Full report
Published: 28 June 2023

Fostering Effective Energy Transition 2023


Country Analysis

Key progress on ETI

Brazil is the ninth-largest economy in the world53 and ranks 14 out of 120 countries on the ETI 2023. The overall ETI score for Brazil has seen an 8%
improvement since 2014, having slipped slightly in 2020 and then increasing again. Brazil’s scores on transition readiness have seen a significant improvement over the years. Today, Brazil ranks among the top 14 countries on sustainability of
the energy system, owing to its high share of renewables in the energy mix, with 80% of its electricity coming from large hydropower plants.54 Investments in wind and solar generation have also increased significantly in recent years, making Brazil’s electricity sector one of the least carbon-intensive in the world. Recent droughts, however, have caused the country to rely on more expensive thermal power plants and imports to meet its electricity demand, resulting in some challenges across the equitable, secure and sustainable dimensions within system performance.

Key imperatives and policies in place

While Brazil has made progress in creating a robust enabling environment for energy transition – in terms of building a stable regulatory environment to attract capital and investment and building infrastructure to facilitate energy transition –more effort is needed to provide a stable policy environment backed by ambitious targets to accelerate the transition. The government’s main goal is to structure the public policies needed to place the country as a world leader in clean energy while also leveraging its significant oil and gas resources. Brazil has already implemented several policies to transition towards a more sustainable and low-carbon energy system. The Auctions for Renewable Energy Support programme was launched in 2004 to encourage the installation of new renewable energy projects through a competitive bidding process. These auctions have not only helped reduce the cost of renewable energy in Brazil, making it more competitive with traditional energy sources, but have also been successful in attracting significant investment in the sector. With the A-3 and A-4 auctions in July 2021, the government allocated 420 MW of wind and 270 MW of solar, as well as biomass and hydro.55 In addition, the Brazilian Development Bank recently approved $650 million in financing for wind and solar energy projects.56 The net results of these policies are reflected in the high ETI scores on regulation and political commitment, infrastructure, and financial investment.

Brazil has become the largest producer of wind energy in Latin America57 and ranks among the top 10 largest producers in the world.58 The Programme of Incentives for Alternative Electricity Sources paved the way to create local manufacturing capacity for wind turbines and the components industry.59 The country has also implemented net metering and the Energy Compensation System for Micro and Mini-Generation to promote distributed solar generation, which currently makes up 70% of its installed capacity.60 Brazil’s national biofuels policy, RenovaBio, came into effect in 2020 and set transportation emission targets, using decarbonization credits to encourage biofuel production and consumption. RenovaBio also promotes the development of advanced biofuels with even lower emissions and has succeeded in making Brazil the second largest biofuel producer globally.61

What’s next?

Brazil, with a large and complex grid system that has not fully kept up with the demands of the energy transition, loses about 16% of the power it generates. Historically, Brazil has lacked investment in new grid infrastructure, particularly in remote areas where the potential for renewable energy development exists. A recent World Economic Forum report62 highlights opportunities for the country to unlock clean energy investments through innovative solutions and collaborative actions, focusing on three areas for acceleration: distributed generation, hydropower modernization and clean energy access for isolated systems. These lessons can also be applied to other countries at similar levels of clean energy development. The proposed solutions include the creation of a distributed generation financing toolbox to support developers and financiers; suggestions of regulatory changes to remove barriers to the commercialization of hydropower plant services; climate risk and resilience mapping for hydropower generation assets; raising awareness of the Climate Bond Standard Hydropower Criteria among potential investors; and creating a platform for existing independent power producers to find developers as well as technical, marketing and financial support to integrate renewables and create hybrid generation models in isolated systems.

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