Meeting Brazil's power challenge
Utilities Unbundled - Issue 14
To meet Brazil's rising power needs, the country needs more diversity in its generation assets and a teamwork approach, says Britaldo Soares, CEO of AES Brasil.
“Building the Brazilian power system requires the same kind of team effort we are seeing now in the lead-up to the World Cup in 2014 and the Olympics in 2016.”
— Britaldo Soares, AES Brasil
As Brazil's GDP grows 4% per year, our energy sector needs to add the capacity to generate 5GW per year over the next decade (see Figure 1).
Figure 1: Meeting Brazil's electricity demand
Adding that much capacity is a challenge, but the structural changes Brazil has made over the past 10 years make me confident that the industry will make it happen.
The regulatory framework put in place in 2003 and 2004 liberalized Brazil's energy market, giving power producers and investors the assurance they need to invest in new capacity and infrastructure.
A portfolio approach
The country needs a better balance in its portfolio of generation assets: hydropower accounts for 70% of Brazilian electricity. Clean, renewable and local hydropower has obvious environmental and geopolitical advantages but more diversity is needed. Forecasters believe that global warming will make future water levels more uncertain.
To supplement hydro, AES plans to develop wind resources. However, natural variations in wind supply could leave occasional but significant shortfalls. To cover this, gas-fired thermal plants will also be necessary. Natural gas has three key advantages:
- Enhancing the balance of our portfolio with schedulable resources
- Security of supply: Brazil recently discovered major natural gas resources
- Lower environmental cost than many other hydrocarbons, in particular on CO2 emissions
One of the biggest challenges will be to link sources of natural gas with generation plants. For example, a 640 MW thermal plant near the Argentine border has been idle for more than four years as we wait for a natural gas supply to come.
Deeper cross-border energy integration would help Brazil and our neighbors, for example by giving Argentina a convenient market for its shale gas and Brazil's new gas discoveries once they are online.
Another major hurdle is sector policy consistency. Businesses need assurance that the rules of the game are stable, particularly when making decisions that will impact not only a utility's future but also a region's economic development for the next 40 or 50 years.
In the end, building the Brazilian power system requires the same kind of team effort we are seeing now in the lead-up to the World Cup in 2014 and the Olympics in 2016. The Brazilian Government has organized a working group of government agencies, companies, and non-governmental organizations to create a world-class power grid for these events.
We are investing US$160m in games-related transmission and distribution capacity upgrades over this next year alone. We all want to contribute to the success of the games, and to the social and economic growth of Brazil.