Cheaper and potentially cleaner energy

The 24 hospitals in the Comerc Energia portfolio have saved around R$547 million from 2012 to May 2018

by Aderbal Aragão (*)

What changes in a hospital’s energy supply when it chooses to go to the free energy market? Nothing. It is true that the public sector in general and hospitals in particular are especially careful when it comes to ensuring reliable supply — and rightly so, since these institutions render essential health services to the population. That is why power distributors prioritize hospitals, allocating them to the safest subsystem in their networks, where there are usually fewer consumers and consequently less voltage variation. Yet few consumers realize that the same supply risks exist in either market, regulated or free.  The main risk factor is the path the energy must travel to reach the consumer unit –- and the path is exactly the same for both markets. Whether procured in the free market or in the regulated market, the energy will travel along the same local distribution wires. The difference between a consumer in the traditional market and in the free market is simply the contract for the purchase of the energy required. In the regulated market, the power distributor gets paid for the energy bought; in the free market, the payment goes directly to the plant generating the energy.

So why should a hospital migrate to the free energy market? There are many advantages. First, savings in energy bills: the 24 hospitals in the Comerc Energia portfolio have saved around R$547 million from 2012 to May 2018.  The significant savings can be used to improve services rendered to the population. On average, shifting to the free market will bring savings between 10% and 30%.  Any hospital spending more than R$ 80,000 a month or having a monthly demand of more than 0.5 MW is eligible to go to the free market.

There are other good reasons to migrate besides cost savings. In the free market, contracts have fixed prices, that is, they are predictable. In a country like Brazil, where energy prices vary tremendously depending on the season, this is great news.  Differently from the traditional market, contracts in the free market are not subject to the “yellow flag” or “red flag” prices set by government authorities when rains are scarce over power plant reservoirs, requiring the deployment of costlier thermal power plants. In the free market, contracts are adjusted annually by the inflation index set in the initial agreement between the parties.

There are other important advantages for those who choose to enter the free market. For one, the client can choose the source of the energy to be consumed. This means the free consumer can select a specific source, from traditional choices such as large hydro and gas power plants to renewable energy sources, such as wind, solar and thermal plants burning sugarcane bagasse, for example. Being part of the free market brings the freedom to choose cleaner sources, reducing the amount of GHG gases released in the atmosphere. Environmentally friendly energy may come from wind farms, or photovoltaic, biomass and Small Hydro Plants (PHCs, or Pequenas Centrais Hidrelétricas in Portuguese). The choice of renewable energy sources is a relevant fact that can and should be mentioned in the hospital’s social responsibility reports, showing its commitment to the environment and to sustainability.

One example that shows the relevance of this contribution: in 2017 alone, Comerc Energia clients choosing renewable sources avoided 378 thousand tons of CO2 emissions, which is equivalent to the reforestation of an area of 2.55 thousand football fields with more than 3.3 million trees for more than 30 years. The calculation was made by Sinerconsult, the consulting firm specializing in quantifying the environmental impact of GHG emissions in the atmosphere, and the methodology used is based on the international standard Greenhouse Gas Protocol. This environmentally friendly choice is not possible when a hospital buys energy in the so-called captive market: when buying energy from a local distributor, the consumer unit pays for energy generated by an unknown mix of sources, which may include thermal power plants (oil, gas, coal or nuclear) and conventional power plants, all of which pollute much more than renewable energy sources.

The free market also enables some practices that are unthinkable in the captive market. A very specific example in the hospital segment is the unprecedented project called Energia do Bem (something like “Energy for a Good Cause”) benefitting the Barretos Cancer Hospital (HCB).  HCB has been in the free market since 2012, and its monthly consumption is around 2.5 MW. Until December 2017, biomass power plants using sugarcane bagasse in the Barretos region had donated a total 16,200 MWh to the hospital. Each megawatt-hour donated is equivalent to saving R$ 250 in the hospital’s monthly power bill. Comerc Energia was responsible for supporting the migration of the Barretos Cancer Hospital, and also helped develop the new idea of “energy raising”. The migration to the free market combined with the energy donated by local biomass plants reduced the hospital’s energy bills by an average 30%, adding up to R$ 6.7 million savings until May 2018.

The free market might be a great option for hospitals to buy cleaner, cheaper energy at fixed prices. Beyond that, it opens the possibility to search for partners who can make donations in the form of energy, helping drive significant savings in energy costs.

(*) Aderbal Aragão is Commercial Director at Comerc Energia.

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