The Real Possibility of Competitive Generation Markets in Hydro Systems : The Case of Brazil
Brazil's electricity sector is made up of more than sixty-five, mostly vertically integrated, federally- and state-owned monopolies. The most pressing problems in the sector are excessive operational costs and large investment needs. Both of...
| Main Authors: | , |
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| Format: | Viewpoint |
| Language: | English |
| Published: |
World Bank, Washington, DC
2012
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/1997/02/694973/real-possibility-competitive-generation-markets-hydro-systems-case-brazil http://hdl.handle.net/10986/11595 |
| Summary: | Brazil's electricity sector is made
up of more than sixty-five, mostly vertically integrated,
federally- and state-owned monopolies. The most pressing
problems in the sector are excessive operational costs and
large investment needs. Both of these problems can be
addressed through more competition and more private
participation. There is a consensus among federal and state
policymakers and key operators that the sector's
potentially competitive segments should be separated from
its natural monopoly segments and awarded as concessions or
sold to private investors. However, there are important
technical challenges, one of which relates to competitive
generation. First, to ensure open entry and the long-term
viability of competition in the electricity sector, the
government must figure out how to competitively allocate
water rights. Second, to provide incentives for investing
in generating capacity, a pricing system must be put in
place that will ensure recovery of the high sunk capital
costs characteristic of hydro systems. This Note describes
one consistent approach, using incentive-based organization
and regulation, for overcoming the technical challenges to
effective competition in the generation market. |
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