J.A. Jardini, D.S. Ramos, J.S.C. Martini, L.B. Reis, C.M.V.
Tahan
Brazilian Energy Crisis
W ith deregulation and the privat-
ization processes in progress,
there were high expectations that the
Two important factors led
to the crisis: a delay in
private sector would invest in genera-
tion and transmission, but this did not
occur. The shortage of generation was
generation investment
exacerbated by drought conditions that and drought conditions
deteriorated reservoir levels. These cir-
cumstances led to an increase of the risk
of an energy shortage.
Plans are now being implemented that take measures to as- After 1995, the energy business began restructuring with
sure a proper balance of generation and consumption in the near deverticalization, privatization, and the creation of regulatory
and long-term future. agencies (ANEEL for electricity, and ANP for petroleum and
natural gas).
Brazil and Its Regional Characteristics
The Federative Republic of Brazil is situated in northeastern
South America. Administratively, the country is divided into 27
federal units (states and DC) and the capital is Brasilia. For the
purpose of this analysis we shall address the four main regions:
North (N), Northeast (NE), Southeast (SE), and South (S), with
their specific characteristics.
The Southeast is the most developed area, followed by the
South, the Northeast, and the North. Table 1 shows the country’s
population, electrical generation, and energy consumption by
region.
In 1999, the participation of the fuels in the Brazilian energy
matrix was: oil (22.8%), natural gas (2.4%), electricity (39.5%),
mineral coal (4.1%), firewood (7.5%), and alcohol and others
(23.7%). Oil production is lower than demand, resulting in some
dependence on importation. The country’s mineral coal presents
a low standard quality level, and it is, therefore, more used in the
metallurgy sector than for electricity production, which is
mainly based on hydro plants.
Figure 1 shows the Brazilian regions, with their main cities,
river basins, and hydroelectric plants. The North region, where
the Amazon River and the rain forest are located, is the largest
area with the lowest population density. The largest Brazilian
cities are São Paulo/SP, Rio de Janeiro/RJ, Belo Horizonte/MG
in the Southeast; Curitiba/PR and Porto Alegre/RS in the South;
Recife/PE and Salvador/BA in the Northeast; and Belém/PA,
São Luiz/MR, and Manaus/AM in the North.
Energy Business
Until 1995, energy was mainly a state business controlled by the
government: Petrobrás in the oil sector and Eletrobrás, a federal
holding company, in the electricity sector. In 1997, 94% of the
electricity consumption was provided by hydropower (87% in
1999). Transmission interconnections play an important role to
ensure a better use of water, due to the differences in the river bas-
J.A. Jardini, D.S. Ramos, J.S.C. Martini, L.B. Reis, and C.M.V. Tahan are with
São Paulo University, São Paulo, Brazil.
IEEE Power Engineering Review, April 2002 0272-1724/02/$17.00©2002 IEEE
ins’ seasonal characteristics. Oil, coal,
and nuclear plants provide thermal gen-
eration. The use of natural gas, most of it
coming from Bolivia, for producing
electricity is just beginning. So far, its
use has been implemented primarily to
produce electricity, reducing the imbal-
ance between generation and consump-
tion resulting from the lack of
investments in the last decade.
Electricity Business Before Deregulation
Under Eletrobrás, the federal holding company, there were four
regional companies: Furnas (SE), CHESF (NE), Eletronorte
(N), and Eletrosul (S); these companies were responsible for
electricity generation and transmission, except that Eletronorte
was also responsible for distribution in the Amazon’s isolated
systems.
The Brazilian states owned most of the distribution compa-
nies. Very few were private. The state distribution companies of
São Paulo and Minas Gerais in the Southeast and of Paraná in
the South also had generation and transmission activities.
Eletrobras supervised the centralized power system opera-
tion as well as the expansion planning activities.
New Electricity Business Structure
The new structure includes:
● ANEEL, the regulatory agency
● ONS, the independent system operator (ISO)
● MAE, the wholesale market
● Deverticalized companies (generation, transmission, and
distribution)
● Free competition and free customers (depending on size
and according to a time schedule)
● Expansion planning retained by the government, under the
Federal Energy Secretariat.
Conceptually, the generation and distribution companies un-
dergo privatization, whereas the transmission companies remain
governmental. At present, most distribution companies have
been privatized, except for the states of MG and PR; however,
the latter is in the process of privatization.
To date, very few generation companies have been privat-
ized. Eletrosul is one. São Paulo state generation has been di-
vided in three companies, two already privatized and the largest
scheduled to be privatized by the end of 2002. A major percent-
age of the Brazilian generation plants (Furnas, CHESF,
Eletronorte) are behind in the privatization process, leading to
21
 Table1. Brazil and its regions at a glance (1997)
Indicator Total Brazil SE (%)
Population 161 million 49
Income per capita 5,000 USS$/yr
Electrical engery consumption 290 TWh/yr 64
Per capita consumption 1,800 kWh/yr
1 2
Total electricity installed capacity 57 GW 40
1
Includes Itaipu (A Brazil-Paraguay joint enterprise
2
Hydro 53.5 GW; thermal 3.5 GW
doubts about the process itself. Discussions are being held, and
other alternatives are being implemented, even in the Brazilian
Congress, which approved the present privatization process.
Electrical System
The hydro generation locations and the major river basins of
Brazil appear in Figure 1. Respective installed capacity figures
are shown in Table 2. The hydro system is cascade operated, op-
timizing the water flow into the power plants. A set of historical
reservoir water inflow data is used to avoid the risk of deficit.
Up until now, thermal generation complementation to hydro
has been very low (< 15%). As large hydro plants demand a long
time to be built, from 5 to 10 years, the recent lack of invest-
ments has created a scenario requiring alternative solutions with
lower construction time, such as gas-fired plants. Add to this the
increasing attention being given to the environmental and social
problems attributed to large hydro plants. In Brazil, the delay in
investing in alternative solutions is one of the reasons for the
present crisis.
Within this context, the transmission interconnections play
an important role, since they allow the optimum use of hydro for
producing electricity, taking into account the seasonal diversity
of river basins. Transmission interconnection bottlenecks, on
the other hand, can result in undue water spilling, which some-
times occurred, during the last periods.
Energy imports of neighbor countries are also part of this
scenario; besides the Bolivian natural gas imported to fuel the
new planned thermal plants, electricity is directly bought from
Paraguay (Itaipu 50 Hz machines ) and Argentina.
Figure 2 shows the high voltage transmission system of 345
kV, 440 kV, 500 kV, 765 kV ac lines and dc bipoles of ±600 kV
(from Itaipu).
Prior to 1998, the integrated N-NE system was not connected
to the S-SE system. Now they are interconnected through one
500 kV transmission line with controlled series compensation.
Duplication of this facility is scheduled for the end of 2002.
Many new 500 kV lines are scheduled for 2002 and their con-
cession was adjudicated to private companies by a bidding pro-
cess. In 1997, the total length of high voltage transmission lines
was about 120,000 km.
System Planning General Criteria
The (n-1) criteria are used for transmission line and transformer
planning. For load growth, three scenarios are established: the
reference (5.8% per year from 1998 to 2007), the high (6.5% per
year), and the low (5.3% per year), based on hypothetic eco-
nomic and population growth.
22
Generation is allocated in this timeframe
based on a 5% energy risk criteria, meaning
Region that the probability of generation not supply-
S (%) NE (%) N (%) ing any amount of load (generation firm
power) is 5%.
15 29 7
Crisis in 2001
The Brazilian system was mainly developed
15 16 5
in the 1960s and 1970s. In the 1980s, impor-
tant hydro plants were completed. At that
1 time, the economic growth was smaller than
36 16 8
the planning forecasts, so that the electricity
installed capacity was sufficient to start the
1990s without a shortage and with minimal
investment.
With deregulation and the privatization
processes in progress in the mid-1990s, the Brazilian govern-
ment essentially did not invest in generation and transmission,
which was compliant with their policy of economic stabilization
and nonacquisition of external debts. There were high expecta-
tions that the private sector would invest in these areas. This did
not occur for many reasons, such as: strong opposition to the
changes and the privatization process, conflict between the nat-
ural gas price (bought in US$ from Bolivia) and the electricity
tariffs (in Reais, the Brazilian currency), the price escalation
policy, lack of clear rules for the transition to the new model, dif-
ficulties in getting long-term contracts for selling electricity to
guarantee project financing, and enforcement of environmental
requirements.
This has led to an increase of the risk of an energy short-
age, which has already been detected in the electric sector
planning process, as can be seen in Figure 3. This figure, from
which Eletrobrás evaluated the risk of deficit in 1997, clearly
shows that from 1998 to 2001 the risk was greater than the de-
sign criteria.
Recognizing that the construction of new hydro plants in a
short period of time is not feasible, a thermal generation plan,
the Thermoelectricity Priority Plan, using natural gas imported
from Bolivia, was conceived and launched in the beginning of
2000. This plan initially called for the construction of 49 plants,
Figure 1. Regions, cities, and rivers
IEEE Power Engineering Review, April 2002
comprising a total of around 12 GW, to be built by the end of tion added an extra delaying force to investments in generation,
2003. because the fuel is bought in US$ whereas consumer tariffs are
There were many reasons for delaying private investments in regulated by ANEEL in R$. Within this scenario, the govern-
the electricity sector. Some of the problems were caused by the ment had to count on its company Petrobrás. Basically, only the
international crisis (1999) and the devaluation of the Brazilian projects in which this company was involved as a partner were
currency (R$). The risk of a Brazilian currency maxi-devalua- carried out. This government procedure, to a certain extent
forced by current circumstances, has been seen as a contradic-
Table 2. Installed capacity in the river basins (1997) tion within the context of the privatization plan.
River Installed Capacity (MW) But another important factor must be considered to better un-
derstand the present electricity crisis: the behavior of hydro gen-
Tocantins 4,2000 eration. Figure 4 shows the SE/NE equivalent reservoir levels in
Sao Francisco 9,3000 the period 1997-2001. A continuous reduction in the average
reservoir levels due to the lack of supplementary generation, the
Paranaiba 4,000 reduction in the annual precipitation rates, and the growth in
Grande 5,900 load can be observed.
In 1999, although the level of hydro reservoirs had decreased
Paranaiba 4,9000
significantly, the load could be supplied but with little safety
Paranaiba (Itaipu) 12,6000 margins. The same occurred in the year 2000. In the last rain pe-
riod (November 2000 to January 2001), the SE/NE reservoir
South 6,700
levels were in a little better situation compared to the previous
year.
But by February 2001, the SE/NE reservoir levels were
worse (lower levels) than at the same period in 2000. In addition,
the weather forecast in February 2001 indicated less rain for the
March to May period. This led to a government strategy of es-
tablishing a plan to reduce consumption in order to avoid a

120

100

80
Percent

60

40

20

0
1997 1998 2001

Figure 4. SE/NE equivalent reservoir levels from 1997 to 2001 (Source: ONS)

Figure 2. Transmission lines in 2000 (Source: ANEEL) 35

%

18 30

16
25
14
12 20
Percent

10
8 15 SE
S/SE
6
N/NE 10
4
2 NE
5
0
1998 2000 2002 2004 2006
0
Year May Jun Jul Aug Sep Oct Nov Dec

Figure 3. Risk of deficit in 1997 (Source: Electrobrás report) Figure 5. Reservoir levels prognosis (Source: ONS)

IEEE Power Engineering Review, April 2002 23

 GW avr GW avr
20 50

40
15

30

10
Mean
20

Mean 2001
5
10
2001 Historical Minimum

Historical Minimum
0 0
Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov

Figure 6. NE inflow (Source: ONS) Figure 7. SE inflow (Source: ONS)

shortage. From June to November, consumers had a target to re- Table 3. April 2001 Regional Data
duce their consumption by 20%.
Figure 5 shows that this procedure decreases the risk of a N NE SE S
load shortage even if a water inflow below the mean long-term Peak load (MW) 2,932 7,721 36,342 9,846
average occurs (75% for SE and 56% for NE, in Figure 5). Fig-
Average load (MW) 2,558 6,028 27,824 7,191
ures 6 and Figure 7 compare the water inflow in 2001 to the
long-term mean and the historical minimum. In fact, 2001 is a Reservoir level (%) 75.7 33.7 32.7 82.4
low rain year mainly in the Northeast.
Reservoir full capacity (MW) 10,700 50,000 160,000 14,300
Also note that both in the North and the South the rains were
above the long-term mean, which resulted in a lot of water be-
ing spilled. The excess energy from the North and the South uncertain, there is a concern related to the continuation of the
could not be transferred respectively to the Northeast and to the crisis into the year 2002.
Southeast due to transmission congestion. The energy flows The implementation of the planned gas-fired thermal plants
from South to Southeast through the Itaipu 765 kV ac lines. is very important, but the government is taking other measures
The construction of the third Itaipu ac circuit was delayed due to assure a proper balance of generation and consumption in the
to environmental reasons, and the situation was aggravated by near and long-term future. A new plan was launched on 6 July
a failure in one 765/345 kV, 1500 MVA transformer in the São 2001, aimed at integrating an additional 19.9 GW into the sys-
Paulo area. tem by 2003. Of this, 7.8 GW are from 21 large hydro genera-
There is a concern about the forthcoming situation in 2002. tion units; 6.4 GW will be produced by 15 thermoelectric plants;
The hydro reservoirs are expected to start the year at a very low 2.8 GW will be imports from neighboring countries; 860 MW
level, and, if 2002 is a dry year again, there is a high risk that the from small hydro plants; 960 MW from cogeneration projects;
crisis situation will not be alleviated. Anticipation of the con- and 1,000 MW from wind and solar generation projects.
struction of part of the planned gas-fired thermal plants may par- Many issues are still to be resolved before this plan is com-
tially solve the problem. pletely implemented, such as the guarantee of private invest-
ments, the environmental questions, the currency exchange
Table 3 shows the situation in April 2001 by region. Brazil
issue, increasing tariffs and others. But it seems that the devel-
had a total installed generating capacity of 65,700 MW (59,600
opment of the crisis has brought other variables into the general
MW of Hydro, 4200 MW of conventional thermal and 1,900
scenario (as, for example, better government integration, the
MW nuclear) with a peak load of 56,800 MW at that time.
transparency of the problems to the population, the population
joint effort to solve the crisis) that increase the possibility of this
View of the Future plan being successfully implemented, compared to the previous
Two important factors that have led to the crisis are: Thermoelectricity Priority Plan of 49 thermal plants.
● Delay in generation investment

● Drought.
The initial public response to the government strategy for
avoiding a shortage has shown a very high level of cooperation
from consumers. In May 2001, the total energy consumption
was spontaneously reduced by 10%, and in June the reduction
was around 20%. However, since there is not enough time to
build the necessary generation facilities and the rain behavior is
References
“Decenal expansion plan 1997/2008,” Eletrobrás GCPS.
Operador Nacional do Sistema Elétrico (ONS) Web site,
http://www.ons.org.br.
“Balanco energetico nacional sinopse 2000” (in Spanish), Brazilian
Government Energy Secretariat. Available on the Web,
http://www.mme.gov.br/Sen/dadhist/Tsinop_p.htm.

24 IEEE Power Engineering Review, April 2002