Forecast of Brazil Rains Will Halt Expensive Power Plants

Dec. 4 (Bloomberg) — Rains forecast for Brazil in the next
few months will allow the country’s grid operator to shut down
some of its most expensive power plants.

If November’s weather continues, Brazilian rainfall may
exceed the monthly average in December, alleviating a drought
that has curtailed hydroelectric power supplies, said Hermes
Chipp, general director of the electric grid operator ONS. Some
of the highest-cost thermal plants may no longer be needed in
March if wet weather lasts through the summer months, he said.

“The outlook for rainfall is favorable in the short
term,” Chipp said today in an event in Sao Paulo. “A normal
wet season would meet power system needs in 2015.”

Thermal units — which includes coal, natural gas, diesel
and biomass plants — have been used as a stopgap to ensure
adequate electricity supplies after the worst drought in eight
decades caused water shortages and dried reservoirs at dams that
produce 70 percent of Brazil’s power. Use of the more expensive
energy source boosted electricity spot prices to records.

Without heavy rains, the risk of energy shortfalls in 2015
is increasing as Brazil’s most important dams are currently at
an average only 16.1 percent of capacity. A year earlier, when
the drought was starting, reservoirs were 40 percent full.
According to Chipp, reservoirs below 10 percent would mean
problems for energy supplies.

Without rain, Brazil would start the dry season on April
2015 with a 50 percent chance of rationing, Joao Carlos de
Oliveira Mello, chief executive officer of the consultant Thymos
Energia, said last month.

“If rainfall is normal, electricity supply is guaranteed;
if not, there won’t be any margin and a savings program will be
needed,” BTG Pactual said in a Nov. 26 report.

BNP Paribas SA has said energy rationing would shave as
much as 2 percentage points from gross domestic product next
year.

More Thermal

Since 2013, Brazil restarted all of its idled thermal
plants to make up for the hydropower shortfall. Chipp said the
country needs more capacity to handle a 4 percent annual
increase in power demand for the next five years.

“If you want to keep the system safe, thermal capacity
must increase,” Chipp said today in the event. “The society
wants energy supply security, a clean energy mix, and don’t want
to pay more for energy. This is not possible.”

To contact the reporter on this story:
Vanessa Dezem in Sao Paulo at
vdezem@bloomberg.net

To contact the editors responsible for this story:
Reed Landberg at
landberg@bloomberg.net
Tina Davis, Randall Hackley

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