Why is Brazillian energy the second most expensive in the world? Learn with 5 topics

In the last 5 years, the cost of electric energy in Brazil increased by 47%, accordingly to the Associação dos Grandes Consumidores Industriais de Energia e Consumidores Livres (Abrace). The sequent increases put the country on top in the energy cost world ranking. Nowadays, Brazil has the second most expensive energy bill in the world, accordingly to a study from the Cupon Livre platform. The survey carried out in 2022 points out that Brazil is second only to Colombia. The survey also points out that – on average – 25% of the whole family budget of Brazilians is spent only on their energy bills.

The exorbitant cost deepens the precariousness of the economic situation of working-class families, who also suffer from the increase in the price of food in the basic items kit and cooking gas during the Bolsonaro government. Faced with the situation, many Brazilians had to choose between paying the electricity bill or buying food for the family.

Understand why the cost of energy has reached such high levels in the current government.

1 – High profitability of energy companies

According to the study by Plataforma Cupon Livre, of the total cost paid by consumers in Brazil, only 53.5% are effectively used for the generation, transmission, and distribution of energy. The rest is used to pay fees and guarantee high profits for the shareholders of the companies (mostly foreign) that control the energy sector in Brazil. Eletrobras, for example, registered a net profit of R$ 6.4 billion in 2020, even in a pandemic year, being the sixth most profitable company in the country in this period. In addition, the company has a cash generation of R$ 15 billion per year – which will now be fully allocated to the private sector.

2 – Poor management of hydroelectric reservoirs

Brazil has historically reduced its dependence on hydroelectric power, but it still represents 65% of its energy generation. And the rainfall pattern, on which the plants depend, has become more uncertain in times of climate change. Even so, many experts in the sector say that the increases in Brazilian electricity bills are not due to lack of rain, but to poor management of hydroelectric plant reservoirs.

The Operador Nacional do Sistema Elétrico (ONS) is responsible for this management – ​​a government agency that controls the operation of generation and transmission company facilities. It is its role to manage the production of energy from different sources based on the forecast of rain in the country. That is, in periods of heavy rain, it is necessary to reserve water in the reservoirs for periods of drought and, in cases of longer droughts, use other sources of energy (solar, thermal, wind) to avoid the total emptying of the reservoirs of the hydroelectric plants. This would avoid emergencies – as happened in 2021 – in which it was necessary to urgently contract energy from thermal plants, paying abusive prices for lack of planning. There are also indications that energy companies emptied the reservoirs to force a crisis situation and justify charging extra fees to consumers.

3 – Privatization of the sector

One of the main economic projects of the Bolsonaro government is to privatize state companies, especially energy companies. So, what happens is that in all five regions of the country where electricity companies have already been sold to the private sector, there are power outages, a lack of workers, and expensive bills. That’s because, when they are privatized, these companies want to maximize profit, lay off employees, and start charging market prices, imposing abusive increases in the final consumer’s bill. With the privatization of Eletrobras, the cost of energy tends to be up to 25% even more expensive.

In addition to increasing the electricity bill, privatizations represent a significant attack on our sovereignty. Energy is a strategic resource because it is simply needed for everything: to run a factory, generate other forms of energy, keep a hospital’s ventilators on, a school running, and an irrigated agricultural area. So, putting energy production in the hands of the private sector is putting not only our economic security at risk but also the country’s autonomy in various sectors.

 4 – Water Scarcity Flag

In April of last year, the Agência Nacional de Energia Elétrica (Aneel) proposed an increase in up to 57% of the tariff flags that were in force during the lack of rain and there are readjustments. There were six months in which consumers paid an extra R$ 14.20 for every 100 kWh consumed. The Government also created a new flag, that of water scarcity, to increase the value of the energy bill, blaming the price of the bill in São Pedro.

5 – Subsidies for large agribusiness companies paid by the people

Currently, the government grants discounts on the electricity bill to large agribusiness multinationals, which represent a cost of R$ 3.4 billion per year. This cost is charged to the electricity bills of all consumers in the country. It is worth noting that the government gives more discounts on the electricity bill to large companies and industries than to the low-income population who are entitled to the social tariff.