The use of composite indicators to evaluate the performance of Brazilian hydropower plants

Abstract

This paper investigates the performance of the largest Brazilian hydropower plants. This study covers 78% of the total installed capacity from hydros in the country, and considers indicators reflecting operational and maintenance costs as well as quality of service. The assessment was conducted using a new approach for the construction of composite indicators, based on a directional distance function model. First, we assessed the hydropower plants allowing for complete flexibility in the definition of weights, enabling the identification of underperforming plants, and quantification of their potential for improvement. Next, we assessed the plants considering different perspectives regarding the importance attributed to each indicator. This allowed reflecting different points of view, focusing primarily on operation and maintenance costs or quality issues. The results identify the hydropower plants that can be considered benchmarks in different scenarios, and allow testing the robustness of plants' classification as benchmarks in the unrestricted model. exploitation occurs through concession or authorization. Transmission services are provided under the concession regime, while electricity distribution is carried out through concession or permission. 1 According to the current legislation, all hydropower plants with installed capacity more than 50 MW are given a concession grant. These hydros participate in public auctions, which operate through competition with a single buyer or purchasing agency, and where companies offer price bids considering that both fixed and variable costs will be recovered along the concession period.Recently, the Brazilian Government gave a referral to the issue of the renewal of the electricity generation concessions through the provisional measure no. 579/2012, converted into the law no. 12.783, of 11 January 2013 (Brazilian Presidency of the Republic, 2013). This norm enables the extension of the generation concession contracts for a period up to 30 years, provided that, among other conditions, the remuneration of assets fully depreciated or amortized is reduced until this compensation reaches the point to pay only the costs of operation and maintenance.Regarding the electrical generation activities, about 20% of the total hydro installed capacity of the country (equivalent of 22 GW) should be extended under this standard or tendered by public auctions. At the end of this process, the generation companies that passed through the process of granting extension are remunerated by a tariff stipulated by the Brazilian Electrical Regulatory Agency (ANEEL). Moreover, the normative resolution ANEEL no. 541 of 12 March 2013 (Brazilian Electricity Regulatory Agency, 2013), which establishes the standard quality of service that should be provided by these utilities, states that hydros observed performance should be taken into account for the calculation of their allowed revenue in each annual adjustment and review process. In other words, those that accept the conditions for the concession ren...

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