The first electricity sector reforms of the 1990s resulted in substantial imbalances that most commentators believe were responsible for the mismatch in supply and demand that led to the 2000-2001 power crisis with rolling blackouts, alongside a period of drought that reduced the river flows and water storage on which hydropower depends. The blackouts were very unpopular and their memory is still etched in the minds of policy-makers today.
The energy sector in Brazil has been engaged in a process of ‘learning from mistakes’. The reforms of 2004-2005 left some principles in place, notably the idea of independent sector regulators and the leading role of private finance in new infrastructure, while reintroducing a greater role for state planning. Sustained high-level policy support for development of technical capacity in hydraulic engineering and associated disciplines was a major factor in Brazil’s exploitation of large hydropower from 1990 to 2010. A further driver has been improvements in the development and management of hydropower plants as individual projects or at least the capacity to deliver improved practice.
Hydropower's contribution to domestic electricity supply doubled in absolute terms between 1990 and 2010. Since then, the Ministry of Mining and Energy (MofME) continues to advance a major programme of large hydropower development. In its plan for 2005 to 2030, the MofME proposes 164 gigawatts (GW) as the country’s ‘exploitable, but as yet unrealized’ hydropower potential.
A further driver of Brazil’s progress in developing energy sector has come from sustained investment in new technologies for ethanol production. From the beginning of the ‘PRO-ALCOOL’ programme in the 1970s, there has been public investment in improvement of sugarcane yields and ethanol extraction. The existence of a sustained and robust market for ethanol products as a result of government intervention provided clear incentives for additional private research and development.