New Market Research Report: Brazil Power Report Q1 2014

From: Fast Market Research, Inc.
Published: Thu Jan 02 2014

Hydroelectric power accounts for, and will continue to account for, the key source of power supply in Brazil. Representing over 80% of electricity generating capacity, hydroelectricity brings with it a series of challenges. To start with, it is an unreliable source of power - with generating capacity fluctuating between wet and dry years. Many of Brazil's rivers are far from populated cities, adding expense to projects as lengthy transmission networks are required. And as recent court rulings remind, hydroelectric power projects are also controversial - with stoppages commonplace. It is of little surprise, then, that the government is seeking to diversify the electricity mix. An auction scheduled for 18 November 2013 will see only one large-scale hydroelectric power project included, with a greater emphasis on renewables as well as two gas-fired tenders. A second auction, planned for mid-December, will see hydroelectric power projects once again gain support.

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With Brazil facing a key power deadline - the country will host both the FIFA World Cup and the Olympic Games in the next three years - the government is keen to invest in its power sector to ensure that its electricity sector is up to the challenge of being under a global spotlight. It has launched a series of tenders for power auctions during 2013, and will finish the year with six hydroelectric power projects, opening for bids in December. We stress, though, that the repeated delays to other hydroelectric power projects in the country may deter potential bidders - Brazil's complex bureaucratic processes will do little to attract investors.

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 3.6% per annum between 2012 and 2022. BMI calculates that total electricity generation in 2012 stood at an estimated 551.38 terawatt hours (TWh) and that this figure will rise to 794.77TWh by 2022. We forecast that hydroelectricity generation will continue to dominate the energy mix, having accounted for an estimated 442.49TWh in 2012, which we see rising to 584.26TWh by 2022.

Key developments in Brazil's power sector:

* The government has announced plans to auction 1.2GW worth of hydroelectric capacity, in the A-5 power auction scheduled for 13 December 2013. A total of six hydroelectric power plants are included in the auction.
* The long-delayed and controversial Belo Monte hydroelectric power plant was subjected to yet another setback this quarter, when a judge ruled that work be halted because Norte Energia had not met its environmental commitments. Work restarted five days later. Tele Pires, another large-scale hydroelectric power plant faced a similar delay, with a judge suspending work claiming that the developers had not completed social impact studies.

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