December 22, 2014
Brazil's hot, dry summer may lead to energy rationing
Brazil faces the possibility of widespread energy rationing for the first time since 2001, as a hot, dry summer has deprived hydroelectric dams of needed water while boosting power use to run air conditioners in sweltering cities.
Even if the country escapes rationing, electricity experts say it may have to boost use of thermo-electric power - a more expensive option which could undermine President Dilma Rousseff's plans to lower energy rates.
Energy Minister Edison Lobao said the extra cost of diesel-fired plants would add less than 1 percent to consumers' electric bills during the months they are in use, ruling out the possibility of new government controls.
"There is no chance of rationing, no chance of shortages," Lobao said in an interview on the Globo television network.
Today, Brazil's stock market shed 1 percent as rationing fears intensified. Depending on how Rousseff handles the shortage - and whether it rains in the next few weeks - the fallout could impair Brazil's ability to hit its inflation goal in 2013 and damage growth in an already stagnant economy.
Several big cities already experienced long blackouts late last year. Rationing would cause particular disruptions for the country's large, power-hungry mining and metallurgical sector.
In late December, Rousseff dismissed the idea of rationing or a power crisis as "ridiculous".
But today, Folha de S.Paulo newspaper reported that the president has called an emergency meeting of energy officials on Wednesday to discuss the situation. Government officials told reporters the meeting of a committee that monitors electricity supplies was previously scheduled.
Brazil's mostly "green" hydroelectric power sector, which accounts for 67 percent of its electricity supply, has been the envy of countries dependent on dirtier and more costly sources of power. But low water levels and dry climate are now showing the vulnerability of depending on hydro-power.
Due to environmental restrictions, Brazil's newer hydroelectric dams have smaller reservoirs that are more vulnerable to changes in climate and drought.
Energy shortages and deficient infrastructure, which caused widespread blackouts in Latin America's largest nation last year, are a sensitive issue for left-leaning Rousseff, who as energy minister a decade ago was charged with making sure rationing never happened again. An energy crisis on her watch would dent her very high approval ratings.