Brazil’s gas imports fell to their lowest level for two decades in 2023 as its brimming hydroelectric reservoirs and rapid wind and solar deployment hit thermal power demand.
Imports were the lowest since 2003, National Agency for Petroleum, Natural Gas and Biofuels data shows, at 6.5 billion cubic metres in 2023, from 9bn cubic metres in 2022 and 16.9bn cubic metres in 2021.
Volumes have been trending steadily lower since 2015, apart from a brief surge in 2021 when Brazil turned to gas-fired power to make up for the loss of hydroelectric due to severe drought.
Brazil’s electricity system relies heavily on hydroelectric power, which has accounted for between two-thirds and three-quarters of total generation in the last five years.
That leaves gas-fired units and other thermal power plants playing a reserve role meeting peak loads, covering seasonal variations in river flows, and providing back up when low water levels constrain hydro output.
Most gas arrives via pipeline from neighbouring Bolivia but marginal needs have been satisfied by liquefied natural gas (LNG) imports from the US and elsewhere in the Atlantic Basin.
In the second and third quarters of 2021, Brazil’s drought and higher LNG imports contributed to the rise in gas prices in the US and Europe, even before Russia’s invasion of Ukraine in 2022.
More recently, however, plentiful water behind the major hydro dams has ensured high levels of generation and sharply cut the need for imported LNG. This has relieved the pressure on gas supplies around the Atlantic Basin and contributed to the progressive decline in gas prices since late 2022 and throughout 2023.
Hydro generation recovered to 445bn kilowatt-hours (kWh) in 2023 from a low of just 378bn kWh in 2021, according to the National Electricity System Operator.
As a result, gas-fired generation fell to 19bn kWh from 69bn kWh over the same period, while other fossil fuel generation fell to 16bn kWh from 39bn kWh.
Hydro resources have remained relatively comfortable despite lower than average precipitation across most of Brazil since the middle of 2023 as a result of El Nino. Reservoirs in the Southeast-Midwest electricity transmission region, Brazil’s largest, were storing enough water to generate 92bn kWh at the start of February.
Resources were down from 115bn kWh a year ago but were still 30bn kWh above the prior ten-year seasonal average.
Massive deployment of wind and solar generation has also cut into demand for gas and other fossil fuels. Wind generation has grown at a compound annual rate of 15 per cent over the last five years to reach 94bn kWh in 2023 from 46bn kWh in 2018.
So far, solar and wind generators have mostly met incremental load growth, displacing some coal and other fossil fuels, and had little impact on gas.
Increased wind and solar generation (+95bn kWh) has satisfied most of the increase in total generation (+106bn kWh) since 2018.