In Brazil there is popular saying that “God is Brazilian” (Deus é brasileiro). It can mean different things to different people, from the lack of natural disasters like earthquakes in the country to the beauty of its diverse landscapes – from rainforests to Rio de Janeiro. But its biggest blessing is the abundance of natural resources in the continent-sized country, 15 times the size of France and with 12% of the world’s reserves of fresh water. And that could help propel Brazil to be a renewable energy superpower and thrive in the coming transition.
The country is already a leading global agricultural, mineral and commodity exporter, Latin America´s top oil producer and home to some of the world´s largest recoverable deep oil reserves. Brazil is also recognized for the outsized share of renewable sources in its energy matrix, which is three times more sustainable than the global average. According to the Mines and Energy Ministry, currently 46.1% of energy demand is met from renewable sources, compared to the international mean of 14.2%, whilst 83% of the electric energy comes from renewable sources against the global average of 26.7%. Breaking that down, from an installed capacity of more than 170 GW, hydroelectric power accounts for over 65% of the total, 20% from solar, wind and biomass combined, and just 15% from thermal and nuclear power.
These developments have been decades in the making, well before they were in vogue. Ahead of its time, the military government´s energy policies prioritised hydropower and sugarcane-based ethanol technology (via the ProÁlcool program) from the 1970s, in part as a response to the oil shocks of that decade and to reduce foreign energy dependence. The success of flexible-fuel vehicles, powered by petrol and ethanol, introduced in the noughties, has led to more than half of the country’s car fleet running on sugarcane alcohol.
Furthermore, since first experimenting with water-driven energy in 1889, Brazil has become the world's second-largest hydropower producer, accounting for 80% of electricity supply. The giant Itaipu dam, the second-largest renewable energy plant on the planet, powers approximately 15% of the country´s energy demand, and over 90% of Paraná state´s electricity, where it is located on the border with Paraguay.
"Brazil is also recognized for the outsized share of renewable sources in its energy matrix, which is three times more sustainable than the global average…"
The country is the ninth-largest power consumer and producer in the world, having climbed six places since 2012, and ranks as Latin America’s renewable energy leader. The outlook for renewable energy in Brazil is positive, led by supportive federal government policies, acute growth in solar and wind technologies and market pressure to meet growing energy demand without significantly increasing fossil fuel supply. The country has a competitive and well-established regulatory and legal framework, long-term power purchase agreements (PPAs) and a mix of stated-owned and private-sector initiatives, which help drive FDI. Primary energy demand has doubled in Brazil since 1990, driven by strong growth in electricity consumption, economic growth, albeit not always linear, and an expanding middle class. Renewable sources accounted for more than 75% of the 7,246 MW of new capacity Brazil added to its national grid in 2019. Despite additional hydropower capacity under construction in the Amazon region, continued expansion of hydropower is increasingly limited.
Wind and solar
Brazil’s hydro head start made it slow to look at alternate renewable technologies. But wind and solar are now gaining market share, boosted by contract auctions to bring forward investment in new generation and transmission capacity.
Brazilian wind energy plants have around 16 GW of installed capacity with another 6 GW in construction. There are already more than 500 wind farms, mostly onshore. By 2022 wind power should be the second-largest source of electricity in Brazil, with further capacity growth expected over the next 15-20 years. The potential of wind power generation in Brazil could reach up to 145GW, 85% of current installed capacity. Wind power, more intense from June to December, complements hydro power by coinciding with the months of lower rainfall intensity.
If Brazil is a latecomer to wind energy, it is even more so to solar energy. Until 2012, solar energy was used to power only a few isolated private grids but since then has grown exponentially. With Brazil having some of the solar irradiance metrics in the world, the country has the potential to become one of the three largest global markets for distributed solar energy with a fourfold increase in connected solar systems to the grid by 2024. Investments in utility-scale solar energy projects, already contracted in the energy auctions are expected to reach over $5billion by 2022.
The Brazilian Energy Planning Agency´s (EPE) Energy Expansion Plan (PDE) for 2019-2029 indicates that renewable sources will remain a high priority, targeting a majority share of Brazil´s energy network by 2029, with the domestic energy supply powered by renewables expected to grow by 33% in absolute terms over the next decade. The plan also aims to achieve a 10% efficiency gains in the electricity sector by 2030. Electricity generation from wind and solar PV sources is estimated to increase to 150 GW until 2040, representing 44% of the Brazilian matrix, closing the gap with hydropower. Nuclear power, another key clean energy source, is also expected to grow especially after the Angra 3 power plant’s enters into operation, estimated for 2026. Indeed, Brazil is planning to more than quadruple to nuclear power generation by 2050.
Total power consumption is forecast to increase by 20% over the next decade. To meet this demand and further realise its green potential, Brazil will have to increase investment in its energy infrastructure. The trends are promising and even during a 2020 stunted by the pandemic, investments in new capacity continued.
The country was the largest recipient of renewables FDI in Latin America between 2009-2018, with $20billion in investment – 11.6% of global investment over the period – and $70billion in total investment in the space. An increase of 1,000 TWh in electricity consumption is expected to 2050, which would generate the need for $150billion in renewable investments. According to BNEF-Climatescopes 2019, Brazil is ranked as the third-most attractive country in the world for clean energy investment. In the same year, the government announced investment of $57billion in the renewable energy sector.
"Brazil is ranked as the third-most attractive country in the world for clean energy investment…"
Government polices promoting market liberalisation and green finance instruments are also playing a significant part in this positive scenario. Like several other Latin American countries, Brazil has created policies that facilitate access to bilateral PPAs, spot markets, derivatives and green energy contracts and led to global major players like AES, Engie and Shell and institutional investment funds like Actis being active in the segment. And yet the market is still relatively fragmented.
Last year, the Brazilian President, Jair Bolsonaro, signed a decree to boost green bonds for renewable energy projects including small hydro installations and biomass. Solar energy seems to be a particular favourite of the head of state with moves to zero taxation and installation incentives.
Brazil is currently the second-largest green bond market in Latin America with 30 bonds totalling $5.9billion, but the new law could help unlock and additional $33billion by 2029 and help generate millions of jobs. This is to be welcomed as although renewables are a clear secular trend, aided by improving economic price points, the pandemic, has at least temporarily affected state energy auctions. Innovative investment solutions will certainly be important. Brazil’s energy sector is one of the least carbon-intensive in the world and has further committed to cut its greenhouse gas emissions by 43 %, compared to 2005 levels, by 2030.
As the president of the Brazilian State Development Bank (BNDES) Gustavo Montezano has said, "Brazil has all the conditions to be a global leader in green economy". This does not just make sense through a climate lens but also to strengthen and modernise its electricity grid, create new jobs and drive economic growth. It may not be anything divine after all, but with it´s legacy in renewables, an innovative power sector and vast natural resources, Brazil is certainly blessed with an incredible potential to thrive in the global energy transition.