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Energy efficiency risk analysis and policy in Brazil

  • Jose Eduardo Nunes da RochaEmail author
  • Marco Aurelio Cavalcanti Pacheco
Original Article
  • 86 Downloads

Abstract

One of the main barriers to the development of energy efficiency (EE) projects in Brazil is the decision-makers’ lack of knowledge about the risks of the projects. The Brazilian Government’s Procedures of Energy Efficiency Program (PROPEE) is currently one of the main sources of funding for energy efficiency (EE) projects. The method for evaluating the technical and economic feasibility of projects presented in PROPEE applies the traditional discounted cash flow (DCF) methodology to calculate the net present value (NPV). The energy price used in this model is a fixed value calculated through the postponement of investments (cost of avoided demand) and/or reduction of operating expenses (avoided energy cost). The avoided costs for a given voltage level are incurred throughout the power system, upstream of the consumption unit (view of the electrical system’s operator). The PROPEE’s methodology, applied on a large scale in Brazil, does not consider some technical uncertainties present in EE projects, nor the market uncertainty regarding the fluctuation of the energy price paid by the consumer units. This paper evaluates the investment risk of EE projects (consumer’s perspective) adopted by the Brazilian market, taking as example a large electricity consumer. A methodology is proposed, which, considering the technical and economic uncertainties, performs a more comprehensive and realistic analysis of the complex business scenario involving the EE projects. This case study considered the data collected by a team of independent engineers, for the first time in January 2009 and updated in January 2015, to assess the energy efficiency potential of a commercial consumer unit installed in the city of Rio de Janeiro and connected to the grid of local distribution level voltage 13.8 kV. This study demonstrates a model that made the risk management projects viable in energy efficiency demand-side management (DSM). However, it could also be applied in other markets as well. Understanding how the uncertainties affect decision-making in EE projects is essential for developing a more comprehensive outlook on constructive and regulatory perspective, contributing to the promotion of energy efficiency projects.

Keywords

Energy efficiency Energy diagnosis Measurement and verification Risk analysis Net present value 

Notes

Compliance with ethical standards

Conflict of interest

The authors declare that they have no conflict of interest.

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Copyright information

© Springer Nature B.V. 2019

Authors and Affiliations

  • Jose Eduardo Nunes da Rocha
    • 1
    Email author
  • Marco Aurelio Cavalcanti Pacheco
    • 1
  1. 1.Pontifical Catholic University of Rio de Janeiro—PUC-RioRio de JaneiroBrazil

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