September 24, 2019

Alternative Energy Supplementing Hydroelectricity in Brazil

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

For decades Brazil has relied on hydroelectric dams to supply the vast majority of its electrical needs. Numerous reservoirs in southeastern Brazil supplied the needed electricity for Brazil's largest cities. In the 1980's and 90's, hydroelectric dams supplied more than 80% of Brazil's electricity, but that I now changing.

Currently, hydroelectricity supplies 64% of Brazil's electrical needs and that is expected to decline to 51% by 2027. The amount of energy supplied by wind and solar is on the upswing. Currently, wind and solar supply 22% of Brazil's electricity and that is expected to increase to 28% by 2027.

These changes are in part the result of Brazil's Decade Energy Plan imitated in 2017 with the goal of expanding Brazil's electrical sector by 2027. It includes investments in developing alternative energy sources and transmission networks to get the energy to where it is needed.

In an interview with Reuters, the director of Brazil's National Electrical System (ONS), Luiz Eduardo Barata, explained that the country had no choice but to diversity its energy sources. The big cities in southeastern Brazil rely on hydroelectric dams and their reservoirs to supply the vast majority of their electrical needs.

Those reservoirs are not expanding while the demand for electricity continues to increase. In 2005, those reservoirs held enough water to supply electricity for 27 months. By 2017, they held enough water to supply electricity for 16.4 months and it continues to decline.

The ability to add new dams and reservoirs to the grid in southeastern Brazil is very limited. In light of the new reality that Brazil could not meet its future electrical needs by building more dams, the country adopted the Decade Energy Plan. This plan was designed to increase the production of electricity from wind and solar and to use natural gas to generate electricity during peak demand. The plan also included new technologies such as batteries and a smart electrical grid to meet the future demand.

At one point not too many years ago, there were plans to build 120 hydroelectric dams in the Amazon Basin. Only a few of those dams have been built and only a handful more dams may ever get off the drawing board. There is growing opposition to dam construction in the Amazon Region including: environmental concerns about river ecologies and indigenous groups who rely on the rivers for part of their livelihood.

Even the agricultural sector in Brazil is wary of future dame building. The agricultural sector needs the electricity, but they are not sure that more dams is the right way to go. The idea of using rivers as a means of transporting grain to export markets apparently never was considered when some of the recently built dams were designed. The dams were built without the necessary locks needed for barges to bypass the dam.

When these dams were being designed, virtually all the grain in Brazil was exported through ports in southeastern Brazil. That has now undergone a fundamental change with new export facilities in northern Brazil using the Amazon River. These "Northern Arc" of ports are encouraging grain to move north from central Brazil instead of south to southeastern Brazil. Currently, the vast majority of the grain moves to the northern ports by truck, but there are plans to develop barging operations and railroads to reduce the cost of moving the grain to the Amazon River.

If dozens of dams are built without the necessary lock system needed to accomdate barge traffic, it could hinder the adoption of the cheapest way to move bulk products such as grain and fertilizers.