The rainfalls at the beginning of the year boosted the export of surplus power from Brazil's hydroelectric plants to Argentina and Uruguay. In addition to contributing to the energy security of neighboring countries, Brazil was able to earn foreign exchange, which helps reduce tariffs.
Now Brazil's main power generation companies want the government to maintain exports throughout the year. They believe the wet season in Brazil can save the winter in Argentina and solve the water crisis in Uruguay without compromising Brazil's energy security, considering the domestic scenario of low demand, an oversupply of power, and the lack of reservoirs for storage.
In recent months, Brazil has wasted record-high amounts of water in several hydropower mills, as these plants release excess water without producing power. This occurred in mills including Belo Monte, Jirau, Santo Antônio, Itaipu, Tucuruí, Furnas, and São Simão. Until May, the average waste totaled 13.5 megawatt-hours (MWm), which in energy equivalent is more than enough to supply the Northeast region.
Copel CEO Daniel Slaviero considers the waste of natural funds unacceptable. According to the executive, the prospect of full reservoirs continues for the next 18 to 24 months, and the year-round export would be reflected in the improvement of hydrological risk and revenues. "Ultimately, this reduces tariffs, lowers the cost of the system for Brazilian consumers, and strengthens Brazil's role as a regional leader."
Brazil's national grid operator ONS estimates that reservoirs will end May above 80%, the highest since official records began, in 2000. With so much water, Brazil could once again experience a context of waste.
Engie CEO Eduardo Sattamini believes that exporting power to neighboring countries could be a solution to reduce Brazil's excess supply, which puts downward pressure on prices.
"If we continue to reserve water, next year we will have large volumes of waste," he said. "The possibility of sending power to our neighbors also frees up gas from Argentina to be exported to Chile, which is suffering from the reduction in LNG shipments."
Eletrobras, Cemig, Itaipu, and AES Brasil have also said they are in favor of greater power integration in the Southern Cone. These companies combined account for more than 37% of Brazil's generation capacity - including hydroelectric potential. Some of them have tried a better dialogue with the Ministry of Mines and Energy, but complain about the lack of interaction between the ministry and the market.
Luís Barroso, CEO of the consulting firm PSR, recalled that Argentina's supply system is outdated, with thermal plants unavailable or shut down for maintenance. Vaca Muerta, the country's giant project in the Patagonia region, can change this and even export to Brazil, Chile and Bolivia, where production is declining.
Until then, Mr. Barroso sees the possibility of Brazil creating a firm demand in supply contracts, which would be an additional market to the occasional exchanges.
The problem is that converter stations Melo (which sends power to Uruguay) and Garabi I and II (which send power to Argentina) are limited and can send only 2.7 GW, and the current guidelines for exporting electricity also allow exports from thermoelectric plants that are not used to send energy throughout the year.
Since there will be no thermal dispatch in 2023, the most profitable way for companies operating in this segment is to export, provided they give up the fixed revenues from the contracts. Eneva's chief financial and investor relations officer, Marcelo Habibe, said the company has sent energy to Argentina in recent months and is likely to export soon.
"Although the reservoirs are full, they have stopped wasting, so this 2GW demand from Argentina must be attended by Brazilian thermal plants," he said. "Petrobras exports about 500 MW. The coal [plant] is something around 500 MW. So that leaves a little more than 1 GW for us," Mr. Habibe predicts.
For hydro generation companies, in this competitive process, Brazil should take into account environmental and economic characteristics. Mr. Barroso believes that the right to export should be open to all sources.
Eletrobras is perhaps one of the most interested. Brazil's main power utility, which was privatized last year, owns 35 hydroelectric plants with an installed capacity of 40.6 GW. CEO Wilson Ferreira Jr. sees the solution as a way to remunerate these projects and generates revenue for states and municipalities in Brazil.
"The strengthening of energy integration with neighboring countries through improvements in export mechanisms that allow their expansion and predictability will increase the benefits and is an important way to streamline Brazil's power resources," he said.
Sought for comment, the ONS avoided taking a position on whether it was in favor of maintaining power exports throughout the year to neighboring countries. However, the agency said that the stored water resources should be preserved as a priority, both to meet the multiple uses of water and to guarantee power production in the future. "The continuity of epower export transactions depends on market dynamics and cannot affect domestic consumption."
The Ministry of Mines and Energy said that it is a priority of the Lula administration to strengthen partnerships with neighboring countries, and that it is working on actions to increase energy integration among the countries. The ministry also said that, together with other sectoral institutions, it is evaluating the guidelines for the export of electricity from non-hydroelectric renewable sources.