On January 25, the Brazilian Government published initial guidelines for offshore power generation (Decree # 10.946), setting forth the legal and regulatory framework for the development of offshore power generation projects along the country’s coastline, especially long expected offshore wind projects.
The decree, which has been well received by players in the power sector, provides for the lease of land located in Brazilian inland waters and territorial seas until the continental shelf, as well as the use of natural resources for the generation of electricity from offshore wind.
With nearly 8,000 kilometers of coastline, Brazil has immense potential for offshore wind, with an estimated installation potential of 674 GW (for 100-meter-high turbines in areas 50 meters deep) and estimated capacity factors over 60%.
Onshore wind power has been ranked second place in the Brazilian power matrix for a few years now. In terms of renewable power supply, advancing offshore wind will put Brazil in an even more prominent position globally, as well as enable the country to supply its growing power demand while also providing the base load for a potentially flourishing green hydrogen export market, which has been increasingly discussed by the energy industry.
In fact, given the significant competitiveness of variable renewables in Brazil (especially wind and solar) and the proximity of the Brazilian hydrogen hubs to Europe and other markets, wind-driven electrolysis for hydrogen export has been of significant interest and offshore wind has the potential to be a game changer for Brazil to meet the growing global demand for green hydrogen.
For investors, the offshore wind industry represents significant business opportunities, due to the great volume of natural resources, the consolidated industry supply chain in Brazil, research capabilities, etc.
According to the Brazilian Energy Research Agency (“EPE”), the forecast is that by 2050 Brazil will reach an offshore wind installed capacity of nearly 16 GW, if there is a 20% reduction in capex for this source.
Although Brazilian power authorities will need to work on a detailed regulation, Decree # 10.946 has established that its main objective is the pursuit of sustainable development, the fostering of employment and income generation as well as local and regional development, with concrete actions to reduce social inequality and that foster social inclusion, evidencing that the decree is absolutely in line with the United Nations’ sustainable development goals.
Moreover, the decree provides that the land lease may be granted in two different formats: (i) individually between the Brazilian Government, the same way as the authorization of power generation grantees; or (ii) through auctions following the planning by governmental entities, as the concession auctions for transmission.
In any case, although Brazilian power authorities must prepare a fully detailed permitting framework for the offshore areas to be leased, as well as competitive auctions and other mechanisms for the wind power offtake, Decree # 10.946 provides clarity and certainty to the wind industry, so it can move ahead and continue to develop large scale projects off the coast of Brazil.
The Global Wind Energy Council (GWEC) and the Brazilian Wind Power Association Abeeólica have been closely working with the Brazilian Government and other key stakeholders to help provide their inputs on relevant experiences from international wind markets.
Abeeólica’s CEO Elbia Gannoum stated: “Wind energy already has a long successful history in Brazil onshore, and now, with this decree, we start a new phase with offshore wind. For Abeeólica, the decree is a crucial advance so that Brazil can unlock investments and deploy offshore wind farms with security for investors, government and society.
“In a sector that is taking its first steps, this security is key, so that companies, society and government know what the technical criteria, requirements, and study obligations are, and the agencies that will be responsible for analyzing, approving and formalizing the progress of each stage of the projects, which are more complex than onshore wind farms,” said Gannoum.
GWEC has congratulated the Brazilian Government on the publication of the decree and on the efforts to help facilitate development of offshore wind projects. GWEC’s chief executive officer Ben Backwell has affirmed: “Brazil has virtually unlimited offshore wind resources and wind energy companies have already presented applications for licensing for 40GW of offshore wind projects in Brazil, representing a unique opportunity to meet growing power demand, develop green hydrogen projects and create vast amounts of investment and skilled jobs.”
Although the offshore wind installation capex is not yet as competitive as other consolidated sources in Brazil (such as onshore wind and solar), as the offshore industry and technologies evolve and become more mature, it is expected that the investment costs drop.
In this regard, the international experience demonstrates that incentives (such as the feed-in tariffs in Germany, the Netherlands, continental China, Japan, Taiwan, etc.), and support programs (such as the PSO tariff in Denmark and the WindSeeG auction program in Germany), will be critical for the offshore generation strategy to be successful. Financing incentives and tax credits, such as the ones granted in the United States, can also play a major role in the development of offshore wind in Brazil.
Another factor that might largely contribute to consolidate offshore generation in Brazil is the establishment of a clear and simple permitting process, as this can significantly reduce the length and the cost associated with a plant construction and installation.
Since the publication of Decree # 10.946, developers and investors have announced plans for several gigawatt-scale offshore wind farms off Brazil.
Prumo Logística has started the permitting process for the 2160 MW Ventos do Açu offshore wind cluster, comprising 144 wind turbines of 12-15MW, for a total installed capacity of up to 2.16GW, off Rio de Janeiro. The developer is a partnership between American fund EIG Global Energy Partners and Abu Dhabi sovereign wealth fund Mubadala Investment Company.
In a separate development, Singapore-headquartered developer Enterprize Energy has entered into an agreement with the Brazilian state of Rio Grande do Norte for the development of opportunities for multi-gigawatt-scale offshore wind, green hydrogen and green ammonia projects off the country’s northeastern coastline. The economic viability of co-developed desalination and green hydrogen hubs will also be assessed, both for local distribution and export to global markets.
Offshore technology offers extensive possibilities for project development and systemic efficiencies, as projects can be built more closely to large coastal cities, reducing the need for transmission investments and avoiding the social impacts of onshore projects.
Although several issues still need to be addressed, such as environmental management tools and adaptation of port infrastructure, the recently enacted Decree # 10.946 has the potential to unlock a significant amount of domestic and foreign investments in Brazil.
