Economy & Energy

Year XV-No 81

April/June 2011

ISSN 1518-2932


No 81 Em Português





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Capital Productivity Using the Brazilian Agribusiness Censuses

Construction of Hydroelectric Power Plants and Sustainable Development

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O Crepúsculo do Petróleo
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Construction of Hydroelectric Power Plants and

 Sustainable Development

 Nivalde José de Castro[1]

Guilherme de A. Dantas[2]

Raul R. Timponi[3]


The environmental impacts caused by the social-economic development of the last 250 years have resulted in damages to specific ecosystems balance and to the Earth biosphere. At the same time, this economical development was concentrated and restricted to a small number of countries and of the world population that has benefited from the best living standards in its different aspects. However, there is a paradox: the environment impacts are beeing “socialized” while most of the world population now still lives in extreme poverty conditions without access to basic services. In this contraditory context the concept of sustainable development arises and it is looking for social economic advances with minimum environmental impact and therefore without hindering the life quality of future generations.

Since energy generation uses natural resorces as input and necessarily produces impacts on the environment, the improvement of better living conditions for the present generation without undermining the resources for future generations demands the adoption of sustainable strategies in the energy sector. This argument is based on the following relationships:

(i) social-economic development and higher energy consumption levels; and

(ii) energy and environment.

There are different possible strategies so that the expansion of electric energy offer - which is the analytical focus of the present article – will have a sustainable form. These strategies are complementary and not mutually excluding. The available options vary from development strategies that give priority to sectors with higher aggregated values or adoption of processes with higher energy efficiency up to the promotion of renewable energy sources.

Among the renewable sources to be explored for electric energy generation one can highlight hydroelectricity because of its technological maturity and competitive costs. However, even though there still are significant potentials in development countries, the expansion of electric energy offer is based on thermoelectric sources to the detriment of the exploration of the hydro potential, as it can be verified in Latin American countries, for example.

The central argument of the present article is that the thermoelectricity option is due mostly to the particular character of the environmental impacts evaluations of the electric energy generation projects. If the strategic evaluation of environmental impacts is adopted, when the discussion is made in the planning phase, and the impacts of different alternatives are compared, the hydroelectric projects certainly will be given priority.

The present article is divided in four sections. Initially the inter-dependence among the energy system and the social and environmental spheres are presented. The main policies and instruments regarding the expansion of energy offer is shown. The third section examines the environmental impact evaluation of the projects emphasizing that this analysis should be a strategic one. Finally, the last part tries to explain the arguments of the previous section based on the Santo Antônio hydroelectric plant analysis.

I – Energy, Environment and Development: the Need of Promoting Sustainable Development

According to GOLDEMBERG and LUCON (2007), the biosphere is subjected to continuous transformation processes over which man has no control[4]. However, natural changes occur in a slow pace and this permits the Earth to adapt itself to these changes. On the other hand, from the Industrial Revolution in the 18th century on, great changes occurred due to anthropomorphic actions associated with population growth and social-economic development that have accelerated in an exponential way the extraction of natural resources and the disposal of wastes to the environment.

Among the new human activities derived from the Industrial Revolution, the production and consumption of energy is the source of most of the environmental negative impacts of the last 250 years, mainly because the social-economic development was based on the combustion of fossil fuels[5]. Therefore, it is necessary and strategic to mitigate the impacts of the energy sector on the environment because these impacts hinder the extraction of natural resources, causes imbalance in the ecosystems and the biosphere and on the limit they are an element of risk regarding the future of human life on Earth.

However, the intense use of natural resources by part of the energy sector since the middle of the 18th century and the environmental impacts associated with this use have supplied the energy demands of the now called developed countries and about one third of the world population has no access to modern and commercial forms of energy. So, it can be concluded that the potential energy demand in the developing countries based on the present energy consumption standard is considerable.

GOLDEMBERG et al. (1988) have emphasized that the main need of humanity is to eradicate poverty. The authors maintain that this eradication needs the increase of agriculture productivity and distribution of food in developed countries, the construction of sewage networks and adequate distribution of potable water, access to basic education and health services, besides basic comforts and industrial development. All these activities demand high energy consumption since there is a clear and doubtless relationship between social-economic development and growing energy consumption levels.

According to JOHANSSON and GOLDEMBERG (2002), access to modern and efficient energy forms is an important index of living conditions of a population. The authors assert that approximately 2 billion people do not have yet access to electric energy or modern fuels, such as liquified petroleum gas. These people use firewood, agriculture and animal residues for cooking and in some cases with harmful health effects. Therefore, it is evident that to improve the living conditions of this population it is necessary access to modern and efficient energy forms. As demonstrated in Table 1, where estimates of per capita energy and electricity consumption in different countries in 2008 are shown.

Table 1 – Average Electric Energy and Energy Consumption in 2008


Per-capita Energy Consumption

(in tep per inhabitant)

Per-capita Electric Energy Consumption

(in kWh per inhabitant)







Latin America






Source: IEA (2010).

In this context, in order to improve the living conditions and reduce the number of people who live in extreme poverty it is necessary to develop their social-economic conditions. At the same time it is necessary to mitigate the environmental damages so that there will not exist negative externalties for future generations. In the same way the pace of resources extractions for generation purposes should no hinder the natural capital of future generations.

These parameters are the basis of sustainable development, namely satisfy the present social demands without hindering the life quality of future generations.

As BÜRGENMEIER (2005) notes, the promotion of sustainable development should be carried out as it was described in the Brundtland Report in 1987, that is, explore resources, orient investments and adopt techniques and institutional arragements that permit to satisfy the needs of the present men and that of future generations.

To make viable sustainable development means necessarily the adoption of sustainable solutions for the energy system taking into account its interface with the social and environmental spheres. The next section examines the strategic policies that will be make possible the sustainability of the energy sector.

II – Sustainable Energy Alternatives

The discussion of energy strategies should be preceded by analysis and discussion of development strategies themselves. Assuming that there is a relationship between social-economical development and higher energy consumption levels it is necessary to look for a balance of this dynamic relationship, giving prioritary to economic sectors that will lead to economic development and improvement of social living conditions.

According to PINTO et al. (2007), energy consumption is determined by the combination of three variable vectors:

i.   economic activity level;

ii.   economic sectorial composition; and

iii.   energy intensity of this economy.

In this sense, changing energy consumption is a function of variations in one or more of these three vectors. Projecting energy demand based on econometric relationship between energy consumption and income level ignores the effects of economic structure changes and technical alterations that cause energy intensity variation. This type of analysis is valid for short-term projections, however, it is not consistent when the analysis horizon is amplified because for longer terms the hypothesis that the structure and intensity effects have significant impacts on energy demand variation becomes very plausible.

Therefore, it is verified that the relationship between economic development and energy demand is not static regarding time and one of the factors that can change this relationship is the economic structure itself. In this sense, before any discussion concerning the energy sector it is necessary to consider that an industrial policy focused on less energy-intensive consumption that produces goods with higher aggregated value can reduce the dimension of the energy sector challenge.

In general and based on historical evidence, the development process of a country tends to have an initial industrial phase with investments in heavy industry. Then it is possible the development of industries with more aggregated value and finally there is a relative de-industrialization process where the services sector gains importance. In general, this was the development route of the now called industrialized countries. In energy terms, this path means increase of the energy intensity of the industrial park in the first scales of development until the moment when this energy intensity is stabilized and from then on it decreases due to a higher share of services sector in the economy.

What can be examined is the possibility of the developing countries of not repeating the developing path of the developed countries. It is possible to adopt development strategies that are focused on sectors with more aggregated values and less energy intensity. This type

of strategy is known in the literature as leapfrogging[6], which permits the per capita income to grow with a lower growth of the energy intensity.

However, if leapfrogging strategies are consistent regarding the economic development of a determined country this path could no be applied to the set of developing countries because they are based on a new international labour organization. That is, the priority of sectors with more aggregated value does not eliminate the demand of energy-intensive goods which would have to be supplied by a set of countries to which the basic industries would be transferred to. It was exactly this transfer and the consequent new international labor organization that has permitted the reduction of energy intensity in the economy of developed countries

In the energy system area, JOHANSSON and GOLDEMBERG (2002) maintain that there are physical resources and technology to promote sustainable development. However, the dissemination of these alternative routes demand the elaboration of policies for the incentive of these routes. In this sense, it can asserted that policies aiming at increasing the efficient use of energy and a higher use of renewable sources are fundamental strategies in order to have a sustainable energy system.

Promoting energy efficiency is the only available instrument that can satisfy the three stategic objetives, even though conflicting ones, of a consistent energy policy:

i.   supply assurance;

ii.  competitive costs; 

iii.  environmental sustainability.

It should be emphasized that even in the developing countries there is room for promoting efficiency through technical solutions that permit satisfying the demand for energy services using less input. Care should be taken regarding the average consumption in the developing countries because they are countries having such inequalities that in spite of these low average values, there is an elite with energy consumption at the same level as that of developed countries and it is exactly there that energy efficiency policies can be adopted.

Nevertheless, even though energy efficiency policies should be promoted in developing countries, the repressed demand in these countries is so big that inevitably significant investments will be necessary to expand the energy offer. The question is which sources will have priority so that the expansion will happen in a sustainable way. For this purpose it is necessary to define energy policies that permit to increase the share of renewable energy sources that represent only 12% of the world energy supply.

In the electric energy sector there are some renewable energy sources (hydroelectricity, bioelectricity, wind energy and solar energy) to be used in the expansion of the electric matrix. The great obstacle to these sources is still their higher cost relative to conventional sources. Therefore, it is necessary to adopt policies that will promote these sources in order to reduce their costs, for example, scale gains. However, among the renewable sources for electric energy generation, hydroelectricity is the one that is technologically mature and competitive in terms of costs. Besides that, there is an enormous hydroelectric potential to be developed, mainly in developing countries. Table 2 presents data about the hydroelectric potential of South American countries.

Table 2 – Hydroelectric Potential of South American Countries in 2008


Potential  (MW)

Installed (MW)

% Explored









































Source: OLADE (2009).

However, in many cases the electric energy offer in these countries does not give priority to the hydroelectric potential. The authors consider that one of the reasons for that is related to the way the environmental impacts are evaluated and this will be discussed in the next section.

III – The Importance of the Strategic Environmental Impact Evaluation

Energy generation produces environmental impacts by definition. In the electric sector the impacts vary in type and dimension according to the source used. Table 3 presents the main social-environmental impacts of the main electric generation sources.

Table 3 -  Social-Environmental Impacts of Electric Energy Generation


Social Environmental Impacts


Greenhouse Effect Gases Emissions;

Particulate Material Emissions;

SOx Emissions;

NOx Emissions.


Flooding for Dam Construction;

Change in the River Downstream Regimes;

Silting of upstream dam;

Barriers to fish migration;

Algae Proliferation;

Loss of Historical, Archeological and Tourism Sites;

Removal of Local Populations.


Loss of Biodiversity;

Atmospheric Poluttion;

Mass Fish Death;

Contamination of Phreatic Aquifers.

Wind Energy

Noise Pollution;

Esthetic Pollution;

Death of Birds.

 Solar Energy

Accumulation of Toxic Resídues in the Environment.

Small Hydroelectric


Interference in the Local Fauna and Flora ;

Conflicts withTourism.

 Nuclear Energy

Risk of Accidents;

Uncertainties Relative to Residues Management;

Danger of Atomic Arms Proliferation.

Source: GOLDEMBERG e LUCON (2007).

The environment impacts of electricity generation vary in relevance but most of all in their spatial dimension considering local impacts (such as emission of particulate material from a coal-fired thermoelectric plant or the silting of a river due to the construction of a hydroelectric plant), regional impacts (for example, acid rain) and global impacts concerning climate change. These different dimensions of the environmental impacts produce on those involved different perceptions. In this sense it is necessary that the evaluation of the environmental impact of an electric system expansion will occur in a coordinated form namely, comparing the impacts of different projects in order to avoid that this differenciated perception might supersede the interest of society as a whole.

However, what generally happens is the impact evaluation of specific projects and this is the Brazilian case where the environmental impact evaluation and the necessary mitigation measures are made. The question is that this type of analysis does not permit the electric system expansion to occur through the contracting of undertakings with lower social-environmental impact. This anomaly is due to the different dimensions of impacts and this is clear in the paradox existing in Brazil, namely the difficulty regarding the licensing of hydroelectric undertakings and the quick environmental licensing of thermoelectric ones.

The social-environmental impacts regarding the construction of a hydroelectric plant are essentially local and of high relevance to the population living near the project site. To the contrary, the main impact of a thermonuclear plant are the greenhouse effect gases emissions that have no direct impact on the population living near the plant. At the same time, hydroelectric projects have a larger generation scale than the thermoelectric ones which tend to occupy a smaller space. These factors result in a larger political mobilization regarding environmental impacts of hydroelectric project licensing which are consequently slow-moving and have to deal with social opposition.

In this sense, an evaluation of environmental impacts of electric system expansion that have as result the choice of undertakings with minimal impacts should be connected with the planning sector. It should be mentioned that originally this was the purpose of environmental evaluation impacts, however, it became usual to connect the environmental impact with the undertaking licensing and this evaluation now refers to specific projects.

The strategic environmental impact evaluation methodology basically consist of evaluating impacts in the plannimg phase when policies, plans and programs regarding the electric sector expansion are defined. So, the environmental variable becomes a decision parameter together with financial and economic ones (COMAR et al., 2006). For this purpose it is necessary to mensurate the environmental impacts in a common unity so that they can be compared.

The main hypothesis of this article, that will be tested in the next section, is that, based on the strategic environmental impact evaluation, hydroelectric projects will have priority in the expansion of electric systems in detriment to thermoelectric ones because hydroelectric generations has less negative environment impacts. This analysis compares mitigation costs of social-economic impacts regarding the construction of hydroelectric plants and those associated with greenhouse effect gases emissions from fossil-fueled thermal plants.

It should be emphasized that thermoelectric generation has also local environmental impacts, namely, the emission of particulate material, SOx and NOx. Therefore, environmental costs are still higher. However, for simplification we are considering only greenhouse effect gases emissions. The simplification is more consistent as far as there is legislation limiting the emission of those pollutants and considering the necessary investments – for example, electrostatic preceptor and absorption towers for post-combustion control of particulate materials and SOx, respectively – will be directly transferred to the energy cost.

IV – Evaluation of the Strategic Environmental Impact: Analysis of Santo Antônio Hydroelectric Plant

In recent years there was a preponderance of thermoelectric projects in the contracts regarding the Brazilian electric system in detriment to hydraulic energy. As a result there was a considerable number of thermoelectric undertaking contracts, specially in the 2007 and 2008 new energy auctions as can be seen in Graphic 1.

Caixa de texto: Hydro


Graphic 1 – Contracting in the New Energy Auctions in the Brazilian Electric Sector: 2005 – 2009 

Source: National Operator System, Energy Operation Annual Plan 2010, Vol. II.

This considerable contracting number of thermoelectric plants is inconsistent with the still important hydraulic potential to be explored in Brazil. The limited offer of hydroelectricity is due to the inexistence of hydraulic inventories along the 1990s and the difficulty of environmental licensing of hydroelectric undertakings. As the studies concerning hydroelectric inventories were resumed in 2004 when EPE (Enterprise for Energy Planning) was established, the question to be examined is the consistency of the environmental impact evaluation process regarding electric energy generation projects in Brazil.

In this sense a new immediate question arises: is the environmental impact of the contracted 7,715 MW from oil-fired thermal plant lower than that of hydroelectric plants and does it justify the easier environmental licensing?

Examining the environmental impacts of the Santo Antônio Hydro Plant can help to answer this question. This plant has an installed power of 3,150 MW and 2,140 MWaver of firm energy [7]. Therefore, it is expected that this hydroelectric undertaking will produce annually about 19.5 TWh. Due to the expressive social-environmental impacts of such project and the need of mitigating them, its environmental licensing was rather slow and has mobilized environmental entities that were against this project.

However, not constructing this plant would not eliminate the need of satisfying the growing demand for electric energy. So, it would be necessary to construct alternative undertaking to produce what the Santo Antônio plant would produce. That is, the environmental impact should be centered in a comparative analysis of the environmental impacts of Santo Antônio and of those of alternative generation.

Based on the contracted energy regarding new energy auctions, it is a plausible hypothesis that this demand would be satified by thermoelectric undertakings that emit greenhouse effects gases which is their most relevant environmental impact. The existence of carbon markets permits to determine the value of this environmental impact. Therefore, it is possible to compare the environmental costs of the Santo Antônio plant with those of thermoelectric generation.

The mitigation cost of the social-environmental impacts of the Santo Antônio plant is estimated in R$ 1.5 billion corresponding to about 10% of the total investment. On the other hand, the environmental cost of thermoelectric plants is a function of the emission factor of the fuel used and of the projection of carbon price. Table 4 presents the emission factor of the main thermoelectric routes.

Table 4 – Greenhouse Effect Gases Emissions in Thermal Generation

Thermal Sources

CO2eq Emissions (grams per kWh)

Natural Gas – Combined Cycle


Natural Gas – Open Cycle






Source: EUROPEAN UNION(2007).

The annual emissions of greenhouse effect gases from a thermal plant are defined as the annual electric energy generation multiplied by the emission factor of Table 3. It is then possible to mensurate emissions along the entire life of the plant by multiplying this value by the useful life of the plant. The useful life will be taken as 30 years, the same as for Santo Antônio, even considering the eventual need of equipment substitution in the case of thermal plants. Finally the environmental cost will be calculated by multiplying the total emissions of the project by the estimated carbon cost.

Table 5 illustrates the environmental cost of a thermal plant considering different technologies. The adopted carbon price is R$ 24.00[8].

 Table 5 – Environmental Costs of Thermal Generation (in billion R$)

Thermal Sources


Natural Gas – Combined Cycle


Natural Gas – Open Cycle






Source: the authors.

The data of Table 5 show that in the case of thermal plants the natural gas combined cycle, which is the fossil fuel with the lowest emission factor, the environmental cost is almost four times higher that those of the Santo Antônio hydroelectric power plant

The carbon price considered, namely R$ 24.00, is the price of long-term carbon, that is 10 euros, considering an exchange rate of R$ 2.40, which is plausible and can even be considered as conservative taking into account the need of reducing greenhouse effect gases emissions and the commitments of enterprises and countries. However, since it is a projection, it is important to discuss critical scenarios and it is verified the environmental cost of a natural gas fired plant operanting in a combined cycle would to be the same as that of Santo Antônio then the carbon price should be R$ 6.50.

Therefore, the presented values do not permit to reject the hypothesis that an environmental impacts analysis that considers the strategic energy planning of the sector would give priority to hydroelectric undertakings in cases where they have a lower social-environmental cost.


The challenge of eradicating poverty and at the same time mitigating environmental impacts demands development based on sustainability. The energy sector, due to its importance regarding social-economic development and its connection with the environment, has a central role in sustainable development. Economic growth that gives priority to sectors with higher aggregated value, policies that gives incentive to energy efficiency and a higher share of renewable energy sources in the world energy matrix are  complementary mechanisms that should be adopted aiming at making compatible and adequate the energy sector to the sustainable development purposes.

In the renewable sources area, electric energy generation has a large potential of hydro resources to be explored in developing countries. But it is verified that investments in this exploration have not had the expected priority and the offer expansion has been through the construction of thermoelectric plants. Among the reason for this fact we can point out the methodology used for impact evaluations that analyzes specific projects instead of a stategic analysis that compares the social-economic impacts of the different alternative in the expansion planning phase.

The Santo Antônio hydroelectric plant helps to understand the necessity of adopting the strategic environmental impact evaluation because it was really difficult to license this undertaking even though its environmental costs are lower than those of thermal alternatives.

It should be emphasized that this analysis is a first approximation and it should be carried out further. Among the points that should be examined with more details it can be mentioned the possible greenhouse effect gases emissions due to the change in the ecosystem where Santo Antônio will be constructed and the valoration of environmental costs of the local pollutant emissions from thermoelectric plants.


 BÜRGENMEIER, Beat. Economia do Desenvolvimento Sustentável. Instituto Piaget. Lisboa, 2005.

 COMAR, Vito; TURDERA, Eduardo Mirko Valenzuela; COSTA, Fábio Edir dos Santos. Avaliação Ambiental Estratégica para o Gás Natural. Editoras Interciência e UEMS. Rio de Janeiro, 2006.

 D'ARAÚJO, Roberto. Setor Elétrico Brasileiro: Uma aventura mercantil. Brasília: Confea, 2009.

 GOLDEMBERG, José; JOHANSSON, Thomas B.; REDDY, Amulka K.N.; WILLIAMS, Robert H. Energia para o Desenvolvimento. T.A. Queiroz, Editor. São Paulo, 1988.

 GOLDEMBERG, José; JOHANSSON, Thomas B. The Role of Energy in Sustainable Develpment: Basic Facts and Issues. In: Energy for Sustainable Development: a policy agenda. UNDP. 2002. 

  GOLDEMBERG, José; LUCON, Oswaldo. Energia, Meio Ambiente e Desenvolvimento. Editora da Universidade de São Paulo. São Paulo, 2007.

 INTERNATIONAL ENERGY AGENCY. Key World Energy Statistics 2010. IEA. Paris, 2010.

 OLADE. Informe de Estadísticas, 2009. Disponível em: Acesso em 12 de janeiro de 2011.

 ONS, Operador Nacional do Sistema. Plano Anual de Operação Energética 2010. Vol. II.

 PINTO JUNIOR, Helder Queiroz; ALMEIDA, Edmar Fagundes de; BOMTEMPO, José Vitor; IOTTY, Mariana; BICALHO, Ronaldo Goulart. Economia da Energia: Fundamentos Econômicos, Evolução Histórica e Organização Industrial. Elsevier. Rio de Janeiro, 2007.

 SANTO ANTÔNIO ENERGIA. Tecnologia e Cuidado. Disponível em < >. Acesso em 09/01/2010.

[1] Professor at UFRJ and coordinator of GESEL – Grupo de Estudos do Setor Elétrico do Instituto de Economia da UFRJ (Study Group of UFRJ Economy Institute’s Electric Sector) .

[2] PhD candidate at COPPE/UFRJ Energy Planning Program and - GESEL/IE/UFRJ Senior Researcher.

[3] MSc in Economy at the UFRJ Institute of Economy and GESEL/IE/UFRJ Researcher.

[4] The seasons, earthquakes, volcanic eruptions, hurricanes, forest fires are examples of natural phenomens upon which man has no control.

[5] The environmental impacts of energy production and consumption occur in all levels. From respiratory diseases due to the use of firewood for cooking in poor households, that until now kill annually a considerable number of people, to causing imbalance in the carbon cycle due to the combustion of fossil fuels that enhances the greenhouse effect and aggravates climate changes. 

[6] See GOLDEMBERG and LUCON (2007).

[7] Firm energy is defined as the average energy generated in the worst historical period of inflow, the critical period (critical period – longest time period when reservoirs, fully flooded at the beginning and not totally reflooded, are maximally depleted). Presently it correspond to the June 1949/November 1956 period (D’ARAÚJO, 2009).

[8] It is difficult to make projections about carbon price evolution due to the number of variables that determine its intrinsic uncertainty. So we have adopted the heroic hypothesis of constant price along the analyzed period.

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