Prepared by Chris Cote and Mark S. Langevin, Ph.D. December 2013
“Brazil needs to increase its energy supply to guarantee maximum economic progress and to set conditions to improve the population’s standard of living… At a minimum, Brazil needs to double energy consumption per capita and at the same time keep up with the 1 percent demographic growth.”
Distinguished Brazilian Energy Policy Scholar and Professor at the University of São Paulo
Brazil’s long struggle to achieve energy security now faces a new era as the country’s policymakers and industry leaders work to meet the rising demand for electricity while lowering costs and diversifying the national energy matrix. Since the shocking “blackouts” of 2001 that swept through the country’s most populous, developed and politicaly important Southeast region, Brazilian policymakers have intensified efforts to increase installed generation capacity, lower tariffs to industrial and residential customers, achieve greater efficiencies through “smart grid” transmission technologies, and attract greater private sector investment to a national campaign to insure that mounting consumer demand for electricity is met today and well into the future.
Following reforms in 1998, the Brazilian electricity system was undergoing partial privatization when severe droughts and inadequate resource management led to the 2001 blackouts. Upon the election of President Luis Inacio Lula da Silva in 2002, the Brazilian government embarked on an ambitious agenda of reforms and investment programs to insure supply for rising demand. In 2004, President Lula’s government introduced a complete overhaul of the national electricity system (Public Law 10.848). The cornerstone of this system reform was the establishment of an auction-concession contract system to promote competition between both public and private enterprises responsible for generation and transmission. Through the generation and transmission auction-concession system, the federal government would then coordinate public and private investments in generation, and transmission activities at both the national and regional levels to guarantee supply.
This BrazilWorks Briefing Paper explores and outlines the Brazilian electricity system to advance a practical understanding of this sector’s institutional architecture as well as the challenges and opportunities policymakers, industry leaders, and investors face in the coming decade as the generation, transmission, and distribution system (GTD) continues to mature in tandem with Brazil’s economic development.