* 2001 energy crisis shaved up to a point off GDP
* Severe drought revives fears history could repeat
* Today's power grid more diverse, but economy has grown
By Anthony Boadle
BRASILIA, Jan 9 Brazil looks less vulnerable
today to an energy crisis similar to one in 2001 that cut output
at factories, lopped about a percentage point off economic
growth, and led millions of people to spend their nights by
Still, the risk of a major disruption remains - in part
because the South American economic powerhouse has grown so much
Twelve years ago, Brazil experienced a severe drought that
reduced water levels at hydroelectric dams - just as is
happening today. The solution then was to ration energy supplies
for eight months, in large part because the nation relied on
such dams for 88 percent of generating capacity.
Residential and industrial consumers were forced to cut back
their power usage by a fifth. Brazilians learned to conserve
energy, street lights were dimmed, and the then-president even
ordered the exterior lights and refrigerators switched off at
the presidential palace.
The solution to that crisis helps explain why Brazil looks
somewhat less vulnerable now. In ensuing years, the government
built dozens of thermoelectric power plants mostly fired by
natural gas, expanding its generating capacity by 10,000 MW.
That means hydroelectric dams now account for about two-thirds
of electricity - making droughts less threatening.
Brazil's stock market broke three days of declines
on Wednesday and rose 0.5 percent by early afternoon after
government officials dismissed any comparisons with the 2001
crisis, and pacified investors by offering more specifics about
their response to the current dilemma.
For example, a senior official told Reuters late Tuesday
there was no change to President Dilma Rousseff's plan for a 20
percent cut in electricity rates this year - which many analysts
have said is in grave risk because of the drought.
"We are looking at no other option than a 20 percent cut in
rates," Treasury Secretary Arno Augustin said in an interview.
He said the lower energy costs would trim inflation by more than
half a percentage point this year - a rosier forecast than many
independent analysts have made.
Despite such guarantees, worries remain that the current
crisis could still trip up Brazil's economy, which has already
struggled to grow for the past two years.
The main reason for concern is the economy's boom over the
past decade, which saw electricity consumption grow by 40
percent under former President Luiz Inacio Lula da Silva.
The expansion pulled 30 million people from poverty and into
the consumer market for household goods such as fridges, TVs and
air conditioners - all of which consume large amounts of power.
Rousseff was Lula's first energy minister, charged with
making sure that Brazil would never have to ration electricity
again. She restructured the energy sector and pushed ahead with
the building more hydroelectric dams which has not made her
popular with environmentalists.
Due to environmental concerns, Brazil's new dams have
smaller reservoirs to reduce the impact of flooding. That has
made the new reservoirs more vulnerable to lower rainfall.
WAITING FOR RAIN
A hot, dry summer, coupled with the worst drought in decades
in the poorer northeast of Brazil, has shown up the vulnerable
side of the country's energy system, raising the risk of
rationing again if it does not rain soon.
The budding energy crisis has already pushed up electricity
prices on the spot market and forced Brazil to import more
liquefied natural gas to fuel more costly gas-fired generators
that are running at full capacity and producing 25 percent of
the national grid's electricity.
Too much use of expensive LNG could undermine Rousseff's
efforts to curb inflation.
Her government is insisting that rationing is not on the
cards. Mauricio Tolmasquim, head of the energy research agency
EPE, said Brazil's electrical grid is much stronger than in 2001
and guaranteed there would be no rationing.
"Today the situation is structurally different," he told
reporters on Tuesday.
Brazil's generating capacity expanded by 75 percent between
2001 and 2012, and thermal power generation increased by 150
percent, Tolmasquim said.
He said Brazil still has a reserve back-up of 1,000 MW in
thermoelectric generating capacity, including 640 MW at the
gas-fired plant in Uruguaiana on the border with Argentina.
But firing up that plant depends on restoring Argentine gas
pipeline supplies from Bahia Blanca, cut off in 2009. And
Argentina is short of gas and having trouble importing LNG.