By: Leonardo Neri

At the end of 2020 and after five long years of processing by the National Congress, new conditions for the renegotiation of the hydrological risk of electricity generation (GSF – Generation Scaling Factor) were approved.

The GSF measures hydrological risk, which concerns the volume of energy generated by plants and their physical guarantee (minimum amount of energy that a hydroelectric plant can supply in a period). This equation is directly related to the volume of water in the river basins, which depends on the annual, monthly and weekly rainfall volume.

Thus, as is well known, since October 2020 the low level of reservoirs and low rainfall have drawn the attention of Brazilian authorities, who have changed the order of merit, dispatching thermoelectric energy.

However, the numbers remain alarming and the forecast is that the country's largest reservoirs will reach 10% of their capacity. 

Meanwhile, with no expectation of rain, and with the use of energy produced by thermoelectric plants, consequently, there is and will be an increase in the cost of energy, creating, once again, a debt, given that the high costs will be borne by the market – generators, transmitters and consumers.

The scenario is not new and is similar to the years of 2015, in which there was a reduction in reservoirs caused by the drought in the country, an increase in energy consumption and the use of thermoelectric plants and the energy crisis of 2001, caused, at the time, by the severe drought and combined with the scrapping of the energy sector due to the lack of investment in energy generation and transmission. However, from then on, the Government dedicated itself to the sector, regulating it and encouraging energy production, through the growth of the Free Contracting Environment - ACL, privatizations and incentives for the transition of the energy matrix.

Thus, observing the current context and the history of the country, we have to say that the proposed solutions, regardless of the government's affiliation, have not solved the water crisis that the country is experiencing, because, if, in 2001, the person responsible for the energy crisis was the state's inability to invest in infrastructure, in 2015, the scenario and the celebrations for the sector's investments were applauded by both the reds and the blues, but the lack of rain caused a huge shock to the system, contradicting the merit orders of the dispatches and exorbitant energy prices supported by consumers.

We have arrived in 2021, once again, the lack of rain leads to the inversion of the order of merit of the National Operator's dispatches and energy prices exceed reasonableness, and after 20 years of investments, incentives and improvement of the sector's regulation, the problem is the same, the lack of rain. In other words, regardless of the government, we continue to have the same problem of unpredictable energy, whether in existence or in price, high volatility, inadequate interference by the government and the absence of policies aimed at solving, or rather, adequately studying the problem, the lack of rain.

As a result, droughts in river basins, combined with a lack of governance and inadequate state interference in the market, mean that we are once again faced with a crisis in the sector, which needs to find a balance between supply and demand for energy. It is therefore unquestionable that we are facing an imminent new crisis in the GSF.

[1] https://www.epe.gov.br/sites-pt/publicacoes-dados-abertos/publicacoes/PublicacoesArquivos/publicacao-153/topico-574/Resenha%20Mensal%20-%20Agosto%202021%20(base%20Julho).pdf