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Series C-4: Competitive dynamics (2)

China: leads in UHV (ultra-high-voltage) transmission projects

 

China built its first UHV transmission line in 2007, aiming to ease energy pressure on the country’s commercial center Shanghai and Xiangjiaba, a remote city in southwestern China along the Yangtze River[1]. China has the world’s most UHV direct current lines, more than ten lines are under construction or already in use. UHV technology can transmit electricity over long distances with relatively low loss of power. And China is now exporting this technology. When it comes to transmitting electricity, Brazil has a lot in common with China. Both countries have a vast territory, with energy consumption areas located far away from hydropower resources[2].

 

In February 2014, a consortium made of 51% shares owned by SGCC and 49% shares owned by Eletrobras won the bid of Brazil’s Belo Monte Hydropower UHV Transmission Project (Phase I, total length 2,084 km, concession period 30 years)[3], [4].. In July 2015, SGCC independently won the bid for 2nd phase of Brazil’s Belo Monte Hydropower UHV Transmission Project (total length 2,518 km, concession period 30 years), outrunning Eletrobras and Spanish firm Abengoa [5].

 

The First Phase of Belo Monte Hydropower ±800kV UHV DC Transmission Project (Belo Monte I), jointly invested and constructed by Electrobras and State Grid, was put in operation in 2017 (2,076 km delivered with a capacity of 4GW)[6]. The second phase of the Belo Monte UHV power project in Brazil, spanning 2,543 kilometers, is likely to start commercial operations by the third quarter of this year, according to SGCC, the operator of the project[7],[8].

 

Besides SGCC, Shanghai Electric Group, China Three Gorges Corporation, China Communications Construction Company (CCCC) and Shanghai Pengxin Group Company are also expanding their presence in the country. Among the companies planning to invest in Brazil are China Southern Power Grid, China Huadian Group Corporation, China Huaneng Group Corporation, State Power Investment Corporation (SPIC) and China Guodian Corporation19.

 

Shanghai Electric Power Transmission and Distribution Engineering (SPTDE), a subsidiary of Shanghai Electric, in June 2017 signed a preliminary agreement with Eletrosul Centrais Elétricas S.A. (Eletrosul), a subsidiary of Eletrobras, to transfer control of transmission system development for the Rio Grande do Sul project. Brazil’s energy regulator Agencia Nacional de Energia Eletrica (ANEEL) awarded the project to Eletrosul during an auction organised in November 2014. The total investment was budgeted at BRL3.27 billion to enable the construction of about 1,900 km of transmission lines and seven substations, as well as the expansion of 16 existing substations. As per Eletrobras, the next stage of the negotiations will establish the detailed conditions of the business, through a binding agreement, including issues related to the implementation and operation schedule. Shanghai Electric will establish an SPE to construct, operate and maintain future projects. Eletrosul is likely to hold up to a 25 per cent interest in the SPE. This agreement with Shanghai Electric is the result of the public call launched by Eletrosul in 2015 for the selection of companies interested in establishing a partnership for the implementation of the auctioned project19.

 

Other foreign companies

 

In December 2017, France’s Engie SA, India’s Sterlite Technologies Ltd and Neoenergia SA, majority-owned by Spain’s Iberdrola SA, were among companies that won the right to build transmission lines. The event drew aggressive bidding, averaging 40% below ceiling prices set by regulators. The auction will spur 8.75 billion reais ($2.6 billion) in investment , in line with government expectations[9].

 

In December 2018, Indian power transmission developer Sterlite Power has won a lot in Brazil’s recent auction for transmission projects that will facilitate the development of Rio Grande do Sul state’s wind potential. Lot 13 represents an investment of about USD 0.6 bllion (EUR 527.4m) over three to five years. It involves the construction of six substations and 316 km (196.35 miles) of transmission lines[10]. The company’s investment in Brazilian transmission sector crosses USD 2bn[11].

 

Rio Madeira transmission link

 

Before the 2nd phase of Belo Monte transmission project, the Rio Madeira transmission link, with an overhead length of 2,385km, is the world’s longest power transmission line. The 600kV high-voltage direct current (HVDC) bipolar line was brought into commercial operation in November 2013 and is capable of transmitting 7.1GW of power[12].

 

The HVDC transmission line was constructed in 24 months by Interligação Elétrica do Madeira (IE Madeira), a consortium comprised of three major Brazilian energy providers. ABB supplied power equipment for three HVDC stations. Alstom supplied two HVDC bi-pole converter stations and four HVDC converter transformers for the project31. (Much of the early work on UHV systems was done by electrical engineering companies such as Siemens and ABB23)

[1] http://www.chinadaily.com.cn/business/2017-09/05/content_31573458.htm

[2] https://www.beltandroad.news/2019/03/17/bri-chinas-state-grid-builds-electricity-super-highway-in-brazil/

[3] http://www.sgcc.com.cn/html/sgcc_mobile_en/col2017113008/2018-07/19/20180719114734472929947_1.shtml

[4] https://www.reuters.com/article/us-china-electricity-grid-kemp/column-super-grid-china-masters-long-distance-power-transmission-idUSKBN0EU19B20140619

[5] http://www.stategrid.com.cn/html/sgid/col1230000133/2015-09/06/20150906143312478205153_1.html

[6] http://www.sgcc.com.cn/html/sgcc_mobile_en/col2017113008/2018-07/18/20180718164057688856936_1.shtml

[7] http://global.chinadaily.com.cn/a/201903/22/WS5c9437e1a3104842260b1eed.html

[8] http://www.xinhuanet.com/english/2019-04/05/c_137952512.htm

[9] https://www.bloomberg.com/news/articles/2017-12-15/after-year-with-none-brazil-holds-three-power-auctions-in-week

[10] https://renewablesnow.com/news/indias-sterlite-wins-wind-lot-in-brazil-transmission-auction-637641/

[11] https://www.sterlitepower.com/press-release/sterlite-power-wins-prestigious-transmission-project-brazil

[12] https://www.power-technology.com/features/featurethe-worlds-longest-power-transmission-lines-4167964/

Series C-3: Competitive dynamics (1)

Competitive dynamics

 

In terms of length, in 2017, State controlled Eletrobrás reached approximately 65,000 kilometers of electric power transmission lines with voltage higher than or equal to 230 kV, representing almost half of this type of lines in Brazil[1].

 

In a 2013 report, it is said that Private companies:~35 out of 45 companies in the transmission systems. o-existence between state-controlled and private companies. There are no limitations on the foreign ownership of electricity companies; however, every company must be incorporated under Brazilian law[2].

 

 

Note: Furnas, CHESF, Eletrosul are majorly  owned by Eletrobrás[3].

Note: CEMIG is controlled by The State of Minas Gerais[4].

 

Colombian firms

 

The second on the list of companies with largest transmission lines, CTEEP, is controlled by ISA, a Colombian state-owned company [5].

 

More recently, in March 2015, Empresa de Energía de Bogotá (EEB) entered the Brazilian market with the acquisition of a 51 per cent equity share each in four Brazilian power transmission companies. Under the deal, which cost EEB about USD170 billion, the company acquired Transenergía Renovável S.A., Transenergía São Paulo S.A., Goiás Transmissão S.A. and MGE Transmissão S.A. With this, the company acquired 1,094 km of power transmission network established at 500 kV, 345 kV, 230 kV and 138 kV, located in the states of Espírito Santo, Goias, Mato Grosso, Mato Grosso Do Sul, Minas Gerais and Sao Paulo. The remaining 49 per cent stake in the four Brazilian concessionaries is held by Furnas Central Electric SA (Furnas), a subsidiary of Eletrobras. In April 2015, EPM acquired a 22.14 per cent stake in Brazil-based local transmission utility Transmissora Aliança de Energía Eléctrica S.A. (TAESA) for BRL1.53 billion.[6]

 

The Colombian state-owned ISA Group is already an established player in Brazil’s transmission sector. In December 2016, ISA further strengthened its position by acquiring a 41.6 per cent equity stake in the transmission developer Transmissora Aliança De Energia Elétrica SA (TAESA), which currently holds 33 transmission concessions comprising 11,000 km of high voltage power lines in Brazil. In a BRL1.06 billion deal, ISA has acquired 26 per cent of TAESA’s ordinary shares and 14.9 per cent of its capital stock from Brazilian equity firms Fundo de Investimento em Participações Coliseu (FIP Coliseu) and Fundo de Investimento em Ações Taurus (FIP Taurus) 19.

 

Another acquisition deal that took place recently—in May 2017—in Brazil was for the concessionaire Interligação Elétrica Norte e Nordeste (IENNE). Under this, Companhia de Transmissão de Energia Elétrica Paulista (CTEEP)—a Brazil-based subsidiary of ISA—exercised its rights to acquire the entire equity interest of IENNE from Spain’s Isolux and local power company Construções e Participações S.A (Cymi Holding). Isolux holds a 50 per cent equity share and Cymi owns a 25 per cent equity share in IENNE. The deal cost CTEEP about BRL96.75 million, under which CTEEP purchased 164 million ordinary shares in IENNE from Isolux and 81.8 million ordinary shares from Rio de Janeiro-based Cymi Holding19.

[1] https://eletrobras.com/en/Paginas/Energy-Transmission.aspx

[2] https://publications.iadb.org/publications/english/document/Energy-Dossier-Brazil.pdf

[3] https://www.sec.gov/Archives/edgar/data/1439124/000119312512242237/d350457dex81.htm

[4] http://cemig.infoinvest.com.br/static/enu/estrutura_acionaria.asp?idioma=enu

[5] http://www.isacteep.com.br/en/isacteep/cteep-history

[6] https://www.globaltransmission.info/archive.php?id=30033

Series C-2: Overview of Brazil Electricity System (2)

Organization structure

 

History

 

Before the 1990s reforms, Brazil’s electricity can be characterized by 3 phases[1]:

  • private ownership with minimal regulatory control (until 1930);
  • private ownership with poor regulation (from the 1930s to the1940s);
  • state ownership with centralized control (from the 1950s to the first half of the 1990s)

 

In the early 1990s, the Brazilian electric sector was characterized by: (i) centralization of operation and planning; and (ii) vertically integration of transmission, distribution and generation of the sector[2].

 

Privatization: 1990s reforms

 

In 1995, a major transformation of the existing regulatory framework entered into effect to foster competition10:

  • Private participation in the electricity sector
  • Creation of a new market model in generation and commercialization. The figure of Independent Power Producer and the concept of Free Consumer, was created.

 

From 1996 – 1998, a project to restructure the sector defined the new conceptual and institutional framework to be implemented for the Brazilian Electric Sector10:

  • De-verticalization of the electric power companies.
  • Competition in the segments of generation and commercialization.
  • The State will keep under control distribution and transmission of electric power, considered to be natural monopolies.
  • Creation of a regulating agency, ANEEL (1996).
  • Creation of an operator for the national electric system, ONS (1998).
  • Creation of an operator for the commercial market, MAE (1998).

 

The energy crisis of 2001 – 2002[3]

 

Whilst the reforms of the late 1990s were a bold attempt to overhaul the failing system which preceded it, serious issues remained in the sector which the initial reforms failed to address. Growth in capacity continued to lag far behind growth in demand, and the country relied heavily on hydroelectric generation for 80 per cent of its electricity. Delays continued in the expansion of the sector due in part to the uncertainty in the definition of pass-through prices which complicated pricing mechanisms. After a few years in which average rainfall had been significantly lower than expected, reservoirs were depleted, and strict demand reduction programs had to be implemented by the Crisis Management Board, established and led by President Cardoso in June 2001. The Board had powers to implement emergency measures such as special tariffs, compulsory rationing and blackouts. Additionally, the government established a quota system based on historical and target consumption levels, and a corresponding bonus and penalty scheme whereby consumers were rewarded or penalized according to whether they fell within or exceeded their quota.

 

The government’s goal to reduce consumption by 20 per cent was achieved, and the quota system proved so effective that the government paid out over US$200 million in bonuses to residential, industrial and commercial consumers. Additionally, the government succeeded in avoiding blackouts and brownouts during the crisis. The response to the crisis was successful in reducing consumption and conserving resources. The biggest losers in the crisis were generators and distributors who inevitably experienced significantly reduced revenues.

 

The 2004 model

 

Following the energy crisis in 2001-2, and the election of the new administration led by Luiz Inàcio Lula de Silva in 2003, there was some speculation that the initial reforms of the late 1990s might be rolled back. As the reforms of the 1990s were so closely followed by the energy crisis, there was widespread criticism and skepticism of the new model, and some expectation that the sector would be fully regulated and effectively returned to government control. However, contrary to these expectations, the new administration continued to seek long-term private investment into the sector, and to introduce more competition into the market to drive efficiency that would protect the interests of captive consumers. The institutions established by the reforms of the 1990s were preserved and in many cases strengthened, and further reforms were implemented, including the introduction of energy auctions, to consolidate and improve the new model11.

 

In 2004, the Brazilian government implemented a new model for the electricity sector. One of the main components of the new electricity model was the creation of two energy trading markets, as showed in the figure: a Regulated Contracting Environment (RCE) where a pool of distributors buys power from generators in public auctions under set prices and a Free Contracting Environment (FCE) where free consumers and generators can freely negotiate their own bilateral contracts[4].

 

 

This hybrid approach to government involvement splits the sector into regulated and unregulated markets for different producers and consumers. This approach allows for both public and private investment in new generation and distribution projects. Under the plan, Eletrobrás was formally excluded from privatization efforts. In August 2017, the Brazilian government announced its intention to divest its controlling stake in Eletrobrás. The sale will not include Eletronuclear (a nuclear power company owned by Eletrobrás) or the Itaipu hydroelectric dam6.

 

According to a Reuters report in Feburary 2019, Eletrobrás manages power plants that generate about a third of Brazil’s electricity needs. It also controls power transmission lines that account for half the electricity transported throughout the country. The privatization likely will happen through a capitalization plan in which new shares would be offered to investors in a process that would dilute the largest shareholder, the Brazilian government, to such a level that it will no longer hold a controlling stake[5].

 

Summary of major changes10

[1] https://www.aneel.gov.br/documents/656835/14876412/Artigo_Ludimila_Silva.pdf/a4758c18-441a-4647-967f-9a29d912c425

[2] https://www.eba-net.org/assets/1/6/Energy_Bar_Ass_Brazilian_Power_Sector_Chang.pdf

[3] http://www.mondaq.com/brazil/x/93780/Oil+Gas+Electricity/Brazils+Electricity+Market+A+Successful+Journey+And+An+Interesting+Destination

[4] https://pdfs.semanticscholar.org/5473/9da77745a629b6bf7d78bc122827d83ea097.pdf

[5] https://www.reuters.com/article/eletrobras-capitalization/update-1-brazils-eletrobras-privatization-plan-could-be-ready-by-june-minister-idUSL1N20M14C

Series C-1: Overview of Brazil Electricity System (1)

Overview of Brazil Electricity System

 

The electricity sector in Brazil is the largest in South America and the third–largest in the Americas behind the United States and Canada[1].

 

Sources

 

Brazil is the second-largest producer of hydroelectric power in the world, after only China, and hydropower accounted for more than 70% of the country’s electricity generation in 2018[2].

 

 

Located on the border between Brazil and Paraguay, Itaipu Hydroelectric Dam is the largest operational hydroelectric energy producer in the world, with an installed generation capacity of 14GW, accounted for ~25% of Brazil’s hydropower generation[3].

 

Brazil’s National Interconnected System consists of four subsystems: South, Southeast / Midwest, Northeast and most of the North region[4]. Less than 1% of the country’s electricity consumption is located outside the SIN, in small isolated systems located mainly northern region[5].

 

Transmission system

 

Most of Brazil’s hydroelectric plants are located in the country’s Amazon River basin in the north, but Brazil’s demand for electricity is mainly along the eastern coast, particularly in the southern portion. Reliance on hydropower for most of the country’s electricity generation, combined with the distant and disparate locations of its demand centers, has presented electricity reliability challenges2.

 

Because most of Brazil’s generation capacity is located far from urban demand centers, significant investment in transmission and distribution systems is required. The Madeira transmission line, completed in 2014, is the longest (until the completion of 2nd phase of Belo Monte transmission) high–voltage, direct–current line in the world and spans 1,476 miles to link hydropower plants in the Amazon Basin to major load centers in the southeast. Increased emphasis on distributed generation will help reduce the need for additional transmission infrastructure in the future[6].

 

As of October 2017, Brazil’s transmission network comprised 136,835 km of lines and 343,816 MVA of transformer capacity at the 230 kV to 750 kV levels. During 2006-16, the line length increased at a CAGR of 4 per cent and transformer capacity at a CAGR of 6 per cent. In December 2017, State Grid Brazil Holding (SGBH), the Brazil-based concern of China’s State Grid Corporation of China (SGCC), put the country’s largest ±800 kV high voltage direct current (HVDC) line into operation. This was the first transmission line associated with the 11.2 GW Belo Monte power complex[7].

 

Usually, HVDC lines of 800 kV or more are commonly referred to as UHVDC (ultra-HVDC)[8]; DC = direct current.

 

In the United States, most long-distance transmission lines operate at 230kV, 345kV, 400kV or sometimes 500kV, where kV stands for thousand volts. In Britain, most of the National Grid operates at 275kV or 400kV23.

[1] https://www.eia.gov/beta/international/analysis.php?iso=BRA

[2] https://www.eia.gov/todayinenergy/detail.php?id=39692

[3] https://www.itaipu.gov.br/en/press-office/news/itaipu-records-fourth-higher-annual-production-2018

[4] http://www.ons.org.br/paginas/sobre-o-sin/o-que-e-o-sin

[5] http://www.ons.org.br/paginas/sobre-o-sin/sistemas-isolados

[6] https://www.eia.gov/beta/international/analysis_includes/countries_long/Brazil/brazil_background.pdf

[7] https://www.globaltransmission.info/archive.php?id=32000

[8] https://www.navigantresearch.com/news-and-views/hvdc-the-future-of-long-distance-and-renewables-transmission

Series B-5: How the schools are funded / organized

Education is state-run, with little involvement of private providers in the school sector, and increasingly decentralized. County-level governments have primary responsibility of the governing and delivery of school education11.

 

State budgetary allocation is the main source of funds for education in China. China’s central treasury and local treasuries contribute to education funding11.

 

The education system in China is funded by a number of sources. Government appropriations are the major source of funding. Government appropriations are comprised of budgetary and non-budgetary funds, of which budgetary funds are the main component. Budgetary funds, or public expenditure on education, include funds from both the education sector and other sectors. Non-budgetary funds include taxes for education levied by local government, educational funds from enterprises and other funds that belong to government appropriations. Additional financial sources for education include tuition fees, donations and fundraising. Other than government appropriation for education, private organizations and individuals are the principal sources of funding for schools run by these organizations or individuals11.

 

 

Among government supporting, central government’s contribution is estimated at around 16% between 2015-2017[1],[2].

 

2018 total national contributions according to MOE:[3]

 

  ¥, in billions
Pre-school Education[4] 367.2
Compulsory Education[5] 2,085.8
Regular Senior Secondary Schools[6] 472.1
Secondary Vocational Schools[7] 246.3

[1] http://www.21jingji.com/2019/6-5/wMMDEzNzlfMTQ4OTYwMw.html

[2] http://www.cnki.com.cn/Article/CJFDTotal-DYLC201903006.htm

[3] http://www.moe.gov.cn/jyb_xwfb/gzdt_gzdt/s5987/201904/t20190430_380155.html

[4] http://www.moe.gov.cn/s78/A03/moe_560/jytjsj_2017/qg/201808/t20180808_344728.html

[5] http://www.moe.gov.cn/s78/A03/moe_560/jytjsj_2017/qg/201808/t20180808_344722.html

[6] http://www.moe.gov.cn/s78/A03/moe_560/jytjsj_2017/qg/201808/t20180808_344797.html

[7] http://www.moe.gov.cn/s78/A03/moe_560/jytjsj_2017/qg/201808/t20180808_344778.html

Series B-4: Curriculum requirement

The following discussions are according to The Basic Education Curriculum Reform Outline (Ministry of Education, 2001) [1], and the 2016 OECD report mentioned previously.

 

  • Primary education

 

The primary school curriculum should consist of courses that encourage all-around development of individual learners. This document suggests that schools offer courses like morality and life, Chinese, mathematics, physical education and art to primary students in lower grades. Morality and society, Chinese, mathematics, science, foreign language, comprehensive practical activity, physical education and art should be offered to primary students in higher grades.

 

  • Junior secondary education

 

The curriculum for junior secondary students mainly includes morality, Chinese, mathematics, foreign language, science (or physics, chemistry and biology), history and society (or history and geography), physical education and health, art and comprehensive practical activity. Schools are encouraged to choose comprehensive courses, and to offer optional courses as well. The government emphasizes that Chinese, art and painting courses in compulsory education should attach more importance to Chinese character (script) writing.

 

  • Senior secondary education

 

When it comes to senior secondary school, the government suggests that schools offer various elective subjects in addition to the compulsory subjects. The requirements in elective subjects should be different from the requirements in compulsory subjects. Throughout primary and secondary education, the comprehensive practical subject is emphasized as a compulsory subject. The subject covers information technology, research study, community service, social survey, and labor and technology for primary and junior secondary school students. It covers research study, community service and social practice for senior secondary students. The comprehensive practical subject aims at improving students’ creativity and research capability, as well as helping students develop a sense of social responsibility through practical experiences.

[1] http://old.moe.gov.cn//publicfiles/business/htmlfiles/moe/moe_309/200412/4672.html

Series B-3: Enrollment

The following discussions come from a 2016 OECD report “EDUCATION IN CHINA: A Snapshot”[1].

 

In China, students usually enroll in pre-school at age two or three, and leave pre-school at the age of six. Pre-school education is not compulsory, and many pre-schools are privately owned. However, the government has taken on a more proactive role in promoting access following a national commitment to progressively universalize one to three years of pre-school by 2020.

 

In China, students must complete nine years of compulsory education. Most students spend six years in primary school, though a few school systems use a five-year cycle for primary school. Primary education starts at age six for most children. This is followed by three to four years of junior secondary education.

 

After finishing compulsory education, students can choose whether to continue with senior secondary education. Senior secondary education takes three years. There are five types of senior secondary schools in China: general senior secondary, technical or specialized secondary, adult secondary, vocational secondary and crafts schools. The last four are referred to as secondary vocational schools.

 

Although senior secondary education is not part of compulsory education in China, in 2014, 95% of junior secondary graduates continued their study in senior secondary schools (National Bureau of Statistics of China, 2015). This figure is notable because in 2005 only around 40% of junior secondary graduates attended senior secondary schools (National Bureau of Statistics of China, 2005).

[1] http://www.oecd.org/china/Education-in-China-a-snapshot.pdf

Series B-2: Number of schools in Chinese K-12 system

According to China’s Ministry of Education (MOE) statistics for 2017,

 

  Number of schools
Pre-school Education[1] 254,950
Primary Schools[2] 167,009
Junior Secondary Schools[3] 51,894
Regular Senior Secondary Schools[4] 13,555
Secondary Vocational Schools[5] 8,181

 

[1] http://www.moe.gov.cn/s78/A03/moe_560/jytjsj_2017/qg/201808/t20180808_344728.html

[2] http://www.moe.gov.cn/s78/A03/moe_560/jytjsj_2017/qg/201808/t20180808_344722.html

[3] http://www.moe.gov.cn/s78/A03/moe_560/jytjsj_2017/qg/201808/t20180808_344763.html

[4] http://www.moe.gov.cn/s78/A03/moe_560/jytjsj_2017/qg/201808/t20180808_344797.html

[5] http://www.moe.gov.cn/s78/A03/moe_560/jytjsj_2017/qg/201808/t20180808_344778.html