Itaipu HPP: 100 million MWh in 2013

Interview with Jorge Samek, general manager of the Itaipu Hydropower Plant

Giant “comes of operational age” and establishes high standard of efficiency in its thirty-year history, achieving world leadership in the production of electrical energy.

Soon to complete 30 years of existence since its construction, the Itaipu Hydroelectric Power Plant provides proof of great vitality, closing the first six months of 2013 with a record production of energy:  50.012 million megawatt-hours (MWh). This was the second semester in which the hydropower plant logged this achievement (during the same period of the year) since the plant reported 50.105 million MWh in the first half of 2012.  But one should remember that 2012 was a leap year with an extra day in the month of February that, if disregarded, would indicate that production for the six-month period in 2013 is in the lead.

From January to December of last year (2012), Itaipu logged an annual production of 98.3 million MWh of electrical power, which stimulated the plant’s management and technical team to pursue a new challenge: having secured the position of world record holder in power generation, Itaipu’s goal is to wrap up 2013 with the production of 100 million MWh.

To Jorge Samek, general manager of the Itaipu plant for Brazil, it is a difficult goal to accomplish, but not impossible. He says that the excellent performance displayed by Itaipu is explained, in part, by the abundance of rain during the period, but is mainly attributable to improved operational performance - a point of honor for the technical staff of the unit since the beginning of the power station’s operation in May 1984.

The director assures that the results were only achieved thanks to the high availability of the equipment in use at the hydroelectric power, the technical quality of the teams and the efficiency of its management model.

One result of this management model and plan, for example, is the optimization of interventions aimed at maintenance, which increased the availability of generating units by an additional 36 days per year, and the implementation of ‘automatic action logic’ in the generation-transmission of the 60 hertz and 50 hertz sectors until the development of the methodology and of the production plan.

What also weighed decisively was the entry into operation of new transformers at the substation on the right bank (the Paraguayan side of the dam) and the Foz-Cascavel 500 kV transmission line that belongs to Copel.

On the following pages, Jorge Samek takes stock of these three decades of operation at Itaipu – an enterprise that will long be a reference of the capacity of Brazilian engineering – and reveals the operation’s plans for the future.

Grandes Construções –  Cumulatively in the first six months of this year, the Itaipu Hydroelectric Power Plant (HPP) repeated the feat it achieved in the first half of 2012, surpassing the mark of 50 million megawatt-hours (MWh) of production in a single semester. What accounts for this successive breaking of records by Itapiu?

Jorge Samek - Three things determine this performance. The first is that the economy has to be ‘heated’ so that there is consumption of power. Despite the modest growth of the country’s Gross Domestic Product (GDP), which many mockingly dubbed “pibinho” (or ‘GDPuny’), the same is not true of the sector of electricity. There is something wrong about all this. An extraordinary factor to measure the economic growth of a country is its consumption of energy. And what we see is that, from 2011 to 2012, consumption grew by almost 5%. And the outlook for growth in 2013 is even greater. We faced years and years of times when Itaipu had the energy to deliver, could produce more, but did not have consumers. When the country is not growing, it's no use producing energy since the installed capacity is enough to meet the demand. And that’s not what’s happening now, whether we’re talking about Brazil or Paraguay which are the two markets that Itaipu serves. This year, Paraguay will grow about 15%.

Grandes Construções – What is the second most relevant factor that determines growth in the production of power?

Jorge Samek – That’s a factor that we are less capable of interfering in…: you’ve got to have water. And it’s not just about having rain [where the dam is located] on the Paraná River. That helps a lot, but you’ve got to have water in the states of Minas Gerais, in São Paulo, in Goiás, which ends up flowing to the Paraná River. These ‘waters’ are what enable the plants that make up the system to operate. The rain that falls in Rio de Janeiro, for example, does not do us any good. That water goes straight to the coast and is not transformed into megawatt-hours. But when it rains a lot in São Paulo - rainfall that turns cars on the streets upside down - we know that that water will reach Itaipu. Sure, it’ll come via the Tietê River, the Paranapanema, but it will get here. The same happens when there are heavy rains in the state of Minas Gerais which includes all the major reservoirs that we have, both on the Rio Grande and on the Parnaíba River. These reservoirs, when they are in good conditions at the time the rainy season ends, enable us to have good performance. Typically, this end of the rainy season coincides with the month of March, but in 2012, due to a delay in the rainy season expected for November, we had an extended period of rainfall until the end of April. Therefore, this accounts for part of the results.

Grandes Construções – And what was the third most decisive factor for the good performance in the semester?

Jorge Samek – It was the fact that we have our machines and transmission lines in perfect working condition. If the ‘Operador Nacional do Sistema’ (ONS- the government’s National Operator of the Electric System) goes “on the blink”, we are ready to respond immediately. And we take great pride in that. Today we are the benchmark for the energy sector in the improvement of maintenance processes, developed over all these years. Those who visit our facilities can hardly believe that the construction of this plant was concluded 40 years ago, with machines that have been producing energy for over 30 years. The impression one has is that all of this was installed three or four years ago; so great is the care that has been taken with process of maintenance, of modernization. To us it is almost a dogma. Obviously, over time we have gained enough experience to know which months of the year are more appropriate to perform maintenance because there will not be much water, and it’s no use having all the machines available then. We also know in which months the machines have to be 100% available, because there will surely be a greater flow during what we call the “dance of the waters”. And, besides all these points, there is the factor of Itaipu’s location. From the standpoint of engineering, considering the whole planet, there is no other place in the world that has such a ‘regular’ river’, with such a substantial gradient and so close to the regions of power consumption as this location. It even seems that when God was creating the Earth, He decided to look for a place to install a hydroelectric power plant. And He put His finger here! So all this is what accounts for the performance you see, enabling these records. And it gives us the expectation of reaching 100 million MWh in 2013. This is the great challenge to be met by this technical board, and that’s why we are increasingly improving our power transmission processes. Now, in cooperation with Paraguay, we are building a 500 kV line in Paraguay thanks to investments from the ‘Mercosur Structural Convergence Fund’. This is the first Mercosur structuring project which we will deliver by the end of August. These works have been assumed by Itaipu as a result of an agreement between then-presidents Lula of Brazil and Fernando Lugo of Paraguay. It is expected that Paraguay will consume more energy, which adds to the likelihood that Itaipu will reach 100 million MWh of production in 2013.

Grandes Construções – Will that production make Itaipu the world leader in the generation of energy?

Jorge Samek – This past year we came close to 100 million MWh with 98.3 million MWh and, with that, we held on to first place in the production of energy worldwide. Despite the fact that ‘Three Gorges’ in China has 70% more installed potential, they do not have the regularity that we do with these 45 plants upstream. But we are not content in leaving it at that. We want to go beyond that.

Grandes Construções – Are the meteorological systems, which are increasingly more accurate in their forecasts, allies in this process?

Jorge Samek – Yes, day by day these systems are developing, getting better. Presently, we know, with a great degree of accuracy, the amount of water that will arrive today or tomorrow. We are able to determine the exact amount of water that is passing through the Rio Grande, for example, which is the main river in our particular basin.

Grandes Construções – Taking into account the consequences of the policy of keeping tariffs low, which the government has set as a priority, is Itaipu presently a profitable venture?

Jorge Samek – Itaipu is the product of a treaty between Brazil and Paraguay, with its own particular set of norms and regulations and it operates breaking even. It operates at cost price. However, in order to get built, funding was required. So money had to be sought all over the world. And, here in Brazil, Eletrobrás took on the debt with the approval of Brazil’s National Treasury. To pay off these loans the energy produced is, itself, the collateral. Therefore, the Itaipu project required three major engineering efforts. The first was legal engineering, which gives legal support to its operation - even when involving two countries with different languages, different cultures and histories and, especially, different economies. Despite all these differences, such legal engineering enabled a project of this magnitude; the world's largest project made jointly by two governments in two different countries. The second engineering effort was the construction of the plant itself, and the third was economic engineering, enabling the payment of the investment with the very energy that was generated. That’s why, the treaty established in its ‘Anexo C’ (Exhibit C), referring to its economic fuindamentals, a period of 50 years for maturity which expires February 2023. On that date, Itaipu finishes paying off all the debt that it incurred for over 17 years to finance itself. Today, that represents 64% of our costs. In the budget for Itaipu, interest and debt represent 64% of the rate charged, which is US$ 37.00 per MWh, here at the “foot of the plant”.

Grandes Construções – How much is that debt?

Jorge Samek – We pay about US$ 2.3 billion per year in amortization of the investment, with half that amount going to the National Treasury and the other half to Eletrobrás. In 2023, when Itaipu finishes paying off its debts, leaving only the costs of royalties and costs of production, we expect to have a cost reduction of around 32%, equivalent to the energy produced on the Brazilian side of the dam, to be passed on to our final consumers. Since we represent about 20% of the country’s electrical system, the result of this, i.e. 20% of 32% , would be the amount of the discount to be passed on to the consumer similar in effect to the federal government’s ‘Medida Provisória 579’ (Provisional Measure 579), which resulted in a decrease in the price of electricity. But by that time, concessions on other plants will also have expired, which means that we may have the cheapest electricity in the world. That can only be done with hydroelectric power. Thermoelectric plants, whether fired by coal or gas, have a lifespan which is very similar to the period of concession itself. A gas-fired plant, for example, generally has a concession period of 20 years. So, when that period ends and the plant enters its 21st year, it is a shambles. One has to practically build a new plant to produce energy. A well-kept hydropower plant, such as Itaipu, can have a service life of as much as 200 years.

Grandes Construções – Such being the case, why do other countries that do not have a hydrologic profile like ours, or that have already exploited 100% of their hydrologic potential, are so against the installation of hydropower plants?

Jorge Samek – Because no one in fact will able to compete with Brazil in terms of having energy as cheap as we will. After all our plants are built - and I’m referring to Belo Monte, Teles Pires, Tapajós, among others - and this coincides with the end of the payment of Itaipu, Foz do Areia, Segredo and Osório, scheduled to take place over the next 20 years, the possibility that we will have a price of electrical energy which is much lower than any country that uses coal, natural gas or uranium to produce power is very great.  And that gives us an extraordinary competitive advantage.

Grandes Construções – How much did it cost to build Itaipu?

Jorge Samek – The total amount spent on Itaipu was US$ 27 billion, from the expropriations to the construction of the dam, equipment, etc.. Upon that amount there was interest, and we will continue to pay US$ 2.3 billion a year until 2023. This figure was maintained through substantial negotiation which was signed in 1996, and payment is being made strictly on time. All our commitments are paid on time with a tariff for power that is very well established. And this project, if not done then, would never have been done; ever again.

Grandes Construções – How big is Brazil’s hydropower generation park and how many power plants are in this process of concluding their amortizations?

Jorge Samek – Hardly anyone knows that number, but it was easy to remember until three years ago: 2,222 units. Today, that has changed. I’d say another 20 or 30 units have been inaugurated. This power generating ‘park’ includes from the first Small Hydropower Plant (SHP) inaugurated 100 years ago in Juiz de Fora (MG), and which is still operating, to Itaipu. But the ones that are significantly representative, and that are operating in the national system, number about 200 plants of 50 MW and over.  Of this total, about 100 will have been amortized by 2023.

Grandes Construções – What is the ‘guaranteed power output’, also known as in Brazil as ‘physical assurance’, of the Itaipu plant?

Jorge Samek – We have a methodology that gives Itaipu a great deal of assurance: we calculate our production predicting all the worst possible scenarios that could ever happen.  And that leads us to calculating that we would produce 75 million MWh. So if Saint Peter does not cooperate, if a transformer blows up, a very strong gale topples transmission towers, etc. all that, if taken into account, puts us in a position in which we will not produce any less than 75 million MWh. Our budget is very easy to do. Practically a ‘baker’s dozen’ type calculation. We calculate all the money we'll need in the year, how much we'll spend on interest and debt, how much we’ll pay in royalties, and how much our operating expenses are (to pay staff , cover the cost of upgrades and maintenance). That tells me how much money I’m going to need and I divide that amount by 75 million MWh. That way I have the price of energy in the neighborhood of almost US$ 45. But if I produce 98.3 million MWh, and I did my calculations based on 75 million MWh, everything I produce in excess goes as a discount. The only other thing (cost) that applies to this additional energy is royalties. That’s why our energy is cheap. Nobody complains. Yes, there's even cheaper energy than what is produced here, from plants that have already been amortized. But the vast majority of plants, and especially thermal power, wind power, etc. have energy priced much higher than ours. So our physical structure, which is maintained based on the production of 75 million MWh, gives us a fantastic assurance. We will never have a shortage of money to pay our obligations. But there is a paradox that we have to face: the more efficient we are, the more we are penalized. To be effective, I have to spend more. If, for example, a machine stops running, my cost is very, very high. Here at Itaipu, we have a preventive maintenance schedule for our machines, performed every four years, in which we practically take an X-ray of the facility. The first time this was done at Itaipu, it took 61 days to get this ‘machine’ back up and running. Today, with all the refinement and with 30 years of development, we are getting it back into operation in 11 days. There are areas in the plant run non-stop - that have no Christmas, no New Year, or holiday, nothing - 24 hours a day, 365 days a year. But this gives me the capacity and ability to produce to this degree.

Grandes Construções – What is Itaipu’s participation share in the national system (grid)?

Jorge Samek – Today it is 17.86%. There was a time when it corresponded to 27% of all the energy produced in Brazil. If one “glitch” happened here, in the transmission line, it meant a tremendous loss for the country. All the plants in the country have a technical reserve. If one of them goes off line, the reserve immediately comes to the rescue and goes into operation. There’s only one hydroelectric power plant that cannot shut down,   ever, and that’s Itaipu. If Itaipu shuts down, the grid’s dependence is such that Brazil will be in the dark. In April of this year, the grid began to receive direct current coming from the Jirau and Santo Antonio HPPs on the Madeira River. Each power plant that goes into operation is cause for celebration for us here at Itaipu. Because our relative share in the national grid drops. Now, with the entry into operation of the plants on the Madeira River, Itaipu’s share may drop to 15%. That’s fantastic assurance for Brazil’s electricity sector.

Grandes Construções – Besides this year’s goal of producing 100 million MWh of electricity, what are the prospects for the sector in your opinion?

Jorge Samek – In February we held our annual strategic planning meeting here and it became clear that in another 13 years we will have to have, in Brazil, twice as much installed potential as we do now. That’s wild! And that’s considering average growth of 4% to 5% per year, incorporating all this [low-income] parcel of society that did not partake of the country’s growth all this time. In Brazil, until now we have tapped 35% of our hydropower generating potential. We are now in the neighborhood of 101,000 MW of installed capacity and have to surpass 200,000 MW. A large part of this growth will come from hydropower generation. Another major part will be through generation using sugarcane. Then comes wind farms - one of the sources of energy in which investment has been most outstanding, but which today accounts for a share of only 0.69% of the national power grid mix. The strategic plan establishes that wind farms should account for a 5% to 7% share, which is already pretty much.

Project EV: Itaipu presents electric vehicles

Itaipu, in collaboration with Agrale and Stola do Brasil, developed the Agrale Marruá Electric Utility Vehicle - a prototype included in Project EV, led by the bi-national power plant (Itaipu), for the development of hybrid and electric vehicles. The four-wheel drive (4x4) prototype is equipped with an electric motor rated at 40 kW (approx. 54 hp) and torque of 130 Nm (13.3 kgfm); capable of reaching a peak output of twice the rated power and torque. The motor is water-cooled, which allows a significant reduction in its size and weight (79.5 kg).

The vehicle has two sodium batteries, which give it a range of about 100 kilometers and a recharge time of 8 hours at 220 Volts. The batteries are recyclable and suitable for tropical climates; the raw material used in their production is abundant and they are three times lighter than conventional lead-acid batteries.

Project Electric Vehicle (EV) is a partnership between Itaipu and KWO - Kraftwerke Oberhasli AG, which owns and operates hydroelectric power plants in the region of the Alps in Switzerland. The agreement was formalized in May 2006. Invited by KWO to coordinate the project, Itaipu assessed the initiative as sustainable, environmental in character and capable of providing transfer of technology.

In the first five years alone of Project EV, over 50 prototypes left the ‘Centro de Pesquisa, Desenvolvimento e Montagem de Veículos Elétricos’ (CPDM-VE - Center for Research, Development and Installation of Electric Vehicles), built within Itaipu.

The challenge to be addressed by Project EV is to develop a model with a range of 450 km, top speed of 150 km/h and recharge in only 20 minutes – with robustness and price comparable to the conventional market.

Besides producing the EV, Itaipu is itself the vehicle’s largest proving grounds. The models that come out of Itaipu’s G5 warehouse, equipped with air-conditioning, transport employees inside and outside the plant. There are 120 charging stations (outlets) at the site.

Electric bus and truck

Besides personal transport, Project EV seeks solutions for freight and passengers. This concern led to the development of the first electric truck in Latin America, in cooperation with Iveco – a division of Fiat for heavy vehicles, launched in August 2009. The truck has a 40kW electric motor, autonomy of 100 km and reaches 70 km/h with a 2.5 ton payload.

Project EV also developed the first 100% electric-powered buses in the country, which will contribute to transport personnel and visitors/tourists to the electricity sector; and the hybrid bus, powered by electricity and ethanol, with a capacity for 34 passengers. The vehicle reflects Itaipu’s and its partners’ concern for the environment: CO2 emissions produced by the ethanol-powered engine are offset by the absorption of this greenhouse gas during the production of sugarcane. The net balance of emissions is zero or ‘carbon neutral’.

Works begin on the Baixo Iguaçu HPP

June 21st marked the laying of the cornerstone, which formalizes the start of construction of the Baixo Iguaçu hydroelectric power plant on the Iguaçu RIver, between Capanema and Captão Leônidas Marques, in the Southwest of Paraná state. The project is the result of a partnership between the ‘Companhia Paranaense de Energia’ (Copel – Paraná Energy Company) and Neoenergia - one of the largest private groups in the country, working in the energy sector. The amount to be invested is R$ 1.6 billion (US$ 800 million), with Copel holding a 30% share and Neoenergia 70%. The power plant, due to go into operation in 2016, will provide for the electrical energy needs of one million people.

“The project is of the highest significance in view of the growing consumption of energy in Brazil,” said Jonel Iurk – Copel’s director for the environment and corporate citizenship - at the official ceremony announcing the project which took place at the ‘Centro de Exposições de Capanema’ (Capanema Exhibition Center).

The director of Copel cited the expansion of Paraná’s industrial sector with the establishment of new industries and expansion of existing plants. “In this context of growth and development, the Baixo Iguaçu Power Plant is important toward expanding the supply of power to the state and the country,” said Iurk. Also present at the announcement of the startup of construction were Copel directors: Jaime de Oliveira Kuhn, director of Generation, Transmission and Telecommunications; Jorge Andriguetto Jr. director of Engineering; and Julio Jacob Jr, director of Legal Affairs.

The impact of the Baixo Iguaçu Plant on the region was emphasized by Neoenergia’s CEO Solange Ribeiro. “The initiative means progress, movement in the economy and development," she said. Solange Ribeiro underscored the partnership with Copel in the venture. “Copel is a major company and is secure for investment,” she stated.

The municipalities of Capanema and Capitão Leônidas Marques, which will have areas involved in the construction of the plant, will directly benefit from the increase in tax revenue and from the creation of jobs. Furthermore, when the Baixo Iguaçu HPP starts to produce energy, it will provide financial compensation for the use of water resources, increasing the revenue of the municipalities’ city halls.

“This is the largest work of construction in the history of our city. Capanema has been awaiting this for over ten years and now it has become a reality thanks to the state government,” said (Ms.) Lindamir Denardin,  mayor of Capanema. “The construction of the plant will create 2,500 jobs and greatly help to develop our region,” she affirmed.

Resumption

In addition to participating as a member of the management of the consortium that is to be formed between the companies, Copel will assume the owner’s engineering activities and will be responsible for monitoring the execution of the work and compliance with schedules, managing contracts with suppliers, evaluating the plant’s civil construction project from a technical standpoint, monitoring the production and assembly of equipment, among its other duties.

The construction of the Baixo Iguaçu HPP marks the resumption of Copel’s activity in building power generation units. Last December, the company inaugurated the Mauá Power Plant in Telêmaco Borba and Ortigueira, with 363 megawatts of generating capacity. In the coming weeks, the Cavernoso 2 SHP (small hydropower plant) will be inaugurated between Virmond and Candói with 19 megawatts of capacity. Together, Baixo Iguaçu, Mauá and Cavernoso 2 total R$ 3.42 billion (US$ 1.7 billion) in investments.

The new plant will be about 30 kilometers downstream of the Governador José Richa HPP (a.k.a. Salto Caxias HPP) and will have three generating units that, together, have an installed capacity of 350 megawatts. The powerhouse will be of the ‘sheltered’ type and will be located in the city of Capanema, on the left bank of the river. A unit consisting of a substation and transmission line will also be built to connect the plant to Brazil’s ‘Sistema Interligado Nacional’ (SIN - National Interconnected System - national grid).

A dam will be built across the Iguaçu River riverbed to enable the formation of the reservoir (i.e. pondage) which will have a surface area of only 31.6 square kilometers - considered quite small compared to other power plants of the same size. The Baixo Iguaçu ‘lake’ will provide “run-of-the-river” operation, which means that the reservoir will not have the job of accumulating a large volume of water to regulate the flow of the river. Therefore, this will reduce potential environmental impacts to a minimum.

The tapping of Baixo Iguaçu is the last such initiative of this kind planned for Paraná’s main river, on which five large hydroelectric power plants already operate: Foz do Areia, Segredo, Salto Caxias - all operated by Copel - plus Salto Osório and Salto Santiago, both owned by Tractebel. Together, these power plants total 6,674 megawatts of installed power.

Baixo Iguaçu HPP – Technical Specs

Installed Capacity: 350.2 MW;

Guaranteed Power Output (Physical Assurance): 172.8 MW average;

Number of Turbines: 3;

Height of the Dam: 22 meters;

Length of the Dam: 410 meters;

Gross Head: 15.80 m;

Reservoir Area: 31 km2;

Flooded Area: 13 km2.