How Brazil’s drought impacts the ICT industry

The harsh drought Brazil is facing has heightened the risk of energy rationing and rising costs for large energy consumers, such as telecom operators and datacenter firms.

Rainfall is at its lowest level in over 90 years in the areas with some of the country’s main hydro reservoirs, and this lack of rain is negatively impacting electricity generation. Brazil relies mostly on hydro dams and to compensate for low water levels costlier thermoelectric power generation must be activated.

“For many years, countless reservoirs have not reached flood levels and, quite often, there is a need to complement generation using thermoelectric plants,” Sérgio Abela, Ascenty's datacenter operations director, told BNamericas.

Within one year, thermoelectric power generation in Brazil has jumped from 7,881MWa to 14,279MWa of the total power load, according to latest data from national grid operator ONS compiled by BNamericas.

In response, electric power regulator Aneel has activated the red flag tariff system (level 2) with a cost of 6.24 reais (US$1.22) per 100kWh.

“June starts with the main reservoirs of the SIN [national interconnected system] at lower levels for this time of year, which points to a horizon with reduced hydroelectric generation and increased thermoelectric production,” the regulator said in a statement.

According to Abela, "if there is rationing or lack of supply, the company may be forced to generate energy with its own generators, increasing the operating cost."

This would have a larger impact. Ascenty is the biggest datacenter colocation company in Brazil, operating 16 sites with total power capacity of 217MW, serving the data storage needs of different corporates and industries. 

Another seven datacenters are in development, involving a combined 128MW.

IN OPERATION
Location	Go-live date	Total built area	Power
Campinas 1	2012	5,000m2	6MW
Jundiaí 1	2014	7,000m2	15MW
Jundiaí 2	2019	9,000m2	14MW
Fortaleza 1	2015	9,000m2	10MW
São Paulo 1	2017	4,000m2	6MW
São Paulo 2	2017	9,000m2	14MW
Hortolândia 1	2015	4,000m2	10MW
Hortolândia 2	2019	4,000m2	7MW
Hortolândia 3	2019	3,000m2	3MW
Sumaré 1	2017	11,000m2	14MW
Sumaré 2	2019	12,000m2	20MW
Rio de Janeiro 1	2017	7,000m2	10MW
Vinhedo 1	2019	21,000m2	34MW
Paulínia 1	2019	8,000m2	14MW
Vinhedo 2	2020	25,000m2	36MW
São Paulo 3	2020	4,000m2	4MW
Chile 1	2020	6,000m2	11MW
IN DEVELOPMENT
Rio de Janeiro 2	2021	3,000m2	3MW
México 1	2021	20,000m2	21MW
México 2	2021	24,000m2	31MW
Chile 2	2022	21,000m2	31MW
Hortolândia 4	2021	2,000m2	3MW
Hortolândia 5	2022	21,000m2	31MW
Hortolândia 6	2023	21,000m2	31MW
Sumaré 3	2022	12,000m2	20MW
Sumaré 4	2023	12,000m2	20MW
Sumaré 5	2024	12,000m2	20MW

According to Abela, Ascenty relies on its own generators, which are redundant and with enough diesel storage to operate for days without the need for refueling.

With refueling, it is possible to operate the generators uninterruptedly throughout the year, he said. According to the executive, Ascenty's diesel supply contracts guarantee refueling within a few hours upon request.

“But, of course, we don't want to reach this condition and, to minimize supply risks, we have for years been migrating our datacenters to the free contracting environment (ACL), also known as free market.”

As a result, “we have energy contracted until 2026, from large generating companies that have their own generation conditions from different types of energy sources and in different submarkets.”

This contracted energy comes mainly from wind, solar, biomass and small hydro dams, in addition to conventional hydro dams.

TELECOM

TIM

Energy diversification was also adopted by telecom operators, whose related investments have largely focused on solar supply.

Brazil’s TIM said in response to a query by BNamericas that it depends on the constant supply of energy at a competitive cost to serve the physical structure of the telecommunications network, its own stores and administrative buildings.

However, the company sees its renewables diversification efforts helping to mitigate potential electricity supply problems stemming from the drought situation.

The operator has a centralized area to manage energy consumed by all operations, for planning and monitoring consumption, and energy efficiency projects.

Its energy management has two pillars: energy efficiency and the search for renewable sources.

“Due to its strategic importance and impacts, in addition to being a material topic for the company, energy management is part of the commitments assumed in the 2021-23 ESG plan, with goals regarding the transition to renewable energies and reduction of emissions,” the company said.

The plan aims at more efficient energy use for data traffic and at improving energy efficiency by 80% by 2025. To achieve the goal, TIM said it is replacing energy-intensive equipment.

TIM started its distributed generation project in 2017, with the goal of reaching 60 plants by the end of 2022, including solar, hydro and biogas, totaling monthly generation of 38GWh.

In 2020, thirteen plants started operations (10 solar, two hydro and one biogas), in the states of Ceará, Mato Grosso do Sul, Paraíba, Pernambuco, Sergipe and São Paulo.

The operator has 34 solar, hydro and biogas power plants in operation. TIM's three main renewable suppliers are EDP, Enel X and, more recently, Faro Energy.

In May, the company announced a public notice for contracting plants with lower capacity, which are aimed to power antennas and stores in 11 Brazilian states.

TIM has also installed 1,679 biosites, which are sustainable antennas with lower cost, low visual impact and capable of adding public lighting and security cameras, in addition to telecom transmission.

More recently, the operator announced the use of unplugged sites (antennas). These are autonomous sites that run on solar energy and satellite transmission and are part of the Sky Coverage project, which intends to take 4G to underserved regions.

Oi

The largest Brazilian telecom company does not believe that the country's water crisis and the red flag tariff system (level 2) will impact the operation or provision of services to customers.

“It is true that higher energy costs over a long period tend to put pressure on margins. But in recent years, as part of its sustainability path, the company has been putting into practice a strategy that increases its clean energy consumption through other energy matrices, such as wind, biomass, and solar in distributed generation,” Daniel Hermeto, Oi’s director of business support, told BNamericas. 

According to Hermeto, the migration to the free market and energy efficiency projects, among others, mitigate the impacts of the current crisis, in addition to being environmentally sustainable.

Oi has also partnered with Faro Energy. 

In December, Oi contracted two solar plants from Faro, in a deal worth 45mn reais and involving capacity of more than 21GWh/y.

The telco reports having more than 60% of its energy supplied from these sources and the goal is to reach 100% by the end of 2022.

Oi also saved 400mn reais in 2020 in energy costs by using renewable sources. 

Claro

The company’s renewable energy program was launched in 2017.

It aims to use renewable sources and includes actions to protect the environment in all its operations and installations in Brazil, in addition to reducing costs and dependence on traditional transmission and generation.

In Brazil’s mid-west, every telecom operation is already consuming renewable energy, obtained through its own generation and clean energy purchase contracts in the free market, Claro said in a statement.

The company lists 52 exclusive plants in operation under its program, which according to Aneel makes it the largest distributed generation project in Brazil, generating energy equivalent to the consumption of 240,000 homes.

Together, the plants supply 20,000 Claro consumer units (antennas, stores, among others). 

The operator hired this week four more solar plants from GreenYellow, its main partner in the distributed generation program.

The new solar plants have a capacity of more than 25MW.

Last year, another four units built by the French multinational for Claro started operations, bringing the total to eight.

5G

Efficient power management for telcos is critical not only because of costs and potential supply disruptions, but because 5G is expected to demand more energy. 

According to MTN Consulting, telcos spend on average 5% to 6% of their operating expenses, excluding depreciation and amortization, on energy costs.

However, a typical 5G antenna consumes double or more of the energy of a 4G one, MTN’s chief analyst Matt Walker wrote in a report.

Energy costs are set to rise even more with the deployment of more antennas and small cells, due to the higher bands used by 5G, and because of the expected expansion of edge computing (small data processing units closer to the client) and IoT sensors.