While hydroelectric sources of power account for, and will continue to account for, the majority of Brazil’s electricity consumption requirements, over the course of our forecast period gas-fired power stations will gain importance, as will renewables and nuclear sources of power, once Angra 3 begins operations in 2016.
Brazil’s ambitious Belo Monte hydroelectric dam project continues to generate controversy: in October 2012 indigenous tribes affected by the dam requested a 10% stake in the profits made once the dam is up and running. In December 2012, ANEEL will announce the results of a new transmission and distribution auction, which will see contracts for 15 transmission lines and eight substations awarded; transmission is one of the key challenges of Brazil’s electricity market because of the considerable distances between power stations and end consumers. Brazil continues to attract international investment, and plans to lower the cost of electricity should increase its appeal further.
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Our Q113 report on Brazil’s power market shows that the energy sector continues to post healthy growth, despite our latest downward revision to Brazil’s 2012 real GDP growth forecast. We forecast that Brazil’s power sector will continue to post strong demand, even though some risks remain, with growth in consumption expected to average 4.4% per annum between 2012 and 2021. BMI calculates that total electricity generation in 2012 stood at 552.99 terawatt hours (TWh) and that this figure will rise to 829.36TWh by 2021. We forecast that hydroelectricity generation will continue to dominate the energy mix, accounting for an anticipated 442.20TWh in 2012 and rising to 617.82TWh by 2021.
Brazil’s government plans to lower the cost of electricity for both domestic and industrial users by around 20% – Brazil currently has some of the highest energy prices in the region and is unattractive to investors as a result. In order to achieve these cost reductions, as part of the contracts for utilities renewing power generation licenses, the government will only let utilities charge customers for maintenance and operating costs, and not for past investments.
Key developments in Brazil’s power sector:
Electrobras is considering selling its loss-making power distribution units that operate in isolated, rural areas, as it tries to cut costs before electricity tariff reductions are introduced.
Brazil’s government plans to renew licences for electricity generating power stations at a reduced cost as part of President Rousseff’s plans to reduce energy costs and increase Brazil’s attractiveness to external investors.
The Japan Bank of International Cooperation and the Bank of Tokyo-Mitshuishi has offered Petrobras a US$1bn loan, part of which will promote a more efficient Brazilian energy sector.
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