Brazil To Add 115 GW Of New Power Capacity By 2034, Driven By Wind And Solar Energy – Report

Brazil is poised to install an impressive 115 gigawatts (GW) of new power capacity by 2034, primarily fueled by a surge in free market demand. According to the latest analysis from Wood Mackenzie, wind and solar energy will be at the forefront of this expansion, with plans to add 61 GW of utility and distributed solar and 24 GW of onshore wind projects over the next decade.

Wood Mackenzie’s report highlights a remarkable projected increase of over 100% in free market demand within the next ten years. The market’s liberalization is fostering competition between solar utilities and solar distributed generation, particularly under the new compensation scheme introduced by Law 14,300. However, the report indicates that from 2028 onwards, the full eligibility of residential off-takers to access the free market will likely slow the growth of distributed generation.

Marina Azevedo, Senior Power Analyst at Wood Mackenzie, commented, “As long as the market is not fully opened to residential consumers, solar distributed generation remains an increasingly lucrative business model, sustained by high electricity tariffs. But over the longer term, solar utility gains room to expand, driven by battery growth and new demands, such as green hydrogen.”

Looking ahead, hydro power will continue to play a pivotal role in Brazil’s power system. However, wind and solar energy are expected to account for 71% of new supply growth by 2050. Notably, solar distributed generation is projected to grow at a Compound Annual Growth Rate (CAGR) of 10% over the next decade. This scenario underscores the critical role of natural gas in ensuring system reliability, especially during non-solar hours, which in turn will drive up the system’s average marginal costs. The report notes that with the expiration of legacy Power Purchase Agreements (PPAs), existing gas-unit prices will become indexed to LNG benchmarks.

Azevedo added, “The increase in variable renewables will bring major challenges for operators. The power system will require faster dispatch technologies that can be quickly activated to meet additional load demands as needed. One significant impact will be increased price volatility. From 2030 onwards, hourly prices exceeding 100 USD/MWh are expected over 20% of the time.”

Brazil’s power market is on the cusp of a major transformation, driven by substantial investments in wind and solar energy. As the country moves towards a more competitive and sustainable energy future, the sector will need to adapt to the challenges posed by the rise in variable renewables and the evolving market dynamics. The ambitious growth targets set for the coming decade highlight Brazil’s commitment to enhancing its energy infrastructure and ensuring reliable, high-quality power supply for its consumers.