In this section, you may find information on Power Purchase Agreements (PPAs) signed in the free market
An independent power producer signs a PPA with either a commercializing agent (trader) or directly with a free consumer or special consumer. All parties need to be registered at CCEE. So called “self-producers” are allowed to produce energy for own consumption, but are able to sell a certain amount of energy into the market.
About one third of the electric energy in the market is sold through the free market. PPAs in the free market can only signed with free consumers. A free consumer needs to have a demand of at least 3MW. Special consumers are those that have a demand of at least 500kW and consuming energy from renewable sources.
In the free market projects will be ground mounted and have a size of 5-30MWp. Below 5MWp the net-metering-scheme is more viable and incentives for grid usage are limited to projects up to 30MWp
CCEE is a federal institution
ANEEL and CCEE play the major role in the legal framework. CCEE is the institutions that registers all participants and the PPAs that are in force. The legal framework is based on the following laws.
-Lei nº 9.074, de 7 de julho de 1995,
-Scheme of the private electric sector: Lei no 9.427, de 26 de dezembro de 1996,
-Restructuring of the electric sector: Lei nº 9.648, de 27 de maio de 1998,
-Rules of the national energy sector: Decreto nº 2.655, de 2 de julho de 1998,
-Law about commercializing energy: Lei no 10.848, de 15 de março de 2004, ruled by:
-Concessions and Authorizations: Decreto no 5.163, de 30 de julho de 2004
All technologies are eligible
This system applies to existing and new installations
Most PPAs at the free market are valid for 3-5 years; As the prices at the spot market are at the limit and short term contracts are made at high prices, periods of 10-15 gain importance.
The concession of the producer is 30 or 35 years.
There is no limit and commercializing agents facilitate contracting with different consumers. Because of incentives for distribution and transmission projects are devided into 30MW segments (1 segment=1 project)
Prices are the result of biliateral negotiation,informed to CCEE but conifidential
Prices include generation and operation cost, distribution, transmission and margin of the seller. Further costs are related to CCEE and other administration costs
Producers can structure their electricity in tranches to sell it to different offtakers. An option is to sell all energy to a commercializing agent that sells the energy at the best price through short and long-term contracts.
Excess energy is sold at PLD (spot market price).
The Brazilian Energy Traders Association ABRACEEL provides a standard agreement of 35 pages that includes the general framework as well as important aspects such as penalties and guarantees. This standard agreement can be downloaded on their homepage.
Producers deliver and consumers analogously receive power from the system, at its center of gravity. The system assures product supply and quality. Differences between the hired and the produced or consumed power are liquidated by the Differences Settlement Price (PLD), defined into 4 submarkets and 3 load sections, by computational model. This settlement is made by CCEE The PLD mechanism is comparable with a spot market.
Buyers of the electricity are mainly (95%) from industry (Metal (34%), Chemical (15%), Mines (14%)), and a smaller part from public institutions (Source: CCEE).
As the largest demand comes from the producing industry, the load is typically during daytime.
Average turn-key investment costs for PV systems are about 1,3 – 1,6 EUR/Wp
As most costs depend on global module and inverter prices it makes sense to use EURO. Depending on the exchange rate the value would be higher or lower. The value of the Real is not very stable at the moment; the exchange rate is at 1:3,8; One year ago it was at 1:2,8. The typical duration of start of construction until grid feed-in is about 6 months.
A typical market assumption for operation and maintenance costs is between 0,5% and 1,0% of the project’s total CAPEX investment per year for a 30 MW project. There is however not yet enough data available to further support this number. Land lease varies a lot; especially in the northeast cheap land is available. In the dry regions land is partly available at a price below 1.000 EUR/ha. Cleaning causes in some regions further costs. Without land lease running cost is at about 10 EUR/Wp/y
No data as regards insurance costs is available.
Projects of the free market will not be realized on roofs as the net metering scheme (REN 482/2012) is more viable. In this segment roof lease contracts will not be so common as the consuming side and the generating side has to be the same owner and rather the roof owner will lease the pv system having it to be installed on his own roof. Many roofs are not suitable for pv installations, as the load reserves are too small.
There are discounts on the Transmission Use of System Tariff and the Distribution Use of System Tariff ("TUST" and "TUSD") for solar energy delivering to special consumers.
The average performance ratio being achieved in the key solar regions of the country is about 79%, 1.820 kWh/kWp for a fixed installation in 2014.
Degradation rates are similar to European standard assumptions as long as pv systems are not too close to the coast line. A typical market assumption is between 0,5% and 1,0% per year.
The average yield (kWh/qm/a) for the key solar regions based on application potential is about 1.820 kWh/kWp
Depending on the investor, solar pv projects are more likely to be financed on balance sheet as finance from BNDES is not easily accessible (an example of BNDES financing is the Fundo Clima).
A typical debt gearing (debt/equity ratio) for PPAs based PV projects is 70/30
Interest rates are at about 18% p.a. whereas BNDES finance is enabling finance at around 8-9% p.a. (see “auctions”). BNDES money is almost not accessible for projects acting in free market.
According to the short PPA running time and high interest rates, debt tenors were kept short (for thermal-generator projects in free market it´s 5 years)
The inflation rate is at 8,5% at the time of researching (30.06.2015). Updated information on inflation is available here.
The current base rate of the central bank is 14,25% and is expected to fall to 11,5% in 2016. Predictions are divergent for further years.
Contracts have almost all inflation rate adjustments, linked to the IPCA-index. Free market PPA prices most likely are negotiated based on the best alternative of the consumer which is usually the grid electricity price. Consumer prices are usually between consumer prices are between 0,29 and 0,59 R$/kWh without tax (source: ANEEL).
PPA prices in the free market are driven through missing grid stability and high prices in diesel generation in some regions. Never the less wind turbines entered the market and caused a price drop to about 0,20 R$/kWh some years ago. Temporarly the price goes up again as result of the energy crisis.
PPA prices are not so much linked to the electricity price development of the end consumer, but rather to the development of energy auction prices as well as amount of water in the reservoirs of the big hydro power plants.
In case the agreed supply quota is overfulfilled, the energy will be sold automatically at the PLD (spot market price). If the supply does not reach the quotas the missing energy has to be bought at the spot market; additionally penalties come into force.
Until now the free market segment was not in the focus. Projects were partly realized in combination with fuel-based generation or to provide additional capacity to wind farms that are underperforming.
Currently, PPAs in the free market are not considered a viable investment. The main reasons are uncertainty of the investment's rentability itself and the contract duration. Contract duration, in fact, is estimated to be around 2-3 years on average, which proves to be too short for investors.
Contrato de Compra e Venda de Energia Elétrica no Ambiente de Contratação Livre (CCEAL)
The mentioned PPAs set the price and volume at a certain time of day and a specific location.
Party 1: Buyer of energy
Party 2: Seller of energy
Commercializing agents are able to buy and sell energy. A free consumer is connected to the grid with a demand of at least 3MW. The special consumer is a free consumer who buys renewable energy and has a demand between 500kW and 3MW. As a matter of fact they are connected to the medium voltage grid. Both are able to buy energy in the free market.
The link to the template is available at: http://www.abraceel.com.br/zpublisher/secoes/contratoPadrao.asp
Duration of the contract is not set by law, but limited by the concession that is limited to 30 or 35 years on the one hand side and the deadlines for signing the following contract. Common contract are closed for 3-5 years. As the PLD (spot market price) went up, contract periods got longer in order to achieve a lower price for the buyer.
Contracts (PPAs) and agents (operator and traders) are registered at CCEE
There is no limitation to certain sources of energy. Even though there are regulations that are applied to renewables differently, that effects grid usage and deadlines to renegotiation of the contract.
For the price calculation, besides the generating cost, also TUST (transmission costs) and TUSD (distribution costs) need to be considered. These can be requested at ANEEL. Also fees and penalties applied in case energy cannot be provided according the PPA have to be taken into account.
According to the numbers published by Aneel on September 30, 2014, most pv power plants received a tariff for grid usage of: 4-6 R$/KW per month for pv plants connecting to the hight tension grid, and 1,5-3,5R$/kW per months for projects connected to the 88kV- or 138kV grid. Values for projects that operates in the free market are comparable.
Prices are negotiated without limitation. The prices are influenced by the PLD, the price level of recent energy auctions and the situation of the water level of the hydro power plants. If the government decides to run back-up generators, prices automatically are higher (red flag) and the PLD therefore goes up. This also has an influence on the PPA-prices negotiated in the free market.
Portaria INMETRO / MDIC Nº 04/2011: defines requirements and procedures for mandatory Inmetro labeling of PV modules, inverters, charge controllers and batteries.
Portaria INMETRO / MDIC Nº 357/2014: defines the requirements and procedures for mandatory Inmetro labeling of PV inverters with power rating of up to 10 kWp. Technically not applicable for large-scale PV power plants, due to the low power rating limit. 17 test items are foreseen for the inverter testing. Laboratories outside Brazil can be acredited by Inmetro
Portaria INMETRO / MDIC Nº 271/2015: Further laboratories are qualified to execute testing for certification as outlined by Portaria INMETRO / MDIC N° 357/2014. Several laboratories are mentioned, that will be allowed to execute tests for at least 18 months in order to accelerate the certification of equipment. Certification and testing costs depend on laboratory.
Certifications / Labels
Mandatory PV module Inmetro labeling, as required by Ordinance Nº 04/2011, described above.
Currently, there are no specific regulations for PV professionals in force.
Currently, there are no specific certifications for PV professionals in force.