Brazil electricity shortage predicted to last 2 years


By the OGJ Online Staff

HOUSTON, June 8, 2001—If electricity consumption in Brazil is not cut by 20% during the second half of the year, sweeping mandatory rolling blackouts will be used to ration power among users, said credit rating agency Fitch IBCA, Duff & Phelps.

The electricity crisis is expected to continue into next year and will negatively impact every participant in the Brazilian economy, analysts said. While Brazilian politicians have proposed assessing stiff financial penalties for not cutting usage and cutting off individual service completely, Fitch analyst Daniel Kastholm says the most "fair" way to ration an electricity shortage and conserve power is through blackouts.

"The crisis will not permanently affect the credit quality of most businesses," he said.

However, the power crisis will slash Brazil's economic growth rate almost in half, he said. Large industrial sectors such as pulp and paper, iron ore, and steel will be minimally affected because these industries have inside the fence cogeneration facilities and back up generation. Economically, sales of Brazilian heavy industry could be negatively impacted, however.

"The impact will depend on how much they sell into the local market. Whether people will be able to consume?" pointed out Kastholm. Fitch just published a new research report 'Brazil's Electricity Shortage: Far Reaching Implications.'

The existence of a shortage of electricity was known by Fitch officials late last year. But the extent and the depth of the crisis was not known until a few months ago, Kastholm conceded.

"The country was living on razor thin margins for years but sufficient rain allowed Brazil to avoid black outs," he said. "There was also underinvestment in generation and mismanagement of the hydro resources."

The reservoir levels were depleted over the last 3 years to produce more electricity. The impact of the shortage will mean distribution company revenues and income will decline by 20%, he said.

Kastholm said the crisis is not a short-term problem and will require substantial investment in transmission and generation. It is likely the same problems will recur next year. The country is 90% dependent on hydroelectric power and needs to diversify its energy mix.

"They have begun to see this," he said. For the latter to occur, generators must be able to pass gas prices through to end users. Kastholm said fuel adjustments clauses common in the US are a foreign concept to countries dependent on hydroelectricity.

However, this week Petrobras said it agreed to absorb the currency risk of natural gas contracts for power generation. Investors considering power generation projects are weighing if that is enough to warrant investment.

But with the political climate shaky about further privatization, some generation companies are abandoning plans to invest in Brazil. AES Corp., Arlington, Va., announced recently that it would suspend investments in Brazil, he noted.

Sponsored by FLSmidth

Related Articles

Profiling Geothermal Energy in North America

North America holds diverse geologic conditions, economic and political contexts, and geothermal experiences.

Energy Reform Package to Increase Competition And Private Sector Opportunities in the Mexican Power Industry

In April, Mexican President Enrique Pena Nieto proposed a legislative reform package that was approved by the Mexican Congress, overhauling the nation's energy industries.

Follow Power Engineering on Twitter
Latest News
Siemens signs contract with Thailand for 18 industrial gas turbines

Siemens signs contract with Thailand for 18 industrial gas turbines

The units -- purchased by TEC Project Services Corporation (TPS), a subsidiary of the Japanes...
GE is supplying two sets of high-efficiency steam turbines and generators for Petrovietnam’s new coal-fired thermal power plant in Soc Trang.

Petrovietnam selects GE's high-efficiency steam turbines for new coal-fired power plant

GE is supplying two sets of high-efficiency steam turbines and generators for Petrovietnam’s ...
Duke Energy Renewables acquires 50-percent stake in Mesquite Creek Wind

Duke Energy Renewables acquires 50-percent stake in Mesquite Creek Wind

Duke Energy Renewables has acquired a 50-percent stake in Mesquite Creek Wind, a 211-MW wind ...
Co-op signs power purchase agreement for solar project in Colorado

Electric co-op signs solar power purchase agreement

Tri-State Generation and Transmission Association Inc. signed a 25-year power purchase supply...
US construction spending at highest level in seven years

US construction spending reaches highest level in 7 years

U.S. construction spending in July climbed to its highest level in more than seven years, boo...
GE announces launch of latest aeroderivative gas turbine, LM6000-PF+

GE announces launch of latest aeroderivative gas turbine, LM6000-PF+

GE is launching its latest aeroderivative gas turbine, the LM6000-PF+, which employs technolo...
Sendai nuclear Unit 1 in Japan connects to power grid Kyushu Electric Power Co.

Sendai nuclear Unit 1 connects to grid

The Sendai 1 nuclear power unit in Japan is expected to reach commercial operations, almost t...
EPA allows one claim to stand in Sierra Club appeal of Schiller air permit

EPA allows one claim to stand in Sierra Club appeal of Schiller air permit

U.S. Environmental Protection Agency (EPA) Administrator Gina McCarthy signed a July 28 order...

Power Engineering Current Issue

01/01/2015
Volume 119, Issue 1
1501pe-cover-lg
Products Showcase
GE announces launch of latest aeroderivative gas turbine, LM6000-PF+

GE announces launch of latest aeroderivative gas turbine, LM6000-PF+

GE is launching its latest aeroderivative gas turbine, the LM6000-PF+, which employs technologies from four GE businesses, bringing power online faster and more efficiently than ever before.

Dynamic Fluoride Ion cleaning DFIC of industrial natural gas turbines Hi-Tech Furnace Systems

Dynamic Fluoride Ion Cleaning of IGT Parts

The Dynamic Fluoride Ion Cleaning (DFIC) Process from Hi-Tech Furnace Systems is able to clean deep, narrow cracks of oxides by cycling between negative, atmospheric, and positive pressure.

Archived Articles

2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015

Power Industry Wire News

KPIT Selected by UPPCO to Deliver New SAP(R) Software Implementation and Electric Utility Transformation Project

KPIT Selected by UPPCO to Deliver New SAP(R) Software Implementation and Electric Utili...

Pacific Energy Development Announces Restructuring of Debt Facilities in Anticipation of Previously Announced Merger

Pacific Energy Development Announces Restructuring of Debt Facilities in Anticipation o...

Neah Power Systems, Inc.: August 2015 Update to Shareholders

Neah Power Systems, Inc.: August 2015 Update to Shareholders

Scorpio Bulkers Inc. Announces Purchase of 552,481 Common Shares by Scorpio Services Holding Limited

Scorpio Bulkers Inc. Announces Purchase of 552,481 Common Shares by Scorpio Services Ho...

Magnum Hunter Resources Declares Monthly Cash Dividend on Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock

Magnum Hunter Resources Declares Monthly Cash Dividend on Series C Preferred Stock, Ser...

Power Engineering

Article Archives for Power Engineering Magazine

Continuing Education

Professional Development Hours

To access a course listing associated to a specific topic listed below, click on the topic of choice from the list below.

Latest Energy Jobs

View more Job Listings >>