Brazil May Turn to Gas as Drought Cuts Off Power

Brazil has arguably the greenest and cleanest economy in the world, as it gets 80% of its electricity from hydropower and only a small share from fossil fuels. Yet a prolonged drought has reservoirs running dry, and in some of the most populated areas that is leading to blackouts. In an effort to shore up the country’s energy supply ahead of the much anticipated world cup, the government has suggested it may provide financial support to utilities to cover the cost of increased electricity from thermal sources to make up for the shortfall.

Brazilians are suffering through their driest January since 1954, and the shortage of water has led to blackouts in eleven states, including six that will be hosting World Cup games. The Finance Minister said that the government may need to spend up to 9 billion reais ($3.78 billion) to boost energy supplies – equivalent to the amount the country spent on roads for all of 2013. That means using more natural gas to keep electricity flowing. “Any calculation on the magnitude of that help is still too premature,” Muricio Tolmasquim, an official at the Ministry of Mines and Energy said. “But we want to make the distribution utilities assured that we won’t allow them to be hurt in a situation that is not their fault.”

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While the government is not in a strong position to step up spending amid slow growth and concerns from international investors about the country’s finances, President Rousseff is also reluctant to increase electricity prices on millions of people still fuming after the 2013 protests. The cost of living has skyrocketed in recent years and it only took an increase in the cost of a bus ticket to set off public unrest last year. It appears the federal government would rather eat the cost than risk instability again. And with the globe watching Brazil as the World Cup approaches, the government will likely do whatever it takes to keep the lights on.

By. Joao Peixe of Oilprice.com