Brazil needs US$260 million for new hydro project studies

Brazil needs about BRL1 billion (US$260 million) to fund feasibility studies for new medium-sized hydro projects (50 MW to 1,000 MW), according to federal energy planning company Empresa de Pesquisa Energetica’s president Reive Barros.

The executive said during a recent event in Rio de Janeiro the studies are needed so projects can enter the decennial power expansion plan, which defines the plants to be auctioned. The country has vast potential for new medium-sized hydro plants, with each unit’s feasibility plan costing about BRL20 million (US$5.3 million), according to BNamericas.

Investments of this order used to come from state-run firms and big engineering companies but dried up since the Lava Jato corruption scandal emerged just as a deep economic crisis hit.

Solutions that could help finance new studies include national development bank BNDES or using part of the energy tariffs paid by consumers. Federal law already permits this mechanism, but the government has yet to implement it.

“Brazil’s hydro potential is very big, but we are offering in the electric power auctions a very small capacity, because entrepreneurs do not have projects; they do not want to take the risk of making a feasibility study that shows that the plants are not feasible,” Barros said.

One obstacle for new firms to invest in the studies relates to uncertainties regarding environmental restrictions that could impede building plants.

EPE identified a potential for 196 new units above 30 MW in Brazil, totaling 52 GW, of which only 98 units (12 GW) are in areas without environmental and social protection. Out of the total potential, 58% are in areas protected for indigenous people, and 11% would interfere in environmental conservation areas.

A group of power firms, including Engie Brasil and EDF, proposed creating a fund for indigenous people affected by hydro projects, which would help to advance some units. The companies hired a law firm to draft a bill they will present to congress that advocates a fund to be administrated by the entrepreneur responsible for each plant, together with indigenous leadership and indigenous foundation Funai.

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