This article is part of the special report: Challenging perceptions: Brazil makes a comeback

As one of the top 10 largest oil producers in the world, the energy industry plays a significant role in Brazil’s economy. New opportunities are emerging for investors in both the renewable and traditional sectors, driven by increasing consumer demand, government liberalisation and an abundance of natural resources.

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The International Energy Agency reports that total primary energy demand in the country has doubled since 1990, propelled by strong growth in electricity consumption and demand for transport fuels on the back of robust economic growth and a burgeoning middle class. 

However, the US Energy Information Administration (EIA) reveals that issues challenging energy generation and transmission include uncertainty about the reliability of the national electricity generation system because of the country’s reliance on one resource — hydropower, which accounts for the majority of domestic electricity generation; the big distances between generation and demand centres; as well as ongoing droughts and deforestation. 

Market liberalisation

The government’s plans to liberalise the energy industry include the privatisation of Electrobras, Latin America’s largest power utility. In May 2022, Brazil’s audit court ruled in favour of allowing the state to reduce its controlling stake in the public entity. The next step will involve filings with financial regulators and an investor roadshow.

The government is also launching a series of auctions for Brazil’s oil-rich pre-salt layer. According to the Brazilian trade and investment promotion agency Apex-Brasil, an estimated 50 billion barrels of high-quality crude oil could be extracted from these pre-salt layers alone.

State-owned multinational Petrobras has been going through a period of divestment by selling several small to mid-size upstream producing assets, and midstream oil and gas assets since 2015. “Firms that acquire those assets will have access to cash flow from the start and could develop an energy base in Brazil or South America,” Giovani Loss, oil and gas partner at law firm Mattos Filho, told fDi.

Renewables push

According to the Ministry of Energy, almost 50% of the energy matrix comes from hydropower and renewable sources, and plans are afoot to increase the share of clean energy sources within the mix. 

Major new investments in renewable energy are on the cards for 2022, designed to scale up wind and solar infrastructure. 

One of the latest wind projects to come online is the 716 megawatt (MW) Lagoa dos Ventos facility in the state of Piauí, which consists of 230 wind turbines that can generate more than 3.3 terawatt hours per year. 

Apex-Brasil says that other recent renewables announcements include Engie’s 2021 commitment to a new wind farm complex in Rio Grande do Norte on Brazil’s far north-east coast which will see the construction of 70 turbines and generate up to 434MW of electricity. Other investments have come from Canada’s Brookfield Renewable Partners which is building 1.8 gigawatts (GW) of solar capacity.

Elsewhere, major players such as Shell, Petronas, Petrobras and Equinor are among those who have announced evaluation plans for offshore wind projects aimed at increasing the country’s electricity generation capacity.

Brazil is an important market for energy firm Enel, according to its head of Latin America, Maurizio Bezzeccheri. “It already accounts for 40% of our growth in Latin America’s renewable market. The Enel Group’s renewables arm, Enel Green Power, currently operates more than 4.7GW of renewable power in the country. In 2022–2024 alone, we will add 2GW to our renewable capacity portfolio in onshore solar and wind plants, and much more is expected for the next few years,” he tells fDi.

In association with Apex-Brasil. Writing and editing were carried out independently by fDi Intelligence.