Henry Borden hydroelectric plant in Cubatão

Today we visited the Henry Borden hydroelectric plant. The complex was installed by General Electric in the year of 1926 with another unit added in the year of 1950. The hydroelectric plant lies in the foothills of the Serra do Mar mountain range in Cubatão, São Paulo. It was once the largest energy plant in South America, which was built in order to meet São Paulo’s rising demand for electricity. Valleys close to the project were flooded, and water flow was reversed to produce energy, becoming a very successful but also controversial project.

While we walked from external part of the plant to the underground facilities I couldn’t help but think, the damages the development of this hydroelectric plant must have created back in the time were taking care of the environment was not a priority. Industrialization in Brazil started taking place in the 1960’s and 1970’s, were many industrial complexes were built in the city of Cubatão. This surge in industrialization created extreme air and water pollution, creating birth defects and respiratory problems among Cubatão habitants. In the year of 1980, 80 out of 1000 babies born in Cubatão, were either stillborn or died within the first week of life (Beal, Brazil Under Construction).  By that time, Cubatão had the reputation of the most polluted city in the world. This hydropower plant was crucial to the development and future of Cubatão, which is why it expanded and acquired great importance throughout the years. However, because the environmental issues were not a concern, measures were not taken to protect the environment as well as the life and health of people creating negative externalities.

Externalities are a form of market failure, which means that the market is incapable of reaching an efficient equilibrium” (Santos, Behrendt, Maconi, Shirvani and Teytelboym, 2010:3). The graphs below, illustrate the problem of this inefficient equilibrium, were the producer does not bear the full cost of production, and it is instead imposed on society.

As seen in the graph, a negative externality occurs when marginal social cost is higher than marginal private cost. Meaning that the cost to society is greater than the cost of production. In this case the negative externality would be created because of the use and construction of the hydroelectric plant. Negative externalities result in a market failure and consequently create deadweight loss, which is the loss to society, shown in purple. I assume that with time, the Henry Borden’s plant has started taking measured for environmental protection and improvement of the health of the environment and community.

I have never been to a hydroelectric plant, so I was amazed to see the size of the industry and infrastructure of Cubatão Power Plant. It was also interesting to observe the mix and the use of not so modernized equipment with more technological systems. I found this trip to be much more interesting and exciting than our CPFL excursion. It was breathtaking to observe up close how energy is produced with the use of water, I would have never thought I would be part of this experience. I realize now how much potential Brazil’s hydroelectricity sector has.