Huge Hydro Plant Planned for Amazon

Madeira River photo by Mario Kabilio: flickr

The era of mega-hydroelectric projects in Brazil is back after a hiatus. A consortium led by Brazilian engineering firm Odebrecht and federal power company Furnas won the December 10 auction to build and operate the 3.15 gigawatt Santo Ant`Unio plant on the Amazon’s Madeira River. The project could usher in a new era of major hydroelectric plants.

The auction results came as a surprise, as the winning offer was far lower than expected. In Brazilian power auctions, the project goes to the bidder who offers to sell the plant’s power at the lowest price. The Odebrecht-Furnas team, dubbed the Madeira Energia group, won on an offer of 79 reais ($44.60) per megawatt-hour, well below the government’s auction price cap of 122 reais per MWh. The other two bidders submitted offers of 98 and 94 reais per MWh.

The low price raised eyebrows, with critics saying it would not cover the cost of plant development, estimated at 9.5 billion reais. They claim the government put pressure on bidders to keep prices low, pointing out that federal power companies held major shares in the three competing groups. However, others say the project will be profitable and that Madeira Energia will earn roughly 100 reais per MWh, given the transmission fees it will collect from distributors.

Regardless, Santo Ant`Unio could be the start of a new series of hydroelectric plants in Brazil. The government plans to hold an auction this year for the 3.3 GW Jirau power plant, also on the Madeira River, and in the next couple of years aims to hold a competition to build and operate the 11 GW Belo Monte plant on the Xingu River in the country’s midwest.

Brazil’s vast hydro capacity is the most cost-effective way to ensure power supply in coming years, when demand is expected to grow roughly 5.5 percent annually. Although Brazil generates roughly three-quarters of its power from hydro, the government has pushed to build thermal power generators in recent years to protect the grid from droughts. As a result, Brazil built its last major hydro plant in 1994, the 3.16 GW Xingu in Sergipe State. But natural gas supply problems from Bolivia and the high cost of LNG have motivated planners to turn their attention back to hydro.

Santo Ant`Unio will not be without controversy, as environmental groups will fight projects they believe irrevocably damaging to the Amazon. But if the project advances without major setbacks, other hydro initiatives are sure to follow.

© 2013 Energy Tribune

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