A new methodology for royalties distribution of the Itaipu hydroelectric plant: The hydrographic basin as the unit of analysis.

Over the past few years, many sectors such as energy generation, industry, domestic supply, and agriculture have encountered serious environmental problems due to the lack of rainfall. Thus, the purpose of this paper is to review the current methodology of royalties distribution from Itaipu hydroelectric plant. In the proposed approach, two criteria were considered to establish the division of Itaipu royalties: (1) the relative percentage of the water flow in the generation of electricity and, (2) the relative percentage of the drop in the height of water. 62 hydroelectric plants were evaluated in this study. In 52 plants the water flow was the factor that most contributed to the generation of electricity. In 2013, 346 municipalities benefited the Itaipu royalties. With the proposed methodology, 1,327 municipalities will receive the resource, what would increase the revenue of each of these municipalities by, on average, US$ 87,436.91 per year. The methodology presented herein proposes a reduction in the environmental disparity that now exists in Brazil, through improvement to Government instruments and environmental policies. The distribution of royalties throughout the watershed can provide additional resources to support payment programs for environmental services at the state and municipality levels.

Itaipu royalties: The role of the hydroelectric sector in water resource management.

For countries dependent on hydroelectricity, water scarcity poses a real risk. Hydroelectric plants are among the most vulnerable enterprises to climate change. Investing in the conservation of the hydrographic basin is a solution found by the hydropower sector. Given the importance of the Itaipu plant to the energy matrix of Brazil and Paraguay, the aim of this study is to review the current distribution of royalties from Itaipu, using the hydrographic basin as a of criterion of analysis. Approximately 98.73% of the Itaipu basin is in Brazil. The flow contributes 99% of the total electricity generated there, while the drop height of the water contributes only 1%. Under the current policy, royalties are shared equally between Brazil and Paraguay. In the proposed approach, each country would receive a percentage for their participation in the drop height and water flow in the output of the turbines, which are intrinsic factors for electricity generation. Thus, Brazil would receive 98.35% of the royalties and Paraguay, 1.65%. The inclusion of the hydrographic basin as a criterion for the distribution of royalties will promote more efficient water resource management, since the payment will be distributed throughout the basin of the plant. The methodology can be applied to hydroelectric projects worldwide.