The perfect timing to invest in renewables in Brazil | Overview of the sector

published on 17th Feburary 2022

A global trend, the investment in renewable energy sources has increased exponentially in Brazil in recent years, especially after ANEEL resolution 482. Since April 17, 2012, when ANEEL Normative Resolution No. 482/2012 entered into force, Brazilian consumers can generate their own electricity from renewable sources or qualified cogeneration and even supply the surplus to the distribution network in their locality. This is the micro and mini distributed generation of electricity, innovations that can combine financial savings, social and environmental awareness and self-sustainability.

A survey by Bloomberg New Energy Finance points out that Brazil is expected to attract US$300 billion in infrastructure investments in the energy sector by 2040, which results will be an increase by 189% of its current capacity. Of this total, 90% will come from renewable sources: small and large hydroelectric plants, wind, solar and biomass capture. Many industries are already adapting to this scenario in order to reduce operating costs and generate the least possible environmental impact.

Still according to Bloomberg New Energy Finance, Brazil, the second largest economy in the Americas, is expected to double its current installed capacity from 157 GW to 316 GW until 2040. Low-carbon energy sources currently represent 84% of installed capacity, and hydropower, with a total of 102 GW is by far the biggest contributor. Although hydropower will remain a critical source until 2040, with 111 GW in operation, other technologies may take the lead in terms of growth: solar energy is forecasted to grow by 116 GW of installed capacity and wind energy by 16 GW. An average of nearly 6 GW of renewable energy capacity will be added per year until 2040, more than doubling the share of non-hydro renewables to nearly 50% of installed capacity. In addition, another 52 GW of batteries and flexible capacity will be installed by 2050.

The survey also shows that most of the large-scale PV investment will be made before 2035. Small-Scale PV dominates investment prospects from the mid-2020s to 2040, when $77 billion of investment from homes and businesses helps install more than 100 GW of capacity across the country.

Renewable energy sources in Brazil

Brazil occupies a prominent position in the renewable energy sector. According to data from the Ministry of Mines and Energy, renewable sources already account for 48.4% of the country's energy matrix – triple the global percentage. This can be explained by the geographic characteristics of Brazil and the abundance of the country's natural resources.

Investment in solar energy, for example, grew 92% in 2019 in the national territory, while the generation of wind energy grew 15.5%. Together, these numbers represent 50% of the total increase in the share of renewable sources in the Brazilian energy matrix. These indicators are part of the 2020 Brazilian Energetic Review, whose data source is the National Energy Balance for the base year (in this case, 2019), produced by the Energy Research Company (EPE), in partnership with the Ministry of Mines and Energy, companies in the sector and other agents in the energy sector.

The Decennial Plan for Energy Expansion (PDE), also prepared by EPE, indicates that investment in renewable energy sources will have an average increase of 5.1% per year in the country. Other important EPE indicators suggest a growth in wind energy production from 1,000 megawatts to 16,000 over 2021. The generation of energy from sugarcane-derived products, such as ethanol and bagasse, also tends to increase – something around 8.1% per year. The plan also foresees an increase in the installed capacity of hydroelectric energy, which is expected to grow 56% over the next 10 years.

The perfect time to invest in Brazil

In 2021 a record number of new solar projects were registered with ANEEL (National Electric Energy Agency). But the new distributed generation legislation, currently awaiting ratification, will see a new rush of solar projects as developers seek to avoid gradual new charges for the use of transmission networks through TUSD (Distribution System Usage Tariffs).

The legislation proposes a 10-year transition from the current model, with projects already connected to the grid authorized to operate according to existing rules until 2045. The new legislation will see developers moving quickly with projects in an effort to overcome higher tariffs so they can offer cheaper power purchase agreements, or PPAs, to outside buyers for as long as possible. In 2021, the installed solar capacity in Brazil reached 12 GW and, before the changes were outlined, in September 2020, the portfolio of renewable projects registered under development was 8.7 GW.

In April 2021, at a US-sponsored climate summit, Brazil pledged to achieve zero carbon emissions by 2050 (commitment reinforced in November during the 26th United Nations Conference on Climate Change), a 10-year forecast earlier than previously planned.