IEEE Power & Energy Magazine - July/August 2016 - 56

july/august 2016

Average Discounts (%)

10
20
11
20
12
20
13
20
14
20
15

09

20

08

20

07

20

20

Annual Revenue Requirements
(Nominal US$ Million)

figure 1. The results of Brazilian transmission auctions
between 2007 and 2015.

and social-environmental licensing. Concessionaires are
experiencing increasing difficulties with the acquisition of
land-use rights, and, while the government has oversight and
can interfere with the declaration of land as being of public
utility, in practice negotiation with land owners has recently
become more complex and costly. Social-environmental
licensing requires the interaction of transmitters with several poorly coordinated licensing bodies, from the national
sphere to municipalities. Investors complain about inadequately specified requirements for licensing, lack of coordination and opaqueness of the process due to the multitude of
licensing bodies, and sluggishness due to poor incentives for
public employees.
Figure 3 indicates the accumulated number of concessions concluded on time and with delays in the 2002-2012

40
30
20
10

4
20
15

3

20
1

2

20
1

1

20
1

20
1

0
20
1

9

20
0

8

0

20
0

Among the studied countries, Brazil auctioned the most
transmission facilities in the last decade. Figure 1 shows the
monetary values of the total ARRs awarded as a result of the
auctions held since 2007, which amount to almost US$3 billion. The dots indicate the average discounts over the ARR
cap set by the regulator as a reservation value in the auction,
i.e., the average percentage by which the bids of auction participants were lower than the regulated bid cap, indicating
how competitive auctions have been.
Increases, since 2012, in the nominal ARRs may suggest
that the model has been working well in recent times, but the
data should be carefully appreciated before such a conclusion
is reached. Auctions results of 2014 and 2015 were heavily
influenced by two sets of high-voltage (HV) dc links spanning through 2,500 km to evacuate the power from the Belo
Monte hydro plant, located in the north of Brazil, to southwestern load centers. The ARRs associated with these assets
account for a big parcel of the total values each year, and bids
from Chinese companies seeking to enter the HVdc business
in Brazil have ensured competition for these facilities.
Moreover, the total volume of transmission facilities
offered in auctions by the government grew steadily in
recent years and, while the total awarded ARRs increased in
absolute values, the number of auctioned items (concessions)
for which there were no bids increased vertiginously since
2012, as shown in Figure 2.
The growing number of concessions with no valid bids
hints at a decreased interest in transmission auctions. While
several factors contributed to this, including deteriorating
macroeconomic conditions in Brazil, this article focuses on
the effects of implementation problems.
The most notable difficulties with transmission implementation in Brazil relate to acquisition of rights-of-way

Annual Revenue
Requirements (Nominal US$ Million)
Average Discounts (%)

7

Successes of Model and Recent Difficulties
with Transmission Implementation

60
50
40
30
20
10
0

20
0

Brazil

700
600
500
400
300
200
100
0
Year in Which Public
Session of Auction Was Carried Out (-)

Number of Auction Items
(Concessions) per Occurence (-)

equity funds to participate in auctions. Even pension funds,
which are more risk averse, acquired shares of transmission
assets, helping to consolidate the perception of the transmission segment as one that is comparatively low risk.
After an agent acquires a concession via the auction, the
next step is implementation, starting with the acquisition of
rights-of-way and environmental licensing and culminating
with commissioning tests and commercial operations of the
facilities. This process encountered barriers since the model
began to be used in the early 2000s, but delays in the commercial operation dates had been more manageable until the
early 2010s; after that, transmission expansion implementation problems increased in severity and frequency.
The following sections visit the situation faced by each
country, addressing evidences of the historical successes of
the expansion framework, current implementation issues,
and recent solutions strategies.

Year in Which Public
Session of Auction Was Carried Out (-)
Relocated to Other Auction Before Public Session
No Valid Bids
Effectively Auctioned (Awarded to Concessionaire)

figure 2. The number of concessions per occurrence for
auctions between 2007 and 2015.
ieee power & energy magazine

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Table of Contents for the Digital Edition of IEEE Power & Energy Magazine - July/August 2016

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