Blackouts spark fears of grid ‘collapse’ in Brazil’s biggest city

São Paulo faces the collapse of its electrical grid following years of under-investment, officials have warned, as widespread blackouts disrupt activity in the largest city in the Americas.

A key financial and economic hub whose metropolitan area is home to almost 23mn people, São Paulo has in recent months suffered multiple large-scale outages that have left hundreds of thousands of people without power for consecutive days.

City officials and the federal government have pinned the blame on Enel, the Italian energy group that has operated the grid for six years, but the blackouts highlight the damaging impact of chronic underinvestment in Brazilian infrastructure.

“It is something very serious. It is very clear that Enel is unable to continue,” said Ricardo Nunes, the centre-right mayor of São Paulo, adding that he had been told by experts that the city’s grid was at risk of “collapse” within three years without significant investment.

Last year leftwing president Luiz Inácio Lula da Silva made infrastructure a key area for spending, unveiling a four-year $76bn public works programme.

But projections from consultancy Inter B suggest that infrastructure investment this year will still account for less than 2 per cent of gross domestic product, down from just under 2.5 per cent a decade ago under previous leftwing administrations, and far from enough to meet the country’s needs.

Moreover, the lion’s share of this investment is being driven by the private sector. In the electrical power sector alone, more than 90 per cent of expenditure is projected to come from private companies, according to Inter B.

Alessandra Ribeiro, a partner at consultants Tendencias, said infrastructure investment totalling 1.8 per cent of GDP was “well below what is needed” in Brazil.

Nunes’s criticisms of Enel were echoed by Alexandre Silveira, Brazil’s energy minister, who has asked regulators to start a disciplinary process that could result in company losing its operating concession. Under the terms of the current concession, which is due to run until 2028, Enel is responsible for investing in and maintaining the grid.

The furore was sparked by a blackout late last month that lasted about three days and predominantly affected the city’s poorer central region. Businesses, hospitals and schools were forced to shut, causing widespread public discontent.

It followed another days-long outage in November, which was initially caused by a storm. Experts estimated that the outage drove a 6.5 per cent fall in retail revenues compared with the same period the previous year.

Enel said it was in “full compliance with all contractual and regulatory obligations” and that the “threat of revocation of the concession could raise concerns among foreign investors [in Brazil and] harm relations between Brazil and Italy”. Rome has a stake of about 24 per cent in the utility.  

With Brazil hosting the COP30 climate conference next year, “it would not be in the country’s interest to jeopardise the good relations it has always had with Enel”, it added. The company is one of the world’s largest private renewables operators.

Claudio Frischtak, president of Inter B, said responsibility for the blackouts was partly on Enel, which despite meeting its obligations under the concession had been slow to repair the infrastructure during outages.

But he also said that the government should shoulder the blame for not closely auditing the company and for not providing new proposals to improve the power sector’s resilience.

“It’s a multiple failure. The situation we’re experiencing in the country doesn’t have a single cause,” he said, adding that extreme weather linked to climate change would make blackouts increasingly likely and the only long-term solution is a programme to lay cables underground.

The city’s power problems will probably feature heavily in campaigning for municipal elections in October.

Claudio Sales, president of the Acende Brasil Institute, said Nunes and the city government were looking for “things that can motivate the population” to back their re-election bid, while opposition politicians are using the crisis as a platform to burnish their credentials.

But he added that “Enel has almost doubled investments . . . to about R$1.5bn [$300mn] a year, compared with R$800mn invested by the previous concession holder. [Enel] has demonstrably met its quality targets.”

Additional reporting by Beatriz Langella