SHPs

Small hydroelectric plants (SHPs)

SHPs are hydroelectric power plants with capacity from 1 MW to 30 MW, or small hydropower plants (SHPs). SHP technology is already quite mature and well known in the sector, which has led to lower costs for development and more efficient equipment becoming available over the years.

These plants have seen both a decline in their costs of installation as well as the use of more efficient equipment. The attractiveness of these plants rests principally on the lower environmental impact, reduced investment, shorter maturation and incentives offered under the current regulations. In this context, one of the characteristics of the SHP is the waiving of the concession bidding process with the potential concessionaire requiring ANEEL authorization only.

Despite being smaller, SHPs offer a competitive price in relation to traditional hydro plants in view of the following incentives: (i) the possibility of using the presumed profit tax regime; (ii) greater ease in obtaining the environmental license, (iii) exemption from payment into the Fundo de Uso de Bem Público (UBP), (iv) exemption from ANEEL’s compulsory R&D charge; (v) shorter term for implementation and maintenance of the investment and (vi) exemption from payment of financial compensation for use of water resources; (vii) possibility of immediate sale of electric power to consumers with a load factor equal or higher than 500 kW; (viii) and the possibility of substituting the CCC (Fuel Consumption Account) for operations involving the stand-alone system. Currently there are 357 SHPs in operation (authorization for generating 2,973MW granted), 74 under construction (authorization for generating 1,001MW granted) and 145 authorized projects (2,068MW) although still not under construction.

Additionally, the sale of energy generated by the SHPs in the free unregulated market enjoys benefits under the regulations for incentivized contracted sales. These provide for reduced distribution/transmission tariffs for the generators and the respective consumers of this energy. Under Law 9,427/1996 renewable energy sources (SHP’s, biomass, eolic and solar) command a discount of at least 50% in the tariffs for the use of the associated transmission and distribution systems. The right to this discount is also extended to consumers of this clean energy – so-called “renewable energy”.

The development of this market presents certain advantages such as (i) the possibility of combining production from these generators with production from other generators in order to offset periods of low output; (ii) the prospect of using trading companies to sell renewable energy without the purchaser losing the benefit of the discount to which he is entitled. This implies the opportunity to sell significant amounts of energy by ensuring access to a segment of the market which is currently captive with no possibility of tapping the free contracting environment unless energy can be acquired from generators enjoying incentives.

From the socio-environmental point of view, SHPs allow the energy generated to be distributed locally thereby increasing the supply of electricity in regions in which the plants are installed. This contrasts with the heavy duty hydro and thermal plants where this aspect of distribution is absent. The larger hydroelectric schemes are mostly concentrated in isolated regions, thus allowing the smaller enterprises to make a significant contribution to the distribution systems particularly in view of their intrinsically lower costs of transmission.

Currently, we have a 1.41% (41.8 MW) share in the installed SHP market (2,973 MW), the only market where we are currently active as a result of our three SHPs in operation.