Spotlight: The expansion of Brazil’s power generation

Brazil has just surpassed the mark of 190GW of centralized installed electric power generation capacity, according to sector regulator Aneel. 

Most of the authorized generation is from large hydro (103.2GW), thermal (46.15GW) and wind (24.9GW) plants.  

Centralized PV solar power currently totals 8GW and small hydro plants 5.7GW. 

Meanwhile, national distributed generation (DG) capacity, which mostly uses solar energy, surpassed 18GW in February. 

The free or non-regulated market – where consumers can choose their own electricity suppliers – is expected to be the main driver of the growth in the country’s electricity system in the coming years. 

In parallel, the regulated market is likely to play a backup capacity role, contracting, for example, large thermoelectric projects from which power will be dispatched at times when water reservoirs are low and to fill gaps related to the intermittency of solar and wind generation. 

According to the latest 10-year energy plan published by federal energy research company EPE, Brazil’s installed electricity generation capacity should reach 215GW by 2031.

The biggest increases will result from the expansion of centralized wind and solar generation projects and, above all, micro and mini distributed generation (MMDG) undertakings.

BNamericas spoke with two important local power generators about the outlook for the market. 

Fernando Elias, director of commercialization and regulation at Casa dos Ventos

“Wind power has grown exponentially in recent years, reaching 25GW in operation. But the plants that are now entering the system were planned two, three years ago, in a completely different situation than the one we see today. Now, the growth perspective is low in the short and medium term, since the growth in demand is being partially taken by distributed solar generation. 

“Prices in the free contracting environment are at a floor and should remain low for another two years. So, large energy consumers have the option of contracting energy on the spot market, rather than entering into a medium or long-term PPA [power purchase agreement].  

“The prices of raw materials and equipment are high, so there’s a debate being taken to the government for projects that have requested authorization to be implemented through March 2022 to have longer than 48 months to start commercial operation, thus being able to enjoy discounts on transmission and distribution tariffs and consequently reduce the capex for their implementation. 

“Today, about 35% of consumption is in the free market, which is the great vector for the expansion of the system. With this, we will be able to reach new consumers who are currently with the distributors [energy concessionaires, in the regulated market]. Therefore, the growth of the free market is a positive point. 

“But it’s important for Brazil to think about an agenda of reindustrialization of the country, taking advantage of our potential for renewable energy generation.”

Marcelo Lopes, director of marketing, commercialization and new business at Eneva 

“Even though we’re going through a moment of high availability of power supply due to reservoirs that are favorable for hydroelectric generation, the need to guarantee the country's energy security continues to be the main issue for the sector in Brazil. 

“This creates opportunities, such as the backup capacity auctions and the free proposals of interest for the substitution of the current, more polluting generation in the isolated systems [i.e. areas not connected to the national grid, often supplied by diesel-fired plants], especially in the north region. 

“In both scenarios, Eneva sees good prospects, both because of our experience in the reservoir-to-wire model, which uses the gas produced by the company itself onshore for generation – which makes us highly competitive in terms of price and logistics – and because of our presence in places where few others have ventured and we have gained unique experience.

"The opening of the free market to all high-voltage consumers creates opportunities for customers to seek products that are better suited to their needs and at more competitive prices and, for generators and retailers, opportunities for new investments to serve this market segment. 

"If the opening reaches low voltage [customers], this opportunity will be within the reach of all Brazilians. For Eneva, it can generate new business opportunities and investments focused on serving the segment of smaller customers."

Editor’s note: Current minimum demand to be eligible to access the free market is 500kW for high-voltage consumers. But a decree published in September 2022 by the mines and energy ministry (MME) will make all high-voltage consumers eligible to migrate, regardless of load, as of January 2024.

The government is studying the possibility of migration for all consumers, including low-voltage consumers, starting in January 2028.