As Brazil enters its dry season, the country is grappling with a drop in reservoir levels at hydroelectric plants. Despite the development and growth of wind and solar power sources, hydroelectric plants still provide more than half of Brazil’s power supply. The local power regulator, Aneel, has decided to introduce an additional charge on electricity bills in response to the low reservoir levels.
Aneel has established a pricing system that includes different levels ranging from “green” to “red level 2.” Under the system, no additional charges are applied at the “green” level. However, as the level progresses to “yellow” and beyond, additional tariffs are gradually implemented. The activation of the “red level 2” rank in September means that Brazilians will have to pay an extra 7.88 reais ($1.40) for every 100 kilowatt-hour of power consumed.
Concerns Over Inflation and Power Generation
The decision to implement the “red level 2” tariff has raised concerns about inflation in the country. The move comes as rainfall forecasts for September indicate a significant drop in precipitation in Brazil’s primary hydroelectric regions. This decrease in rainfall will require power generators to rely more heavily on thermoelectric plants, which are costlier to operate.
This is the first time since August 2021, during a major drought, that Brazil has experienced the activation of the “red level 2” tariff. In August, consumers did not face any additional charges on their electricity bills. Looking ahead, the reliance on thermoelectric plants and the increased cost of power generation could continue to impact electricity prices in Brazil.
Brazilians are set to bear the brunt of higher electricity costs in September due to low reservoir levels at hydroelectric plants. The activation of the “red level 2” tariff highlights the challenges posed by the country’s dependence on hydroelectric power and the need to diversify energy sources to ensure stability and affordability in the long run.
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