Government will give bonuses to large customers that reduce energy consumption

BRASILIA — The Ministry of Mines and Energy published on Monday an ordinance with rules for large energy customers to reduce electricity consumption. The measure is part of the actions the government has taken against the worst water crisis in 91 years, which threatens the country’s energy supply.

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With the measure, large consumers will be able to earn a “bonus” to reduce the demand for energy. The focus of the MME is the peak hours, between 12:00 and 18:00 on weekdays. The government is also preparing a measure to encourage the reduction of demand from residential consumers, who may have a reduction in electricity bills according to consumption.

The ordinance published on Monday is aimed only at so-called free consumers, those who buy energy directly from the generator, without going through the distributor. This mainly covers industry, malls and large businesses.

According to the rules established by the MME, the consumer can make an “offer” to reduce consumption. The consumer may propose the hourly duration, from 4 to 7 hours, and with a minimum batch of 5 megawatts (MW) for each hour of the offer’s duration.

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The volume was well below what the government initially expected, 30 MW, and close to what had been defended by the Federation of Industries of the State of Rio de Janeiro (Firjan), which had suggested 1 MW. With the change, small industries will also be able to participate in the offer.

Offers must follow the standard of R$/MWh, in addition to the indication of the day of the week. A company might propose, for example, to cut 10 MW at a cost of R$1,000 per MWh. It will be up to the National System Operator (ONS) to define in advance which times will be allowed both for the reduction and, later, for the compensation of this reduction.

For the system, this is advantageous because the cost of reducing consumption can be lower than that of thermoelectric generation. An oil-powered thermoelectric plant, for example, costs more than R$1,000 per MWh. There will be a competition between generation offers and demand reduction offers.

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In addition, the operator is able to reduce consumption during peak hours, which reduces the pressure on the system and the risk of blackout.

In a statement, the MME said that the guidelines allow the industrial sector to participate and contribute “to ensuring the security of electricity supply, at a time when water scarcity poses great challenges to meet the demand for electricity in the country ”.

“The objective of the proposal is to make viable, from the perspective of demand, an alternative that contributes to increased reliability, safety and continuity of electro-energy service to consumers in the country, at lower costs”, says the note.

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To guarantee the system’s security, the government has taken measures such as maintaining reduced flows in important hydroelectric plants in the Southeast and Midwest, which concentrate the crisis. The level of the reservoirs in this region is below 25%. The reduction in flow saves water in the reservoirs, but harms other sectors, such as navigation.

It is also driving a record volume of power generation by thermoelectric plants.

The ONS will also take a measure to increase the transmission of energy from the Northeast to other regions of the country. The reservoirs in the Northeast are fuller, in addition to the region generating energy from large-scale wind power plants. On the other hand, there are limits to transmit this energy to the Southeast and Midwest. Government technicians have been working to expand the transmission capacity between the systems.