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Brazil: a loser in the energy arena

image credit: Rafael Herzberg
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Consultant energy affairs Self employed

Rafael Herzberg- is an independent energy consultant, self-employed (since 2018) based in São Paulo, Brazil* Focus on C level, VPs and upper managers associated to energy related info, analysis...

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  • Mar 1, 2022
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Brazil: a loser in the energy arena

The cost of Brazilian electricity is the most expensive among the BRICS (Brazil, Russia, India, China and South Africa).

This is a situation that has been going on for many years.

But what really worries is the tendency of Brazil to increase the distance in the last position.

The reason is simple. Our competitors are replacing thermal plants by renewable ones to reduce emissions and the unitary cost of electricity produced.

And so Brazil becomes a country less and less competitive because the bulk of its productive activity is of "low added value" in which the energy component has a relevant weight in the list of costs.

It is no wonder that the GDP of the country's industrial activity has shrunk year by year!

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Julian Silk's picture
Julian Silk on Mar 1, 2022

Dear Rafael,

 

It is not just that, although that is true.  Brazil relies so much on hydropower, and has suffered a major drought, as in 

 

https://www.argusmedia.com/en/news/2287168-viewpoint-2022-brazil-to-stru...

and 

https://theworld.org/stories/2021-12-21/electricity-rates-have-skyrocket...

Investment in energy was relatively low, too.  According to BNAmericas, Brazil only invested about (my estimate) $5 billion (U.S.) in electricity generation and transmission in the 3 years between 2019 and 2021.  Brazil's population is 215,060,231 now, according to 

https://www.worldometers.info/world-population/brazil-population/#:~:tex....

The similar site 

https://www.worldometers.info/gdp/gdp-per-capita/

has Brazil's per capita GDP at 82nd in rank.  Colombia is lower, in 90th place.  But the Colombian company Ecopetrol, will invest more in absolute terms by itself for the coming years, as in 

https://www.reuters.com/business/energy/ecopetrol-invest-between-52-bln-...

This excludes investments in fossil energy providers for electricity and other foreign direct energy investments which they are targeting, according to 

https://www.spglobal.com/commodity-insights/en/market-insights/latest-news/electric-power/030121-ceraweek-colombia-accelerating-reforms-to-attract-investment-in-clean-energy-generation

 

So there is more to the story.

 

Rafael Herzberg's picture
Rafael Herzberg on Mar 2, 2022

Hi Julian,

Unfortunately Brazil has chosen to increase the thermal power plants participation in the country's power mix as opposed to taking advantage of our abundant hydro resources.

In the same line of thought, new hydro power plants are "run of river" - not including dams which help and a lot mitigate the drought risks. Historically when Brazil had only hydro power plants with "decent" reservoirs, there were no problems with the supply side. Only in the past 20 years when this policy changed (and reality shows it was a super bad decision) that drought has become an issue.

It is as if Brazil has chosen to build "thermal reservoirs". More emissions and higher costs. 

It is recognized - globally - that hydro power plants are one of the best in terms of emissions and costs. Renewable and very consistent.Actually, as published by FIESP a few years ago, hydro is #1 in terms of low emissions (including the reservoirs) and costs ($/installed kW and load factor).

Julian Silk's picture
Julian Silk on Mar 2, 2022

Dear Rafael,

Thank you very much for this.  Why on earth did they make these decisions?  Unless they have snakehead fish as a real problem - and even then it could be solved with intelligent technology - the fish shouldn't be a problem with the dams, and it just doesn't seem to make any sense.

Julian

Rafael Herzberg's picture
Rafael Herzberg on Mar 8, 2022

Julian you came with great questions!

Brazil is a very corrupt country! Lots of huge scandals. Decisions are not based on what's best from a technical/financial/management prospective. It is more about the oligarchs. The "friends". The cronies. The sweetheart deals.

That's why Brazil is always a laggard when it comes to GDP/inhabitant. For centuries. We are and have been a  poor country.

It is very sad. And I do not see changes happening. 

 

Julian Silk's picture
Julian Silk on Mar 8, 2022

Dear Rafael and anyone else who may be interested,

I don't guarantee this.  But if there is enough resistance in Ukraine to sustain a war, either direct as now, or a guerilla war later, and it becomes a popular cause outside (and conceivably, inside) Russia, you might get something like the "solidarity tax" mentioned here - J. -

https://inequality.org/great-divide/in-the-ukraine-war-we-can-make-oliga...

 

 

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