Last month, Brazil's electricity regulator ANEEL announced long-awaited regulations regarding the deployment of smart meters throughout the country. The new regulations were not the market catalyst – in the form of a binding mandate - many were anticipating, but nonetheless still provide for a significant smart grid market to materialize in the country over the next decade.
Northeast Group, LLC has released a second volume of its earlier study Brazil Smart Grid: Market Forecast (2012-2022) that analyzes the market impacts of the new regulations announced in August 2012. The research firm found that Brazil is now expected to cumulatively spend $27.7 billion on total smart grid investments by 2022, as compared to the original forecast of $36.6 billion. These smart grid investments cover the transmission, distribution, metering and home energy management segments of the market. The largest reduction in the total forecast was found in the smart metering, or AMI, segment of the market. Distribution and transmission network investment forecasts remain largely unchanged.
"The August regulations were not the binding mandate that many had expected ANEEL to announce, calling for the replacement of all 63 million meters in Brazil," said Northeast Group. "As a result, we have revised downward our smart meter forecast for the country. At the same time, the regulation provides clarity for utilities and vendors and will help ensure that investment in this multi-billion dollar market will increase in the next few years. A recent wave of merger and acquisition activity in the Brazilian smart grid market shows that firms still see big opportunities in the country."
The recently announced regulations require all new meter installations to be smart meters by early 2014, but do not require the replacement of existing legacy meters. Instead, customers may "opt in" by requesting one of two types of smart meters: a free meter that enables time-of-use (TOU) pricing, or a more advanced smart meter (AMI) with additional functionality. Customers would need to cover the cost themselves of the more advanced smart meter. The additional functionality will include – among other things - net metering to boost distributed or micro generation in the country.
"Combined with a recent micro generation law, it is clear that Brazil is eagerly pursuing increased use of distributed generation," continued Northeast Group. "Brazilian residents now have access to the smart grid infrastructure and regulatory incentives they need to implement residential-level solar panels and other forms of distributed generation. Given Brazil's high transmission costs and high solar resource potential, this is a top priority."
In addition to updating its forecast, Brazil Smart Grid: Market Forecast (2012-2022) Volume II includes detailed analysis of the new regulations passed within the past six months, as well as information on recent smart meter deployments and new partnerships between Brazilian and international smart grid vendors. In the past several months, international vendors such as Elster, Itron, Sensus, Siemens, Silver Spring Networks, Trilliant and others have been active in either partnerships or merger and acquisition activity with Brazilian vendors, or have announced recent wins with utilities. The market has seen significant activity, which is a sign that large deployments are imminent.
Northeast Group has not altered its forecasts for distribution and transmission level investments, such as distribution automation and wide area measurement technologies in Brazil. These are expected to make up a significant portion of the total smart grid market in the country. Distribution automation technologies in particular will be critical in improving the reliability of Brazil's grid in the run-up to the 2014 World Cup and 2016 Summer Olympics.
Northeast Group expects many Brazilian utilities to continue to deploy smart meters to help combat non-technical losses, which are well above the levels seen in other parts of the world. The research firm added that, "even without a binding mandate, all Brazilian utilities will deploy AMI in some form, especially since five of the largest utility groups have non-technical losses above 14%. These utilities have found that AMI deployments can bring immediate savings by reducing theft; this alone justifies the business case. Several Brazilian utilities are even already experimenting with full-scale 'smart city' concepts that leverage a number of smart grid applications, such as distributed renewable generation and sophisticated home area networks."