The emergence of smart grid experiments can be witnessed in numerous cities all over the globe, and has been given increasing importance by power utilities in Brazil. In April, 2013, two events confirmed this trend. The biggest power distribution company in Latin America (in terms of consumption and billing) – AES Eletropaulo announced a smart grid project that is not only the largest in the number of impacted clients, but also the first to focus on the metropolitan area.

Second, Brazil’s federal government launched Inova Energia — a R$3 billion (US$1.4 billion) plan aimed at fostering innovation in the electric sector that has catalyzed substantial interest by companies in smart grid development.

Barueri: initial steps towards a smarter metropole

AES Eletropaulo will invest $72 million reais (around $32 million) by 2015 to provide 60,000 clients in Barueri with smart meters for real-time and remote monitoring of energy distribution and consumption. With a population of over 250,000 residents and located just 30km away from São Paulo, the city was chosen largely due to its characteristic as a complex metropolis that serves as a good representation of its concession area. It serves as a laboratory for future expansions.

The company reports a total consumption of 1,316 GWh in the city last year, a 20% increase from 2008 that represents Barueri’s current growth.  Almost half of clients are in the commercial segment, including the new headquarters of the holding AES Brasil.

Transforming consumers into smarter, more satisfied clients and citizens

Digital meters will enable better control over energy consumption and expenditures by users, as information will be updated on a daily basis and made available on the client portal. Other improvements will bring even more impact and convenience. Power outages and subsequent waiting time for maintenance causes collective frustration and immediate negative reaction from citizens. With the new systems, the utility will be able to identify interruptions automatically and make repairs remotely whenever possible, reducing the need for field workforce intervention and alleviating client discontent. Among other advantages are prepaid energy bills and variable tariffs according to the period in which energy is used.

The first group receiving new meters is comprised of 2,100 families and small businesses that are making use of illegal connections to source energy, mainly in in low income communities. Since 2004, the company has led the regularization of more than 500,000 connections at a cost of $380 million reais ($170 million) to bring access to legal and safe energy in 288 communities in the Greater São Paulo area. Under the name of “Transforming Consumers into Clients”, the program enables families to have a proof of residence through their electricity bills, as well as provides education on energy efficiency and electricity-related accident prevention.

Making the business case for smart grids in Brazil

Eliminating illegal connections also helps AES Eletropaulo cut down its energy loss rate attributed to power theft. By shifting the grid to a smart one, commercial losses — today at 4 percent of total energy distributed — are expected to drop by 30% due to improved control over consumption rates. That is why the low income consumers and future clients in Barueri play a key role in the financial performance of the project, which is expected to pay for itself in eight years with loss reduction accounting for 80% of expected returns.

So if smart grid investments prove to be good for business and make clients happy, what will it take for them to take off? “Energy loss and theft can definitely leverage smart grids in Brazil”, says Paulo Pimentel, Smart Grid Project Manager at AES Eletropaulo. The estimated additional revenue to be captured with the help of new technologies was key in the design of a financially solid project.

But this analysis will differ depending on the company, according to Pimentel. “In our case, the company found itself with the ideal conditions for it, as we’re building on significant investments that were already made. We’re now reaching the client frontier.” Since 2010, AES Eletropaulo has invested $220 million reais ($99 million) in grid innovation, from the installation of automatic activators and digitalization of substations, to the integration and upgrading of three monitoring centers into one with high-tech software and equipment.  Barueri is where full smart grid functionalities will be applied by AES Eletropaulo for the first time.

Will smart grid boom in the next years?

The high costs of innovative infrastructure and tightly regulated energy prices do not make up the best environment for utilities to advance smart grid projects in Brazil. Therefore, the recently announced Inova Energia program means great news for the sector. The partnership between the Brazilian Development Bank (BNDES), the Brazilian Innovation Agency (Finep) and the National Electric Energy Agency (Aneel) will provide financial instruments to foster innnovations in smart grids and ultra-high tension (UHT), alternative energy sources, hybrid vehicles and vehicular energy efficiency.

Nearly R$12 billion (US$5.4 billion) in projects was the amount demanded by the private sector, four times the amount initially earmarked, and most of them were in the category of smart grid and ultra high-tension transmission.   Finep estimates that the selected projects should be contracted by November — at which point a boom in smart grid projects are expected all over the country as of next year.

In the meantime, the smart grid concept is already becoming a reality in different cities. EDP (www.edp.com.br) launched the InovCity program two years ago in the municipality of Aparecida, located in the State of Sao Paulo, for its population of 35,000. The city is best known for its Basilica of the Shrine of Our Lady of Aparecida where Pope Francis recently led a big mass as part of his visit to Brazil for the 28th World Youth Day. The installation of 13,450 digital meters will be completed this year, as part of a new model encompassing the introduction of public lighting with LED technology and electric mobility solutions. In April, EDP announced the replication of InovCity in two municipalities in the state of Espírito Santo. Like Aparecida, these projects build on EDP’s experience in the Portuguese city of Évora, a UNESCO world heritage site.

There are already 3,200 smart meters operating in Sete Lagoas, in the state of Minas Gerais, where 8,000 clients will benefit from new equipment provided by Cemig by 2014.

In Búzios, a tourist destination in the state of Rio de Janeiro, Ampla (Endesa Brasil) estimates up to 20% in energy savings with the application of variable tariffs once 10,000 meters are ready to be used — 6,000 already this year. Electric bikes and free internet will also be made available as part of a broader smart city project, and studies for electric water taxis are underway. Further pilots and research are being carried out by utilities in the states of Amazonas, Ceará, Pernambuco and Paraná.

While the first projects will come into full operation in 2013-2014, a greater amount is expected to advance  and thrive boosted by new investments and learnings from peer companies.