Northern Brazil's drought expected to have limited impact on power prices

The interruption in the operation of the Santo Antônio hydroelectric plant and the drought in the north of Brazil should have a one-off and geographically limited impact on the price of electricity in the country, according to experts heard by BNamericas. 

João Sanches, CEO of consultancy and energy trader Trinity Energias Renováveis, does not believe there will be any significant effects in the medium term. 

"There may be a decoupling of prices in the north and northeast regions, rising above prices in the southeast and south," he told BNamericas.

Due to the drought in the Amazon, the federal government has decided to activate the Termonorte I and Termonorte II thermal plants to guarantee energy supply in Acre and Rondônia states. 

According to the mines and energy ministry (MME), fuel reserves for thermal generation in the region, including in isolated areas not connected to the national grid, are at the right level.

João Mello, president of consultancy Thymos Energia, predicts that the PLD – the reference price in the free energy market – will remain close to the floor, at about 70 reais (US$13.50) per MWh, since the country's main hydroelectric reservoirs are full. 

"This cost [of the thermal power plants] will be included as a system service charge. This generates an extra bill for the country, but it's not a particularly high bill," he told BNamericas. 

Mello said Santo Antônio is particularly vulnerable to droughts and floods because it has a very low drop height.    

"In 2014, the downstream filled up, lowering the height, and the machines couldn't generate either," he said.

In all, around 500,000 people in Amazonas, Acre and Rondônia states have been affected by the extreme drought. In Amazonas alone, a state of emergency has been declared in almost 60 municipalities.

Alexandre Nascimento, director of weather science consultancy Nottus Meteorologia, said the drought affecting the Madeira River is the cumulative result of three years of La Niña, a phenomenon that reduces the temperature of waters of the Pacific Ocean. 

"The Madeira starts in Peru and flows through Bolivia, regions that have seen little rainfall in recent years," he told BNamericas. 

"With El Niño [the opposite to La Niña], which began about three months ago, the Madeira River could be favored in the next rainy season."