‘No one will sleep peacefully until November’, says former director of Aneel – Economy

Former director of the National Water Agency (ANA) and the National Electric Energy Agency (Aneel), Jerson Kelman believes that Brazil will “scrape” without electricity rationing this year, but may suffer involuntary blackouts during peak hours . For him, the supply and demand management measures are correct, but communication needs to be strengthened in order to have the population’s support. “The reservoirs will be very low, nobody will sleep peacefully until November. It’s a worrying situation.”

Kelman chaired the task force created by the then President of the Republic, Fernando Henrique Cardoso, to investigate the causes of the 2001 rationing. Part of the problems has been corrected. But some distortions remain. One of them is the issue of physical guarantees for hydroelectric plants, which, according to him, are still overestimated. That is, they generate less than they say they can produce in a time of drought. Another issue is the lack of gas to supply the thermal plants. “It looks like déjà vu.”

Are we going to have a rationing?

I don’t rule out the possibility, but I don’t think it will happen. Rationing can be avoided with supply and demand management, which is already being done. According to the (consulting) study PSR, the probability ranges from 2% to 20%. This requires some measures that under normal conditions would not be taken. For example, the ONS (National Electric System Operator) has already authorized the reduction of the N-2 criterion to N-1 in the transmission lines between the Northeast and the Southeast. It’s like a car that used two spare tires and now has only one.

Is the program that the government announced, with the voluntary reduction and increase in tariff flags, enough to avoid rationing?

I think rationing is unlikely. In October and November, we will have power concerns. This means that at peak time, which is the maximum consumption in the country, it will be necessary to use reserves (generators that are not producing). If the reservation is not sufficient, there may be an involuntary blackout. Despite this, the percentage that would not be met would be low.

Is anticipating the selective cut a way out?

The best way to balance supply and demand is to show that the product is in short supply. When you have a shortage of tomatoes, for example, the price goes up and people reduce their consumption. What is right is to make it clear to everyone that, to avoid rationing, a greater evil, which is turning on expensive thermals, has to be done. As we are in a complicated situation, they are all connected and the consumer is going to pay the bill. The problem is more economical. We are spending part of the resources that the population does not have to keep everyone unrestricted in their energy use. It is good that consumers know that it is expensive and that they need to reduce consumption.

Did the mitigation measures not come too late?

After the Creg (Chamber of Exceptional Rules for Hydroenergy Management) created (on June 28, 2021), the steps that had to be taken gained speed. The first measures were to ease the operating restrictions of hydroelectric plants. These restrictions were forcing the plants to empty their reservoirs. The ideal would have been if, before Creg, ANA and ONS had articulated better so that this flexibility could take place sooner. It was necessary to create Creg to take the measures. The Porto Primavera plant, the last hydroelectric plant before Itaipu, had a high-flow restriction imposed by Ibama to preserve fish. This restriction emptied not only Porto Primavera but also the plants in the Paraná River basin. Creg removed this restriction and Cesp managed to move a team to capture the fish.

But what about demand reduction?

I think the best medicine and the best posture is transparency. There was no doubt that 2020 was a dry year and 2021 would be too. The drought we’ve been experiencing for the past seven years is very similar to the drought of the 1950s. In fact, it’s nothing new, it wasn’t in July that it was discovered that we were in a terrible drought. In this case, anywhere in the world, widespread publicity is given and everyone is asked to save for the good of all. Should have more communication.

Are we going to continue being held hostage by hydrology?

Turning on the thermals when there is a drought is part of our hydroelectricity option. Brazil is the country that produces the most energy from renewable sources, hydroelectricity being the main one. This takes a toll. When there is a drought, the hydroelectric system requires the operation of thermal plants. We’ve adopted this model for decades and it’s correct. Now the system shouldn’t be designed so that when a drought occurs, everyone is nervous. This is not what should happen. In 2001 we had a rationing and then a reform was made to correct some defects, because something didn’t work. When there is no energy supply, something was wrong. Something was wrong in 2001 and something is wrong now. In 2001 some things were fixed and some things haven’t. The long-term contract auctions (PPA) were very positive and today we are imitated by other countries. The creation of the CMSE (Electrical Sector Monitoring Committee) also.

What hasn’t been fixed?

After 20 years we are suffering the consequences of exactly what has not been corrected. First, the plants have a physical guarantee, which is the contribution that a plant makes to the collective effort to meet demand. This physical guarantee was oversized in 2001. What does this mean? The country expected that the system would be able to meet a greater demand than it actually could. This was the main cause of the rationing in 2001. So it would have been necessary, over the course of 20 years, to have corrected this in order to re-establish the truth about what is the true generating capacity of each generating unit. There was only one time when the government reviewed the physical guarantees, which was in 2017. But there are many plants with greater physical guarantees than they actually have. When we look at the theoretical capacity of the system, the plants should meet the demand we have today. But if it’s oversized, in a drought, they can’t.

And what else was not fixed?

In 2006, it was suspected that the thermal plants would not have gas to operate. They were there, but right now they wouldn’t work. They did a test and found that there was no gas. In other words, it is not enough to have a thermal plant, it has to have gas. Today we have the same problem. There are two thermal plants in Ceará (Termofortaleza and Termoceará) that do not have gas to operate. They use LNG on a Petrobras ship. But the state company took the ship from there and took it to Bahia. The maintenance of Mexilhão also put Petrobras platforms out of action. It is too much coincidence. When you need it most, something happens and you run out of gas. It looks like déjà vu.

And now?

We have two agendas in 2021. In the short term, it is to manage supply and demand so that we can spend scraping without rationing. The reservoirs will be very low, no one will sleep peacefully until November. It’s a worrying situation. We are taking more risk. Suppose it rains in November and December, then we can start thinking about a new reform of the sector.

Does shaving this year mean we may have new problems in 2022?

Rains from November to April will determine the cost of energy. But there is a lot of new generation coming into 2022. Even if the rain is normal in this period, we will be recovering. To remain in a distressing situation, the drought has to continue at the same intensity as in recent years.

Is this new generation wind and solar? Does that solve the problem?

We can only be expanding wind and solar energy because we have hydro and thermal power. Wind and solar are non-dispatchable. Hydro and thermal plants produce energy when the sun is not shining and the wind is not blowing. I’m going to say something that may seem like heresy, but I’m in favor of resuming assessments about the possibility of building hydroelectric plants, preferably with reservoirs. We gave up on building hydroelectric dams with reservoirs even without examining the favorable cases. Not every location where building a hydroelectric plant is considered is unfeasible. But we gave up on them all, in my view, too soon. Brazil has always been a leader in hydroelectricity and I think that we have abandoned this natural wealth hastily.