New Report Available: Brazil Power Report Q4 2013

With hydroelectric sources of power dominating - they accounted for around 80% of electricity generating capacity in 2012 - Brazil's electricity sector depends on what is an unreliable source of power. The government is keen to rectify this, and power auctions scheduled between mid- and end-2013 will offer firms the chance to bid for thermal, renewable, and hydroelectric power projects. But the terms of these auctions have been shifted to focus on reliability of supply: in a change to standard conditions, the government now gauges capacity based on how much electricity is guaranteed 90% of the time, as opposed to 50% of the time in previous auctions. These conditions will boost thermal and solar-powered sources of electricity. One of the key challenges in Brazil is the country's vast size and the distances between sources of power (rivers in remote states) and consumers of power (urban populations in coastal settlements). As such, a robust transmission infrastructure is, and will continue to be, the key to ensuring a reliable electricity supply.

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With Brazil facing a key power deadline - the country will host both the World Cup and the Olympic Games in the next three years - the government is keen to invest in its power sector to ensure that its electricity sector is up to the challenge of being under a global spotlight. With this in mind, the government plans to launch a series of power project tenders in 2013 - including bids for coal-fired capacity (which had been excluded since 2009) - as well as in transmission.

We forecast that Brazil's power sector will continue to post strong demand, even though some risks remain, with growth in consumption expected to average 3.8% per annum between 2012 and 2022. BMI calculates that total electricity generation in 2012 stood at an estimated 551.38 terawatt hours (TWh) and that this figure will rise to 808.32TWh by 2022. We forecast that hydroelectricity generation will continue to dominate the energy mix, having accounted for an estimated 442.49TWh in 2012, which we see rising to 596.98TWh by 2022.

Key developments in Brazil's power sector:

* In July 2013, the government announced several power auctions, planned for between August and December 2013, which will see auctions for coal and gas-fired power plants, renewable auctions and hydroelectric concessions - as well as a transmission auction planned for December 2013.
* Operations at the Jirau hydroelectric plant, developed by GDF Suez, are scheduled to begin in September 2013.
* State energy firm Eletrobras approved a restructuring programme in May 2013, which aims to cut costs by 30% over the next three years. By July 2013, over 4,000 employees had agreed to the voluntary dismissal scheme, and more job losses are expected by the end of 2013.

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