SUSTAINABLE ENERGY IN BRAZIL

SUSTAINABLE ENERGY IN BRAZIL Mari Aparecida dos Santos1 Nataliya Popova2 Marcia AFD Moraes3

ABSTRACT

The objectives of this research are to analyze the evolution of the Brazilian electric matrix sources, compare the participation of each energy source in the matrix and to estimate concentration market indexes for all electricity sources. In order to verify the characterization of the electricity market, the Concentration Ratio, CR4, as well as the Herfindahl- Hirschman Index, HHI, for all electric energy sources, are estimated. It was observed that the total electric energy supply increased (22.28%) from 2009 to 2013, and that there was a change in the market shares of the different sources. In 2013, the participation of natural (11.3%), biomass (7.6%) and Hydropower (70.6%) accounts altogether for 87.7% of the total energy supply. The results have shown that the market structure does not present high level of concentration, except for the nuclear energy segment, which is a duopoly. The electric sector depends highly on the mercy of diffuse policies that inhibit investments in alternative energy sources. There is the need of a clear formulation of proposals for consistent policies that ensure its long-run development.

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PhD student in Applied Economics from University of Sao Paulo (USP), Luiz de Queiroz College of Agriculture. Master in Regional Economics from State University of Londrina - PR. Professor and Researcher at PUC-PR. Address: 151 Almirante Barroso st., Piracicaba City-SP, Brazil, CEP: 13416-398; e-mail: [email protected] / [email protected] / 55 19 981608577 2 PhD student in Applied Economics from University of Sao Paulo (USP), Luiz de Queiroz College of Agriculture. Master in International economics and finance from University of Tuebingen. Address: 115 Quirino do Amaral Campos, st, Campinas City –SP, Brazil, CEP: 13023-570. E-mail: [email protected] Phone: 55 19 98237-3108 3 Professor and Researcher at University of Sao Paulo (USP). Ph.D. in Applied Economics from the University of Sao Paulo. Luiz de Queiroz College of Agriculture. Address: Luiz de Queiroz College of Agriculture. Address: 11 Padua Dias av., Piracicaba, 13416-480, SP, Brazil. E-mail: [email protected]

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1 Introduction Brazil has a predominant hydropower matrix. Although globally the national matrix has been recognized as composed mainly of renewable energy, recent sustainability requirements have been becoming stricter and, according to these new patterns, the Brazilian matrix is considered to be not diversified. Due to the dependence on climatic conditions, hydropower plants work with large idle capacity during the dry seasons. The diversification of the matrix, besides creating new opportunities for the industry, is a necessity for the country to meet a sustainable economic development. However, both expansion and diversification of energy supply have never depended as much as it is right now on the development of effective government policy, with clear rules, incentives to expand production and to the use (commercial, residential and industrial) of alternative sources. The Brazilian territory has a huge potential for exploring renewable energy, which can generate several benefits, such as clean electricity for current and future generations as well as job opportunities. Besides, renewable energy may help to reduce climate change impacts, due to the decline of greenhouse gas emission. It is expected that the use of biomass as an energy source can increase considerably through a clear policy of commercialization, due to its advantage of decentralized energy generation, the proximity to the loading points and the environmental benefits arising from its use. Energy cogeneration is the simultaneous production of electricity and useful heat. According to Souza (2011), bioelectricity produced from sugarcane bagasse attends the own sugar and ethanol mills’ energy demand, and in addition, it is another important source of revenues for sugar and ethanol plants. There are several technological processes to generate energy from biomass. The main ones are the following: steam cycle with backpressure turbine; cycle with steam extraction and condensing turbine and integrated gasification cycle of biomass. The three forms generate mechanical energy and/or thermal

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energy (so they have been called cogeneration), which is used internally (in the production process of plants), in addition to the electrical power generation, obtained by organic matter of vegetable or animal origin, that is transformed into energy. The origin of the biomass can be forest (wood, mostly), agricultural (soybeans, rice, sugarcane etc.) and urban and industrial waste (solid or liquid, such as garbage). Thus, the objective of this research is to analyze the evolution of the Brazilian electric matrix sources; to compare the participation of every energy source in the matrix and to estimate the concentration market indexes for all sources of electricity energy. In order to verify the characterization of the electricity market, the Concentration Ratio, CR4, as well as the Herfindahl- Hirschman Index, HHI, are estimated. 2 Methodology Market concentration is an important factor to identify the market structure in which a firm operates. The higher the concentration, the greater the firm’s autonomy to adopt several strategies, such as the coordination of prices or the influence on market competition. The Structure - Conduct - Performance (SCP ) model indicates that there is a causal relationship between the market structure, the conduct of the firm and market performance. This model is concerned with the influence of market concentration level on societies’ welfare losses. As indicated by Carlton and Perloff (1994), it is important to analyze the following variables related to the market structure and concentration: the number of sellers and buyers, barriers to entry, vertical integration, product differentiation, diversification of production and cost structure. The model also emphasizes the public policies’ influence on the market structure, firms conduct and market performance.

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According to Church and Ware (2000), there is a “causal relationship between structure of an industry, firm conduct, and market performance”. The main aspect of market performance for an industry analysis is the exercise of market power, which is strictly related to the market concentration. Among the factors most commonly used to measure market concentration are the concentration ratio (CR) and the Herfindahl-Hirschman Index (HHI). Such methods are used to achieve the objectives of this research; therefore, it is detailed in the next section. Thus, the market concentration measures may indicate, in a preliminary way, the sectors in which market power is expected to exist, although the concentration itself does not guarantee market power. Equation 1 represents the calculation of the concentration ratio (CR): k

CRk   si

(1)

i 1

in which k is the number of firms observed and si is the participation of the i-th biggest firm in the market. For i equal to 4, the CR4 represents the participation of the four largest firms in the industry. The CR indicator has simple interpretation and varies from 0 to 100. The closer it is to 100, the higher the concentration in the industry. Another advantage of CR is the ease of obtaining the information necessary for the calculation. It should be noted that the CR does not capture the inequality of the firms in the market, that is, it does not capture the differences of the companies within the group (RESENDE, BOFF, 2002). To calculate Concentration Ratio, the firm’s production capacity

is used in this study.

Concentrated companies generally have greater bargaining power, which interferes on the conduct and performance of the organization. The Herfindahl- Hirschman Index (HHI) is the sum of the squares of the share of each firm in the overall industry, so it takes into account all firms (KON, 1994). Equation 2 defines the HHI:

5 k'

2

HHI   Si 

(2)

i 1

in which Si is the share of each firm, while k is the number of firms in the industry. When k is equal to 1, the HHI obtains its maximum value equal to 1, indicating a monopoly. Similar to the CR, the smaller HHI indicates low market concentration. For firms with equal participation in the industry, Si could be described as 1/N for N equal to the number of firms. The HHI can also be described as a percentage ratio. In these terms, according to the Horizontal Merger Guidelines (U.S. DEPARTMENT OF JUSTICE AND THE FEDERAL TRADE COMMISSION, 2010), the concentration market is considered moderately if HHI is between 1500 and 2500. Smaller indices indicate unconcentrated and, above this, is considered highly concentrated market. As a source of information, this research relies on secondary data, such as publications on the industry of interest and the information released by the Ministry of Mines and Energy (MME, 2014) and the Brazilian Electricity Regulatory Agency (ANEEL, 2008). 3 Development of the theme The Brazilian electric matrix is mainly composed by hydropower source. Its composition has one of the largest shares of renewable sources worldwide, including biomass. According to the Brazilian energy planning company (EPE), in 2013, Brazil had 79.3% of energy generated from renewable sources, while the world average in 2011 was only 20.3% (EPE, 2014). Despite the favorable conditions for the generation of hydro energy in Brazil, due to its geographic characteristics, new sources have gained ground in recent years. This fact is favorable to reduce the dependence on hydro to electric power generation. However, it is indispensable to complement the matrix with sustainable and renewable sources that do not degrade nor negatively impact the environment. Among renewable sources, wind and biomass are potential energy sources that can satisfy these needs.

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Comparing data from 2009 to 2013, it can be observed that, while there was a decrease of hydraulic power supplied, all other sources, except nuclear, registered an increase in their participation. Figure 1 shows the composition of the Brazilian electric matrix in 2009 and in 2013. It is important to observe that the share of biomass used to generate electricity increased 41% in those four years. Such a source corresponded to the second largest share in the energy matrix in 2009, having been overtaken by natural gas in 2013. In this year, natural gas and biomass follow the hydropower; together they generated 87.7% of the total energy in 2013. It is observed in the Figure 1 a significant reduction in hydropower’s share, and the growth of electricity generated by wind (400%), although its participation in the electric matrix is still small (1.1% in 2013). Other sources that increased their share in the analyzed period were natural gas (331%), followed by the coal (97%).

Brazil (2009)

Brazil (2013) Hydro*

Hydro*

2,9% 2,6% 0,2%

2,5%

1,3%

Biomass**

2,4% 4,4%

Wind Natural gas

5,4%

Biomass**

2,6%

Wind

11,3%

Natural gas

1,1% Oil products 76,9%

Nuclear

70,6% 7,6%

Coal and coal products***

Oil products Nuclear Coal and coal products***

Figure 1 - Composition of the Brazilian Electric Matrix, 2009 and 2013. Source: Authors from EPE (2014). * Includes import. ** Includes wood, bagasse, bleach and other recoveries. *** Includes coke oven gas.

Table 1 shows the production evolution of different energy sources present in the Brazilian Electric Matrix, for the 2009-2013 period, and the average growth rates by source, as well as the participation of each source in 2013. During the period observed, there was a positive variation of the

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hydropower in the first three years with a decrease of 9.6% after 2011, while there was an increase of 22.28% of the total supply, given the importance of other sources to meet the energy demand. Table 1 – Electricity generation and statistics, by source, in Brazil, 2009-2013. 2009

2010

2011

Hydraulic i 390,988 403,290 Natural Gas 13,332 36,476 Biomass ii 21,851 31,209 Oil products iii 12,724 14,216 Coal 5,429 6,992 Nuclear 12,957 14,523 Other iv 7,640 6,916 Wind 1,238 2,177 Total 466,158 515,799 Source: Authors from EPE (2014). *Average annual growth rate in the period i Includes self-production ii Biomass: wood, sugarcane bagasse and others. iii Petroleum products: diesel oil and fuel oil iv Others: recoveries, coke oven gas and other secondaries

428,333 25,095 31,633 12,239 6,485 15,659 9,609 2,705 531,758

2012

2013

GWh

Average growth rates* %

415,342 46,760 34,662 16,214 8,422 16,038 10,010 5,050 552,498

390,992 69,003 39,679 22,090 14,801 14,640 12,244 6,576 570,025

0% 51% 16% 15% 28% 3% 13% 52% 5%

It is observed that the total of electric energy produced in the period increased 22.28% (annual average growth rate of 5% a year). The electric hydropower production oscillated during the period, and the 2013 production is almost the same as in 2009 (the annual average growth was almost zero). As for natural gas, its growth was impressive (417.57%). The average annual growth during the period for natural gas was 51%, and for biomass, 16%. The increase of these sources has been important to reduce the hydraulic dependence. According to Goldemberg and Moreira (2005, p.217), “for security of supply reasons, it is more interesting to depend on several primary energy sources than just on one or two”. Among all sources, wind presented the biggest increase (52%), although this source still has low participation in the electric matrix. The average annual growth rate of non-renewable sources (such as Oil Products, Nuclear, and Others) was lower than the average rates of other sources in the period. Among the non-renewable sources, only coal recorded strong annual average rate growth (28%) in the period.

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Table 2 presents the consumption of electricity by geographic regions in Brazil in 2013. It is important to note the higher consumption per capita in the Southeast (2,831 kWh/year) and South (2,781 kWh/year) regions, followed by the Central-West (2,168 kWh/year), North (1,765 kWh/year) and the Northeast (1,427 kwh/year) (EPE, 2014). This level of consumption appears to be very low compared to that in developed countries, which indicates that with an increase in the level of national economic development, there will be greater needs to expand the electrical grid. Table 2 – Population and statistics on electricity consumption by Geographic Regions in Brazil, in 2013. Region North Northeast Central-West Southeast Population 17,107,000 55,990,000 15,106,000 84,791,000 Consumption in the network (GWh) 30,196 79,907 32,756 240,084 Per capita consumption (kWh/year) 1,765 1,427 2,168 2,831 Total customers 4,498,000 19,629,000 5,779,000 33,646,000 Average total consumption (kWh/month) 559 339 472 595 Source: EPE (2014).

South 28,906,000 80,392 2,781 11,266,000 595

Biomass is one of the sources with larger capacity to generate power and to amplify its production and participation in the electric energy matrix. According to Goldemberg and Moreira (2005), Brazil has the potential to increase the utilization of biomass energy, since its soil has a large portion available for the expansion of energy crops without compromising food production. In addition, this renewable energy source has higher capacity to generate jobs than the more capital-intensive sources. In 1987, the first contract for selling electricity produced from sugarcane bagasse was signed, between São Francisco sugar and ethanol mill, located in Sertãozinho (SP), and the Companhia Paulista de Força e Luz (CPFL). Currently, in all existing sugarcane mills in the country, there is a process of energy cogeneration (UNICA, 2014). However, according to Souza (2011), two decades after closing the first contract, only 23% (100 plants out of 437 in the sugarcane industry) of the sugar-energy plants are exporting their surplus of bioelectricity for the electricity sector, through the Brazilian Electricity Regulatory Agency (ANEEL) auctions4.

4

From 2004 onwards, auctions began to define electricity purchasing and selling trades. See more in (ANEEL, 2008).

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The energy produced in the sugarcane mills is important to meet their own electric energy demand and, even more important, to supply the market demand in the dry seasons, avoiding the use of reserves of the hydroelectric plants. The commercialization of this product has moved forward due to institutional changes in the industry after 2004. From 2004 on, through government auctions, the selected electricity producers are those who accept receiving auctions’ lower prices energy sale to sell in the future. Contracts began to be celebrated in two environments: Regulated Contracting Environment (ACR), unique to generators and distributors - so the distribution and transmission activities remain fully regulated; and the Free Market (ACL), with the participation of generators, traders, importers, exporters and free consumers – through bilateral contracts (ANEEL, 2008). Figure 2 illustrates only sugarcane bagasse electricity production and consumption in Brazil in the period between 1980 and 2013. Figure 2 also illustrates the area that represents the growth of the biomass production and its consumption, which is increasing rapidly in recent years. The potential of sugarcane for electricity generation is high. According to Souza (2011), the sugarcane industry could generate the equivalent of the production of the third largest hydroelectric plant in the world (Belo Monte Hydroelectric). 180,000

160,000

140,000

120,000

10³ ton

100,000

80,000

60,000

40,000

20,000

2013

2010

2007

2004

2001

1998

1995

1992

1989

1986

1983

1980

0

Year PRODUCTION

TRANSFORMATION1

ENERGY SECTOR

CHEMICAL

FOO DS AND BEVERAGES

3

PAPER AND PULP

Figure 2 - Production, consumption and electricity generated from sugarcane bagasse (10 ton), by sector, Brazil, 1980-2013. Source: Authors from EPE (2014).

OTHERS

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In addition to the diversification of the electric matrix, with clean renewable energy, the biomass of sugarcane can meet the demand during the dry season in the Southeast/Central-West region of the country, where the largest hydroelectric power in Brazil is concentrated. The electricity supplied during this period preserves the stocks of hydroelectric plants. The relevant market of biomass is composed of diversified agents. Due to the intrinsic characteristics of production, the energy from this source can provide supply for small communities in remote areas and even for big cities. However, the residential consumption of biomass has given way, over the years, to industrial sectors. Figure 3 shows the percentage of biomass consumed by sector in Brazil in the 1980-2013 period. Regarding the biomass consumption, as shown on Figure 3, over the past decades the food and beverage industry has been the main consumer (31% in 2013), followed by the energy sector, which consumed 16.2% during the same period and the transport sector, with 15.2%. Consuming approximately 10.7% of the total biomass are the pulp and paper industry and the residential sector, which was on the fifth place in 2013. 100%

80,000

90%

70,000

80% 60,000 70%

%

50%

40,000

40%

30,000

30% 20,000

20% 10,000

10%

Year ENERGY SECTOR

RESIDENTIAL

AGRICULTURE AND LIVESTOCK

TRANSPORTATION

PIG-IRON AND STEEL

IRON-ALLOYS

COMMERCIAL AND PUBLIC CEMENT

MINING/PELLETIZATION

NON-FERROUS/OTHER METALS

CHEMICAL

FOODS AND BEVERAGES

TEXTILES

PAPER AND PULP

CERAMICS

OTHERS

FINAL CONSUMPTION

Figure 3 - Sectorial composition of the final biomass consumption * Source: Authors from EPE (2014). * Includes sugarcane bagasse, wood, other renewable primary sources, charcoal and ethanol.

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

0

1979

0%

10³ tep

50,000

60%

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The biomass producers have double benefits from the production - through saving their own energy expenses and trading their energy surplus. In the Decree number 2003 from November, 9, 1996, the terminology adopted in the electricity sector is legitimately defined and the self-producer is characterized as an individual, a legal entity or consortium, holder of a concession or authorization to produce electricity for own consumption. The Decree 2.655/98 grants permission to self-producers to sell their energy surpluses. This type of commercialization may occur remotely in the spot market. Another type of producer is defined in the Law 9.074/95, as Independent Power Producer, which is a legal entity or consortium, holder of a concession (Souza, 2002). The independent energy producers can sell to the following agents: public distributors of electricity; free consumers of electricity (ones who acquires electricity from any provider as specified in the legislation and in special regulations); electricity sale companies (agents holding authorization, concession or permission to buy and sell electricity for the final consumer); electricity consumers integrated in industrial or commercial groups, which provide steam or other input coming from the cogeneration process; groups of electricity consumers, regardless of voltage and load, on previously set conditions with the local distribution dealer; and any consumer who demonstrates that the Brazilian Electricity Regulatory Agency (ANEEL) does not provide local distribution of electricity within 180 days from the corresponding request (Souza, 2002). Independent producers have access to the distribution and transmission networks, which enables the direct energy trade between producers and free consumers, regardless of their location (Souza, 2002). However, there are a number of obstacles that hinder the advancement of this important segment in the electric energy matrix. Despite the great potential of electric energy production, it is important to observe the institutional environment (norms, regulations, public policies), because they greatly influence the competitiveness of different energy sources, including the process of prices formation.

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It should be noted that, as the electric energy plants might use different inputs and technologies, the cost structure is differentiated for the various types of electric energy producers. Nowadays, generally speaking, in the public actions, contracts are signed between electric energy suppliers and the government, considering who can offer the lowest prices, without considering the peculiar characteristics of each production structure. In other words, the rules can bring difficulties for higher cost producers – even for those with better environment impacts - to enter or to improve their participation in the market. According the SCP model, it is known that the agent’s conduct can affect rules and norms, and the conduct is influenced by the market structure. Thus, the lower amount of competitors and the higher concentration of some of the sectors can influence auction’s rules. Besides, the market structure also plays an important role in the performance of the companies, as well as on the market efficiency. The next section presents an analysis of the electric energy sector’s market structure. Estimated values of CR and HHI indexes indicate the difference in the market structure of each segment of the energy industry. Table 3 presents the estimated indexes for each type of the electric generation plant. Table 3 – Market Concentration indicators* by type of plant. Brazil, 2013. Type of plant

Quantity of Plants 2

CR4 (%) 100

HHI 5636

UTN

Plant Thermonuclear

UFV

Central Generating Solar Photovoltaic

248

52

991

UHE

Hydroelectric Energy

199

27

297

EOL

Wind Power Plant

196

8

81

11

88

UTE

Thermal Power Plant (Total)

1,711

-

UTE-A (except sugarcane biomass)

1,397

15

153

-

UTE-B (sugarcane biomass)

314

6

68

PCH

Small Hydroelectric Power Plant

469

3

39

Central Hydroelectric Generator

477

2

28

CGH

Source: Elaborated by authors * Calculated considering the productive capacity of the plant (monitored power).

The HHI indicator, which takes into account the total number of firms in the industry, presents values that indicate low concentration (values less than 1.500) for all types of energy plant, except for

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the UTN case (Thermonuclear Plant), which has only two firms - Angra I and Angra II, from RJ. Moreover, the UFV market has the second most concentrated structure. The photovoltaic plant Nova Aurora, located in Santa Catarina State –SC, represents 20.8% of the total produced by this electric energy source, followed by the plant Sol Addresses Salitre and Rodeadouro (14.3)%. The four biggest companies account for 52.11% of this market. Therefore, with the third largest HHI is the UHE, which contains the largest plants in capacity of installed power generation: Tucuruí I and II - PA; Itaipu (Brazilian Party from PR); Ilha Solteira – SP; and Xingó – SE. From the 199 existing UHE plants, the four biggest companies produce 57.1% of this market. The low HHI Index indicated that, besides low concentration, firms’ inequality is small. The plants with the highest production capacity within the EOL category are: Praia Formosa – CE; Alegria II - RN; Parque Eólico Elebrás Cidreira 1 - RS; and Miassaba-RN. In this group, there is a very low concentration with a balanced production among the firms (very low CR4 and HHI indexes). The lowest levels of concentration were observed for the following groups: UTE, PCH and CGH. It is important to notice that, due to the various inputs used for the generation of thermoelectric power, the plants were subdivided, excluding the ones generating only for their own use. Two new groups were created: UTE-A (which uses various inputs, except sugarcane bagasse, for power generation) and UTEB (only uses sugarcane bagasse). In this way, it is possible to observe the level of concentration of the industry when sales are restricted only to cogeneration of energy that results in sugarcane bagasse. It is interesting to observe that the level of concentration is higher in the group with the bigger number of firms, UTE-A, comparing with the UTE-B. In the first group, the plants (including the biggest in the group) are located in Rio de Janeiro State: Governador Leonel Brizola (former TermoRio); Mario Lago (former Macaé Merchant); Norte Fluminense; and Santa Cruz. In the UTE-B group, the largest plants are: Barra Bioenergy-SP; Cocal II-SP; Santa Luzia I-MS and Caçu I-GO.

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The lowest levels of concentration are in the group of small hydroelectric generating stations and of hydroelectric plants, where the top 20 have the same capacity (limited to 30,000 kW) in the first group and the participation of the top 100 is similar in the second group. 4 Final Considerations Brazil stands out for its favorable conditions for the production and use of renewable electric energy. Analyzing the evolution of Brazilian electric energy matrix sources for the 2009-2013 period, it was observed that the total supply has grown (22.28%), and that there was a change in the market shares of the different sources: while the participation of hydraulic and nuclear sources have decreased, all others sources have risen their participation. It is important to observe that the share of biomass used to generate electricity increased 41% in this period. Participation of natural gas (11.3%), biomass (7.6%) and hydropower (70.6%) accounts altogether by 89.5% of the total energy supply, in 2013. Wind and other renewable sources achieved a significant growth in the period although its participation in the Brazilian electric matrix is still small (1.1% in 2013). Despite the fact that the electric energy from coal is more pollutant than other sources, its production has been increased a lot (the participation in the electric energy matrix has moved up from 1.3% to 2.6%). It is important to mention that the calculated indices of market concentration presented, in general, a market structure with low level of concentration, except for nuclear plants, which is a duopoly currently. It was observed that the solar electricity market, despite having 248 plants, features levels of concentration indicating moderate concentration (CR4 of 52%), and the value of HHI may indicate some inequality among firms in this industry. Although it has not been the focus of this study to evaluate the relationship between market concentration and performance, it is assumed that the most concentrated industries and with greater

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participation in the Brazilian energy matrix has greater influence on rules of government auctions, strategically its can interfering with the nature of competition and the prices set by the government. Otherwise, industries with both lower participation and market concentration, which fits the production of electricity from biomass, have low market power under those rules. the investigation of how the rules are established and the interaction between them and the market concentration is a suggestion for future works. In addition, Brazil is among the largest sugarcane producers worldwide and has a great potential to produce bioenergy, ethanol and electric energy cogenerated through the sugarcane bagasse and residues, besides other renewable energy sources. From the point of view of energy planning, the diversification of the electric matrix is important; however, government programs to encourage the production have been scarce and could be improved taking into consideration the several impacts of the expansion of each energy source, and the environmental externalities should also be taken into account. The electricity sector in Brazil, for its intrinsic characteristics, is extremely regulated by the government. Investments from entrepreneurs in this industry are constrained due the lack of clear and stable rules, which can inhibit their development. This discourages entrepreneurs from investing in energy efficient equipment. There is low participation in auctions due to the conditions imposed by the ordinances, especially in relation to cogeneration plants. On one hand, there are the regulation turns to ensure reasonable tariffs, with the law of minimum prices; and, on the other hand, the regulation is restricting the market competition, preventing new projects and investments in research and development to happen, which can ensure greater amount of energy in the future to address the growing demand. There is the need for more detailed research in order to obtain more favorable future scenarios for the development of the different sources to produce electric energy. For the existence of such a favorable

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scenario, the government should create a favorable institutional environment for the new participants. The extremely bureaucratic environment can create excessive barriers, undermining opportunities for improvements in the energy sector. References ANEEL. Atlas de Energia Elétrica do Brasil. Agência Nacional de Energia Elétrica. 3. ed. – Brasília: Aneel, 2008. Available in: < http://www.aneel.gov.br/arquivos/PDF/atlas3ed.pdf > Access 28 out. 2014. CARLTON, Dennis W; PERLOFF , Jeffrey M.. Modern industrial organization. 1994. CHURCH, J.; WARE, R. Industrial Organization: A strategic approach. San Francisco: McGraw-Hill, 2000. 926p. EPE. Anuário Estatístico de Energia Elétrica. Brasília: EPE, 2014. Available in: < http://www.epe.gov.br/AnuarioEstatisticodeEnergiaEletrica/Anu%C3%A1rio%20Estat%C3%ADstico %20de%20Energia%20El%C3%A9trica%202014.pdf > Access: 11 out 2014 GOLDEMBERG, José; MOREIRA, José Roberto. Política energética no Brasil. Estudos avançados. 2005. 215-228. KON, Anita. Economia industrial. NBL Editora, 1994. MME. Leilões de energia elétrica: Próximos leilões. 2014. Available in: Access 15 out 2014. RESENDE, Marcelo, and Hugo BOFF. "Concentração industrial." In: KUPFER, D.; HASENCLEVER, L. Economia Industrial: fundamentos teóricos e práticos no Brasil. Rio de Janeiro: Campus (2002). SOUZA, Zilmar José de. A co-geração de energia no setor sucroalcooleiro: desenvolvimento e situação atual. In Procedings of the 4th Encontro de Energia no Meio Rural, 2002, Campinas (SP). 2002. Available in: Access 18 out 2014. _______. A bioeletricidade sucroenergética: estágio atual e perspectivas. In: MARJOTTA-MAISTRO, Marta Cristina (Org.). Desafios e Perspectivas para o setor sucroenergético do Brasil. São Carlos: EdUFSCar, 2011. UNICA – União da Indústria de Cana-de-Açúcar. Usina Virtual. Available in: Access 03 out 2014. U.S. Department of Justice and the Federal Trade Commission. Horizontal Merger Guidelines. 2010. Available in: Access 03 out 2014. U.S. Department of Justice and the Federal Trade Commission. Horizontal Merger Guidelines. 2010. Available in: Access 03 out 2014.