Carlos Augusto Tortoro Jr., partner at Tortoro, Madureira & Ragazzi Advogados and the head of the electric energy and strategic litigation area

Brazil is currently experiencing a critical situation with regard to the supply of electrical energy, and the situation may get even worse.

The Brazilian electric matrix is still predominantly hydroelectric (63.5%), according to data from the Operator of the National Electricity System (ONS). However, even with the current support of thermoelectric power plants (22.60%) and a large share of wind (11.2%) and solar (2.4%) energy, the country is facing the worst period of drought in 91 years, which has drastically affected reservoirs in the southeast/middle-west regions subsystem, and also affected other river basins.

Despite all this, there are sectors of the government that claim the supply of electrical energy is not a concern because currently there are alternatives to meet the possible shortage of hydroelectric power plants.

Although there are alternatives in the country’s electricity matrix, the lack of well-informed discussion for planning the integration of different sources, the difficulty of investment in electricity transmission, and the lack of clarity in government information may lead Brazilian society to experience something similar to the distant year of 2001.

When analyzing the reports resulting from the investigations and studies about the great electricity rationing that the country suffered 20 years ago, it is possible to verify a common point: the lack of clear communication.

The difficulty in transforming data into an objective communication with society and the sector’s agents becomes an almost insurmountable obstacle for planning. Nevertheless, there is no denying the resilience of this economic niche and the engagement of those who work every day to keep the national interconnected system running.

The inability to communicate sends out a distorted economic signal to society and investors. For society, there is no clear warning about the need to save water and electricity, or even about what should really be demanded from the authorities about public policies and financial incentive programs for certain economic segments. For investors, the path to take in the expansion of the country’s generation and transmission system is unclear.

It is not possible to talk about modernizing the electricity sector if we are still trying to overcome problems from the past. When looking at the discussions surrounding the Brazilian Electricity Code (Bill No. 2/2019 of the House of Representatives), the commercial model of the electricity sector (Senate Bill No. 232/2016), Law No. 14.052/2020 (Renegotiation of the hydrological risk in the free market) and, more recently, the handling of distributed generation, it is not possible to identify a systemic vision for gathering all the interests in favor of a long-term planning and sustainable energy security.

In an untechnical explanation outlined by a layman, harmonics in an electrical system are distortions of voltage and current caused by external agents.

All the issues that constitute the supposed core of the modernization of the Brazilian electricity sector have no modern characteristics whatsoever. Some issues that already exist and are part of the sector are simply being repackaged, and instead just need proper regulatory treatment, such as the expansion of the free market. Nothing about this discussion is new, since the legal and regulatory concept already exists and is widely dominated by the sector’s agents who have vast experience.

The same can be said about distributed generation and even the long-awaited renegotiation of the hydrological risk, which is still under discussion at ANEEL itself. None of these issues are new or will culminate in the modernization of the electricity sector.

They are actually configured as harmonics in electrical systems. These are external elements to the true modernization of the sector and generate distortions that prevent or, at the very least, hinder the country from planning its way toward a sustainable energy transition with security of supply and stability in the business environment.

We should be discussing how distributed generation and variable renewable energy can contribute to the preservation of hydroelectric plant reservoirs during the dry season and how these reservoirs could enable the expansion of intermittent generation; or how demand response would hold an important place in voltage equalization, providing room for the operator to maneuver the national interconnected system.

Additionally, economic and institutional agents should endeavor to develop technologies that allow the use of batteries and hydrogen in the composition of our interconnected system, creating new business niches and contributing to economic development, especially consigning security of supply to isolated systems and those interconnected in a radial way.

There are several issues that will lead the Brazilian electricity sector to true modernization, in line with what the rest of the world is discussing. This is not to say that other issues are not important; on the contrary, they need an appropriate regulatory and legal approach, if applicable, so that rights are protected and ensured, with respect to what has already been agreed. A capital intensive and strategic sector from an economic and social point of view cannot thrive with sudden swings that do not preserve and respect contractual conditions, i.e., the sector requires legal security.

We urgently need to treat harmonics with harmony, but the modernization of the electricity sector, which has a long-term proposal, cannot be overshadowed by collateral issues. They need to be integrated into the system in a cooperative way, so that the pillars of the regulatory framework are respected, namely, security of security of supply, reasonable tariffs, and universalization.

In this context, attention has been drawn to the difficulty that the national interconnected system has been experiencing, with serious water restrictions and without a broad and planned discussion being held by society and by the economic and institutional agents about the directions of the country’s energy supply security, which can sustain a necessary economic recovery, especially in a post-pandemic scenario.

The warnings from ONS and the Comitê de Monitoramento do Setor Elétrico – CMSE (Electricity Sector Monitoring Committee) about the need to inspect almost every single Brazilian thermoelectric power plant, as well as the increase in electricity imports from Argentina and Uruguay, demonstrate the seriousness of the situation and its urgency, so that communication with civil society and the authorities must be clear and objective, signaling correct economic indicators.

There is still time to resolve such urgent issues, even if they have been going on for a long time, since the technical staff of the electricity sector is highly skilled and has a great deal of experience in solving planning and operational problems. All that is needed is to give due importance to the issue that really should be prioritized. Brazilian society cannot rely only on the chance of an abundant rainy season.