Analysis: Brazil’s worst water crisis in 90 years exposes electricity model’s shortcomings

RIO DE JANEIRO, BRAZIL – Amid the worst water crisis in 90 years, Brazil is once again discussing the risks of blackouts and rationing – the alternative found for the crisis in 2001.

The flaws in the electrical system’s planning and operation, as well as in the energy pricing model, are pointed out as the causes behind the situation affecting inflation, threatening economic growth and potentially jeopardizing president Jair Bolsonaro’s reelection prospects.

Luiz Barroso, chairman of PSR, the largest energy consulting firm in the country, says that the sector’s planning is focused on the so-called physical guarantee, an indicator that translates how much a plant contributes to the security of supply.

“The problem is that, in Brazil, the physical guarantee neither guarantees nor is physical,” he says. He explains that the physical guarantee is calculated based on computational models that need to be optimized – the methodology was established in 2004. “It does not represent the expected production of a plant, but rather its economic value to the system,” he says.

An example is Belo Monte, in Pará, which has a physical guarantee of 4,571 average megawatts. The figure does not accurately represent the characteristics of a run-of-the-river plant that depends on rainfall: in rainy months, it generates triple the energy produced in drier months, when the capacity is 1,963 average megawatts.

This means that in rainy months, Belo Monte generates enough electricity that could supply all homes and businesses in the states of Rio de Janeiro and Minas Gerais. In dry months, production is capable of supplying only the equivalent to the state of Pernambuco.

If it does not reflect what happens with power generation, the physical guarantee is used as a reference for how much they can sell in contracts – that is, it has commercial significance. This is why there is resistance to any government initiative to recalculate physical guarantees and adjust these figures to more realistic levels.

Barroso points out that over the past 20 years only one revision was made – in 2017 – and even then many companies went to court to avoid losing revenue. An overestimated physical guarantee, as Brazil currently has, also means less need to hire more plants in bids to supply energy because the system says that the quantity is sufficient.

In addition, the pricing model, also used to estimate the physical guarantee, does not accurately represent the generation capacity. Nor is it fed with data regarding climate change, which affects rainfall, and the multiple uses of water.

Another factor Barroso highlights is that the performance of hydroelectric plants has been worse than expected for some years now. In 2012, his consulting firm estimated that plants spent 4% more water than needed to produce the same megawatt-hour – currently they spend 2%, still a poor level. Among the hypotheses are reservoir silting, old turbines, and even water theft for irrigation and fish farming, in addition to restrictions not included in the planning model.

“In many plants, we can’t store more water because we need to maintain a minimum flow to meet other uses. And this is misrepresented in the physical guarantee calculation due to the model’s simplification,” he says. “In times of stress, ideally we should plug the drain to fill the sink, but this is not simple.”

He believes the system will change, with hydroelectric plants as batteries, offsetting generation from intermittent sources, such as solar and wind. “Renewable sources help offset the variability of hydroelectric plants,” he says.

Luiz Eduardo Barata, ex-director general of the National Electric System Operator (ONS) agrees. He advocates the expansion of wind and solar power plants. “Thermal power plants help us reduce this kind of problem, but I still don’t think they are the solution. We need to introduce more renewable sources, such as wind and solar, to the point of recovering the levels of the reservoirs,” he says.

Blackout

For Luiz Barroso, the blackout is a risk, but not a certainty. According to him, the government has a larger list of alternatives today than it had in 2001, when rationing occurred. If the situation is difficult in the Southeast and Midwest, where the main hydroelectric plants are located, the storage level in the North, Northeast and even in the South is more comfortable.

The transmission line system is now stronger, enabling energy transfers from one region to another that were previously impossible. The energy supply is greater, and the sources are more diverse, with more wind and solar thermoelectric plants. Energy can also be imported from Argentina and Uruguay.

Source: O Estado de S. Paulo