Brazil has the largest power market in Latin America, with a total installed capacity of 149GW in 2016. The country’s size, plentiful resources and conducive policies have made Brazil the region’s main renewable energy market and one of the top 10 in the world.
In Brazil, energy from wind projects has reached wholesale price parity with conventional sources and become one of the main sources of new capacity. In 2016, total installed wind capacity in the country reached 10GW. Brazil is also the second largest ethanol producer worldwide.
The country is battling a macroeconomic crisis, and its clean energy sector is feeling the impact. In 2016, wind projects did not secure any long-term contracts through federal auctions, marking the first year the wind industry has had no PPA since 2009. Demand for clean energy—and power in general—has decreased, costs have increased and financing a project is more difficult.
Brazil’s matrix remains highly reliant on hydropower. In the past five years, roughly 75%-80% of the country’s generation came from moving water. The heavy reliance on one source came at a high cost for the country in 2014. A prolonged drought put Brazil’s water supply and energy matrix into stress, exposing the market to costly generation from fossil fueled thermal plants.
The hydro crisis emphasized the country’s need for generation diversification. Auctions and net metering will continue to be crucial policies to develop Brazil’s power sector. Further incentives to encourage small scale renewable systems are expected, as high costs and access to finance continue to prevent mass-deployment of PV systems in Brazil, in spite of higher electricity prices.
New generation capacity to supply the regulated utility market is contracted through reverse auctions. Brazil has held renewable energy auctions where technologies compete against each other as well as biomass- and wind-specific auctions. However, due to falling costs of renewable power generation, since 2010 all renewables compete with conventional fuels in regular tenders.
Banco Nacional de Desenvolvimento Economico e Social (BNDES) has played a major role in the development of the Brazilian renewable energy market. The bank is among the top global lenders to clean energy, having disbursed $29 billion for renewable energy (excluding large hydro) projects between 2006 and 2016. BNDES applies a strict local content requirement in making wind and PV project loans, pushing equipment manufacturers to set factories in the country.
Energy efficiency is promoted through an energy savings obligation, requiring electricity distribution companies to allocate 0.5% of their net operating revenue towards end-use energy efficiency investments. Starting in 2018, electricity distributors will be obliged to accept smart meters at no cost to customers who opt in to the dynamic tariff scheme. Customers who request additional smart-meter functionality are charged for the cost of the meter.
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