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Brazil Power Report Q4 2011
Business Monitor International, Oct 2011, Pages: 55
BMI View:
BMI has revised its Brazil power industry forecasts this quarter, following the release of new historical data by two of its main reference sources. BMI has also incorporated changes related to the power mix, as new successful renewable auctions should lead to a surge in green capacity.
These changes confirm BMI's view that Brazil's electricity consumption will rise sharply in coming years, and that power generation will increase substantially as the country increases installed capacity in order to meet demand.
In light of Brazil's economic and demographic growth, power consumption is expected to increase from an estimated 459.63 terawatt hours (TWh) in 2010, to 766.32TWh in 2020. According to BMI's forecasts, electricity supply will also increase from an estimated 506.11TWh in 2010 to 886.45TWh by 2020.
In early 2009, Brazil's energy ministry noted that the country needs to increase electricity generating capacity by 50% over the next 10 years; an average of 5,000MW a year. In addition, the country is looking to diversify its power sources in order to reduce its dependence on hydropower, which in 2010 accounted for an estimated 71% of its generating capacity.
Hydro-electric sources are expected to remain the dominant fuel for electricity generation in the coming years, even though the country has been trying to diversify its electricity generation mix away from this power source due to the inherent risk of power shortages during times of severe drought.
BMI also notes that an estimated 16% of power generated has historically been lost in the transmission and distribution process due to the distance between power-generating facilities and end-user markets.
These weaknesses in the transmission infrastructure have certainly played a significant role in exposing the country to nationwide power cuts. The Brazilian government will need to address the problem and increase investments in the coming years.
On top of these long-term elements, key developments for Brazil's power sector include:
- As part of its effort to expand renewable capacity, the country has been relying on electricity auctions. In the latest round (August 17 and 18 2011), Brazil contracted 3,962 megawatts (MW) of new thermal, hydro, biomass and wind projects during two auctions for power projects to come online by 2014. Wind power projects emerged as the undisputed winners, thanks to a number of interrelated domestic and international causes that led to lower production costs.
- Recent announcements that Brazilian electricity holding company Centrais Elétricas Brasileiras (Eletrobrás) plans to invest an average of BRL12bn (US$7.4bn) a year between 2012 and 2015 corroborate BMI's view of increasing generation capacity. The figure is significantly higher than that announced in previous years, even though investment targets previously released by Eletrobrás have recently fallen short, with BRL5.3bn (US$3.3bn) invested in 2010, compared to an initial BRL6bn estimate. The majority of investment planned for 2012 is to go towards generation (BRL6.4bn), with the rest to go on industry (BRL4.3bn) and transmission and distribution investments (BRL1.9bn).
- Brazilian energy research company EPE has announced that the country's electricity industry expects to invest more than BRL8.5bn (US$5.1bn) on transmission expansion projects through 2015. The anticipated investments will be directed towards the construction of more than 5,450km of transmission lines in the country. Around BRL4.4bn (US$2.6bn) will be required for transmission lines, primarily in northern Amazon region, while BRL1.84bn (US$1.1bn) will be needed for northern Brazil. In addition, the north east region will need BRL1.29bn (US$0.77bn), while construction of new substations will require around BRL1.8bn (US$1.08bn).
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