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- 26 May 2022
- Brazil is Latin America’s top performer in the biomass and waste power sector and we expect it to continue to be so over the coming years, rivalling top global markets such as Germany, India and the US.
- Upside risks are present for Brazil’s biomass and waste power sector, as investors also look to capitalise on the market’s ethanol production industry as biofuel for electricity generation.
- While the market sees large potential for electricity generation from biomass, its growth will be dwarfed by growth seen in the solar and wind power sectors.
Brazil is Latin America’s top performer in the biomass and waste power sector and we expect it to continue to be so over the coming years. The market’s installed capacity for biomass and waste facilities stands at about 10.3GW as of end-2021. This places it as the largest biomass and waste power sector in Latin America, and the third globally in terms of capacity. As for biomass and waste power generation, Brazil comes in fourth at 57.5TWh, very closely behind Germany’s 57.7TWh. Brazil’s well-developed biomass and waste power sector is skewed to developments in the biomass sector, as it has been capitalising on Brazil’s sugar industry by utilising sugarcane waste for power generation through bagasse-fired power facilities. The market’s sugarcane industry is the world’s largest, and our Commodities team estimates that Brazil’s 2021 sugar production made up 22.5% of the global production. With an extensive agribusiness sector, Brazil has rich amounts of feedstock to tap into for biomass power generation, which supported the development of the market’s biomass power sector.
Brazil's Biomass Power Generation Among Top 5 Globally
US, Germany, Brazil & UK - Biomass & Waste Power Generation, TWh (2021-2031)
Note: Mainland China, the top performing market not displayed. e/f = Fitch Solutions estimate/forecast. Source: EIA, IRENA, National sources, Fitch Solutions
Upside risks are present for Brazil’s biomass and waste power sector as investors also look to capitalise on the market’s huge sugarcane industry for ethanol production used for electricity generation. Other than being the top producer of sugar in the world, Brazil is also the world’s second largest in ethanol production. Ethanol is a biofuel that can also be made from sugarcane and can be blended with select fossil fuels for use in combustion engines and co-generation power plants. As ethanol is a combustible fuel that is derived from agriculture, it is widely regarded as a more sustainable alternative to fossil fuels in terms of carbon emissions. While the method of using ethanol for electricity generation is still nascent, Brazil successfully commissioned its first ethanol-fired power plant in 2010, and plans for a second one to come online in 2023. The second plant will be developed by the Brazilian energy company, Raízen SA, and will be located in the state of São Paulo. While this bodes well for the biomass power sector, it only remains an upside risk as further large-scale developments still remain limited at present.
Solar And Wind Growth Subdues Well-Developed Biomass Sector
Brazil - Non-Hydropower Renewables Generation by Type, % of non-hydropower renewables generation (2021-2031)
e/f = Fitch Solutions estimate/forecast. Source: EIA, IRENA, National sources, Fitch Solutions
While the market sees large potential for electricity generation from biomass, its growth will be dwarfed by growth seen in the solar and wind power sectors. Brazil’s biomass and waste power generation will experience a total net growth of 4.1TWh from end-2021 to 2031. While this represents growth in the sector, it pales in comparison to that in the wind and solar sectors, which will experience total of 82.7TWh and 42.5TWh respectively over the same period. These forecasts reflect the focus of investor interest toward wind and solar, through power project auctions, supportive government policies and legal frameworks to support distributed generation facilities. This in turn boosted the development of solar and wind power sectors, strengthening their project pipelines significantly. While this downplays the potential that Brazil’s huge power generation feedstock that the agribusiness can provide to the biomass and waste power sector, solar and wind power sectors continue to provide significantly cheaper growth opportunities. As the solar and wind equipment manufacturing sector matures in Brazil, this will boost the cost-attractiveness and convenience for developers to expand the solar and wind power sectors.