Evaluating regulatory strategies for mitigating hydrological risk in Brazil through diversification of its electricity mix

Maria-Augusta Paim, Arthur R. Dalmarco, Chung-Han Yang, Pablo Salas, Sören Lindner, Jean-Francois Mercure (), José Baltazar Salgueirinho Osório de Andrade Guerra, Cristiane Derani, Tatiana Bruce da Silva and Jorge E. Viñuales

Energy Policy, 2019, vol. 128, issue C, 393-401

Abstract: Hydroelectricity provides approximately 65% of Brazil's power generating capacity, making the country vulnerable to droughts, which are becoming increasingly frequent. Current energy law and policy responses to the problem rely on a sectorial approach and prioritise energy security and market regulation. Brazil has opted to increase energy security levels during periods of hydrological variability with national grid interconnection and thermal plants backup. Additionally, Brazil has created the Energy Reallocation Mechanism (MRE) to manage the generators’ financial impacts in times of insufficient water. This policy, however, was unable to avoid the high financial exposure of generators in the spot market during the severe droughts experienced in the period 2012–2016. To explore how a more diversified electricity matrix can contribute to reducing hydrological risk, this article uses Integrated Assessment Modelling (IAM) techniques to analyse future macroeconomic and energy scenarios for Brazil in a global context, aligned with the Brazilian Nationally Determined Contributions (NDC) under the 2015 Paris Agreement on Climate Change. We show that the addition of non-hydro renewables is an advantage from the integrated Water-Energy-Food nexus perspective because it reduces trade-offs amongst the water and energy sectors. Our conclusions suggest that a nexus perspective can provide useful insights on how to design energy laws and policies.

Keywords: Hydropower; Hydrological risk; Electricity mix; Water-Energy-Food Nexus; Brazilian law and regulation; Integrated Assessment Modelling (IAM) (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:128:y:2019:i:c:p:393-401

DOI: 10.1016/j.enpol.2018.12.064

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