‘Power plant ships’ contracted at a billion-dollar cost are delayed and should only start generating energy in August

BRASILIA – The hiring of four power plant ships by the federal government, an emergency measure taken at the end of last year to guarantee the supply of energy in the country, has become the newest financial bomb in the electric sector. Late, the initiative has not yet lit a single light in Brazil, although it has a billionaire impact on the electricity bill.

By contract, these power plant ships had to have started delivering power on May 1st. The deadline was an essential condition to justify an agreement closed in October last year, when the country had most of its hydroelectric reservoirs emptied and was under the threat of an electricity shortage this year. It is not by chance that the federal government contracted through a “simplified competitive procedure” at the cost of BRL 3 billion per year. The plan was to publish an emergency public notice, without requiring in-depth technical studies and which dispensed with basic environmental licensing processes.

The result is that everything is delayed. No power plant has been connected to date and not even the entire contracted structure is anchored in the chosen region.

The project is unprecedented in Brazil. The four Turkish ships of the company Karpowership work as large plants powered by gas. Anchored in Sepetiba Bay, three kilometers off the coast of Rio de Janeiro, they must be connected to a 15-kilometer power transmission line, which would leave the sea and reach a power substation on the coast. From there, the energy would be sent to any region of the country, through the interconnected energy transmission system. Turns out it wasn’t ready.

The most optimistic current deadline foresees the start of operations on August 1st, that is, three months after the originally required deadline, which justified the generation of thermals during the so-called “dry period”, which runs from April to November. In practice, about half of this period will have passed. Added to this is the fact that it rained a lot this year, in most parts of the country, which has already led the electric sector to shut down the most expensive thermal plants and, even, end the extra charge of the tariffs included in the electricity bill of the consumer.

The four vessels of the Turkish company Karpowership, which have already been built and operate in other countries, are prepared to generate 560 megawatts of power, enough energy to supply around 2 million people. But this is not the only emergency contract contracted by the government in October of last year that is in arrears. Thermal plants of the company Âmbar Energia, which belongs to the J&F group, are also behind schedule and are under pressure from the Federal Audit Court (TCU), after the National Electric Energy Agency decided to suspend the collection of fines for delays in the operation of the plants.

Cost

For the energy consumer, what is left is an exponential cost, estimated at more than seven times the average value already contracted in other auctions. To fund all the energy contracted in last year’s emergency auction (778 average megawatts), the payment of R$ 11.7 billion per year to these companies is planned. Of this amount, R$ 9 billion will be transferred annually to electricity bills.

“Only in 2022, with 60% of the projects expected to start operating, there will be an increase of around 3.3% in the tariff for Brazilians”, says Aneel, in a report on the subject.

“This is absurd. It is evident that the decision taken last year by the government was wrong. They did something so hastily that, obviously, they are not fulfilling what was contracted”, says the coordinator of the Electric Sector Study Group (Gesel/UFRJ), Nivalde Castro. “Given the high cost and the fact that the contract was not even fulfilled, this must be revoked immediately. It was a mistake made because of the haste and that must be cancelled.”

Altogether, the financial impact on the consumer will be in the order of R$ 39 billion. The explosive cost is a result of the contracting model, which foresees that these plants will be on 100% of the time, and until December 2025, under the pretext that they would help to preserve more water in the reservoirs, at any time of the year. Karpowership alone should receive up to R$635 per megawatt-hour, which is equivalent to more than R$3 billion per year.

In a note, Karpowership declared that “it was one of the winners of Aneel’s reserve energy auction, held in October 2021, following the entire procedure of the bidding process with an ethical, transparent, innovative and efficient proposal to achieve the main objective of the event: guarantee the national energy supply and security in the long term. The energy will be generated according to the demand and need of the country, for a period of 44 months.”

“The company reinforces its commitment that the operation will only begin after the entire licensing process, in accordance with all current legislation and the best sustainability practices. The company also clarifies that it has made every effort to progress the project in partnership with the meeting all the demands of the authorities and respecting Brazilian legislation.”

According to the company, “this is a simple environmental licensing process, as it does not involve construction and assembly, nor permanent alteration of the environment, in addition to the fact that it is temporary. At the end of the contract, everything will be restored to its original condition.

What is foreseen in the power plant ship project

  1. Four ships carrying gas-powered thermal plants will be moored 3 kilometers off the coast, in the region of the port of Itaguaí, in Sepetiba Bay, in Rio de Janeiro.
  2. The power plants arrive ready to operate and can deliver a total load of 560 megawatts of electricity generation, enough to supply 2 million people.
  3. The delivery of energy produced by the ships will occur through a transmission line with 14.6 km in length, which needs to be built in and out of the water to connect to the Furnas substation, in the area of ​​the port of Itaguaí, also known as industrial district of Santa Cruz.
  4. From the connection with the Furnas substation, energy can be distributed through the national interconnected transmission system.
  5. The project has a total duration of 44 months and foresees that the plants will work all the time and not just sporadically.
  6. The contracting of the unprecedented service in Brazil was signed by the federal government through a “simplified” auction held on October 25, 2021. The process, which ignored the environmental licensing process of any project, was authorized by the government of Rio de Janeiro .
  7. Turkish company Karpowership had until 1 May to complete the installation of the plants, as established in the contract, but the project was delayed and now the projected date is 1 August.
  8. The basic argument of the contract – carried out with prices much higher than the market average – was to face the water crisis in the country. It so happens that, with the rains and the filling of the reservoirs, the activation of expensive thermal plants became unnecessary.

    Source: Karpowership, Aneel