Government should announce new value of the electricity bill tariff flag this Tuesday (31) – 08/30/2021 – Market

The government should announce this Tuesday (31) the new value of the tariff flag charged on the electricity bill to fund the operation of thermal plants. The expectation is that the value will be increased by at least 50%.

The proposal for additional coverage of the costs of thermal plants was discussed and presented by Aneel (National Electric Energy Agency) to the CMSE (Electrical Sector Monitoring Committee) on Monday (30). The government, however, did not confirm the new value.

Currently, consumers pay R$ 9.49 for every 100 kWh (kilowatt-hours) consumed. If confirmed the increase on Tuesday, it will be the second increase in value since the end of June, when the most expensive flag was readjusted by 52%.

The rise in energy prices is one of the main factors of pressure on inflation, which should exceed 7% in 2021, according to projections by financial institutions compiled by the Focus report, by the Central Bank.

With the biggest water crisis in the last 91 years, hydroelectric plants lost space in the supply, while the government was forced to activate thermal plants, which are more polluting and more expensive.

​At this Monday’s meeting, the CMSE approved the operation of three new thermal plants, as a reinforcement of the generation capacity to avoid blackouts at times of greater demand while the rains are not enough to reinforce the hydroelectric plants’ reservoirs.

The list includes the Uruguaiana plants, in Rio Grande do Sul, and Cuiabá, in Mato Grosso, which may be activated between October and March 2022. The Termonorte 1 plant, in turn, may be activated for a period of six months from September 2021.

“The scenarios presented by the Operator [Nacional do Sistema Elétrico] they reinforce the criticality of the moment,” said, in a statement, the MME (Ministry of Mines and Energy). The text states, however, that the measures already taken guarantee market service in the analyzed scenarios.

Industry experts say that in order to absorb the high cost of thermal power plants, the most expensive level two red flag currently in force should double. For TR Soluções, the ideal value would reach R$19 per 100 kWh.

The crisis led President Jair Bolsonaro to admit last week that hydroelectric plants could stop operating due to lack of water. “We are at the limit of the limit. [hidrelétricas] they will cease to function if this hydrological crisis continues to exist,” he said.

According to consultancy Volt Robotics, Brazil currently has 30 hydroelectric plants already suffering loss of power due to low levels in the reservoirs. The impact on energy generation amounts to 7 GW (gigawatts), equivalent to half the capacity of Itaipu, the second largest hydroelectric plant in the world.

Power loss occurs in plants that currently operate with less than 25% of their water storage capacity. They add up to an installed capacity of 23.5 GW, equivalent to one-fifth of the Brazilian hydroelectric capacity, and losses tend to increase as rivers continue to decline.

According to the ONS (National Electric System Operator), some of these plants may reach November with less than 10% of their energy storage capacity, if the country does not find new sources of generation and is not successful in encouraging energy savings .