Regulatory framework: the key to reversible hydroelectric plants

The energy transition presents new challenges for Brazil’s electric power system. As the country increases the share of renewable and intermittent sources, such as solar and wind power, there is also a growing need for solutions capable of storing energy and providing greater flexibility in the system’s operation. Among these alternatives are reversible hydroelectric power plants (UHRs), a mature technology with high capacity and a long service life, but one that has yet to gain a foothold in Brazil.

To discuss the opportunities and obstacles to the development of UHRs in the country, Coppe/UFRJ brought together experts from different segments of the electricity sector. For Coppe Director Professor Suzana Kahn, promoting debates like this is part of the institution’s role in bringing strategic issues for the country into the academic environment and connecting the university to the challenges faced by society and the productive sector. She also highlighted the importance of offering students the opportunity to directly follow these discussions and to encounter, on a single panel, representatives from different sectors of the electric power system.

Moderated by Suzana, the panel featured Marcos Aurélio Izumida Martins, R&D and Innovation Manager at Axia Energia; Jairo Terra Ferreira Filho, Head of Regulation and Litigation at PSR; Ricardo Oliveira, CEO of Geocoba; Marcelo Lopes, Director of Generation and Transmission Operations at Neoenergia; and Professor Djalma Falcão from the Electrical Engineering Program.

Throughout the meeting, there was consensus among participants regarding the importance of pumped-storage power plants for the future of the electric grid. Among their key attributes are technological maturity, high storage and generation capacity, and the operational flexibility they can offer—especially in a scenario of growing participation by renewable and intermittent sources.

During his presentation, Professor Djalma Falcão provided a comprehensive introduction to pumped-storage hydroelectric plants (PSHPs) and highlighted the technology’s advantages. “In addition to playing an important role in energy storage, PSHPs offer a number of benefits and advantages; one of them is that it is a mature technology. Furthermore, it has a high generation capacity and is a long-term investment (with a service life of 80 years or more).”

According to Djalma, the Brazilian power system has faced challenges related to the loss of physical inertia, reduced robustness, and increased fluctuations. In this context, UHRs could help increase operational flexibility, reduce curtailment—the reduction of generation output to maintain grid stability—and assist in frequency and voltage control as well as in damping oscillations.

But if the technology is already well-known and offers advantages for the system, why haven’t pumped-storage hydroelectric plants (UHRs) gained traction in Brazil yet?

For Jairo Terra Ferreira Filho, the answer necessarily lies in regulation. The regulation of reversible power plants has been under discussion by the National Electric Energy Agency (Aneel) since 2023 and, according to him, could serve as a catalyst for the development of these projects. “The economic potential—not just the technical potential—depends heavily on regulation. Implementing a reversible hydroelectric plant requires significant investment right at the start of its operation, and that investment will only be recouped over the course of 20, 30, 40, or even 50 years.”

The head of Regulation and Litigation at PSR also noted that Brazil has a positive track record of public banks supporting capital-intensive investments, a factor that could help make reversible hydroelectric plant projects viable.

Analyses conducted by PSR also indicate significant potential. According to Jairo, the Hera computational model identified an optimal potential of 31.2 GW of pumped-storage hydroelectric plants by 2050, considering the technology’s cost-benefit ratio and its interaction with other energy sources.

In one of the simulations presented, constraints such as a minimum head of 300 meters and a distance of three kilometers between the upper and lower reservoirs were taken into account. The results indicated a reduction of up to R$ 5 billion in system costs by 2050 compared to a configuration without the expansion of reversible power plants.

For Marcos Aurélio Izumida Martins, however, the challenge begins even before the plants are built: it is necessary to develop sound projects capable of sparking investors’ interest. “We haven’t yet seen a significant surge in reversible power plant projects that have truly captured the company’s interest since the days when it was still Eletrobras. I think it would be important for us to start questioning this. Why don’t we have any relevant projects?”

In Marcos’s assessment, the regulatory issue is central because it is directly related to the economic viability of the projects. “I think the key issue is the regulatory one, which drives the economic aspect. The regulatory framework will provide the projects with an economic basis for the return on these investments.”

Marcelo Lopes agreed that creating a project portfolio is a crucial step for the UHRs to move beyond the planning stage. He pointed out, however, the high cost and the long time required to conduct these studies. “To get a reversible power plant project off the ground, you need two to four years of development studies and an investment of up to 100 million reais.”

As an alternative, Marcelo cited the experience of New South Wales, Australia, where the government offers repayable funds to conduct project studies. The proposal, he said, could inspire a Brazilian solution. “So, it could also be a path—through the BNDES, other entities, and financiers—to promote, for example, these repayable funds, so that stakeholders can invest those 60 or 120 million reais in the studies to create this portfolio of projects for the country.”

Ricardo Oliveira, meanwhile, emphasized the need to develop a solution tailored to Brazil’s specific characteristics. In his view, the country is capable of developing its own strategy for UHRs, rather than simply replicating international models. “Brazil is a country that has lessons to teach the world about energy. The only thing missing to implement UHRs is connecting the stakeholders and the incentives.”

According to Ricardo, experiences from other countries can serve as a reference, but they need to be adapted to the Brazilian context, taking into account the country’s size and the specific characteristics of the national electric grid.

The debate showed that the development of reversible hydroelectric plants in Brazil does not depend solely on the availability of the resource or the maturity of the technology. It is necessary to create the appropriate regulatory and economic conditions, develop a project portfolio, and coordinate the various stakeholders involved.

The full panel discussion is available on Coppe’s YouTube channel.