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Low reservoirs force Brazil to buy energy from Argentina

and . Dec 06, 2020
energy reservoirs Santa Maria reservoir, in the outskirts of Brasília. Photo: Tony Winston/Agência Brasília

Matters of electricity supplies hit Brazilian headlines in November when a fire in the northern state of Amapá plunged the vast majority of the region into darkness for 22 days. But the rest of the country is on alert for similar energy-related issues, after the National Electrical System Operator (ONS) issued a warning about the low level of Brazil’s reservoirs, which could overload the grid in the end-of-year period.

The ONS report led electricity regulators Aneel to reinstate extra charges on consumers’ electricity bills as of December 1. Increased tariffs had been suspended until December 31, due to the Covid-19 pandemic.

</p> <p>Electricity companies in Brazil use a <a href="https://economia.uol.com.br/noticias/redacao/2020/12/03/apos-aumento-da-tarifa-bolsonaro-pede-apague-a-luz-e-tome-banho-rapido.htm">color-coded tariff system</a>, which also serves as an indication of the improvement or worsening of the country&#8217;s electricity supply. The most expensive &#8220;red tariff&#8221; is applied when <a href="https://brazilian.report/society/2018/01/15/sao-paulo-another-water-crisis/">hydroelectric plants&#8217; reservoirs</a> are low and thermoelectric plants are overloaded.</p> <p>All regions of Brazil have registered declines in reservoir levels in recent weeks, according to the ONS. In the Southeast and Center-West, reservoirs diminished 0.4 percent to an overall capacity of just 17.72 percent. The Furnas reservoir in Minas Gerais — which supplies eight local hydroelectric plants — is currently at 16.38 percent of its volume, the lowest level since March.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/4547690"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <h2>Energy crisis: the solution lives next door</h2> <p>Brazil&#8217;s demand for energy is huge, and it is not met by domestic production. According to the Brazilian Energy Security Indicator, the country was &#8220;historically dependent on energy imports until 2017,” which changed after <a href="https://brazilian.report/latin-america/2020/08/31/cold-south-american-winters-increase-demand-for-brazilian-energy/">energy surpluses</a> detected in 2018 and 2019, with 7.6-percent and 9.5-percent increases in oil and natural gas production.&nbsp;</p> <p>But then came the coronavirus pandemic, which caught sectors completely unaware all across the board. Demand slumped, as the population adapted their daily routines. Electricity consumption reached levels only seen five years previous, while the automotive sector reduced its demand by 65 percent.</p> <p>And the drop in demand caused energy production to fall, now causing Brazil to turn to neighbors Argentina — highly interested in exporting their electricity. And, as far as Brazil is concerned, hunger is the best sauce. At the end of September, Brazil began importing Argentinian energy for the first time in 15 years.</p> <p>According to the Argentinian Finance Ministry, the sale of surplus energy to Brazil was made possible by increased production in the country&#8217;s Vaca Muerta shale gas source.&nbsp;</p> <p>While a clear business opportunity for Argentina, the country&#8217;s ex-deputy secretary of industry and commerce, Miguel Ponce, believes it is more than that.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/4578446"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p>“It is definitely an opportunity, but also signals a new scenario after the <a href="https://brazilian.report/latin-america/2020/12/01/argentina-brazil-try-to-amend-fractured-relationship/">dialogue between Presidents Jair Bolsonaro and Alberto Fernández</a> — which we call the &#8216;new normal&#8217; between the governments of Brazil and Argentina. It is a win-win deal, because otherwise we would have to vent our surplus energy,” the economist tells <strong>The Brazilian Report</strong>.&nbsp;</p> <p>“With the current international prices, Argentina is now in a position to export energy after a long time importing it. Meanwhile, for the Brazilian industry, the energy sold by Argentina is the cheapest solution in a period of crisis and inconsistent production.&#8221;

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Lucas Berti

Lucas Berti covers international affairs — specialized in Latin American politics and markets. He has been published by Opera Mundi, Revista VIP, and The Intercept Brasil, among others.

Aline Gatto Boueri

Aline Gatto Boueri is a data journalist. She has had her work published by Gênero e Número, Universa UOL, Marie Claire, Projeto Colabora, among others.

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