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Commentary: Brazil’s Energy Future Is No Longer Dammed: Mac Margolis


February 6, 2018, by Mac Margolis

(Bloomberg View)

When the Brazilian government announced late last month that it was shelving plans to build huge hydroelectric dams, skeptics could be forgiven for dismissing the declaration by Minister for Mines and Energy Fernando Coelho. What better way to spin a policy retreat into a public relations win? Nonetheless, environmentalists rightly hailed a victory for the rights of rainforest communities and for boosters of clean energy. And give the administration of President Michel Temer some credit: Even staggered by scandals and bleeding political capital, it can still get some calls right.

In a nation that took pride in tapping its mighty rivers for nearly all its electrical power, the shifting landscape is striking. I got a glimpse of the transformation on a recent trip to northeast Brazil, where solar panels shingled the roof of my beachside hotel and columns of 90-meter windmills marched along the shoreline. It’s much the same across Brazil, where the brightest engineers who once thought only of towering oil rigs and megadams are now at work to tease energy from the ocean waves, biomass and small hydroelectric stations. Investors are also juiced, and Brazil in 2017 boasted its first clean energy billionaire, wind farmer Mario Araripe.

Long before Temer’s government pulled the plug on Big Hydro, Brazil’s model for the power grid was already in trouble. Scant rains, severe recession, pushback by green groups and indigenous communities and whiplash from corruption scandals involving outsize public works had rendered the national habit of hurling up monster hydroelectric plants a losing proposition.

“Since the military days, we’ve seen the same error over and again: huge, expensive, wasteful public works that leave a devastating environmental and social impact,” Adalberto Verissimo, senior researcher and co-founder at the Amazon Institute for People and Environment, told me. “That model has failed.”

Hastening the conversion was a new generation of researchers who’d learned that instead of generating cleaner energy, the biggest hydroelectric plants actually caused enormous collateral damage, as tracts of flooded forest rotted in the reservoirs, releasing tons of carbon dioxide and other greenhouse gases.

Policy-makers responded by downsizing the reservoirs, but that solution pleased no one. “By barring dams with large reservoirs, the government played to the crowd but also turned a steady source of renewable energy into intermittent energy,” Adriano Pires, head of the Brazilian Center for Infrastructure, told me.

The dirigistes in Brasilia were no help. With the Central Bank projecting rising inflation,  then-President Dilma Rousseff in late 2012 ordered a cap on electricity rates, which tumbled about 15 percent through 2014. That gift encouraged Brazilians to keep their lights blazing and factories humming, setting the country up for a fall.

Enter Saint Peter, Brazil’s patron saint of rainfall, who apparently was slacking on the job. Unusually dry weather early this decade sapped already depleted reservoirs and pushed Brazil to the brink of brownouts and electricity rationing.

In 2011, Brazil drew some 82 percent its electricity from big dams like Itaipu and Tucurui. Today, after successive droughts depleted the reservoirs, hydro power accounts for less than two-thirds of the energy flowing into the country’s grid. As a result, every dry season, Brazil has had to switch on thermal generators, which burned expensive oil or coal, again fouling the air with climate-cooking greenhouse gases.

The result: a 460 percent spike in emissions of carbon gases from 2011 to 2014, Brazilian researchers Luiz Fernando Rosa Mendes and Marcelo Silva Sthel found. Only the recession, Brazil’s worst in recent memory, forestalled fouler skies and an even more embarrassing setback to the government’s global pledge to slash greenhouse emissions.

Add to those woes the Carwash scandal, which uncovered a sluiceway of kickbacks on giant public works, including overpriced hydroelectric dams. “By strengthening oversight and anti-corruption measures, Carwash has discouraged big public works, where the opportunities for diverting money are great,” said Verissimo. Even as a federal audit court just ordered the government to revisit its decision to shelve several big new dam projects on environmental grounds, it also demanded that energy authorities open their books on these exorbitant public works.

Scandal, improbably, has also helped fuel disruption, scrub the system and reboot the power grid. Once a tree-hugger’s idyll, clean energy — from biomass to solar — is now a competitive business in Brazil driven by ever-improving technology. A decade ago, Brazil gleaned almost no energy from the steady winds that buffet the long Atlantic seaboard. Today, windmills generate 8 percent of the nation’s electricity, according to research gathered by Bloomberg New Energy Finance.

Solar energy kicks in as much electricity as nuclear power, while small hydro power — which treads far lighter on the land than mega dams — generates four percent of the grid. Eight percent of Brazil’s electricity is gleaned from biomass, such as the husks of sugarcane, itself a major source of clean-burning car fuel.

Brazil isn’t Sweden. With Petrobras on the mend from the Carwash decade, and prospecting from ultra deep-water “pre-salt” oil reserves on a roll, this emerging oil producer isn’t about to forsake fossil fuels. When winds slacken or skies cloud over, the country still will have to turn on fuel-burning generators.

Instead of relying on dirty diesel and coal, however, thermal plants now burn natural gas, the cleanest of fossil fuels, which comes bundled with the haul from Brazil’s pre-salt oil.

That may not be the stuff of green dreams, but for a country looking to revive its economy and tidy up the grid, it’s a kick-start to a cleaner future.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.



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