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Brazil

With a power score of 2.25, Brazil ranks number 9 among emerging markets and number 26 in the global ranking.

  • Emerging markets
  • Americas

2.25 / 5

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Low-carbon strategy

Net-zero goal and strategy

Brazil committed to cut greenhouse gases (GHG) emissions by 50% below 2005 levels by 2030 and is aiming for net-zero carbon emissions by 2050, having brought forward its previous target date of 2060 in April 2021. Brazil formalized this declaration at COP26 in November 2021.

Nationally Determined Contributions (NDC)

Brazil released an updated Nationally Determined Contribution (NDC) – its plan to achieve the goals set out in the Paris Agreement – in March 2022 in which it reaffirmed its commitment to reduce total net greenhouse gas emissions by 37% in 2025, based on the reference year of 2005, and increase the target reduction from 43% to 50% by 2030. The emission level in the base year, 2005, has changed over the NDC updates. It was initially at 2.1 GtCO2e in the first NDC, revised up to 2.8 GtCO2e in 2020 and later reduced to 2.56 GtCO2e in the 2022 update, because of methodological changes in the emissions inventory.

Brazil's NDC covers all sectors. The country’s power sector is relatively clean with only 21% of the generation coming from fossil fuels in 2021. Large hydro is still responsible for over half the total generation in the country.

Fossil fuel phase-out policy

There is no fossil fuel phase-out policy in Brazil.

Power

Power policy

Since 2009, Brazil has implemented reverse auctions to contract new clean energy generation capacity to supply the regulated utility market. The country is a pioneer of competitive renewable energy auctions, which have led to over 35GW of renewable energy contracted to date. In the May 2022 auction, continuing an established trend, most developers committed not to sell all the generation from their plants via auction but rather 60% of it, on average. They hope to sell the rest at higher prices in Brazil’s free market. In addition, sharp competition among project developers has typically resulted in low average wind and solar prices, including an average solar auction price of $17.5/MWh in July 2019, which remains the lowest recorded in Brazil to date.

Net metering has also been a widely utilized clean energy policy. Retail electricity customers may install up to 5MW self-generation facilities, connect to the grid, deliver surplus generation and obtain compensation in the form of a subsequent billing credit. The incentive has led to a distributed solar boom, with small-scale PV capacity jumping from around zero in 2015 to over 16GW (DC) as of August 2022. Moreover, the new Brazilian net metering and distribution charge law has guaranteed its generous net metering rules will be in place through 2045 for those who have solar systems installed by the end of 2022. New systems installed after that will face a six-year transition period to a new tariff schedule that will gradually pare back compensation.

Power policies

Renewable energy auction
Feed-in Tariff
Import tax incentives
Net Metering
Renewable energy target
VAT incentives

Power prices and costs

Retail electricity prices are among the highest in Latin America. However, commercial and industrial (C&I) customers with power demand greater than 500kW are eligible to purchase electricity from Brazil’s deregulated wholesale market. Consumers with demand between 500kW and 1.5MW (special consumers) choosing this option must purchase wholesale power generated from incentivized renewable sources, including wind, small hydro, biomass and solar. The maximum threshold for special consumers fell from 2MW to 1.5MW in January 2020 and will decline by 0.5MW every January until 2023.

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Power market

Brazil has the largest power market in Latin America, with total installed capacity of around 170GW in 2021. The power sector is fully unbundled. Several distinct actors participate in generation, transmission, distribution and retail. Overall, the power market is fairly evenly split between state-owned and private-sector players. Operador Nacional do Sistema Elétrico (ONS) operates the national power system and Câmara de Comercialização de Energia Elétrica (CCEE) is responsible for the country's wholesale market. Brazil’s matrix remains highly reliant on hydropower and has experienced recurring crises resulting from low rainfall in certain years, most recently in 2020-21. The last crisis has exposed the market to costly fossil-fuel generation, sending power prices soaring and temporarily raising the prospect of electricity rationing. In 2022, the Brazilian government privatized Eletrobras, the biggest electricity company in Latin America, which is responsible for around 30% of the country generation.

Installed Capacity (in MW)

20122014201620182020050K100K150K200K MW

Electricity Generation (in GWh)

201220142016201820200200K400K600K GWh
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Utility privatisation

Which segments of the power sector are open to private participation?


Generation
Transmission
Retail

Wholesale power market

Does the country have a wholesale power market?


Available
Not available

Doing business and barriers

Despite Brazil's increasing share of intermittent renewables, most of the generation still comes from hydropower, and there have not been significant grid balancing issues. Brazil's clean energy capacity is largely contracted through auctions, which offer standardized Power Purchase Agreement (PPAs). Brazil regularly holds capacity auctions to ensure grid reliability. There are clear rules and processes defined for interconnection of projects to the grid, as well as regularly updated and published grid expansion plans. Net metering regulation is defined and the efforts to reform it have involved substantial industry and public input. However, hydrogen and storage-specific targets or regulations do not yet exist.

All PPAs are set in local currency, potentially exposing developers to substantial foreign-exchange risk. As the Brazilian real has depreciated significantly in recent years, developers have suffered from lower foreign currency-denominated revenue from long-term contracts and higher costs of imported energy equipment. Rising inflation has prompted Brazil’s central bank to hike the benchmark Selic interest rate for the 12th consecutive time in August 2022, potentially exposing developers to increased borrowing costs.

Currency of PPAs

Are PPAs (eg. corporate PPAs and all other types) signed in or indexed to U.S. Dollars or Euro?


Available
Not available

Bilateral power contracts

Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?


Available
Not available

Fossil fuel price distortions - Subsidies

Does the government influence the wholesale price of fossil fuel (used by thermal power plants) down through subsidies?


Available
Not available

Fossil fuel price distortions - Taxes

Does the government influence the wholesale price of fossil fuel (used by thermal power plants) up through taxes or carbon prices?


Available
Not available

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