Market participants report significant advancements after Brazilian electricity regulator Aneel approved temporary rules for a new demand response program, but say there is still room for improvement.

 

Participants asked for a new version of the program since Aneel's first version of a demand response mechanism ended earlier this year. Brazil took the first step toward establishing the original program — where free market customers could opt to lower their power demand in exchange for reduced surcharges — last year, when it faced its worst hydropower crisis in history.

 

Brazilian association of energy-intensive industries (Abrace) said the temporary rules brought a series of improvements but still lack some adjustments. The association's main complaint is that program participants have to cover the short-term market's deficit for consumers who do not pay their bills on time, said Victor Iocca, Abrace's director of electricity sector programs. This rule creates the risk that participants will be undercompensated for their demand cuts, depending on the size of the unpaid deficit.

 

Abrace will ask for a revision of the new demand response program's ordinance, so that consumers' reductions to power demand are directly reflected in their surcharge discounts, without being influenced by this deficit.

 

But the association is also complimentary of several changes in the new program. Consumers no longer must sign ancillary service contracts to participate, which allows those who are not in the power business to also offer reductions to their electricity demand. This makes it easier for big industries to take part in the program and increases the number of possible participants.

 

Aneel's new rules also allow participants to offer more products than in the original program. The day-ahead offers can now range from four to 17 hours, with a minimum decrease of 5MW. The previous rules only allowed consumers to offer one-, two-, three-, four- or seven-hour products. This brings some flexibility for grid operator ONS to choose which products the grid needs at any given time of year while also providing more liquidity to consumers.

 

The program aims to reduce dispatch of high-cost power plants at peak demand by allowing consumers to decrease or move their power demand to another time. In exchange, consumers receive a payment calculated as the difference between the spot power price (PLD) and their asked price. This payment is discounted from their surcharges, making power bills less expensive.

 

After last year's hydropower crisis, there was widespread consensus in the sector that a more permanent voluntary demand response program was needed to improve efficiency, according to Bernardo Sicsu, vice-president of electricity resellers' association Abraceel. Argusmedia