Why the electricity bill is so expensive in Brazil

This Saturday (16), the electricity bill gets a relief: it leaves the water scarcity flag, the most serious level, and goes back to the green one, which has no additional charge. There were six months in which consumers paid an extra R$ 14.20 for every 100 kWh consumed – this is what only the electric shower of a house with four people spends.

But it doesn’t stop there: other invoices will be passed on to customers soon.

Under the specter of blackouts due to the low level of reservoirs in hydroelectric plants, the government emergency contracted in the second half of 2021 the equivalent of BRL 39 billion in energy from natural gas thermoelectric plants – a fossil fuel, although not as polluting as oil. and coal, and considered expensive.

The water crisis also resulted in a loan of BRL 10.5 billion to cover the losses of companies in the sector, money that will be raised in public and private banks and that will be paid – by consumers – through a charge to be included. in the accounts from 2023.

There are still other factors to weigh in the bill: this week the National Electric Energy Agency (Aneel) proposed an increase in up to 57% of the tariff flags that were in force during the lack of rain and there are the expected readjustments of the local energy distributors in the next few years. months.

More expensive light impacts product prices. According to Abrace (Association of Large Industrial Energy Consumers and Free Consumers), energy expenses represent 32% of the cost of chicken and 25% of cement.

And the entity, based on data from the International Energy Agency (IEA), points out that the cost of electricity for the family budget is the second highest in the world, only behind Colombia and ahead of countries like the United States and Canada.

“The biggest crisis is not the supply, it’s the cost crisis. It’s no use having the product if it has a cost that people can’t buy. There’s no use in the supermarket being full of filet mignon if people can’t buy it”, says Luiz Eduardo Barata.

The former president of the National Electric System Operator (ONS) and of the Board of Directors of the Electric Energy Commercialization Chamber (CCEE) cites concerns about the increase in default. “Energy is expensive, people default and end up making a ‘gato’ [ligação clandestina na rede elétrica].”

Here are some factors that weigh on the electricity bill:

Dependence on rains and help from thermals

Brazil has historically reduced its dependence on hydroelectric energy, but it still represents 65% of its electricity matrix.

And the rainfall regime, on which the plants depend, has become more uncertain in times of climate change.

There was pessimism at the end of last year about the recovery of reservoir levels. But then came the heavy rains of last summer, which practically eliminated the chances of an energy crisis in 2022, while causing tragedies in Bahia, Minas Gerais and the State of Rio.

“The crisis we experienced last year was already signaled since 2020”, says Barata. “So it was predictable that throughout 2021 we would have a very adverse scenario.”

Help in times like these has come mainly from thermoelectric plants (also called thermal plants), as seen in the last blackout threat. But their financial weight is considerable and has been increasing due to the current situation.

The price of natural gas that powers the thermal plants was impacted by the war in Ukraine – Russia is one of the major producers in the sector and the conflict shook the world market.

In October of last year, due to this fluctuation, Aneel authorized adjustments that made a plant in Paraná the most expensive in the country, charging R$ 2,553.20 per MWh (megawatt-hour).

In comparison, the average tariff for the Itaipu hydroelectric plant is R$ 196.19/MWh, according to Edvaldo Santana, former director of Aneel, in an interview with the newspaper Valor Econômico.

There is another important point in times of global warming: natural gas from thermal plants is not renewable and does not meet the goal of approaching zero carbon emissions – a matter of urgency, warned UN scientists recently.

A little over a year ago, the government presented the National Energy Plan 2050, a long-term plan that aims to develop low-carbon solutions and estimates a greater share of solar, wind and biomass sources in the country’s energy matrix -the minister Bento Albuquerque also mentioned nuclear plants as a necessity for this composition.

Renewables: we don’t use their full potential

The need to ensure energy security together with the concern about climate change makes the country need to intensify the use of the long time of sun exposure and the excellent potential for wind sources in Brazilian territory, says Amanda Schutze, energy coordinator at the Climate Policy Initiative (CPI) and professor at PUC-RJ.

“We, unlike other countries, could start with a 100% renewable electricity matrix. In addition, through electrification, we can collaborate for the decarbonization of other sectors and with green hydrogen transform the country into an exporter of renewable energy to the world .”

“Brazil can be a leader in the energy transition and seize the opportunity for green economic growth”, says Schutze.

The Russian attack on Ukraine has accelerated an energy transition in Western Europe, which is trying to lessen dependence on Russian supplies, and has hydrogen as one of the main bets for a viable fuel substitute.

“We cannot run out of alternatives in this climate crisis”, says Barata, former director of the ONS. “I would say that efforts have been made to expand the use of renewables, but not with the necessary intensity.”

He states that there is “a great deal of insistence on the installation of gas-fired thermal plants”.

The provisional measure that opens the way for the privatization of Eletrobras included tortoises (political requests unrelated to the initial theme of the proposal) during congressional proceedings, such as the installation of a thermal plant in the Triângulo Mineiro and the extension of subsidies to coal-fired generation.

The Ministry of Mines and Energy told BBC News Brazil that “currently, the Brazilian energy and electricity matrixes are among the cleanest and most renewable in the world. Energy matrix: Brazil 46% and world 14%; Brazil electricity matrix 83% and world 27 %. In addition to diversifying the matrix, the Brazilian government’s objective is to increase this percentage over the next ten years.

“For the next 30 years, analyzes indicate that installed solar capacity should reach between 30 and 90 GW [gigawatts] in 2050, considering only the centralized generation. This will represent between 5% and 16% of the total. In some scenarios, it reaches over 100 GW.”

“Wind energy is today the second source of electric energy in Brazil, with more than 8,500 wind turbines and more than 720 wind farms”, adds the note.

account charges

On Wednesday (13), the Association of Large Industrial Consumers of Energy and Free Consumers released a survey that places the Brazilian electricity bill as the second most expensive among 33 countries surveyed.

According to the entity, only half (53.5%) of the value of the bill concerns the generation, transmission and distribution of electricity. Subsidies, taxes, sector inefficiencies and public policies form the other part.

The biggest weight is represented by the Energy Development Account (CDE), a sectoral charge to promote the country’s energy development and which will represent an amount of R$ 28.8 billion this year.

The CDE includes, for example, a benefit granted to the purchase of national mineral coal by thermoelectric plants to increase the competitiveness of this type of energy – which is highly polluting.

It also includes what is spent to bring electricity to populations in isolated locations, which are not connected to the national energy grid. Barata agrees with this mechanism of solidarity with vulnerable populations, but says that it is possible to optimize these costs.

“With the advent of wind, solar, you can replace these sources with fuel oil [que atualmente atendem essas populações] by a hybrid system, which, for example, combines wind and battery. Something much cheaper than fuel oil”, he says.

“These changes are taking place, but at a slow rate.”

The consumer as supplier

Amanda Schutze, from PUC-RJ, defends a greater focus on mechanisms that act on the demand side as an alternative to focusing only on capacity expansion.

One solution, she says, is to reinforce the inclusion of consumers as suppliers – through solar panels.

“Consumers are much more empowered today in the sense that they can not only generate their own energy but can also contribute to the grid by injecting their surplus”.

Currently, an Aneel resolution allows customers to obtain credits with a kind of exchange with unused energy. A proposal to modernize the sector by the Ministry of Mines and Energy, which expands these possibilities, is being discussed in Congress.

According to the National Institute of Clean Energy (Inel), solar panel units in homes and in commerce and industry grew by 50% in 1 year. The energy generated went from 5 GW to 7 GW. The entity foresees 35 GW of power in distributed generation by 2030.

Schutze also says that there are demand response mechanisms that would make a difference to energy security, that is, mechanisms to manage consumption in response to supply conditions.

“If you offer compensation for an industry to transfer its production to another time, to take it off the peak, you price the production time. You can design different incentives to stimulate demand reduction at critical moments in the system.”​