Brazil Spotlight: "Brazil faces the worst drought and floods in nearly a century"

On May 29, the Brazilian Government declared a “water shortage alert” until September for the states of São Paulo, Paraná, Minas Gerais, Mato Grosso do Sul and Goiás. These states account for 70 per cent of the water storage capacity for hydroelectric power in the country.

A drought was recorded from February to April (typically rainy months) threatening the water supply—for consumption, electricity, agriculture, industry and river transport—and impacting the economy at a time when indicators point to a 5 per cent GDP growth in 2021.

This is not the first time Brazil has suffered a water shortage. Despite having 12 per cent of the fresh water on the planet's surface, it is not evenly spread across the country: while the Southeast and Midwest are experiencing the worst recorded drought in 91 years, the North faces the worst flooding of the Rio Negro—a tributary of the Amazon—in 119 years.

After the 2001 power cuts, the National Integrated System (SIN) —a nationwide hydroelectric energy grid—underwent successive reforms, privatising assets to overcome the deficit in public investment, increasing the energy output capacity and enabling the expansion of alternative energy sources such as biomass, solar and wind. However, renewable sources are intermittent and unstable and have the added disadvantage that the energy cannot be stored and must be used as soon as it is generated.

The latest reform to SIN was triggered last May when Brazil’s lower house of congress approved the capitalization of Eletrobras, the sector’s largest public company whose state-controlled shares will be privatized. The Senate is due to discuss and approve the bill by the end of June.

After the 2001 crisis, power generation capacity was increased substantially. New hydroelectric plants—such as the Belo Monte, Jirau and Santo Antônio plants—were brought online, taking a high environmental toll. In order to avoid the risk of power cuts and energy rationing, multiple thermoelectric plants were built close to areas of high energy consumption.

While Brazil is better protected now from energy cuts, the thermoelectric plants have also had an environmental impact, increasing the burning of fossil fuels which generate greenhouse gases. Currently, there are 3,180 thermoelectric plants in operation, powered by gas, coal, diesel and biomass, responsible for 21 per cent of the electricity consumed in the country.

Despite this, conditions are favourable for Brazil to move towards a decarbonized economy, thanks to renewable energy generated by rivers. According to the Brazilian Electricity Regulatory Agency, hydroelectric energy sources currently provide 59.5 per cent of Brazil’s total energy supply; wind farms 9.8 per cent; biomass plants 8.3 per cent; natural gas plants 8.1 per cent; and other sources, such as solar, nuclear, coal and diesel 9.3 per cent. As such, with 83 per cent of electricity provided by renewable sources, the Brazilian power matrix is ​​one of the cleanest and most sustainable in the world.

The fate of the looming 2021 crisis hinges on the drought, a result of the La Niña meteorological phenomenon in the Pacific Ocean (which reduces the surface water temperature, decreasing rainfall in the Mid-South region of Brazil) and the difficulty of structuring a power grid resistant to climate change in a deficit economy. Climate change makes it difficult to predict the flow and use of rivers.

In 2020, while rainfall was low, a crisis was averted because the Covid-19 pandemic reduced economic activity and energy consumption, decreasing Brazil’s GDP by 4.1 per cent. Ironically, the impact of the new drought hits at the same time as the country ramps up its production of materials for the Covid-19 vaccine rollout while the economy begins to recover from the recession.

Last week, the National Electricity System Operator (ONS) ordered a review of Brazil’s 3,180 thermoelectric power plants —belonging to 40 companies—to find out precisely their capacity in order to avoid the risk of power cuts and energy rationing.

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