Brazil has 916 wind farms, according to industry association ABEEólica – Photo: ABEEólica diffusion
Brazil looks set to be a world-leading trailblazer in adopting renewable energy. Andreia Nogueira looks at how abundant natural resources, imported know-how and technology, combined with new regulation, have helped grow clean energy adoption by Latin America’s largest country.
Brazil generated 92.8% of its electricity from low or zero carbon sources during the first nine months of 2023. It produced more clean power by proportion of overall output among all G20 countries in 2022, with a share of 89.1%, according to global energy thinktank Ember. Brazil’s renewables resources include solar, wind, hydro, bioenergy and nuclear, to which green hydrogen may be added in the future.
Ember notes: ‘Brazil is well-positioned to lead the way as the world moves towards 100% zero-carbon electricity by 2040.’ In July 2023, it generated a record 27% of electricity from wind and solar – 10 TWh from wind and 4 TWh from solar. But hydro remains the main source of electricity, accounting for 73% in 2022.
Ember data analyst Nicolas Fulghum says: ‘There’s been a real step-change in Brazil’s clean energy transition, with growth in wind and solar this year twice as fast as in 2022.’ Its year-on-year growth rate for wind and solar at 37% (as of July 2023) was above the global average.
‘It is setting an example to other emerging economies that you can both grow your economy, increase electricity demand and meet these with clean sources instead of fossil fuels,’ he adds.
Meanwhile, Elbia Gannoum, CEO of the Brazilian Wind Energy Association ABEEólica (Associação Brasileira de Energia Eólica), told New Energy World: ‘Brazil has, by nature, many renewable resources for energy production.’ Following European trends, in the early 2000s Brazil imported know-how and technology for wind energy. From 2015, the same happened with solar energy, while the Brazilian government proactively promoted these ‘newer’ renewables.
Charles Lenzi, Executive President at Brazilian Clean Energy Generation Association ABRAGEL (Associação Brasileira de Geração de Energia Limpa), adds that the sector has been boosted by ‘an increased demand for energy, investment diversification and portfolio management, with tax incentives, development of production chains, and commitments associated with energy transition programmes’.
Still room to grow
Lenzi stresses: ‘Brazil is one of the few countries in the world that still has an abundance of potential for sustainable hydroelectric generation… with significant potential for small hydroelectric plants, distributed across different regions and located close to load centres, optimising the transmission system and reducing losses.’ He quotes an International Renewable Energy Agency (IRENA) 2023 report, which called for a doubling of global hydroelectricity installed capacity by 2050 to help achieve climate change goals.
Hydroelectric energy is the backbone of Brazilian renewable energy – pictured here a small hydroelectric power station in Garganta da Jararaca, in Mato Grosso state, in the central-west region
Photo: Atiaia Renováveis
To Lenzi, a safe and reliable electrical system ‘needs balance’. For instance, while more investment is needed in intermittent wind and solar sources, they require a more reliable parallel source to guarantee the operational flexibility needed to provide energy security, for which expansion of hydroelectric plants is key. ‘Otherwise, the alternative would be thermal generation, using fossil fuels,’ he warns.
Gannoum also points out new opportunities for investors: ‘Brazil is in the top five for investment in renewables’ and any potential opportunities for new plants – offshore wind power, hydrogen – ‘will see a lot of investment’. She says these financial inflows needed to be managed. ‘What the country needs is precisely to organise all this legal and regulatory apparatus to receive the investment,’ she observes.
New legislation
The Brazilian Congress is expected to pass a first legal framework for offshore wind farms by the New Year. According to the World Bank, with nearly 8,000 km of coastline, Brazil has immense potential in generation of offshore wind power – 1.2 TW.
This regulatory system may further boost investment. Following the publication in November 2020 of a standard term of reference for environmental studies required by the Brazilian Institute of Environment and Renewable Natural Resources (IBAMA, Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais Renováveis), there was a notable increase in the demand for environmental licensing for these projects, with 91 processes opened, which represents around 220 GW.
Furthermore, Gannoum mentions studies, including McKinsey, ‘showing that Brazil will be the most competitive country in the world to produce green hydrogen’, given the energy used for electrolysis splitting water into hydrogen and oxygen accounts for 70% of the cost of this process. ‘If the energy we have is the most abundant and competitive in the world, the cost of producing electrolysis also tends to be the cheapest in the world’, she explains.
Given this green energy bounty, Brazil is also able to export electric energy. In 1Q2023, the country generated receipts of $153.5mn from exports to neighbouring countries, according to the Chamber of Electric Energy Commercialisation (Câmara de Comercialização de Energia Elétrica).
To Gannoum, ‘what Brazil has taught the world… with wind energy since 2009, is that you contract wind energy in competitive auctions’ – getting better contracts for energy generating companies and consumers. In addition, she says that 80% of wind turbine components used in the country are produced in Brazil, ‘which brings many benefits in terms of GDP also’. In her perspective, although Latin America and the Caribbean have natural resources too, ‘they need to transform and monetise this advantage’ and to do so, they must create a regulatory apparatus.
To her, when countries are blessed with natural resources, no direct subsidies are necessary. But they need attractive financing policies, such as tax incentives, to encourage investments.
Regulations reforms requested
One issue being addressed is Brazil’s complex tax system, with multiple taxes, contributions and fees, combined with a high tax burden. The Brazilian Congress is discussing its simplification, which could also boost future renewable investments.
There is clearly interest among foreign investors to tap in here. According to Brazil’s Foreign Trade Chamber (CAMEX, Câmara de Comércio Exterior), foreign direct energy investments in Brazil rose from $51bn in 2021 to $86bn in 2022, and almost half were related to renewable energy – wind, solar and biomass.
Lenzi also wants more proactive planning of the grid, because while auctions are efficient operationally, ‘not long ago, sectoral planning had a much more active role… guiding the location of capacity and selecting the best offers among the various sources’. Nowadays, ‘with greater market opening and the enormous incentives granted to distributed generation, planning has lost importance’, with price being the ‘only driver of value’, he says.
Moreover, he argues that energy tariffs should reflect all costs incurred with each technology.
Indeed, the Brazilian Association of Large Industrial Consumers and Free Consumers of Energy (ABRACE, Associação Brasileira de Grandes Consumidores Industriais de Energia e de Consumidores Livres) notes that Brazil’s residents paid the highest residential costs of electricity per capita among 17 major economies in 2021 and the second highest in 2022, citing International Energy Agency (IEA) data.
According to ABRACE, only 60% of the value of the electricity bill is linked to generation, transmission and distribution of electrical energy, with the remainder financing public policies, subsidies, taxes and inefficiencies in the sector. Considering that every time consumers buy products, such as bread, ‘they are also paying for the energy embedded in those products’, nowadays a quarter of what a family spends per month is on energy, according to Paulo Pedrosa, ABRACE President.
According to Brazil’s Foreign Trade Chamber (CAMEX, Câmara de Comércio Exterior), foreign direct energy investments in Brazil rose from $51bn in 2021 to $86bn in 2022, and almost half were related to renewable energy – wind, solar and biomass.
Meanwhile, the Brazilian government is pressing ahead with energy expansion, attracting investments for clean energy, not through subsidies, but, for instance, by lending money through the Brazilian Development Bank (Banco Nacional de Desenvolvimento Econômico e Social), with ‘low interest rates, long-term interests’, President Luiz Inácio Lula da Silva said at the 6th Brazil Investment Forum, in Brasilia, in November 2023.
Fossil fuels continue to grow
There is also some fossil fuel expansion. In October 2023, state-controlled oil and gas company Petrobras received permission to drill in the Equatorial Margin offshore zone, in an area rich in biodiversity along the coastline of six Amazonian states.
‘The reality of the world is that we still need fossil fuels,’ according to Mines and Energy Minister Alexandre Silveira, as quoted by the Financial Times. The country owns the largest recoverable ultra-deep oil reserves on Earth, with 96.7% of its oil production produced offshore, according to the US International Trade Administration.
In fact, the Brasilia, Brazil-based Institute for Socioeconomic Studies (INESC, Instituto de Estudos Socioeconômicos) warned in October that the federal government still plans in its federal budget for 2024 to increase the investment in fossil fuel energy, claiming it insufficiently supports programmes that integrate the growth of green energy with reducing poverty.
An INESC study released in October 2023 on contracts signed between wind energy plants and the north-eastern small landowners showed ‘serious abuses on the part of these companies’ with ‘losses for the owners of the explored land’, such as long contractual terms, limiting the use of land for generations, with ‘derisory remuneration’ and insufficient social compensation.
Gannoum says that ABEEólica is mediating contacts to solve the issues highlighted in the study and is working on a good practice guide and models of contracts.
Also in November, days after a strong storm in São Paulo state had left more than 2.1 million properties without electricity, INESC’s Political Advisor for Energy Cássio Cardoso Carvalho warned that the infrastructure operations and capacity has been weakened by labour shortages and insufficient investment. After power outages, difficulties in connections to the grid from microgenerators, such as solar panels, are the second most common type of complaint against distributors, according to a survey conducted by the regulator, the National Electric Energy Agency (Agência Nacional de Energia Elétrica).
The government is aware of the problem, with Energy Minister Alexandre Silveira saying he hopes to raise about $12.3mn for the transmission sector in the coming months, noted Spanish news agency EFE in September.
With these reforms and the expected investments, Brazil could stop relying on fossil energies in the future and increase clean energy exports.
To find out more about Brazil’s energy mix and its transition to net zero, visit the EI Statistical Review Country Transition Tracker.
Fonte: https://knowledge.energyinst.org/new-energy-world/article?id=138441
