) were selected by MME and endorsed by ANEEL. For grid-based connections, the utilities auctioned electricity to the distributors, enabling a fully decentralised approach for the service and tariffs offered to end-users.  The Government placed an obligation on the distributors (concessionaires) to deliver universal rural energy access, with all connection costs subsidised by the government. Approximately 72% of the programme's total funding came from two sources, namely the Reserva Global de Reversão (RGR) and the Conta de Desenvolvimento Energético (CDE). The RGR was a fund providing loans, collected from the concession fees and fines paid by distribution companies. The CDE was a fund providing subsidies, collected from a tariff paid by all electricity consumers. The remaining funding was generally divided equally between the federal states and municipalities (14%) and the power supply companies (14%). However, where initial electrification rates were very low, up to 90% of the distributor's total investment was subsidised through national funds. Electricity consumers did not have to pay for any upfront charges.

Impacts Achieved

Almost 3.4m previously un-electrified households (over 15m people) were connected.  By 2014, the Luz para Todos programme had benefited (according to Government indicators) at least 3,374,248 households, 68% more than the original target of 2 million families.  This included over 261,000 families in poorer rural areas that previously had no electricity.  The programme also had a positive impact on the social and economic development of assisted communities. (A subsequent programme expansion in December 2014, through the Decreto Nº 8.387, aims to give access to an additional 206,200 households (one million people) by December 2018.  About 100,000 of those people are in the Amazon and their needs will be met with standalone solar PV systems).

Lessons Learned

The programme initially fell behind annual targets due to inexperience, political interference and shortages of materials and skills.  The budget overshot by 67% (due to underestimation of demand and costs). Cost recovery by concessions, and hence the longer-term sustainability of the programme (and financial viability of concessionaires), was in doubt due to tariff constraints (especially in areas with a large proportion of remote users and those on social tariffs). It was also not clear whether the rate of additional generation was matching grid extension/ connections/ demand. Though off-grid options were included in programme, they were rarely used in practice (even where they would have been more economic) due to the fixed financing/subsidy structure favoured by Eletrobras (e.g. there was no consideration of cross-subsidy).  There was also a lack of concessionaire awareness/experience and consequently interest in off-grid options.  Despite these early concerns, the program exceeded expectations and targets.  Many factors contributed to this success: the electricity access provided and maintained over time for more than 95% of the national territory; a strong regulatory framework in the energy sector; the expertise of electricity distribution companies; the role of Eletrobras; the availability of resources from electricity sectorial funds to finance the program and reduce tariff impacts on consumers; the industrial base in the electricity distribution system and the use of local workforce; positive reaction to the provision of electricity without costs to the targeted population.

Effectiveness

The Luz para Todos programme has successfully brought electricity to nearly 3.4m households at a cost of US$5.7bn, which equates to US$1680 per household.  (Some of these costs will be recovered through electricity tariffs but users were apparently not required to pay any additional up-front costs). This was based predominantly on grid connection, involving significant infrastructure extension and installation cost but providing a high level of access (expected to be Tier 4-5 under the SEforAll multi-tier framework), sufficient to support a range of productive uses and hence economic development (though reliability and quality may suffer if generation construction has not kept pace with grid extension). The programme was centrally-driven, primarily by the national electricity utility, with the result that the focus has been on grid extension, despite the growing cost - a more balanced grid/mini-grid/off-grid approach may have been more cost-effective.  The future expansion plans involve 50% of the connections being met with stand-alone systems that will help to achieve the "Light for All" objective, but may provide a lower level of access.   There is little evidence of customer engagement (in terms of awareness) or the development of local support structures (such as capacity building for local supply/maintenance), which may be a limitation to the longer-term sustainability of the programme.

Overview of Other Country Case Studies

References

• http://energy-access.gnesd.org/cases/32-energy-access-program-in-brazil-lighting-for-all.html
• http://www.ep.liu.se/ecp/057/vol12/057/ecp57vol12_057.pdf.
• G20 (2015), G20 Energy Access Action Plan: Voluntary Collaboration on Energy Access https://www.se4all-africa.org/fileadmin/uploads/se4all/Documents/guidelines_policy_and_hub_docs/23.09.2015-G20_Energy_Access_Action_Plan-_Final.pdf
• https://www.iea.org/policiesandmeasures/pams/brazil/name-24303-en.php
• IEA, (2010), Comparative Study on Rural Electrification Policies in Emerging Economies https://www.iea.org/publications/freepublications/publication/rural_elect.pdf
• http://www.sciencedirect.com/science/article/pii/S1364032111005776
• http://www.wame2015.org/case-study/989/

Authors

Authors: Mary Willcox, Dean Cooper

Acknowledgements

The Review was prepared by Mary Willcox and Dean Cooper of Practical Action Consulting working with Hadley Taylor, Silvia Cabriolu-Poddu and Christina Stuart of the EU Energy Initiative Partnership Dialogue Facility (EUEIPDF) and Michael Koeberlein and Caspar Priesemann of the Energising Development Programme (EnDev). It is based on a literature review, stakeholder consultations. The categorization framework in the review tool is based on the EUEI/PDF / Practical Action publication "Building Energy Access Markets - A Value Chain Analysis of Key Energy Market Systems".

A wider range of stakeholders were consulted during its preparation and we would particularly like to thank the following for their valuable contributions and insights: - Jeff Felten, AfDB - Marcus Wiemann and other members, ARE - Guilherme Collares Pereira, EdP - David Otieno Ochieng, EUEI-PDF - Silvia Luisa Escudero Santos Ascarza, EUEI-PDF - Nico Peterschmidt, Inensus - John Tkacik, REEEP - Khorommbi Bongwe, South Africa: Department of Energy - Rashid Ali Abdallah, African Union Commission - Nicola Bugatti, ECREEE - Getahun Moges Kifle, Ethiopian Energy Authority - Mario Merchan Andres, EUEI-PDF - Tatjana Walter-Breidenstein, EUEI-PDF - Rebecca Symington, Mlinda Foundation - Marcel Raats, RVO.NL - Nico Tyabji, Sunfunder -

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Any feedback would be very welcome. If you have any comments or enquires please contact: mary.willcox@practicalaction.org.uk, benjamin.attigah@euei-pdf.org, or caspar.priesemann@giz.de.

Download the Tool as a Power Point: https://energypedia.info/images/a/aa/National_Approaches_to_Electrification_-_Review_of_Options.pptx

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