Dear Editor,
It’s too early to make any kind of projections but the approval recently of the controversial Amazon hydroelectric project in Para state by Brazil’s Environment Ministry is bound to have an impact on other potential upcoming hydroelectric projects in the region. Brazil has been dealing with a huge increase in demand for electricity and this project will provide up to 11000 MW for close to 23 million homes. Besides, up to US$30B is being spent on resource extraction capacity building and infrastructure addition to the region in the coming years. This would also provide waterways as exit routes for agricultural commodities grown in the Amazon. An interesting aspect of the potential project is that the project builders will have to pay out around US$800M to build national parks, help indigenous communities, monitor forests, etc. This latter part might provide a benchmark to other projects in terms of what would be required from project builders to support local communities and preserve forests. Also, the fact that there is a strong element of local resource and agriculture-driven activities in the vicinity helps make a stronger case for this project by the government. Of course, environmentalists around the world are most likely going to continue to raise a lot of noise despite the Environment Ministry giving the project a go-ahead licence.
As per news stories, it appears that the country is targeting up to 70 dams in the Amazon in the future to generate electricity. Many critics have been pointing that the power generation could be as low as 10% of capacity for several months each year during the low water period. Also, it could deal a blow to the efforts of many of the indigenous communities who could be severely affected by this project.
Meanwhile, neighbouring Venezuela has allocated US$1B to fix its electrical generation capacity through a new fund set up for this purpose. Of course,Venezuela’s current power woes are a direct result of its Guri reservoir that provides around 70% of its electricity, facing major drops in water levels as a result of drought. It goes to show that depending heavily on hydroelectricity can have its own problems. Many of the Caribbean islands are announcing big drops in average rainfall. Is this a trend driven by climate change or is it something cyclical? Venezuela is looking to build alternatives to hydroelectricity.
For other projects that were looking at Brazil as potential buyer of electricity, this might cause them to pause and gauge the demand. Also, a lot of capital from overseas investors would move to projects which have larger traction and also which support larger agricultural, resource extraction and other activities in the surrounding area.
Brazil is known to invest in projects at home and is not known to invest much in international projects, and so in all likelihood, it will first purchase power from its own projects if long-term guaranteed power purchase plans are the sticking points in financing. Venezuela is likewise focusing on its own power generation.
The demand for power will keep increasing and hydroelectricity often tends to be the easy way out. Other areas in the northern parts of Brazil could still require power from other sources outside Brazil, including from Guyana, although establishing transmission lines might be just one of the hurdles. Capital usually becomes the biggest hurdle. Hopefully, Guyana with its strong requirement for electricity meets with quick success in its hydroelectric power project and gets good responses from overseas investors and lending agencies. Small-scale, distributed power generation, ideally involving renewable resources and sited near coastal population centres is always another option. Nothing better than bypassing setting up hundreds of miles of transmission lines through difficult terrain.
Yours faithfully,
Sanjiv Khosla
