Scarcity in the midst of surplus

THE president, Luiz Inacio Lula da Silva, has just returned from a five-country tour taking in Mexico and Central America, where he touted Brazil’s claims to be an energy superpower. Blessed with sunshine, watered by huge rivers and close to self-sufficiency in oil, Brazil’s energy potential is indeed enormous. But for various reasons, ranging from government lethargy to environmental lobbies, it runs a serious risk of energy shortages at home.

Acende Brasil, an electricity-industry body, predicts a 28-32% chance of blackouts by 2012 if the economy grows at 4.8% a year (the government’s forecast is 5%). Officials dismiss this as alarmist. But Lula is worried enough to have attended a recent meeting of his National Energy Policy Council for the first time.
Even if economic growth disappoints, power could still run short. At present, four-fifths of Brazil’s electricity comes from hydroelectric dams. But at times of high demand or low rainfall, hydropower needs topping up with thermal supplies, mostly natural gas. About half of the natural gas consumed in Brazil comes from Bolivia. Relations between the two countries have been tense since Bolivia declared the nationalisation of the Bolivian operations of Petrobras, Brazil’s state-owned oil and gas company, last year.

Petrobras has also had problems in ensuring consistent production from its gasfields at home. This month the company admitted that there would be a shortfall in promised deliveries, earning a fine of $90m from the electricity regulator. Uncertainty over future gas supplies meant that at a government auction for new electricity-generation plants held last month only oil-fired projects were proposed.

The government’s hopes are pinned on two big projects, both of which have their critics. It recently gave the go-ahead for a third nuclear reactor at Angra dos Reis. Even more controversially, Ibama, the environmental agency, has given approval for two new dams on the Madeira river in the state of Rondonia.

The Economist