Energy Efficiency Program (PEE) in Brazil

Overview

This article informs about the Brazilian Energy Efficiency Program (port. Programa de Eficiência Energética - PEE) and the recent improvement of PEE´s regulatory framework. The Brazilian electricity regulation authority ANEEL (port. Agência Nacional de Energia Elétrica - ANEEL), competent supervising entity of the PEE, was supported by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH. The new regulation entered into force on 2^nd July 2013.  

Introduction

Energy efficiency policies still play a marginal role in Brazil. Vast energy saving potentials exists in many sectors, especially in the industry and commerce. Along with the residential sector, these are the most energy intensive sectors in Brazil. Since the beginning of the century, however, the country is gradually building a regulatory framework to develop such policies.

In 2000, the Brazilian government legally implemented the PEE under regulation and supervision of the ANEEL. PEE demands the 100 electricity providers in the regulated energy market to spend 0.5 percent of their yearly net operating income in energy efficiency projects, which represents a total budget of approx. 120 Mio. Euro per year. This makes PEE the largest financial source for energy efficiency projects in Brazil. Between 2008 and 2012, most projects were implemented in the low income household sector (62%). However, analysis conducted by ANEEL showed trends of declining returns of PEE resources, and that adjustments in the regulation were necessary.

More information about PEE can be found in the following power point presentation:

Numbers and Facts Energy Efficieny Program - Procedimentos do Programa de Eficiência Energética Regulado pela ANEEL - PROPEE (2012)

Enhanced regulatory framework

New regulatory framework of PEE - Procedimentos do Programa de Eficiência Energética - PROPEE (2013)

PROPEE, in force since 2^nd July 2013, describes the enhanced regulatory framework of PEE. It establishes eligibility criteria demanded by ANEEL and guidelines for the execution of energy efficiency projects in the context of the PEE. Projects selection procedures were also altered – under current rules, projects are proposed by the market, and those with higher cost benefit ratios are prioritized. The improved regulation is an output of the cooperation between ANEEL and GIZ, which provided technical advice during the whole improvement process.

Infosheet: New regulation for the Energy Efficiency Program -  Neue Regulierung für Energieeffizienzprogramm (2014)

With the aim of improving the potential energy savings of PEE´s enormous financial potential and quality of PEE projects in all sectors, ANEEL, supported by GIZ, worked in the reformulation of its regulatory framework. The new regulation – “Procedures of the PEE” (port. Procedimentos do Programa de Eficiência Energética - PROPEE) – transformed the PEE from a donation to an incentive program, with a focus on leveraging resources from third parties.

Main modifications of the PEE regulation - Principais alterações na regulamentação do PEE (2013)

This study summarizes the most important changes done at the PEE´s regulatory framework, such as the introduction of “Call for projects”, the possibility of co-financing PEE projects with private funds, incentives to performance contracts, inclusion of incentivized energy sources (which also promotes → Net Metering in Brazil), standardization of M&V procedures, among others.

PEE improvement process

Within the work process on the new PEE regulation from 2011 to 2012, ANEEL and GIZ identified a set of aspects to be enhanced in the new regulatory framework PROPEE:

• Mandatory realization of “Calls for Projects”, with selection criteria given by ANEEL
• Adoption of measures to change decision patterns of consumers from low income households in favor of energy efficient appliances
• Financial incentives for projects in the private sector using performance contracts
• Implementation of electricity generation projects with renewable energy sources following the Net Metering regulation
• Improvement of monitoring and verification (M&V) procedures of energy saving projects

The partners searched for stakeholders’ participation during the whole improvement process. Thereby, the following studies were carried out:

Evaluation of the PEE and proposals for its regulatory improvement - Avaliação do Programa de Eficiência Energética das Distribuidoras de Energia Elétrica – PEE – e Propostas para seu Aprimoramento Regulatório (2011)

This document presents the results of the thorough PEE evaluation process, identifies critical aspects of the regulation and presents improvement proposals, with a focus on harmonizing it with other federal energy policies and standardizing M&V procedures. Special attention is paid to recommendations on incentives for energy efficiency investments in the industrial and commercial sectors, as well as on the use of decentralized renewable electricity generation projects as a complementary energy efficiency measure.  

Strategic proposals for the improvement of the PEE manual - PROPEE: Propostas Estratégicas e Operacionais para o Aprimoramento do Manual do PEE (2012)

The results of the study above and recommendations made by the Brazilian Association of Electricity Providers (port. Associação Brasileira de Distribuidores de Energia Elétrica - ABRADEE) during PEE´s evaluation in 2011 generated relevant inputs about strategic and operational aspects to be improved. This summary presents their proposals in four major thematic fields (strategy, evaluation, performance contracts and regulation).     

Proposals to improve the regulation for monitoring and evaluation of PEE - Monitoramento e Avaliação do PEE: Propostas para o Aprimoramento Regulatório do PEE (2012)

Following PEE´s M&V directives from 2008 for assessing energy saving results of PEE projects, this study presents best practices from UK and United States in M&V the performance of energy efficiency programs. It evaluates the M&V methodology used for the PEE as well as presents an impact evaluation methodology proposal for PEE as an energy efficiency policy.

Proposals for the regulatory improvement of energy efficiency projects in low income households - Eficiência Energética em Comunidades de Baixa Renda: Propostas para o Aprimoramento Regulatório do PEE (2012)

Law 12.212/2010 demands at least 60% of PEE’s total investment to be applied in the low income residential sector (between 2008 and 2012, 70% of total spent has been applied there). However, concerns about the cost effectiveness of these projects due to declining cost-benefit ratios along time, the sustainability of donation measures as well as the durability of energy savings led to the inclusion of this issue in PEE´s improvement process. This study analyzes these problems thoroughly and identifies improvement potentials.

Performance Contracts: Analysis of its use and proposals to improve the regulation of PEE - Contratos de Desempenho: Análise de seu uso e propostas para o aprimoramento regulatório do PEE (2012)

PEE projects in the private sector are expected to be profit-oriented, implemented with performance contracts (i.e. PEE loans must be paid back to electricity providers with the efficiency gains). To promote these projects and further leverage private investment, the improved regulation of PEE aimed at simplifying regulations and providing financial incentives to make projects economically attractive. This study presents a preliminary analysis of the improved performance contracts regulation, with a focus on PEE´s potential to strengthen the Brazilian ESCO (Energy Service Company) market.

Proposals to include projects with renewable energy sources into the PEE - Desenvolvimento de Propostas para Inclusão de Fontes Incentivadas de Energia Elétrica no PEE da ANEEL (2012)

This study analyses, evaluates and proposes rules and procedures to authorize PEE funding for projects that combine small scale, distributed renewable power plants and at least one conventional energy efficiency measure to be considered for the new PEE regulation. Distributed, renewable electricity generation projects (so called “incentivized energy sources") are a cost-effective way to increase energy efficiency in the framework of PEE. These projects allow end consumers to not only achieve higher levels of energy efficiency, but also become small electricity generation plants, able to export electricity surpluses into the grid according to the Net Metering regulation (→ Net Metering in Brazil).