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Floods stress Brazil energy sector vulnerability

  • Spanish Market: Electricity
  • 10/05/24

Record flooding in Brazil's Rio Grande do Sul state over the past week underscores vulnerabilities in the country's energy system to extreme weather, which could also slow its pace of transition to cleaner energies.

Nearly one week after record rainfall began flooding the state, power outages continue to plague it, with nearly 400,000 residents still in the dark.

The flooding forced companies to suspend operations of critical infrastructure for the power sector, including three substations, 25 transmission lines, six hydroelectric plants and 11 power transformers. This led grid operator ONS to import power from Uruguay to meet domestic demand.

With forecasts pointing to more rain, it is increasingly clear that it will take weeks if not months for the state to start returning to normal. The Rio Grande do Sul government estimates that the floods will cost the state R19bn ($3.6bn).

The tragedy in southern Brazil comes less than a year after a record drought struck the Amazon basin, which pushed water levels of the Amazon River and its tributaries to their lowest in 120 years. The drought reduced hydroelectric output from the region's plants and interrupted transport of fuel along key river corridors, leaving many households without power, because of the lack of diesel to operate generators used in off-grid communities.

These crises highlight the country's failure to prepare for extreme weather and underscore the lack of investment in critical infrastructure, including in the energy sector. A study by the World Bank from 2023warned of the need to upgrade the country's aging infrastructure and of future power supply risks.

Brazil's large hydroelectric plants have been operating for an average of 55 years, according to the study, and need investments to boost efficiency and to limit the impact of extreme weather. A total of 11 hydroelectric plants in Rio Grande do Sul are being monitored, including six that present an elevated risk of rupture, such as the 28MW 14 de Julho plant that experienced a partial rupture last week because of the heavy rains.

Authorities will now need to change their focus, which has been largely on limiting the impact of dry weather on the electricity sector, especially following the 2021 droughts, that resulted in expansion of thermoelectric generation.

More recently, electricity regulator Aneel has been focusing on making power distribution and transmission networks more resilient to extreme weather, especially after downed power lines resulted in extended blackouts for some 4mn consumers in the city of Sao Paulo and over 1.3mn consumers in Rio de Janeiro. The sector is working to make transmission towers more resilient to high winds.

Several cities and states in Brazil have launched plans to prepare for climate change, but the bulk of these plans focus on increasing investments in renewable energy and emissions reduction. Increasingly, these plans will also need to focus on mitigating risk from floods, heat waves and landslides.

Brazilian energy companies are also behind the curve in their preparations for climate change. Only 13pc of executives in the energy sector that participated in a recent survey conducted by consulting firm PwC Brasil said they have assessed the impact of climate change on their financial planning.

State of climate

Brazil faced 12 extreme climate events in 2023, according to the World Meteorological Association (WMO). This included a tropical cyclone that hit Rio Grande do Sul last year and affected more than 340,000 people and left nearly 50 dead.

The WMO blamed the extreme climate events in Brazil on the "double-whammy of El Niño and longer-term climate change." Last year, eight Brazilian states recorded their lowest July-to-September rainfall in over 40 years, it said.


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30/01/25

Proven tech focus of 2024 transition investment: BNEF

Proven tech focus of 2024 transition investment: BNEF

London, 30 January (Argus) — Global energy transition investment rose to record levels in 2024, Bloomberg New Energy Finance (BNEF) says in a report published today, but growth was centred on proven technologies and the amount put into emerging sectors declined. Overall investment in the energy transition reached almost $2.1 trillion last year, BNEF says, an increase of 11pc from 2023 and the highest ever. But the increase was markedly smaller than the 24-29pc annual growth recorded over the previous three years. And investment needs to rise to $5.6 trillion/yr in 2025-30, and $7.6 trillion/yr in 2031-35, to align with achieving net zero emissions by mid-century, BNEF says. About 93pc of energy transition investment last year related to "proven, commercially scalable" technologies, BNEF says, resisting pressure from higher interest rates and policy decisions to rise by 14.7pc to $1.93 trillion. Of these, electrified transport attracted the most investment at $757bn, up by 20pc on the year, followed by renewable energy, up by 8pc to $728bn, and power grids, up by 15pc to $390bn. But investment in emerging technologies fell by 23pc on the year to $154bn. Carbon capture and storage investment halved to $6.1bn, as did clean industry investment to $27.8bn. And hydrogen investment declined by 42pc to $8.4bn. BNEF points to issues surrounding technology maturity, scalability and affordability as key hindrances in emerging sectors, flagging the need for public-private partnerships to derisk investment and encourage growth. The main regional sources of investment shifted in 2024, as mainland China increased its contribution by 20pc to $818bn, investing more than the principal 2023 growth drivers — the EU, US and UK — combined. EU investment fell to $381bn and the UK's to $65.3bn, while the US' held stable at $338bn. By Victoria Hatherick Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

DeepSeek undermines AI power demand forecasts


29/01/25
29/01/25

DeepSeek undermines AI power demand forecasts

New York, 29 January (Argus) — Unexpected efficiency achievements by Chinese artificial intelligence (AI) company DeepSeek have cast a shadow over a bullish narrative on booming US electricity demand in the coming decade to power data centers running AI software. Share prices for US independent power producers, natural gas producers and gas pipeline companies fell sharply at the beginning of the week as investors feared DeepSeek's achievement implied significantly less electricity might ultimately be needed to run and train AI models than has been expected. This greater efficiency "calls into question the significant electric demand projections for the US," as the investment case for independent power producers and most integrated utilities is "entirely dependent on data centers," US bank Jefferies said in a note to clients this week. DeepSeek's apparent ability to achieve comparable results to some major US AI companies using far less computing power — and thus far less electricity — may also be bad news for what is widely expected to be the main fuel source to generate incremental power for AI this decade: natural gas. EQT, one of the largest US gas producers by volume, has called growing power demand from planned data centers the "cornerstone" to its "natural gas bull case." Large US gas pipeline companies like Williams, operator of the Transcontinental pipeline, have also touted recent forecasts showing surging demand for gas-fired power, as greater gas generation would require greater pipeline capacity to move those incremental volumes from wellhead to generator. DeepSeek's achievement could even cast doubt on the investment case for nuclear power, which has been recast as something of a silver bullet for major technology companies looking to secure zero-emission electricity to enable their AI development efforts. While investors have generally assumed significant premiums for nuclear power, to the tune of more than $100/MWh, new demonstrated efficiencies might cause those assumptions to be questioned, Jefferies said. A loss in power demand for AI data centers may also undercut the investment case for next-generation small modular reactors (SMRs), into which tech companies like Google and Microsoft have poured substantial capital. Revising the revisions News of DeepSeek's efficiency achievements are a shock to prevailing expectations for surging US power demand in the coming decade, when those expectations have already been substantially revised over the past year, following decades of stagnant power demand. US grid operator PJM, which serves 65mn customers and is the largest US electric grid, on 24 January released a report showing significant upward revisions in its peak seasonal power demand projections. Peak summer power demand in PJM's territory in the mid-Atlantic was projected to surge to 210GW in 2035 and 229GW in 2045, substantially steeper than PJM's load forecast just one year earlier, which showed peak summer power demand in PJM rising to 177GW in 2034 and 191GW in 2039. Consultancy firm McKinsey in November forecast US data center power demand to reach 606TWh by 2030, up from 147TWh in 2023. Under this scenario, data centers at the end of the decade would comprise 11.7pc of total US power demand. If efficiency gains in AI reduce power demand as much as some investors fear, those big forecasts might require big revisions. But efficiency improvements can go two ways — they can reduce demand for fuel, or simply increase output. In the case of AI, more efficient operations could be exploited to accelerate the development of more powerful AI models — using the same amount of power that was previous expected, but to far greater effect. That latter explanation is why, "despite uncertainties," FactSet head of power markets Matthew Hoza tells Argus he remains "bullish" on power demand growth in the coming years. "With AI's increasing integration into company tech stacks and its growing presence in daily life through AI agents, we anticipate continued growth in AI adoption and the resulting power needs," Hoza said. By Julian Hast Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Capacity markets need to reduce emissions: Aurora


28/01/25
28/01/25

Capacity markets need to reduce emissions: Aurora

London, 28 January (Argus) — European capacity markets focus too much attention on fossil fuel-fired plants and not enough on renewable sources of security of supply, according to a report issued by research firm Aurora that was commissioned by campaign group Beyond Fossil Fuels. Capacity markets in the six European countries that have them — the UK, France, Italy, Poland, Ireland and Belgium — have made payments totalling €89.6bn since a mechanism of this kind was first established in the UK in 2015, the report says. The mechanisms are intended to allow firm sources of generation to remain financially viable, even as increasing intermittent renewable generation reduces the number of hours that these types of plants can run profitably. Of this, nearly half went to support gas-fired capacity and 8pc to coal-fired plants, although there is some uncertainty over precise amounts because of data unavailability. Nuclear plants, mostly in France, received 12pc of the support, while storage — located mostly in the UK and Poland — took 13pc. Renewables, interconnectors and demand-side response took only 7pc, 5pc and 2pc, respectively. And 19GW of newbuild gas-fired plants have been funded through the schemes, with another 11GW of newbuild gas-fired plants having been awarded a contract for delivery in the next three years. Some of the plants will continue receiving funding until the 2040s, Aurora said, putting at risk European states' plans to move towards net zero greenhouse gas emissions. Payments for some assets in five of the countries studied continue until 2037-43, although France's unique decentralised system does not provide incentives beyond the front year. Payments to operators of battery energy storage systems (Bess) make up only a small part of the total, even though these units can provide zero-emissions short-term energy storage. Regulators should set up schemes to prioritise zero-emissions forms of security of supply, the report says. And alternative schemes, such as capacity reserves, in which fossil-fired capacity is kept back to resolve supply-demand imbalances but not allowed to act in wholesale markets, can ensure these plants do not lead to emissions increases. At the same time, a lack of viable long-term storage options could mean fossil fuel-fired technologies are needed for longer periods. Bess systems too can suffer from an inability to charge during long periods of low renewables output, which prompted Polish grid operator PSE to increase the technology's de-rating in an auction held last year. Other countries are considering setting up capacity markets, with discussions under way in Spain, Germany and Greece. Spain's planned market, which is under consultation , will allow payments for thermal generators only for a year in advance and in particular circumstances, with only renewables, storage and demand response being eligible for long-term support. By Rhys Talbot Capacity market spending by technology Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Trump's wind order threatens US steel demand


24/01/25
24/01/25

Trump's wind order threatens US steel demand

Houston, 24 January (Argus) — An executive order signed by President Donald Trump this week threatens steel consumption by the burgeoning US offshore wind industry. Trump on Monday ordered that the offshore continental shelf be withdrawn from new wind energy leasing, effective 21 January until the order is revoked. While the order theoretically protects existing leases, Trump also ordered the secretary of the interior, in consultation with the US attorney general, to conduct ecological, economic, and environmental reviews to determine if the leases should be terminated or amended. "We're not going to do the wind thing," Trump said. Trump's withdrawal targets only wind energy leasing on federal property, and leaves leasing for oil and gas, mineral exploration and environmental conservation untouched. The order could cut demand for US platemakers such as Nucor and JSW USA, who have made investments in their operations to target the offshore wind industry. A single monopile can require upwards of 2,500 metric tonnes (t) (2,756 short tons) of steel, according to German-based producer EEW Group, which has been building a monopile production facility in Paulsboro, New Jersey, to serve the US offshore wind industry. Japanese trading company Mitsui, Spanish wind turbine manufacturer GRI Renewable Industries and Nucor announced in August that they were considering developing a joint venture wind tower plant on the US east coast. Nucor recently built a 1.2mn short tons (st)/yr plate mill in Brandenburg, Kentucky, that the steelmaker wants to use to supply plate to monopile structure production. JSW Steel, an Indian steelmaker, announced in June it would invest $110mn to upgrade its Baytown, Texas, plate mill so it could make plates for offshore monopiles. The Baytown mill produced nearly 121,000st of plate and pipe in the fourth quarter, up by 15pc from a year earlier. Trump is also attempting to halt at least one onshore wind project, pausing activities around the Lava Ridge Wind Project, a potentially 1,000MW system on public lands in Idaho. Trump called the Bureau of Land Management's approval in December "allegedly contrary to the public interest" and subject to "legal deficiencies". Interior will evaluate the project's record of decision and possibly conduct new analysis on the system. By Rye Druzchetta Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Trump touts off-grid gas, coal for AI data centers


24/01/25
24/01/25

Trump touts off-grid gas, coal for AI data centers

New York, 24 January (Argus) — President Donald Trump said he plans to give developers "very rapid approvals" to build data centers running artificial intelligence (AI) software, as well as off-grid electric generating facilities to power them. "I'm going to give emergency declarations so they can start building them almost immediately," Trump told the World Economic Forum in Davos, Switzerland, in virtual remarks on Thursday. Allowing for a rapid increase in power generation capacity will enable the US to scale up its AI capabilities and be competitive with China, he said. Trump said he has been telling developers that he wants them to build electric generating facilities next to their planned data centers. These would bypass connection to the grid, which he said is "old" and unreliable. The developers will be able to fuel their generators with "anything they want," including natural gas, and could use "good, clean coal" as a back-up in case a gas pipeline were to explode, cutting gas supplies to a data center's off-grid gas power plant, he said. Trump's comments echo those made recently by executives in the oil and gas industry, who are betting that tech giants' desire to quickly build out data centers to develop their own AI software will force them to eschew the long, arduous interconnection process through which new customers connect to the grid, and instead secure their own personal supply of electricity generated by natural gas. ExxonMobil in December said it was in talks to provide AI data centers with "fully islanded" gas-fired power, which could be installed "independent of utility timelines" and at a pace that other baseload generation fuel sources, like nuclear, could not match. Alan Armstrong, chief executive of Williams, the largest US gas pipeline company, told Argus that AI data center operators are going to build in states where they can quickly secure off-grid electricity supplies. By Julian Hast Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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