Monday, May 12, 2014

The Brazilian government has embarked on a high-stakes political gamble by ruling out energy rationing, a consultant has told BNamericas.

Government officials have insisted that Brazil’s power supply is not threatened by an ongoing drought that has left hydroelectric dams at critically low levels. 

According to Gabriel Cunha, an energy analyst at global consulting firm PSR, President Dilma Rousseff is loath to make a decision that could impact her popularity in the run-up to October’s presidential elections.



We have had hydro inflows about in line with what was expected, and reservoirs remain dangerously low,” Cunha said.



“The government’s strategy seems to be to delay the decision to call for rationing as much as possible – most likely until after the presidential elections in October – gambling on a favorable hydrological situation over the next few months.”



Brazil is currently relying on back-up thermoelectric plants to compensate for dwindling hydroelectric output, which normally accounts for about 75% of the country’s power generation.



Cunha warned the government’s approach would be unsustainable should the drought continue.



“Even though there is a chance that this strategy will pay off and we will emerge unscathed in 2015, the downside scenarios are going to become even more severe,” he said.






The escalating crisis has led the mining and energy ministry to implement a World Cup operational power plan to guarantee supply during soccer’s showpiece event.



Under the plan, power connections to all stadiums will be monitored around the clock by national grid operator ONS.



Utilities have also been forced to meet strict guidelines for the operation of transmission and distribution infrastructure during the June 12-July 13 tournament.



Despite his longer-term alert, Cunha is less concerned about Brazil’s ability to cope with higher demand during the World Cup.



“Even if there is some kind of system failure, which seems unlikely – especially since the authorities have been taking other steps to mitigate such risks during the event – the World Cup is not going to be affected,” Cunha added.



The second of a two-part interview with Cunha can be seen in this week’s Electric Power Perspectives, for subscribers only.