Hydropower in Brazil: An Opportunity and a Liability
The connection between water and energy production is not always appreciated. Areas with a lack of diversity in their energy sources can expose themselves to risks if water supplies are unreliable. Brazil has the Western Hemisphere’s third-largest electricity sector, but it also illustrates the risks inherent with water unreliability.
Hydropower accounts for over 90 percent of Brazil’s electricity – and this abundant hydroelectric power is a mixed blessing.
On the positive side, hydroelectric power reduces Brazil’s overall generation costs, compared to countries with more diverse sources of supply. And compared to most thermal generation, it is also more sustainable for the environment. However, this dependence makes the country more vulnerable to supply shortages in years with low precipitation, especially given sustained and increasing consumer and industrial demand.
Consider what happened in 2000 and 2001, when Brazil faced a severe drought. In order to prevent blackouts, the government imposed energy quotas that aimed to reduce consumption by 10 to 35 percent, according to a report by environmental advocacy group Ceres. Many industries in Brazil’s southeastern region – which accounts for almost 60 percent of the country’s GDP – were negatively impacted by reductions in operational capacity, production delays and increased production costs.
Overall, the drought is estimated to have reduced the country’s GDP by 2 percent, or roughly $20 billion (US) – proving that, especially in countries that depend on hydroelectric power, the impact of water management touches every part of the economy, and can force real drawbacks when resources are unexpectedly diminished.