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Shortage risk

Historic drought exposes vulnerabilities in Brazil’s electricity system, which is heavily dependent on hydroelectric plants

Electricity transmission towers in the city of São Paulo

Léo Ramos Chaves

In 2021, Brazil faced its most serious hydrological crisis in nine decades. As well as impacts on agriculture and water supply in cities, the lack of rainfall put the country’s capacity to generate electricity at risk. Not including São Pedro, the reservoirs of Brazil’s hydroelectric plants—the country’s main power source, accounting for more than 60% of all the electricity it produces—reached historical lows. In April of this year, at the end of the rainy season, the dam reservoirs in the Southeast/Midwest subsystem, where the biggest hydroelectric plants in the country are located, were at 35% of capacity, only slightly better than in April 2001 (32%), when Brazil experienced a severe electricity crisis that led to major blackouts, leaving cities in the dark and forcing the federal government to ration electricity.

To prevent the sector’s collapse and avoid repeating the situation experienced 20 years ago, certain measures were adopted by the Brazilian Ministry of Mines and Energy (MME). In the first half of 2021, the ministry decided to increase electricity generation at thermoelectric plants, which burn fossil fuels and are more expensive and pollute more. It also authorized an increase in electricity imports from neighboring countries, such as Argentina and Uruguay.

Above average rainfall in October and November—the beginning of the rainy season—brought some relief but did not completely resolve the problem. “Projections for the end of November [after this issue goes to print] estimate that reservoir volumes in the South and Southeast/Midwest subsystems will reach 53.4% and 21.3% of capacity, respectively,”  Luiz Carlos Ciocchi, general director of Brazil’s National Electricity System Operator (ONS), responsible for operating, overseeing, and managing electricity generation in the country, told Pesquisa FAPESP.

The MME estimates that dams in the Southeast/Midwest will reach 38% capacity in April 2022 if this year’s rainfall matches the volume of the 2020/2021 rainy season—if reservoir levels fail to surpass around 30% by then, the authorities will be on alert. “We are paying close attention and will continue to monitor the indicators so that we can adopt any measures needed to meet the demands of the SIN [National Interconnected System].” The SIN is the country’s electricity production and transmission network.

Alexandre Affonso

According to Christiano Vieira, electricity secretary at the MME, measures were implemented in October 2020 to ensure enough electricity is generated and supplied this year and next. “Thermoelectric production was maximized during the 2021 dry period [May to October] to preserve water levels in the system’s main reservoirs.”

Researchers and electricity sector experts interviewed by Pesquisa FAPESP both recognize the challenges faced by the sector, which is highly dependent on water sources, but their opinions differ on the root causes. “The 2001 crisis taught us some very important lessons. That year, 90% of our power generation mix was hydroelectric plants, today it is around 62%, and within ten years it will be 58%,” says economist Nivalde de Castro, general coordinator of the Electricity Sector Studies Group (GESEL) at the Federal University of Rio de Janeiro (UFRJ).

Fabio Colombini Jorge Lacerda Thermoelectric Complex in Capivari de Baixo, Santa Catarina: one of the largest coal-fired power stations in South AmericaFabio Colombini

“A power generation mix that is highly dependent on a single source is a risk; if this one source is renewable and seasonal, such as water, the risk is even greater,” the researcher explains, noting that between 2001 and the current crisis, Brazil’s absolute electrical capacity has grown substantially, from 75 gigawatts (GW) to about 170 GW. “During this growth, priority was given to other renewable sources, such as wind, biomass, and solar.”

In absolute values, hydroelectric capacity increased over the last two decades, from 61,000 GW in 2001 to just over 100,000 GW this year—its share of the national energy mix decreased in the period because other sources also increased. In this move to expand water sources, several new plants were built in the Amazon region, including in Jirau, Santo Antônio, and Belo Monte, which have come under criticism for their social and environmental impacts.

The increased capacity, however, was not followed by an increase in total reservoir volume, since some of the new hydroelectric plants, such as Belo Monte, used run-of-river technology, which does not require a dam. During droughts, however, river water levels decrease, strongly affecting electricity generation at these plants, which have no reservoirs and rely solely on river flow. “The construction of hydroelectric plants without reservoirs is the fundamental cause of the problems the country is facing in this area,” highlights José Goldemberg, a physicist and professor emeritus at USP whose research focuses on sustainable energy and development.

Alexandre Affonso

But Castro believes the current problem is caused by climate change, which has drastically affected the rainfall in Brazil. “In eight of the last 10 years, rainfall has been below the historical average. As a result, the water levels of hydroelectric plant reservoirs have decreased, leading to greater use of thermoelectric plants,” he says. An aggravating factor, he says, is the government’s lack of environmental policy. “Priority is not given to preserving the Amazon rainforest, which has a dual environmental function: in addition to recycling CO2 [carbon dioxide], it also generates a huge amount of moisture, which is transformed into ‘flying rivers’ that carrying rain to the Southeast.”

Ildo Luís Sauer head of the Center for Energy Analysis, Planning, and Development (CPLEN) at the Institute of Energy and the Environment (IEE) of the University of São Paulo (USP), says that the crisis the electricity sector is currently experiencing was foreseeable and argues that in addition to circumstantial problems—such as a lack of rain—the sector has suffered for many years from structural deficiencies, dating back to reforms in the 1990s by the Fernando Henrique Cardoso administration (1995–2002), which began privatizing electricity companies, and in the following years by the governments of Luiz Inácio Lula da Silva (2003–2010) and Dilma Rousseff (2011–2016), when legislative changes were made.

“The instability we are seeing in the electricity sector has lasted for over two and a half decades. The big mistake behind the current electricity crisis in Brazil is in how the sector was planned and how it is being run. In efforts to expand the system and ensure its safety, we have been using the wrong types of plants in recent years, from a technical and economic standpoint. I’m talking about thermoelectric plants powered by fossil fuels, such as coal, oil, and natural gas. The right choice would have been to use more wind and solar power plants,” says Sauer, who was gas and energy director at Petrobras between 2003 and 2007 and has written several articles on the energy sector, the most recent on the potential of solar and wind energy in the country, which was coauthored by Nilton Amado and Erick Pelegia, also from the IEE.

Fabio Colombini Três Irmãos Hydroelectric Power Plant, located in the Tietê River basin in Pereira Barreto, São Paulo StateFabio Colombini

According to Sauer’s calculations, Brazil spent approximately R$110 billion on fossil fuels for thermal power plants between 2008 and the last electricity crisis in 2015. “With this money, we could have built wind power plants with a capacity of 30 gigawatts [the current national wind energy capacity is 20 GW]. The issue is that Brazil made bad choices and gave contracts to unsuitable plants. Thus, the crisis reappears in periods of weak economic activity, like now.” He also argues that the approach to planning and offering energy contracts should take into account hydrological changes. “The problem is not nature, but the organization and management of the national electricity system.”

There are around 3,200 thermoelectric power stations in Brazil, with a total capacity of 44 GW. Sixty-six percent of them run on fossil fuels—the remaining 34% use biomass or nuclear power. “Thermal plants are a highly flexible source because you can bring them into operation very quickly. They function well as a backup,” says Maurício Uriona Maldonado, from the Department of Production and Systems Engineering at the Federal University of Santa Catarina (UFSC). The total capacity of thermal sources has grown substantially since the energy crisis in 2001, when it was 10.4 GW, just 25% of the current value.

The problem is that these plants burn fossil fuels, mainly coal and oil, releasing greenhouse gases into the atmosphere, which contribute to global warming. Costs are also high: around R$1,600 per megawatt-hour (MWh) compared to less than R$200 for hydroelectric plants. To cover this expense, the government has had to raise electricity prices, instituting a special “water shortage” tariff. Expected to remain in effect until April 2022, it adds an extra R$14.20 for every 100 kilowatt-hours (kWh) consumed, 50% more than the previously most expensive tariff.

André Luís da Silva Leite, an expert in regulation and competition in the electricity sector from the Department of Administrative Sciences at UFSC, says another mistake made by the authorities was their failure to oversee the so-called physical guarantee of hydroelectric plants, which represents their maximum generation capacity in the face of certain risks. The risk in this case is the reduced volume of the rivers where the plants are located.

“When the physical guarantee isn’t up-to-date, the energy provided by water sources is lower than expected,” he explains. According to Leite, hydroelectric plants nationwide generate an average of approximately 70% of their physical guarantee. “While the 2001 blackout was caused by a poorly formed market with incomplete regulations that was unable to attract the investment needed to increase capacity, the 2021 crisis is a result of bad management of the entire system,” he stresses.

In an article published in the journal New Economy in July 2001, João Lizardo de Araújo, from UFRJ’s Institute of Economics, analyzed the reforms that began in the previous decade and warned of the energy crisis to come. “A lack of financial resources led to delays and suspensions of energy generation and transmission expansion projects. Consumption, on the other hand, increased as the economy grew and continued to increase even when the economy stagnated, as more and more people gained access to electricity,” pointed out the researcher.

Daniel Ramalho / AFP via Getty Images Angra 3: nuclear power plant, which has been under construction for decades, is projected to offer 1.4 GW of powerDaniel Ramalho / AFP via Getty Images

In a 2003 study on the energy crisis of the same period, José Goldemberg and Luiz Tadeu Siqueira Prado from USP’s Polytechnic School also examined the reforms. “The government was not able to implement an adequate regulatory environment nor a reliable free market in the MAE [Wholesale Electricity Market], but it was able to paralyze the management activities of Eletrobrás, leaving the system without a head,” they wrote. The authors conclude that this led to the vast majority of electricity companies running up huge debts and requiring public money not to go bankrupt.

To overcome the crisis, the general understanding is that diversification of the national power generation mix needs to be accelerated, prioritizing renewable sources (see article on page 36). “Emerging energy sources, especially solar and wind, are on the rise and everything indicates that they will dominate the energy sector in the future,” says Ana Flávia Nogueira, a chemist from the Institute of Chemistry at the University of Campinas (UNICAMP) and director of the Center for Innovation in New Energies (CINE), an Engineering Research Center (CPE) formed by FAPESP and Shell that unites researchers from UNICAMP, USP, and the Institute for Energy and Nuclear Research (IPEN). “In this regard, Brazil is in a comfortable position, since it has an abundance of sun and wind, especially in the northeast.”

One problem with these sources, however, is that they are intermittent—the amount of energy generated on a given day varies, with wind farms depending on the occurrence of wind and solar plants on the presence of solar radiation. This variance can affect the energy distribution and transmission network. According to Nogueira, the problem can be solved by installing stationary batteries at solar and wind farms to store the energy they produce, allowing them to supply electricity to the SIN at a steadier pace.

One of CINE’s lines of research is the development of efficient storage systems for wind and solar power stations. Researchers are striving to reduce the cost and increase the storage capacity of these batteries. “Large systems are increasingly being used to store the additional energy generated by solar or wind farms, but they are expensive,” highlights Ricardo Rüther, a metallurgical and materials engineer and head of the Photovoltaic Laboratory at UFSC.

According to the 2030 10-Year Energy Expansion Plan (PDE) written by the Brazilian Energy Research Company (EPE), which provides services to the MME, the share of renewable sources in the Brazilian power generation mix was 84.8% last year, slightly higher than in 2019 (see Pesquisa FAPESP issue nº 297). Among renewable energies, hydropower was top, followed by wind, biomass, and then solar. Fossil sources accounted for about 13% and nuclear energy for just over 1% (see infographic). A country’s power generation mix is the range of sources used to generate electricity and is part of the energy mix, which also includes other sources, such as fuels for cars, buses, and trucks (gasoline, diesel, ethanol, etc.) and for cooking food (firewood).

Alexandre Affonso

The PDE projects that Brazil’s national wind energy capacity will increase from 15.9 GW in 2020 to 32.2 GW at the end of the decade. Solar farms are expected to increase from a total of 3.1 GW to 8.3 GW, while biomass power stations, predominantly in the sugar and alcohol sector, will increase their capacity from 13.9 GW to 15.1 GW in the period—an underestimation, according to the Sugarcane Industry Association (UNICA), which forecasts that it will reach nearly 25 GW by the end of the decade.

“A diverse range of source increases the resilience of any system. There is also a chance that new sources will become cheaper, as is happening now with wind and solar,” says electrical engineer Paulo César Fernandes da Cunha, a consultant at the Center for Energy Studies of the Getulio Vargas Foundation (FGV Energia) and former vice-president of the Brazilian Association of Energy Traders (ABRACEEL).

“Wind and solar power have proven more competitive than other technologies with potential for expansion,” says Vieira, from the MME. The price of solar energy at auctions held by the Brazilian Electricity Regulatory Agency (ANEEL) was reduced from US$100/MWh in 2013 to US$30/MWh this year, according to the Brazilian Association of Photovoltaic Solar Energy (ABSOLAR). The cost of wind energy has fallen by 40% since 2009. Analysts believe the price of these two energy sources may continue to fall in the coming years due to gains in scale and efficiency.

The 2030 PDE also forecasts that nuclear energy will grow in the country. According to the document, it will rise from the current 2 GW to 3.4 GW in 2030. Such an increase would require Brazil’s third nuclear power plant, Angra 3, construction of which began in the 1980s and has been repeatedly interrupted, to be completed. The consortium responsible for the project hopes to complete a technical assessment of the plant’s progress by the end of the year.

According to Goldemberg, nuclear energy is not a short-term alternative. “Regardless of how much emphasis is given to this source, it would be impossible to significantly increase its participation in the national power generation mix. Nuclear power stations are expensive and take a long time to build,” he explains.

Castro, from GESEL at UFRJ, says that Brazil’s energy transition is different to most of the rest of the world. Data from the International Energy Agency (IEA) show that global electricity generation is based primarily on coal (38% of the total) and natural gas (23%). Hydraulic energy, which is predominant in Brazil, accounts for only 16% of global capacity.

“While the power generation mix in most countries is dominated by thermal sources that are now being replaced by renewable alternatives, in Brazil we are moving from one renewable source—water—to two other renewable sources: solar and wind,” he says. “We will therefore continue to have one of the best mixes in the world.”

Research division 1: dense energy carriers (nº 17/11986-5); Grant Mechanism Engineering Research Centers (ERC); Agreement BG E&P Brasil (Shell Group); Principal Investigator Ana Flávia Nogueira (UNICAMP); Investment R$7,997,384.81.

Scientific article
GOLDEMBERG., J and PRADO, L. T. S. Reforma e crise no setor elétrico no período FHC (Reform and crisis in the electricity sector during the FHC administration). Tempo Social. Vol. 22, pp. 2019–35. Nov. 2003.
ARAÚJO, J. L. A questão do investimento no setor elétrico brasileiro: reforma e crise. (The issue of investment in the Brazilian electricity sector: reform and crisis.) Nova economia. Vol. 11, no. 1, pp. 77–96. July 2001.
AMADO, N. et al. Capacity value from wind and solar sources in systems with variable Dispatchable capacity—an application in the Brazilian hydrothermal system. Energies. May 30, 2021.