11/02/2022
Costs due to the hydro crisis reached BRL 16.8 bn (USD 3.0 bn) for the year up to October.
Nearly 60% of the Brazilian energy matrix is supplied by hydroelectric power which is reasonably clean and cheap. But in recent years, precipitation has been lower than average in Brazil leading to reservoirs with low water levels, which do not have the potential to generate enough energy. Thus, in order to avoid blackouts, Brazil has had to rely on other kinds of energy, mainly thermal, to support demand.
However, thermal generation is far more expensive and dirty. Technically, thermal power plants have high UVC (Unit Variable Cost) and are the last type of energy chosen by the optimization model to dispatch energy. But now, due to the hydro crisis, thermal plants have been used for short-term generation. It was noted in the 2021 MME (Ministry of Mines and Energy) review that Brazil expected to spend BRL 13.1 bn (USD 2.3 bn) through to November, but in actuality, BRL 16.8 bn (USD 3.0 bn) was spent through October, which includes energy imports from Argentina and Uruguay. This shows that Brazilians will face higher electricity bills and potentially higher inflation.
Alternative energy is the key to the issue. Investing in solar and wind power is the best way to reduce dependency on thermal and hydroelectricity. It is expected, as per consultants of the sector, that alternative energy will continue to grow as a share of the energetic matrix until 2040.
