Lack of planning threatens to turn lights out on Brazil's World Cup party

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Wednesday, May 22, 2013

There was relief on three fronts when Brazil's federal government announced the deactivation of four diesel-fired thermoelectric plants earlier this month.

While four generators may seem trivial for a country of 193mn inhabitants, the move had wider significance.

Not only was it welcome news to environmentalists who have long lobbied against the use of fossil fuel-guzzling generators, it also foreshadowed a drop in power prices amid rising hydroelectric production.

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But most importantly, it offered some slack to a system that for six months had been pushed to breaking point.

The relief in Brasília was almost audible.

"The system is completely reliable and this announcement is proof of that," energy minister Edison Lobão said.

Lobão was not fooling anybody.

More than 75% of Brazil's power capacity comes from hydroelectric plants and when rainfall is low, like it was in the second half of last year, generators lie idle. This means the government has to rely on costly, carbon-laden gas and diesel-fired plants to make up the shortfall.

From October to May this year, thermoelectric facilities were operating at 100% capacity and provided 25% of the country's power.

While the government will not admit it publicly, analysts say the need to reactivate thermo generators such as the 693MW Uruguaiana plant, out of use since 2009, showed Brazil's power matrix was stretched beyond its limits.

"It is about bad planning, actually a lack of planning," energy consultant Rafael Herzberg said in an interview with BNamericas earlier this year. "We desperately need to diversify our electricity supply or rationing will occur."

Last year the government's energy development secretary Altino Ventura Filho said power capacity needed to increase by 7GW a year until 2020 to keep up with rising demand.

But Brazil has fallen well short of its target.

Figures from industry regulator Aneel show that in 2011 the country's generation potential rose 4.2GW followed by 4.0GW last year.

Meanwhile, 7GW of small hydroelectric projects have been shelved while awaiting regulatory approval, according to Curitiba-based consultancy Enercons. In the country's northeast, 26 wind farms lie idle due to the absence of transmission lines.

According Jurandir Picanço, an energy consultant for Ceará state industry federation Fiec, the consequences could be dire for Brazil's economy.

"If industry has to reduce production as a result of rationing, it will have an effect on Brazil's GDP, just like in 2001 when growth was 1.4% compared to 4.3% in 2000," Picanço said.

Autumn rain has given Brazil some breathing space by replenishing drought-stricken hydroelectric basins.

But many fear it will not be long before alarm bells are raised again.

Brazil's economy has shown signs of rebounding after modest growth in 2012, placing even more importance on the need to expand the country's installed generating capacity.

As the world's eyes turn to South America's largest country for next year's FIFA World Cup and the 2016 Rio Olympics, the government knows that - at least in the short term - power prices and a reliance on fossil fuels are side issues.

Of even greater importance is making sure the lights do not go out.