The Privatization of Brazil's Electricity Industry: Sector Reform or Restatement of the Government's Balance Sheet?

The Brazilian Power Sector, Latin America's largest, unique among energy suppliers to the world's leading economies, is almost completely dependent on one resource for its energy supply: water. Of its 65, 134 MW of installed generating capacity, in 1998 more than 90% was hydro. A substantial amount of that hydro capacity is located on only a few rivers. The sites for the generating facilities, by virtue of the nature of the resource, are generally far removed from major load centers, leaving the country highly dependent on long transmission lines to move electricity from the producer to the consumers. This dependence greatly complicated Brazil’s coordination and optimization in the use off its resources. Seasonal and regional differences in precipitation and water levels, coupled with the fact that most dams are multi-purpose facilities, providing irrigation and navigation as well as energy production, gave rise to a very sophisticated national model for coordination and dispatch. The model worked quite well in operating the generation and transmission sectors in a reasonably efficient manner.