Cost-benefit analysis of reservoir operation scenarios considering environmental flows for the lower stretch of the São Francisco River (Brazil)

ABSTRACT Environmental water allocation consists in considering the environment as a licit user of water. The importance of meeting the environment’s hydric necessities to assure ecosystem protection is recognized worldwide, however their practical implementation is restricted, requiring impact assessment of the implementation towards the other water users. In this context, this article aims to evaluate the financial impacts on the hydroelectric sector considering environmental flows as reservoir release restrictions. The case study is the lower course of the São Francisco River, a region that presents a strong social and environmental degradation of great importance for Brazilian energy system. The method used to achieve this goal contemplates the construction of reservoir operation scenarios, the mathematical modeling of the water system and the cost-benefit analysis for the energy sector. The simulation points out potential conflicts between the non-consumptive uses. Assessing the cost-benefit analyses for normal and dry periods, it turns out that the first leads to total financial losses for the energy sector, while the second to payoffs, enabling agreements between Brazil’s energy generation and the implementation of environmental flows in the lower stretch of the São Francisco River.