Key View 20 Jun 2022
Renewables Headline Forecasts (Brazil 2021-2026)
|Generation, Non-Hydropower Renewables, TWh||141.346||161.618||180.333||192.223||204.376||216.091|
|Generation, Non-Hydropower Renewables, % y-o-y||12.9||14.3||11.6||6.6||6.3||5.7|
|Capacity, Non-Hydroelectric Renewables, MW||47,979.8||56,210.9||63,634.2||68,452.6||73,602.3||79,170.7|
|Capacity, Non-Hydroelectric Renewables, % y-o-y||17.8||17.2||13.2||7.6||7.5||7.6|
Key Forecast And Latest Updates
- Non-hydropower renewables capacity will increase by an annual average of 7.8% per annum between 2022 and 2031, totalling over 100GW. This will take the contribution of renewables to nearly 32% of total electricity generated in
- Solar and wind power will continue to be the technologies of choice for Brazil going forward, supported by power project auctions, supportive government policies and legal frameworks to support distributed generation facilities. Solar and wind power will continue to provide significantly cheaper growth opportunities compared to other renewable energy generating technologies. 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.
- 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, Indiaand 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.
- It was announced in
May 2022that Eletrobrás filed a share offering request with the securities and exchange commission (Comissão de Valores Mobiliários), seeking to offer 627,675,340 new shares in a primary offering and 69,801,516 shares currently held by Brazilian state-owned development bank BNDES in a secondary offering. The group expects to raise BRL 30.69bnfrom this privatisation bid, which will be priced on 9 June 2022. Moreover, the offering may be increased by 15% through a green shoe option, raising the transaction to BRL 35.18bn.
- President Jair Bolsonaro has continued to sideline market-friendly reforms, instead enacting more populist measures as he turns his attention towards the
October 2022presidential election. We maintain our view that Bolsonaro will be at a disadvantage against his main competitor, former president Luiz Inácio Lula da Silva, underpinning greater risks to policy continuity in the coming quarters. Additionally, elevated inflation and an increasingly polarised electorate will threaten social stability in 2022.
20 Jun 2022
20 Jun 2022
- We forecast non-hydropower renewables generation to increase from 161.6TWh in 2022 to 270.6TWh in 2031. This will take the contribution of renewables to nearly 32% of total electricity generated in
- The project pipeline has received a significant boost from recent auctions, which were delayed by the Covid-19 pandemic. In the
June 2021auctions, A-3/2021 and A-4/2021, additions to the pipeline include 23 wind projects totaling 251.7MW and five solar projects with 169.3MW capacity under the A-3 auction. While under the A-4 auction there are 10 wind projects of 167.8MW and two solar projects totaling 100MW. This was followed by the A-5 auction in September 2021which included a total of 718MW of renewables contracts, with solar accounting for 263MW and wind for 161MW. Casa dos Ventossigned a 10-year power purchase agreement with Lightsource bp in May 2022to secure the output from a 210MWp solar project in Brazil. The solar facility, called 'Milagres', would come up in Abaiara. The power plant is likely to be fully operational in early 2024.
- In May,
Auren Energiastarted the construction of two wind projects with 94.5MW combined capacity in the Brazilian state of Pernambuco. The firm plans to invest around BRL455mn( USD92.5mn) in the projects, called Ventos do Piaui II and III. The wind projects will be located in the municipalities of Araripina, Ouricuri and Santa Filomena, in the Sertao do Araripe region. The projects are likely to be operational in November 2022. Petrobras, in partnership with Equinor, is evaluating environmental feasibility for the construction of an offshore wind project in Aracatu. The partnership follows the memorandum of understanding signed in 2018. According to Brazil's Institute of Environment and Renewable Natural Resources, the project would feature 3.8GW installed capacity and 12MW wind turbines. This presents major upside to Brazil’s wind power sector. Engie Brasil Energiahas unveiled plans to acquire development rights of the 882MW Serra do Assurua wind project located in the municipality of Gentio do Ouro in Bahia. Engie Brasil Energiawill acquire the project from PEC Energia for BRL265mn( USD52.1mn).
- Atlas Renewable Energy and Hydro Rein established a joint venture in
May 2022for the construction of the USD320mn Boa Sortesolar park in Paracatu, Minas Gerais. Albras, owned by Hydro and Nippon Amazon Aluminium, will purchase around 815GWh of electricity from the facility under a power purchase agreement from 2025 until 2044. Subject to clearance from the competition authority CADE, construction is expected to start in Q422 with completion scheduled in Q423.
Brazilian Renewables On Firm Upwards Trend
A robust project pipeline, particularly for wind power, will drive rapid growth in capacity and generation over the coming decade, creating a range of opportunities for domestic and foreign investment. Additional upside risk stems from Brazil's plans to phase out thermal power, starting with coal-fired power, which will necessitate further investment in renewables. Non-hydropower renewables capacity will increase by an annual average of 7.8% per annum between 2022 and 2031, totalling over 100GW. This will take the contribution of renewables to nearly 32% of total electricity generated in
Hydropower Risks Could Spur Further Growth
The energy security risks associated with Brazil’s continued heavy reliance on hydropower, which makes up around 60% of total electricity generated, will drive investment opportunities in the renewables and thermal power sectors, particularly after the impacts seen in 2021 when historic drought conditions led to heightened risks for energy rationing amidst supply shortages and spiking wholesale prices. We expect diversification efforts will accelerate following the impacts of the recent drought, posing strong upside risks to our already robust non-hydro renewables forecasts. Notably, the non-hydro renewables sector is supported by a robust policy landscape including the continuation of renewables auctions, increasing cost-competitiveness, large utility-scale wind and solar power project pipelines, and strong growth in distributed generation solar systems.
Strongest Growth In First Half Of Forecast Period
Brazil - Non-Hydro Renewables Capacity (2021-2031)
Auctions will be a key driver of capacity growth over our forecast period. There have already been a number of auctions which have substantially expanded the project pipeline. Over the latter half of 2019, three power auctions led to contracts being awarded for more than 3.5GW of power capacity additions, primarily in the non-hydro renewables sector. In
The disruption caused by the Covid-19 pandemic mean that Brazil’s power, renewables and electricity auctions scheduled throughout 2020 were suspended. This included the
Energy auctions were restarted over 2021: the Brazilian government awarded 873MW in non-hydropower renewables capacity through the country’s A-3 and A-4 power auctions that concluded in
We also expect Brazilian utilities