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The heat has started to affect inflation and threaten food prices and energy tariffs

It is already possible to notice specific effects of the intense heat on inflation. According to analysts, higher temperatures in the coming months, with the arrival of summer in December, will increase risks to prices. The impact of the climate crisis may put pressure on commodities like food and electricity.

The heat has already affected inflation of products such as air conditioning. According to the IPCA (Broad National Consumer Price Index), calculated by the IBGE (Brazilian Institute of Geography and Statistics), prices increased by 6.09% in October.

This was the largest increase in three years since October 2020 (10.54%). According to IBGE, the famine could be linked to higher demand due to heat and historic drought in the Amazon, making production in the state difficult.

“Even if the heat was within normal limits at this time of year, sales of fans and air conditioning would be huge,” says economist Andre Brez of FGV Ibre (Brazilian Economics Institute of the Getulio Vargas Foundation).

“This happens every year, but this year, because the heat came earlier and was very intense, it may cause changes in these objects”, he says.

According to Braz, higher temperatures associated with the El Nino climate phenomenon, which changes rainfall patterns in the country, could spike prices of foods that are more sensitive to climate, such as vegetables and fruits.

“This category of food suffers more from climate change, which is very common at this time of year, late spring and early summer. It is not good for the supply of these foods,” he says.

Sergio Vale, chief economist at consultancy MB Associados, has the same assessment. “Heat brings risks because we can see the impact on yields if there is extreme drought or rain,” he says.

He says another threat from high temperatures is potential delays in soybean harvest, which will result in grain quality. “The main concern is moving forward.”

Analysts’ radar is still considering the potential effects of heat on electricity rates. Higher temperatures increase consumption and force additional use of more expensive energy sources, such as thermal – coal, diesel and gas. According to experts, this could lead to a pass-through for tariffs in the summer.

“It’s possible that this will have some impact [nas tarifas]But this does not guarantee that we will always need to activate thermal plants”, says Paulo Cunha, consultant at FGV Energia. “It is not guaranteed that temperatures will remain at current levels throughout the summer.”

According to Cunha, the amount of energy produced in Brazil is at a “comfortable” level due to the current level of hydroelectric reservoirs and the performance of renewable sources such as solar and wind.

However, the ONS (National Electric System Operator) anticipates the need for additional thermal generation to meet peak demand in November and December 2023. According to the body, this has already been indicated in the last CMSE meeting (Electricity Sector Monitoring). Committee), held on 8 November.

“Economy is always the main criterion to be followed when activating plants. Activation is being carried out to meet load peaks while respecting the technical characteristics of the equipment,” the ONS said.

Alexi Vivan, partner in the energy sector at Schmidt Valois Advogados and CEO of ABCE (Brazilian Association of Electric Energy Companies), admits that the use of thermal plants could put pressure on tariffs, but he does not see any major threat at the moment.
“When you activate thermal, the tariff increases, because it is more expensive.

That is why it is left as a last resort. But we do not believe that sufficient quantities of thermal plants need to be shipped to impact the tariffs. It can be used in specific cases, and I don’t think that will happen”, he says.

According to the ONS, electricity consumption in Brazil broke records for two consecutive days, Monday (13) and Tuesday (14), when the SIN (National Interconnected System) load exceeded the limit of 100 thousand megawatts (MW).

“The heat wave affecting much of Brazil has had a direct impact on electricity demand,” the ONS said on Tuesday.

“The operator emphasizes that SIN is strong, safe, has a wide variety of sources and is ready to meet the load and power demands of Brazilian society,” he said at the time.

The reduction in consumption resulted from the declaration of the Republic holiday this Wednesday (15). Traditionally, holidays bring businesses to a standstill and more people to outdoor spaces, reducing demand for electricity.

At the close of this text, at the peak of the day, consumption reached 89 thousand MWh after 6 pm this Wednesday. The level was below the previous two consecutive days’ records, but still surpassed the useful day’s level of November 16, 2022 (83,079 MWh).

(Leonardo Vecelli/Folhapress)

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