World Bank Water Week – 2004

Jerson Kelman

Hydroelectric power accounts for more than 90% of the total

electric energy produced in Brazil

BRAZILIAN ELECTRIC SYSTEM

Vast territorial extension and hydrological variability

• Country Wide Integrated Electric System

• Centralized Energy Dispatch

BRAZILIAN ELECTRIC SYSTEM

INTEGRATED ELECTRIC

SYSTEM Installed Capacity (2000) = 72,299

MW

96 Hydropower plants > 30 MW

57 Regulating reservoirs

Country is interconnected by 70,000

km of high-voltage lines

THE POWER SECTOR REFORM

The reform process started in 1996

Rationale:

– Public sector has no $ to invest

– To promote economical efficiency

Guidelines:

– Private investment and competition in energy generation and retailing

– Transmission and distribution to remain regulated, with provisions for open access

Reforms based on the same principles had worked in countries based on thermal production.

Would it work in a country like Brazil, based on hydro?

THE POWER SECTOR REFORM

SOUTH-SE SystemEnergy Wholesale Market Prices (US$ / MWh)

THE ENERGY CRISIS OF 2001

There was a market failure

• Lula’s Government restored centralized expansion planning for new plants and transmission lines

• Owner of a new hydroelectric plant will get, before construction, a long term contract with a pool of distribution companies (equivalent to an annual “rent”)

• All power plants operate according to rules set by central dispatch

Cost of new energy (US$/MWh)

Hydro 30

Thermal 40

Alternative 50

Amazon Region

CHEBelo Monte

Rio

Xin

gu

Localization

Total Capacity (MW)

Energy (MW méd)

Xingu River(PA)

11.182

4.796

Reservoir Area (km²) 440

Belo Monte

CHE Belo Monte and theNational Interconnected System - SIN

ENVIRONMENTAL MANAGEMENT

Concern: The social and environmental impacts caused by large hydroelectric projects implemented in the 70s and 80s. What’s new?

Methodology to screen out, at the river basin scale, sites for construction of hydroelectric power plants which would not be social or environmentally feasible

ENVIRONMENTAL MANAGEMENT

The environmental licensing for hydroelectric plants requires preparation of an Environmental Impact Assessment (EIA) with Public Hearings, through three phases:

– first license (LP)

– installation license (LI)

– operation license (LO)

Final Remarks

Brazil needs to ensure a sustainable growth of energy supply

Hydroelectricity cannot be spared

The strategy is to select, from the numerous sites technically and economically feasible for hydroelectric power plants, a subset that would cause minimum environmental and social impacts

However, we are not seeking for a subset that would cause no impact