Brazil & Southern Cone - January 2013 (ISSN 1741-4431)

Rain in late January has allayed immediate fears that the depleted reservoirs of Brazil’s hydroelectric plants would not generate enough power to satisfy the country’s energy needs. Though the rains may have come just in time this year, the alarm caused by the severe drought in the north-east made President Dilma Rousseff’s earlier dismissal in December of the possibility of any energy shortage look seriously complacent.

Dams in the north-east ended December at just 32% of capacity, and dipped briefly below 30% in early January, according to the Operador Nacional do Sistema Eléctrico (ONS). That put them below the 34% the operator considers sufficient to guarantee electricity supplies. Nationally, Brazil generates around 80% of its electricity from hydroelectric power, according to the government’s own figures.

The government, however, dismissed any concerns about energy supply. In late December, Rousseff described talk of rationing as “ridiculous”; a statement that was slightly undermined by an emergency meeting with senior energy officials in early January. In response to the threat of shortages, Petrobras started importing record amounts of Liquified Natural Gas (LNG) to power its thermoelectric plants. Gas prices rocketed, undermining the president’s ambitions to reduce electricity prices by 20% this year, and contributing to fears over inflation.

More gas, less green

Fears of energy shortages trigger inevitable reminders in the Brazilian press about the 2001 energy crisis, when factories and homes had to cut back on consumption amid widespread blackouts. Energy use jumped 40% under former president Lula da Silva’s eight years of government (2003-2010). President Rousseff served as the energy minister in Lula’s first government and was responsible for bringing on stream a network of thermoelectric plants.

Although intended as an emergency supply, thermoelectric production has increased dramatically in recent years, climbing from 6% of total electricity in 2001 to 15% in 2011. Though Brazil is committed to reducing the amount of power it produces through gas to 12%, this looks unlikely. During January’s crisis, Brazil’s power regulator, Aneel, approved the start up of three thermoelectric plants, two of which were new.

World Cup fears

Once the panic over this year’s energy supply waned, Brazilians were quick to ask whether shortages could affect next year’s World Cup football tournament. On 22 January, the director general of Aneel, Nelson Hubner, said there was no way any of the cities hosting World Cup games would be affected. He was responding to questions about a report published by Aneel in December which suggested that 96% of projects to improve electricity generation in Porto Alegre (a host city) were behind schedule. The report also said that the cities of Manaus, Brasília, Rio de Janeiro and Belo Horizonte all merited “special attention”.

Hubner said that there had been a huge improvement in those projects singled out and stressed that the document’s own conclusion stated: “most of these delays offer no imminent risk to energy supplies for the 2014 World Cup”.

• Energy consumption

Brazil’s energy consumption, a useful barometer for the health of the economy, rose 4.2% annually in 2012, according to the latest report by the Operador Nacional do Sistema Eléctrico (ONS). The trend was led by the north east and the main consuming areas of the south-east/centre-west, where it rose 7.4%; in the south it rose 5.1%. The ONS noted that Brazil’s new middle class consumers are buying more appliances like air conditioning and fridges/freezers, encouraged by rising wages, lower interest rates and official tax incentives designed to boost consumption. Although the industrial sector is in a slump, installed capacity use was 84.1% in December, above the historic average of the past five years (83.6%), according to the Getulio Vargas Foundation.