Brazil and British Columbia are not often mentioned in the same sentences. They are two very different regions. Brazil has a population of over 200 million while that of B.C. is just over 4 million. It is growing quickly, but Brazil is still a developing economy with a GDP per capita only about 20% of that of British Columbia's. However, the two regions share some similarities and I am thinking in particular of the challenges we both face in powering our economies.
Looking retrospectively, Brazil and B.C. have both taken advantage of our large hydroelectric reserves. Here in B.C., our crowning achievement is the 3,000 MW WAC Bennett Dam, while in Brazil, they have the gargantuan 12,000 MW Itaipu dam. In both jurisdictions, these large one time investments were made by government and have proven successful at driving the private sector economy.
Looking forward is where things get interesting. Both British Columbia and Brazil will face increasing pressure on their electricity networks due primarily to increases in electricity demand. In B.C, the increase in demand is coming from mines, LNG plants, and others in the industrial sector. In Brazil, the increase in demand is a result of the general high growth rate of the economy and the electrification of many rural and poor areas. In fact, Brazil has already felt some growing pains in this area that have resulted in some structural changes to its power sector.
Like in B.C., the Brazilian government regulated residential power prices and often set them artificially low due to political pressure. As a result, in the 1990's Brazil faced an investment shortfall and needed to turn to the private sector to remedy the situation. The solution Brazil adopted was to more or less continue regulating residential power prices but allowing power prices for large industrial customers to be set by the market. Here in B.C., residential electricity prices are also regulated but so are those of large industrial consumers. In fact, many industrial consumers pay less for their power than residential consumers do. This is not sustainable in the long run, especially given that most of the growth of the electricity sector in B.C will come from the industrial sector. Is it possible B.C. could adopt the Brazilian approach of leaving residential customers alone while exposing larger industrial customers to the market? I think it is an option worth exploring.
The other fascinating development in Brazil has been the growth of renewables, particularly in the wind sector. Wind has flourished in Brazil for a couple of reasons. The fact that all new generating capacity comes from the private sector allows the cost of wind to be compared with other options (such as hydro) on an "apples to apples" basis. This market structure has shown the cost of wind to be more competitive. Another reason wind has flourished in Brazil is because they can use their hydroelectric reservoirs as flexible storage to manage the variability in wind power. As the wind sector in B.C. grows, our hydroelectric reserves will prove similarly valuable. This is just one more example of how B.C. and Brazil share some problems, and solutions, in their electricity sectors.
