WIND

Is offshore wind going to take off in Brazil?

Offshore wind projects of over 189GW are in the development pipeline in Brazil, with Corio and Neoenergia both making new commitments last week. But investor enthusiasm is being tempered by the country’s unclear regulatory regime and the rising cost of offshore wind globally.

RICHARD HEAP

April 2, 2024

  • Brazil has over 189GW of offshore wind projects in development
  • Corio and Neoenergia made new commitments in Rio last week
  • But investors are waiting on the approval the regulatory regime

 

Brazilian city Rio de Janeiro is best known for its annual Carnival in February, where its streets explode into noise and colour. But when will the party vibes reach the South American country’s nascent offshore wind sector?

The interest in offshore wind projects off Brazil has grown tenfold over the last three years, with the Brazilian Institute of Environment & Renewable Natural Resources (IBAMA) revealing last September that environmental investigation licensing processes have been registered for 70 offshore wind developments totalling over 189GW. But development activity is being delayed by regulatory uncertainty and the rising costs of building offshore wind farms.

In addition, many developers have had their hands full installing renewables on land. Bloomberg New Energy Finance said last week that Brazil achieved 5GW of wind installations in 2023, all onshore. This put it in third behind the US (7.2GW onshore and offshore) and China (77.1GW onshore and offshore).

But despite the headwinds, developers are still making new commitments to offshore wind projects off the coast of Brazil.

New commitments

On 26th March, Iberdrola subsidiary Neoenergia signed a memorandum of understanding with the government of the Brazilian state Rio de Janeiro to develop offshore wind farms off the coast. This is the fourth MoU that the company has signed with the governments of Brazilian states, where it is developing projects off the coasts of Ceará and Rio Grande do Sul. It made the commitment at the Brazilian Offshore Wind Summit in Rio de Janeiro.

Also last week, Corio Generation signed a MoU with port operator Profumo to partner on a portfolio of five offshore wind projects in Brazil 6GW. This MoU means Corio will have a dedicated area at the Port of Açu, in the state of Rio de Janeiro, to serve as a strategic base to build its offshore wind projects.

It is also worth looking at those IBAMA figures. It said there were less than 10 offshore wind projects totalling under 20GW at the end of 2020, which grew to around 25 projects totalling 50GW at the end of 2021. But developer interest surged in the first half of 2022, and continued to grow albeit more slowly in the second half of 2022 and through 2023. This coincided with a period of political change and contributed to the over 70 projects totalling 189GW in play today.

One of the largest players in the country’s offshore wind sector has been the oil and gas giant Petrobras, which last September said that it was developing offshore wind farms totalling 23GW in ten regions off the coasts of six states: Ceará, Espirito Santo, Maranhão, Rio de Janeiro, Rio Grande do Norte and Rio Grande do Sul. The group has worked on some of these in partnership with Norwegian oil giant Equinor. Other firms with large pipelines of offshore wind farms in Brazil include Ocean Winds, which revealed 15GW of projects in September with Prumo Logistica, as well as Shell and Shizen Energy.

But Petrobras said this month it has cooled on those 23GW of offshore wind projects because the technology is too expensive and because the industry needs greater clarity from government on regulatory support for the sector. The latter point would be beneficial for the sector as a whole.

Legislative delays

Developers and investors welcomed confirmation from the Brazilian Congress, known as the Chamber of Deputies, in November 2023 that it had approved a legal framework for the offshore wind industry. This sets rules defining where offshore wind farms can be built; how government auctions would be run; how rights for other industries and the military would be considered; and how it will assess the environmental and other impacts of the developments.

However, the bill has still not received authorisation in the Brazilian Senate, which is crucial if developers and investors are to gain the certainty and the structures they need to progress their plans. Other analysts have highlighted the lack of clarity of the tax incentives on offer to encourage developers to progress offshore wind projects, compared to tariffs for other energy sources.

And there is still a lack of clarity over how offshore transmission lines will be dealt with under the Brazilian regime. This is important because it can add extra cost and uncertainty for projects depending on the approach.

None of these issues is insurmountable. However, they must be answered if developers and investors are to gain the confidence needed to take offshore wind in Brazil to the next stage. The South American country has a reported 700GW of offshore wind potential — but that must now become reality.