The obstacles Petrobras faces to get renewable energy projects off the ground

Energy oversupply in Brazil and the consequent low price in the free market are currently the main obstacles to Petrobras getting renewable energy generation projects off the ground, the federal oil giant's executive director for the energy transition, Maurício Tolmasquim, told BNamericas.

Tolmasquim said that for a project to be approved by the company, it is necessary to demonstrate a minimum attractiveness, which requires a long-term contract. 

“In the case of oil, which is a commodity, you know that there will be a market and a price that will probably make exploration viable. But when it comes to electricity, as we have an oversupply of energy, the price on the spot market is very low, so finding a buyer to make the project attractive is a challenge,” he said. 

“But we're sure we'll get there,” Tolmasquim added.  

“Besides, there are potential buyers who are already showing interest in acquiring energy through a partnership with Petrobras and its partners.”  

Tolmasquim said Petrobras has mapped out a large number of projects and the company has secured investment capital under its strategic plan (US$5.2bn for wind and solar between 2024 and 2028). 

PPAs

Inês Gaspar, product manager at consultancy Aurora Energy Research, told BNamericas that the value of a power purchase agreement (PPA) to make a greenfield renewable project viable, with a term of 15 to 20 years, is currently around 300 reais (US$55)/MWh. 

According to Mayra Guimarães, regulation and market studies director at consultancy Thymos Energia, 15-year PPAs are being quoted at around 190 reais/MWh, with solar being slightly more competitive than wind at 3-5 reais/MWh less due to lower capex.

CONTEXT

Brazil’s energy oversupply scenario still reflects two summers with above average rainfall in 2022 and 2023, combined with a strong expansion of renewable generation capacity, both centralized and distributed. 

This in a context of relatively weak growth in demand for energy. 

However, the severe drought hitting the country this year and the consequent rise in electric power prices in hydro-dependent Brazil could help bring new generation projects off the drawing board.