Brazil urges gas, power policy coordination

Policymakers and the Brazilian gas and power sector need to work together to help the natural gas market gain traction and liquidity, industry participants say.

Brazil has advanced little on the issue of coordination, said Ambar Energia natural gas director Rodrigo Senne last week at the Argus Brazil Gas Commercialization Forum in Rio de Janeiro, with grid operator ONS still operating with a hydroelectric bias. Thermal generation does not start to dispatch until late in the drought season every year, when hydropower generation is already lower and prices are higher, because of an ONS computer model that considers water storage levels.

Senne says hydropower generation should be used more flexibly, allowing for a steady amount of gas-fired thermal generation to be dispatched on a daily basis, even early in the season when water levels are high, since gas supply agreements are not flexible.

Brazil uses hydroelectric water storages as a sort of "battery" for generation, storing potential power, said Gustavo Hooper, oil and gas trading director at producer Origem Energia. But this storage is becoming insufficient for the country's electrical demand. Climate change is making weather patterns more and more unpredictable, so Brazil will need to look to other sources more consistently to raise its power grid reliability and stability.

The country is investing in renewable options to expand its capacity, but solar and wind-based plants do not provide stability, as they cannot generate at a moment's notice. Gas-fired thermal plants could come to function as another "battery" for Brazil's power matrix, said Hooper, replacing part of the supply hydropower plants have filled so far. Hooper also said he supports thermal gas-fired generation being increased in the same proportion as the intermittent sources, to provide stability.

Data from by the Brazilian power clearing chamber (CCEE) shows that 241 large-scale solar and wind power plants will start operating by January 2026, bringing more than 6GW of interruptible power generation capacity to the grid.

But for the gas market to better establish itself in the country, companies need conditions to sign decade-long contracts with thermoelectric plants and develop a role that goes beyond giving flexibility to the matrix during emergency dry periods. Ambar's Senne points out how volatile the price of electricity can be, because of poor planning and dependence on unpredictable hydro factors — which climate change could worsen.

Thermal generation is still frowned upon in Brazil, as hydropower generation accounts for more than 60pc of the power matrix.

By Rebecca Gompertz