By Waldaniel Amadis | 2024-04-11

SÃO PAULO, Brazil -- A new deal with China could make Brazil dependent on it for energy.

The Brazilian government signed a multibillion-dollar contract with China State Grid on April 3 for the construction of energy transmission lines.

These lines are aimed at promoting renewable energy within the South American country.

On April 3, officials also signed contracts for two smaller packages of projects that went to Brazilian companies during the same auction.

The total investment is estimated at $4.34 billion and will facilitate the installation of 4,471km of transmission lines.

"The three negotiated lots [the China State Grid contract and the two smaller packages of projects] envision an extension of 4,471 kilometers of transmission lines and substations with a transformation capacity of 9,840 MVA [megavolt-amperes], located in the states of Goiás, Maranhão, Minas Gerais, São Paulo and Tocantins," said the office of the Presidency of Brazil in a statement.

The project's construction is estimated to take between 60 and 72 months. It is meant to "expand the interconnection capacity" between northeastern Brazil and south-central Brazil.

China State Grid's contract is worth more than $3.6 billion and calls for construction of a 1,513km-long electrical transmission network in the states of Maranhão (northeast), Tocantins and Goiás (south-central).

China dependence

The surge in projects involving Chinese participation within critical sectors of the Brazilian economy, notably energy, has sparked concerns over the potential dependence that Brazil might develop on Chinese capital and investments.

The agreement with China State Grid marks the largest energy transmission contract ever recorded in Brazil.

Presently, the Chinese state-owned enterprise oversees operations for 19 electricity transmission concessionaires across Brazil, alongside an additional five through joint ventures.

China State Grid intends to inject a further $40 billion into Brazil over the forthcoming years, spanning the transmission, production, distribution and renewable energy sectors.

Additionally, it aims to embark on strategic mining ventures geared towards facilitating the energy transition.

Collateral effects

The Brazilian government and various sectors are optimistic about these fresh investments and their capacity to facilitate the integration of renewable energy generation into the national power grid, thereby fostering a pivotal energy transition.

Nonetheless, some analysts warn of inherent risks, including the potential promotion of sources of polluting electrical energy, such as fossil fuels.

Even though some of the projects advance solar and wind energy, others envision using dirty fossil fuels, sources from the Brazilian Institute for Consumer Defense (IDEC), a member of the civil society coalition known as the Coalition for Clean Energy, told Entorno.

In an interview with the Diálogo Chino portal, economist Anton Schwyter, who serves as a consultant for the IDEC energy program, highlighted potential collateral effects associated with the implementation of new transmission lines.

As a part of the privatization of the state-owned Eletrobras, Congress in 2022 authorized the establishment of fossil fuel thermal power plants in the northeast, citing the objective of "ensuring energy security" for the population, he said.

Rekindling of interest

When an auction soliciting bids to build thermo-electric plants took place in 2022, nobody participated. This silence from the market likely stemmed from the region's inadequate energy infrastructure.

Planned completion of these transmission lines rekindles interest in fossil-fuel power generation projects, according to Schwyter.

He also raised concerns about the long-term viability of a model heavily reliant on long-distance transmission lines. These lines, with a life span of 50 years, might struggle to keep pace with the rapidly evolving energy landscape, potentially becoming outdated before reaching their full potential.

"I wonder if it makes sense to build two-way transmission lines when there is the possibility of everyone having their own [electrical system]," he told Diálogo Chino.

Environmental groups have raised concerns about the ecological impact of these projects, particularly in sensitive areas like protected zones and indigenous territories.

Many of these transmission lines traverse such regions, potentially disrupting delicate ecosystems and traditional ways of life.