IEEE Power & Energy Magazine - July/August 2016 - 58

Analyses with Best
Information on Potential

Sizeable
Investments:
Hundreds of km
of Transmission
Lines, Hundreds
of MVA of
Transformation
Capacity

Proactive Transmission
Expansion Decisions

Source: EPE (Maps)

figure 4. An example of proactively planned facilities in Bahia, auctioned in 2014. (The maps were obtained from public
documentation made available by EPE.)

transmission concessions. A first effort comes from the Brazilian senate. If approved, Bill #378/2013, proposed in 2013
and currently under evaluation by the Constitution and Justice
Commission, after passing by the Infrastructure and the Environment Commissions, would establish that the first environmental license (FEL) (of a three-step licensing process) shall
be obtained by governmental institutions before the transmission auctions. The FEL specifies the social-environmental
requirements for a given concession. Obtaining it before
the auction would allow investors to accurately evaluate the
efforts required in the implementation stage, thus reducing
the risks of delays and cost overruns. This can contribute to
mitigating the phenomenon of auctions without valid bids.
Yet there are divergences about the effectiveness of this
measure. Some institutions advocate that the responsibility
should remain with concessionaires selected via auctions,
since they have stronger incentives and better means to
obtain the licenses, in comparison with government agencies. In light of this, the Ministry of Mines and Energy
(MME) is currently seeking means to facilitate the job of the
concessionaires by improving the coordination of the various licensing bodies and implementing a one-stop-shop for
all licensing dealings. The improvements may also include
establishing stricter response time limits to licensing bodies
to fast-track environmental licensing. In this case, licensing
would be kept as a responsibility of transmission concessionaires selected via auctions and take place after them.
It is worth mentioning that the planning agency, EPE, has the
mandate to preliminarily evaluate, while devising and comparing alternatives for transmission expansion, social-environmental barriers that may affect the assets' feasibility. These analyses
have been available in official plans for several years.
Regulatory Efforts to Modernize and Enhance
Capacity of Facilities in Existing Rights-of-Way

In 2014, the Brazilian regulator introduced adjustments to
the regulation on reinforcements and technical improvements
july/august 2016

to already existing transmission facilities. In a simple explanation, the adjustments 1) allowed a more active participation of transmission concessionaires in the process of identifying cost-effective reinforcements and 2) improved the
economic incentives these companies perceive to identify
and implement such reinforcements. Contrary to Greenfield
assets, these reinforcements to existing facilities are not
auctioned but rather are directly authorized by the regulator
to the concessionaire.
Though these adjustments were aimed at facilitating the
refurbishment and overhaul of several transmission assets
that were implemented during the 1980s and are thus reaching the end of their physical lifetime, the regulator focused
secondarily on improvements such as the repowering of facilities and installing sensoring systems and remote maneuvering equipment. In a context where implementing new assets is
becoming increasingly difficult, this secondary focus aimed
at enhancing the incentives for transmission companies and
independent service operators (ISOs) to deliver as much
capacity and flexibility as possible with existing equipment
and transmission lines in existing rights-of-ways.
Adjusting the Price Cap of the Auctions

Finally, it is worth mentioning that the regulator has been
very proactive in analyzing the needs of increases of the auction price cap, via changes in the weighted average cost of
capital that is behind the caps and other activities.

Chile
Successes of Model and Growing Difficulties
with Transmission Implementation
The elements of the framework presented earlier have also
been used in Chile. With the 1982 electricity reform, Chile
had initially adopted a more market-oriented transmission
expansion model, based on bilateral negotiations between
agents. This led to an underinvestment in transmission
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