André Pepitone: A management marked by innovation in the Brazilian electricity sector

por The Winners

André Pepitone da Nóbrega is director general of the National Electricity Agency (ANEEL), president of the Ibero-American Association of Energy Regulatory Entities (ARIAE), composed of 27 organizations from 20 countries, and also
vice-president of the Brazilian Association of Regulatory Agencies (ABAR). Assuming command of ANEEL in 2018, an
Agency in which he has been a career servant since 2000, Pepitone led structuring actions aimed at modernization, reduction of energy tariffs and attractiveness of investments, with emphasis on agreements with large banks, reduction of subsidies and more efficient allocation of costs. His management is leading the Electricity Sector from the pandemic and water scarcity to the high-tech society, with a focus on consumer empowerment. The milestone reached in 2021
of R$ 1 trillion in investments in the Sector, since the creation of ANEEL, reflects the market’s confidence in regulation. Honored in the 2021 Personality of the Year award by the Global Council of Sustainability & Marketing and the Forum of the Americas, in this interview Pepitone talks about the challenges of leading the Electricity Sector and how to deliver to Brazilian society a regulation that provides concrete results: jobs, development and quality in the electricity service.

The Winners – During your administration, you were concerned with working on tariff reduction. How has this scenario evolved?

André Pepitone – We assumed in the faceof great pressure on the electricity bill. Between 2013 and 2018, the residential tariff rose 82.7%, with annual adjustments from 17% to 30%, while the IPCA variation was 41.6%. With transparency and respect for contracts, we deployed, in 2018, the tariff reduction agenda. Measures caused the average rate of adjustment to plummet from 15% in 2018 to 1.67% in 2019. In 2020, under the effect of the pandemic, the increases were, on average, 3.60%, lower than inflation. Among the measures, Conta-Covid stands out, which is an operation carried out without any funds from the National Treasury, which injected R$ 15.3 billion into the Sector in 2020. This action relieved tariffs, on average, by 6.94% in 2020 and by 4.91% in 2021. In 2020, ANEEL also started returning to consumers tax credits generated by court decisions that exclude ICMS from the PIS/Cofins calculation basis. The actions taken on several fronts reduced the amount that would be added to electricity bills in 2021 by more than R$ 18 billion, with an average reduction of around 10%.


TW – Within a pandemic scenario, what were the strategies and work carried out to contain the strong water crisis? What are the next steps on this issue?

AP – In late 2020 and early 2021, as the pandemic subsided, energy demand rose again at the end of the worst wet season in 91 years. The electricity sector in 2021 is very different from 20 years ago in terms of generation capacity, diversification of sources and efficiency in energy transport. From 2006 to 2021, the country increased its energy production capacity from 89 thousand MW to 180 thousand MW. The hydroelectric plants, which in 2000 represented 85% of the matrix, today account for 60% of the generating complex. We have less dependence on rain. Thermoelectric plants, which in 2006 were 14.6% of the installed capacity, today are 25.5% of the total. The transmission capacity has leaped. In 2001, the SIN was 70 thousand km long. Today, there are 165 thousand km. In this context, the work to face the water crisis involved different actions, such as flexibilization of flows in hydroelectric plants, dispatch of Merchant thermal plants and energy imports from countries. To manage demand, we created an awareness program for the rational use of energy and demand response mechanisms and we supervise the efficiency of transmission lines.


TW – The auctions carried out by ANEEL have been very successful and have guaranteed significant investments in the sector. In this context, what are the main results to be highlighted, within each segment, and what are the perspectives for the coming years?

AP – ANEEL’s auctions demonstrate the strength of the Sector in Brazil. If, on one hand, the success of the auctions points to the ability to attract investments, on the other hand, it crowns the excellent work that ANEEL carries out. These auctions have made a great contribution to reaching more than R$ 1 trillion in investments in the sector since ANEEL’s creation. In terms of generation, we have already invested more than R$ 318 billion, which brings not only the expansion of the capacity to generate energy, but, mainly, the generation of employment and income. As for energy transmission, investments reach R$ 263 billion. In the distribution segment, they totaled up R$ 419 billion. Investments take place through both improvements and privatization of old companies, which, when transferred to the private sector, rely on the provision of a more efficient service. In the electricity sector, we look to the future through the Decennial Expansion Plan, which sets out expansion projections for the next 10 years. According to the PDE 2030, we will have more than R$ 565 billion of investment by 2030. In the transmission segment, we will have more than R$ 90 billion, with the expectation of building another 40,000 km of lines. Finally, in distribution, we expect R$ 200 billion for improvements and expansion.

TW – In 2021, Brazil saw the biggest increase in new plants since 2016, reaching the mark of 180 GW of installed power – and renewable sources were the main protagonists. How does ANEEL encourage the growth of renewable energies?

AP – Brazil is a giant in energy generation, especially the clean one. In these days of greater global appeal for the use of renewable energies, Brazil is at the forefront of sustainability with an 85% renewable energy matrix, while the worldwide is only 23%. It is not new that the country invests in its renewable potential – since the 1970s we have made large investments in hydroelectric plants. In recent years, there has been an exponential increase in the deployment of complexes of sources such as wind, solar and biomass. Brazil is favored by winds with an incidence twice the world average and by a volatility of only 5%, which enables production to rely on a better forecast. As the speed is higher in the
dry season, it is possible to operate wind farms in a complementary system with hydroelectric plants to preserve the reservoirs in times of little rain. With this scenario, the potential for wind generation could reach 143.5 GW, and today we have 20 GW of installed power in 771 generators and another 12 GW planned for commercial operation.
Solar energy allows its generation both in large plants and in small consumer units, a situation in which users generate their own energy, being able to consume it or inject it into the grid. It is called distributed generation. In centralized generation alone, Brazil has 4,621 solar generation plants, or 4.5 GW of installed power. In the distributed sector, there are 690,735 consumer-generators and a total of 7.9 GW of installed power. In biomass, where the by-product from sectors such as sugar-energy is used, Brazil is also advancing, with 591 plants in operation and an installed capacity of 15.8 GW.


TW – How do you see the recognition of the Agency’s work by international organizations, such as the OECD and the rating agencies Standard & Poor’s and Moody’s?

AP – Throughout ANEEL’s trajectory, we have been granted numerous awards. But the recognition from the rating agencies Standard & Poor’s and Moody’s and from an institution with the reputation of the OECD, in fact, is special, as it places ANEEL in a prominent position internationally. As I have been at ANEEL practically since its inception, I have been able to witness how many solutions were created in the past and today are considered good practices in the Sector. I see how many processes have matured and how much the Agency has gained in efficiency and productivity. Only in this way was it possible to meet the growing demands of the Sector, even with a small workforce for such responsibility. That is why the OECD, in 2021, has pointed out that the transparency in the processes and the technical competence of the Agency give security to the country’s business environment. This commends our efforts and pushes us to achieve even higher quality standards. 


TW – You have been with ANEEL since 2010 and started your first term as general director in 2018. How do you evaluate your trajectory and what is your greatest satisfaction along this journey?

AP – I have been at ANEEL since 2010 as a Director, it is true, and I have followed ANEEL since the onset of its history, as I am a career servant of this great institution. I assess my trajectory at the Agency as stimulating and challenging in an equal measure. Stimulating, because I have always had an immense satisfaction in bringing dignity to Brazilian consumers; more recently – leading a team that is extremely qualified and dedicated to providing a public service of excellence. Challenging, because the problems we have to face in the Electricity Sector, known for the high technical complexity, are not simple. Our work agenda demands constant updating with the best technologies, and the regulatory agency cannot stop in time – quite the contrary – it has to be upto-date with market innovations to enable the full development of our Sector. I consider that one of the greatest satisfactions of my journey is noticing the benefit generated to consumers. Recently, for example, we were fortunate to regulate the automatic registration of
the Social Tariff, benefiting more than 11 million needy families who will now be automatically included in the benefit. 

TW – During your tenure, you received several honors and recently, you were honored in the 2021 Personality of the Year award in the Energy category. How do you transform this recognition into a legacy?

AP – As I always like to point out, I am a career servant at ANEEL, and my professional history is intertwined, in a good sense, with the growth of this institution. Over this period, 24 years at ANEEL and of service in its frameworks of excellence have passed. I went through several positions, got to know the Agency’s work dynamics and was fortunate enough to be the first career employee to become a Director, in 2010, and also General Director, in 2018, a reason for
honor, pride and great responsibility. I am aware that these achievements are due to a qualified team committed to the public cause that leads the Agency to the place of excellence it deserves. Therefore, I think that people’s legacy is built collectively, with work, dialogue, incentive to innovation and qualification. This naturally drives and transforms future generations. As I opened this path, other career servants will also be able to reach strategic and management positions.


TW – What are ANEEL’s next steps for 2022?

AP – The care of the current management with the present is extended to the future. Aware of the energy transition characterized by decarbonization, decentralization and digitalization, I identify as important steps for the future of the Sector the breakthrough in modernization through the constant improvement of standards and the creation of measures aimed to efficiency. The watchwords for the future are: modernize, simplify and reduce costs for one to undertake
in Brazil. The advance towards a new Electricity Sector translates into measures that, in some cases, will extend to the next few years. This is the case with the gradual opening of the free energy market, which has been underway since 2019 and which will allow all consumers, including residential consumers, to choose their suppliers. I also see an opportunity for evolution in the sector with the insertion of new technologies, such as storage systems, hybrid plants and electric mobility.

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