Massive Brazilian power blackout may short circuit future mining ventures

A four-hour blackout, which plunged half of Brazil into darkness Tuesday, could be one indication of the inability of the country's power infrastructure to cope with commodity sector booms.

RENO, NV - 

A power outage that plunged as many as 60 million people and half of Brazil in darkness Tuesday may indicate Brazil's power infrastructure is not adequate to reliably serve its mushrooming commodity-based economy.

Transmission problems at a power substation in Parana state apparently caused a disruption at the Itaipu dam, one of the world's largest operating hydroelectric plants, left 16 of Brazil's 27 states and part of Paraguay in the dark. Itaipu generates 19.3% of Brazil's electricity and 87.3% of Paraguay's power needs.

Almost all of Brazil's electricity runs through an interconnected network. Mauricio Tolmasquim, president of Brazil's Energy Research Agency, told Bloomberg,  "Brazil has the largest integrated power grid in the world; it's fantastic because it facilitates electricity between regions, but the domino effect that happens when we have a problem is a major inconvenience."

In contrast, the U.S. relies on three main regional power grids.

Tolmasquim estimates that investments in the power industry have totaled $10 billion since 2003. However, he added, "The government will have to look into the question of how to restore electricity more quickly. Allowing major urban centers like Rio and Sao Paulo to be without power for more than three hours is not acceptable."

Commodity-based companies including Vale, Gerdau and Petroleo Brasileiro suspended production because of the lack of electricity. Brazil's Mines and Energy Ministry said Rio de Janeiro was the only state left completely in the dark. The world's largest iron ore producer, Vale, is based in Rio de Janeiro.

A spokeswoman for Vale told Bloomberg that operations in Minas Gerais and Espirito Santa states were affected by the blackout. Vale's southern system includes mines that account for more than half of Vale's overall iron-ore production capacity, as well as railroad and port operations.

Vale's operations in the north and northeast which include the Albras primary aluminum smelter were believed not to be impacted by the outage.

Maintenance problems contributed to another major power outage in Espirito Santa state in 2007.

The blackout, which began at 10:13 p.m. local time on Tuesday and lasted four hours, also affected the states of Goias, Parana, and Mata Grosso, which all have mining districts, as well as the coal mining region of Santa Catarina.

Adriano Pires of the Brazilian Center for Infrastructure Studies has argued for years that the country's electric transmission lines, which have been neglected for decades, are unable to handle the added demand created by a commodities boom, and were vulnerable to a huge outage/

However, Brazil President Lula da Silva insisted the blackout was an isolated incident that had nothing to due to a lack of investment in the energy sector. The Ministry of Mines and Energy has claimed that adverse weather conditions caused three transmission lines to collapse. These lines triggered a domino effect that caused the Itaipu dam to go offline.

Itaipu officials say they have feared that transmission problems between the Brazilian states of Parana and Sao Paulo would cause energy breakdowns. The transmission is controlled by Brazilian state company Furnas Central Electric. The Itaipu hydroelectric plant returned to normal operation by early Wednesday.

The Los Angeles Times reported the global financial crisis has forced the postponement of costly long-distance power transmission lines, each costing at least $1 billion. The crisis has also delayed other infrastructure projects

Nevertheless, the Lula Administration has constructed new thermoelectric plants that help prevent blackouts during times of low rain, while increasing connections within the national grid that permit easier movement of electricity. Brazil also plans to build four nuclear reactors.

Otavio Santoro, executive director of the consultant Indeco Energy, told Reuters that the blackout problems should not be affecting so many states. "The energy ministry needs to improve coordination so that these problems can be isolated."

He said projects, such as the controversial proposed Belo Monte dam in the state of Para in the Amazon, would give the energy system greater stability. However, the proposed dam would directly impact the Paquiçamba reserve of the Juruna indigenous people and flood 400 square miles of forest and agricultural lands.

Jose Soares, who researches Brazilian infrastructure for Moody's, told the Wall Street Journal, "There was obviously some failure, either technical or human. The problem is the magnitude, and they should provide a clear answer as to why this won't happen in the future."

To compound Brazil's problems, the blackout has now raised questions about the country's ability to host the World Cup and the Olympics over the next seven years.

Ironically, a series of blackouts between 1999 and 2001 were exploited as an election issue that hurt former President Fernando Henrique Cardoso and resulted in Lula's elected as Brazil's President.

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negative info/propaganda on brasil dorothy, u are an idiot. brazil is not only a commodities based economy. it has a highly diversified manufacturing & services sectors. the problem that caused the balckout was more likely a technical glitch than any deficiency with the grid. the . .more grid is quite robust. the anglo/judeo corporatist international news just loves blowing these things out of proportion. suddenly all foreign journalists have become 'x-purts' in the power sector. you folks conviniently forget the massive power outages that occur in the us from time to time. the scope & severity of the outage that occurred in 2003 which affected the entire us ne seaboard & most of eastern canada, was worse than this. its amazing how you cockroaches spread such negative info in such an irresponsible manner, that serves no constructive purpose. . .less by sage on November 12 2009, 09:45 Find this comment inappropriate? Report it

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