Brazil ups bet on voluntary power rationing in the face of water crisis

Brazil will implement another voluntary program to reduce power demand as part of efforts to deal with a historic draught that has affected hydro power generation. 

To be launched next month, the program will be for regulated market consumers (those who must buy power from a distribution concessionaire) and will be similar to a recently launched one for consumers in the free power market, mines and energy minister Bento Albuquerque told a press conference on Wednesday. 

The technical and operational details are currently being ironed out by mines and energy ministry MME and sector regulator Aneel, with the program’s  main feature being rewarding residential, commercial and rural consumers that reach pre-established reduction targets. 

By doing so, the government aims to reduce the use of marginal and more expensive thermoelectric power that have been pressuring prices and causing inflation to rise amid the worst drought in over 90 years. 

Around 60% of Brazil’s electric power matrix is based on hydro power with water dam levels in the south and south-east regions currently below 50% and 30%, respectively.  

“The prospects for the future that we have in terms of precipitation until the end of the dry season, in September and October, are not good,” Albuquerque said. 

On Monday, MME published regulation 22/2021 with guidelines for large energy consumers in terms of their offers of voluntary demand reduction in the free market. 

The program will work like an auction where consumers offer the amount they plan to save and the price. If the offer is accepted, based on the needs of the electric power system, the payment will be made according to the short-term market liquidation rules and up to the limit of the PLD (free market price index).

On Wednesday, the government also published a decree to set a reduction target for power consumption by federal buildings. The expectation is to reach savings of between 10% and 15% with the help guidelines that include energy efficiency solutions. 

On the supply side, actions taken by the government to assure power supply include increased electricity imports from Argentina and Uruguay, and the flexibilization of power exchange between the northeast, which has registered wind and solar power generation records, and the south and south-east regions.