Tough choices on water and energy in Brazil: Insights from the front line of policy and business

A former head of both the Brazilian Water Authority and the Brazilian Electric Energy Authority, CEO of a major private power utility in Rio de Janeiro, Light SA, and a professor at the Federal University of Rio de Janeiro, Prof. Jerson Kelman has a unique insight into the political and economic realities of balancing social and environmental interests in this sensitive field.

“We are very proud in Brazil that 85% of energy we produce is renewable: hydro, sugarcane bagasse burning, and wind power,” said Prof. Kelman, who visited SEI for a seminar and roundtable discussion on 3 September. “A few years ago we were 90% dependent on hydro … Now we are increasing thermal generation based on fossil fuel. This is not something we should be happy about.”

The problem, he said, is that although Brazil has only exploited around a third of its hydropower potential, most of the best sites have been used. The remaining ones are in the Amazon region, where the low topography means that dams are more inefficient and development plans inevitably come up hard against questions of conservation and indigenous rights.

Asking the right questions

“Does it make sense to build more hydropower plans in the Amazon? Usually when this question is asked, people think of the local consequences,” said Prof. Kelman. “There are a number of nasty consequences to building a hydro plant in a place like the Amazon. If you keep only this question in mind the decision is very easy: don’t do it.

“But there is another question that should be asked: What happens if we don’t build a hydropower plant? What are the alternatives?” He argued that not producing more energy is not an acceptable option, as per capita energy use is still relatively low and Brazil needs more energy to get out of poverty. Wind power is already being exploited competitively, without subsidies, in Brazil, largely thanks to its complementarity with hydro (hydro output can easily be adjusted as wind generation fluctuates). However, it is insufficient to fill the demand gap. “From our experience, if we don’t build hydropower plants and reservoirs, we increase the production of thermal power plants burning oil, which in my mind is much, much worse,” he said.

Inundation for reservoirs: a price worth paying?

Prof. Kelman noted that legal challenges linked to concerns about impacts on the environment and on indigenous rights had often stalled attempts to create dams and storage reservoirs for hydropower plants and new infrastructure to increase water security in semi-arid zones of the impoverished north-east of the country.  “The decision not to build storage reservoirs (to minimize the area inundated) is particularly debatable in the Amazon, because of seasonal fluctuations in flow,” which can be as large as 25%, he said. For example, in the huge and highly controversial plant, at Bela Monte, a storage reservoir could boost the generation capacity by 50% from 4000 MW to around 6000 MW, but Prof. Kelman acknowledged that this would mean inundating a much larger area.

“Because we’re not building storage reservoirs, the relationship between storage and demand is getting worse from the point of view of anyone who is responsible for producing electricity. It also means we are burning much more oil.” This impacts not only Brazil’s greenhouse gas emissions and economy but also development. Furthermore, it pushes up energy tariffs beyond the rate of inflation, which energy providers have to try to justify to their customers.

Prof. Kelman recognised that for some people there are no trade-offs when it comes to the question of dam development: they believe dams simply should not be built. However, he said, “Very frankly, we have to make hard choices. … One way to do this, to preserve biodiversity as much as possible, is to select some rivers where infrastructure will be built, and forget about the impacts, and preserve other rivers that have the same biodiversity.”

Asked whether, based on Brazil’s experience, African countries should be pursuing small, off-grid renewable energy solutions, Prof. Kelman argued that in most cases it should instead be trying to develop large and medium plants, because it has a scale effect and the cost of energy goes down. “Looked at differently, if you build 30 10MW plants, the impact is generally much worse than building one 300 MW plant.”