The narrative that the energy generated is clean and cheap, but the tariff ends up being expensive, has become common in Brazil. This statement has some truth to it and there are several reasons behind it.
In general, Brazil's rich and diverse electricity matrix allows the country to generate clean and cheap energy; however, this energy has a series of associated costs that end up making the final product (tariff) expensive. In other words, we generate a lot of cheap energy far from consumption.
Initially, we will establish that the energy tariff is basically composed of four large groups: Energy Product (TE – Energy Tariff, in the ACR and Energy Price in the ACL), Energy Service (Transmission FIO A – TUST and Distribution FIO B – TUSD), Taxes and sectoral Charges.
Therefore, while the energy itself (product) can be produced at relatively low costs, a variety of factors contribute to electricity tariffs being perceived as expensive by end consumers.
These factors include not only production and distribution costs, but also duties, taxes, infrastructure investments and subsidy policies.
Well, the dynamics of expansion of the Brazilian electricity sector are multifaceted and involve a combination of policies, demand for energy, generation sources, investments in infrastructure and environmental and technological issues.
Strategic planning and an integrated approach are essential to ensure sustainable and resilient growth of the electricity sector in Brazil.
Investments in transmission and distribution infrastructure.
The expansion of the electricity sector requires significant investments in infrastructure, including the construction of transmission lines, substations and distribution systems. These investments are generally carried out by public and private companies, with the of public and private financing. These costs are high and complex to implement.
Brazil is a country of continental dimensions, with a vast and diverse territorial area. This means that the electrical infrastructure needs to cover long distances to reach all regions of the country, which increases construction, maintenance and operation costs.
And since energy needs to be transported from the point of generation to urban centers and end consumers, which involves significant transmission and distribution costs, due to Brazil's territorial extension and the uneven distribution of the population, it can be expensive and complex to bring energy to remote areas.
These are logistical and geographical challenges that are also combined with environmental and social challenges, such as the environmental impact of construction and compliance with legal and regulatory requirements related to environmental conservation and the protection of human rights.
Furthermore, infrastructure projects require long-term financing, which can increase costs due to interest and other capital charges. Furthermore, the capital costs of building new power plants or expanding the power grid can be high, especially in a country as large as Brazil.
Dependence on Hydroelectric Power Plants
Brazil depends heavily on hydroelectric power, with the availability of water in reservoirs being essential to generate electricity.
However, this availability is susceptible to climate variations, such as droughts, affecting supply and increasing costs when there is a need to activate more expensive thermoelectric plants. This is called hydrological risk and it puts strong pressure on energy prices in Brazil when it occurs through tariff flags.
Furthermore, although hydropower is considered a relatively low-cost energy source in of operating costs, hydropower plants still require regular maintenance and infrastructure investments to ensure proper operation. These costs can increase if environmental conditions are adverse or if the plants age.
High Tax Burden
Taxes and charges represent a considerable portion of the final cost of energy for consumers and companies, and can be pointed out as one of the reasons why energy is expensive in Brazil.
The electricity production, transmission and distribution chain in Brazil is subject to a series of sectoral taxes and charges. These include ICMS (Tax on the Circulation of Goods and Services), PIS (Social Integration Program), COFINS (Contribution for the Financing of Social Security).
Although the exact proportion of each charge may vary according to the type of consumer, the region and other factors, it is common for charges to represent a considerable portion of the electricity bill in Brazil. Reducing the burden of charges and taxes on energy has been a concern of the government and the private sector, aiming to make energy more affordable and competitive.
Furthermore, the bureaucracy and complexity of the tax system in Brazil are factors that contribute to the istrative costs of companies in the electricity sector, which can influence the final energy prices for consumers. Simplifying and streamlining the tax system can help reduce these costs.
In addition to taxes, consumers also pay tariffs for the use of the transmission system (TUST) and distribution of electricity (TUSD). These tariffs are regulated and include costs for operation, maintenance and expansion of the infrastructure, as already mentioned above.
Charges such as the CDE (Energy Development ) and the CCC (Fuel Consumption ) represent a significant portion of the total cost of electricity in Brazil.
They are charged to consumers and businesses as part of their energy bill and are used for a variety of purposes, including funding social programs, investments in energy infrastructure, and regulatory costs. Here are some of the main charges and their relative importance:
CDE (Energy Development )
The CDE is an ing fund, established by Law 10.438 / 2002, with the objective of financing, for a period of 25 years, the universalization of the electricity service, the energy development of the states and the competitiveness of renewable energy sources and national mineral coal. The CDE relies on public resources and sources from electricity consumers.
The increase in total CDE expenses in recent years, combined with the decline in the Union's share of the budget, has increased the cost for consumers, who have come to bear almost all of the expenses. In 2017, the cost of CDE subsidies for consumers ed for 9,3% of the national average electricity tariff.
CCC (Fuel Consumption )
The Fuel Consumption – CCC is a charge paid by all electricity distribution and transmission agents to subsidize the energy generation costs of Isolated Systems.
It was created by Law No. 5.899 / 1973, initially with the objective of sharing the costs of fuels used in the National Interconnected System – SIN, but since 1992 it has been used to cover the fuel costs of the Isolated System only.
In short, the energy policies adopted by the government have a significant impact on the costs and availability of electricity. Decisions related to the diversification of the energy matrix, incentives for renewable sources, price regulation and investments in infrastructure are fundamental in defining energy costs in the medium and long term. In addition to the tax burden, of course.
The stability and predictability of the regulatory environment are important (if not essential) to attract investment and promote the growth of the energy sector in order to guarantee the reliability of the system and affordable tariffs.
Frequent changes in policies and regulations create uncertainty for businesses and investors, negatively impacting energy costs and availability.
Therefore, government policies and regulations play a key role in determining the costs and operation of the electricity sector in Brazil. A clear, stable and investment-friendly regulatory environment is essential to ensure the efficiency, competitiveness and sustainability of the energy sector.
The opinions and information expressed are the sole responsibility of the author and do not necessarily represent the official position of the author. Canal Solar.
