IEEE Power & Energy Magazine - November/December 2014 - 32

(a)

(b)

figure 3. Brazil's (a) gas and (b) electricity networks (sources: Gasnet and ONS).

power level by a 100,000-km meshed high-voltage transmission network, and generation and transmission resources
are centrally dispatched by an independent system operator
with the aid of stochastic optimization models. Short-run
marginal costs-by-products of the dispatch model-are
used to set weekly energy spot prices in a wholesale energy
market. In order to ensure adequate capacity expansion
of around 5,000 MW per year, an auction-based scheme
of short-, mid- and long-term contracts has been devised
to supply the captive market. As of the end of 2013, the
Brazilian power sector reached an installed capacity of
130 GW, a yearly consumption of 530 TWh, and a peak
demand of 79 GW. Multiple generation sources are represented in the Brazilian electricity supply, including nuclear,
natural gas, coal, cogeneration from sugarcane bagasse,
and diesel plants, along with more than 12,000 MW of
natural gas-fired generation.

Role of Gas-Fired Generation in Brazil:
The Challenge of Flexibility
Even though thermal gas-fired generation remains an important "anchor" for gas consumption, which has the potential
to spur production and infrastructure investments on the
natural gas side, an interesting question is whether or not
the Brazilian electricity sector actually needs natural gas
as a fuel. Over the past few years, planned capacity additions have been dominated by wind power and run-of-river
large hydro, which have been able to achieve prices as low
as US$40-50/MWh; gas-fired generation is generally more
expensive than that. Even in a context of inexpensive and
abundant renewable candidates for system expansion, however, thermal plants can play two important roles as supporting generation sources:
32

ieee power & energy magazine

✔✔ They can function as back-up generation, especially

during extensive periods of low rainfall.
✔✔ They can function as dispatchable generation that
can respond quickly to the system's needs. Since
environmental constraints have been preventing the
construction of new hydro reservoirs at the same time
that variable wind and solar power plants have been
increasingly participating in system expansion, this
contribution is expected to become even more valuable over time.
Both of these functions rely on the operational flexibility
of thermal plants, which indeed represents their main contribution in a hydrothermal system. As a consequence, the
best usage of available thermal generation resources from the
power sector's standpoint would lead to quite a variable production profile, in which long periods of abundant hydro production (and near-zero electricity prices) would be interrupted
by water scarcity events during which base-load thermal plants
would be dispatched, as illustrated in Figure 4. This behavior,
however, is very undesirable from the gas industry standpoint,
since the infrastructure of gas production and transportation
must be dimensioned for the peak consumption hours and the
irregular demand for natural gas makes it difficult to recover
the substantial fixed costs involved.
In order to ensure that investment costs will be correctly
remunerated, a common practice in the natural gas industry
is to use mandatory "take or pay" and "ship or pay" clauses
in gas supply agreements (GSAs). On the other hand, accepting such take-or-pay clauses without a secondary market
into which to resell the natural gas would translate into
physical must-run generation of natural gas plants, reducing these plants' flexibility and hence their attractiveness to
the power sector. The conflicting needs of the electricity and
november/december 2014



Table of Contents for the Digital Edition of IEEE Power & Energy Magazine - November/December 2014

IEEE Power & Energy Magazine - November/December 2014 - Cover1
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IEEE Power & Energy Magazine - November/December 2014 - Cover3
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