The Sector
Development of wind power in Brazil
The first wind turbine installed in Brazil came into operation in 1992, in Fernando de Noronha archipelago, as the result of a partnership between the Brazilian Wind Energy Center (CBEE) and Companhia Energética de Pernambuco (CELPE), with funding from the Danish research institute Folkecenter. Over the next ten years, wind energy saw little growth, partly due to the lack of policies, but mainly due to the high cost of the technology.
During the 2001 energy crisis, an attempt was made to encourage the contracting of wind power generation projects in the country. The Emergency Wind Energy Program (PROEÓLICA) was then created. This program aimed to contract 1,050 MW of wind energy projects by December 2003. At the time, there was already some discussion of the seasonal complementarity of the wind regime with the hydrological flows in hydropower reservoirs. However, this program was unsuccessful and was replaced by the Incentive Program for Alternative Energy Sources, PROINFA. In addition to encouraging the development of renewable sources in the energy matrix, PROINFA paved the way for the establishment of the wind turbine and component industry in Brazil with national content requirements for wind turbines resulting from this program.
At the inception of PROINFA, wind power generation technology was still very expensive and development in competitive auctions would only come later. At the end of 2009, the first energy trading auction focused exclusively on wind sources was held. This auction, named Reserve Energy Auction (LER), was a success with the contracting of 1.8 GW and paved the way for new auctions that were held in the following years
Since then, wind power has shown solid and consistent growth, and is now a consolidated source of energy. Wind power went from being an “alternative” source to playing a key role in the Brazilian energy matrix. It is today the second source in the energy matrix, with more than 10% share. What explains this development?
Well, firstly, our winds. Good winds are required to produce wind energy: stable, with the right intensity and without sudden changes in speed or direction. Brazil is fortunate to have a huge amount of this type of wind, which largely explains the success of wind power in Brazil in recent years. The features of Brazilian good winds result in a capacity factor that is virtually double the world average.
The strength of Brazilian winds means high productivity and, with more and more wind farms operating, wind power has been breaking record after record during the “wind season”, a period that runs from June to the end of the year, serving the entire Northeast for a whole day and around 20% of the country.
The success of wind power in Brazil can also be explained by the fast development of a local and efficient production chain, which began with a nationalization rate of close to 60% and reached 80% of a wind turbine manufactured domestically, in accordance with the financing rules of FINAME, a program run by the National Bank for Economic and Social Development (BNDES). Today, Brazil has six turbine manufacturers, blade and wind tower factories and hundreds of companies that work on other components, in addition to transport, various consultancies, planning, works, etc.
The development of wind power in Brazil has already accrued an investment of more than US$ 42 billion over the last 11 years. In 2021, for example, investment reached US$ 5.15 billion. The investment data released by ABEEólica is provided by Bloomberg New Energy Finance (BNEF) and can be seen in more detail in the Annual Wind Generation Bulletin, produced by the association.
As one of the countries investing the most in wind energy in the world, Brazil has been classified as a wind powerhouse and already ranks sixth in the GWEC (Global Wind Energy Council) Installed Capacity Ranking. Another factor that explains the efficient development of wind energy in Brazil is its huge potential. We estimate that Brazil has onshore potential of more than 700 GW.
For up-to-date data on the Brazilian wind sector, visit our ABEEólica Data page and consult Infovento and the Annual Generation Bulletin.
Future: offshore, hydrogen and other technologies
At the end of January 2022, Brazilian Government published Decree No. 10.946, which provides for the assignment of the use of physical spaces and the use of natural resources at sea for energy generation from offshore projects. This was a crucial step forward for Brazil to be able to begin its journey towards implementing offshore wind farms with security for investors, the government and society. We believe that the decree not only meets public and collective interests, but is also an important foundation for companies to work on a planned and organized basis.
In a sector that is taking its first steps, this security is fundamental, so that companies, society and the government know what the technical criteria are, the requirements, the study obligations and the bodies that will be responsible for analyzing, approving and formalizing the progress of each stage of the projects, which are more complex than those for onshore farms.
The decree only comes into force in June 2022. The Ministry of Mines and Energy (MME) will then have 180 days from this period to improve the standards. From the point of view of the regulatory framework, the decree is enough to kick-start the process, the rest comes through ordinances and resolutions, but the infrastructure of transmission lines and ports also needs to be developed and this takes time.
What is already known is that investor’s appetite and our potential are huge. In April 2022, we already had more than 100 GW of projects under analysis at IBAMA and EPE’s Wind Roadmap shows a potential of 700 GW. This is a potential that we usually call “infinite”, because considering the technical need to have a diversified energy matrix, no one would bet on a single source and we will never need all this energy in our offshore winds.
In the not-so-distant future, our offshore wind farms may also be linked to one of the industries that will play a central role in next-generation energy, which is hydrogen. The northeastern states of Brazil, for example, are already aware of this possibility and have entered into cooperation agreements that will enable the production of green hydrogen within a few years, mainly using wind turbines, with emphasis on the possibilities of offshore wind turbines which, it should be remembered, are always large-scale projects.
Green hydrogen is a promising technology because it has a number of advantages linked to storage, energy security, reduced price volatility, adaptability of renewable energy systems and fuel production and transportation. Recently, IRENA released a report entitled “Green Hydrogen: A Guide to Policy Making”. The document shows that different countries have created national plans for the production of hydrogen via renewable sources. Countries such as Germany, France, Spain, Japan, China, Chile and Norway have already outlined their hydrogen production strategies via renewable sources. This shows that hydrogen can be a driving mechanism for installing new renewable energy capacity and making this type of source increasingly competitive.
EPE took the first step in the domestic context and at the beginning of February launched the technical note entitled: “Bases for the Consolidation of the Brazilian Hydrogen Strategy”. The document highlights the main hydrogen-related initiatives undertaken by Brazil and their opportunities and challenges. The repot reinforces the need for Brazil to have a strategy for the production of Hydrogen from various energy sources existing in the country to generate a competitive edge in the industry. The role of Green Hydrogen is highlighted due to its potential to generate competitiveness. The document mentions that renewable sources can reduce Hydrogen production prices by up to 60% by 2030. Moving forward with a hydrogen strategy, as proposed by EPE, could help Brazil become an important player in the international market for this fuel, based on the competitiveness of the country’s renewable sources and the current discussions and climate agreements signed between countries.
Energy Transformation
Talking about energy transition is easy when it comes to Brazil. We already have an electrical and energy matrix with a share of renewables above the global average. For electrical energy, for example, we have 83% renewables, while the global average is around 25%. In the energy matrix, we have 46% and the world average is around 15%. And we will be increasingly renewable. We have one of the best winds in the world for generating onshore wind power, in a few years we’ll have offshore wind power, our solar potential is enormous, biomass is growing steadily and we have the possibility of using natural gas from the pre-salt to generate energy.
Therefore, our challenge is not to manage the scarcity of clean natural resources, as is the case in so many countries that have had to invest billions in renewable development policies. Our challenge is to manage their abundance for energy production, getting the best out of each one, protecting nature and delivering social and economic returns for society.
And it is precisely because we have this abundance that we can understand the energy transition process as an opportunity for this to mean an energy transformation. When talking about energy transformation, the concept is broader and involves, for example, all the changes and technologies that are developed alongside renewables to meet and enable their growth, as well as the consequences for society.
We can see, then, that the true potential and opportunity for transformation is the fact that investing in natural resources on a responsible basis will lead to economic and social development through income distribution, inclusion and the reduction of economic and social inequalities. A leap of thought and action is required: generating CO2-free renewable energy is not enough; this energy must have a positive impact on people’s lives. Then we will start talking about a true energy transformation.
We already see this very well in wind power. Wind farms reach remote regions of Brazil, especially in the Northeast, positively impacting communities through, for example, direct and indirect jobs and income generation with the leasing of land from small landowners, who keep on with their livestock or plantations, since only a small portion of the area is used to place the wind turbines. In addition, there are impacts of increased tax collection which, with proper public management, can mean improvements for the municipality. The technological development that comes with renewables also means a new path of professional activity.
In November 2020, ABEEólica released the study “Social, Economic and Environmental Impacts of Wind Energy Generation in Brazil”, undertaken by team of the economist Gesner Oliveira, from the consultancy GO Associados, quantifying the already well-known positive impacts of wind energy. The work analyzes, for example, the multiplier effects of investments made by companies, as well as the impact of amounts paid to lease land for the placement of wind turbines. The study also compared a group of municipalities that have received wind farms with another group that has no wind energy, to assess the impact of the arrival of wind farms on the Human Development Index (HDI) and municipal GDP.
With regard to the MHDI and Municipal GDP, municipalities with wind farms performed 20.19% and 21.15% better, respectively, for these two indicators (Oliveira, Curi, Felini and Ficarelli, 2020). This result shows that there is no doubt about it: wind energy is here and its positive multiplier effects have an impact on the municipality’s indicators.
The study also estimated the multiplier effects of lease payments. This is a very important point in the study, because leases provide a direct injection of income into the region. It’s important to explain that when small landowners lease a piece of land to install a wind turbine, they can continue with their crops or livestock. The lease payment then becomes a fixed amount for landowners who can invest in their own land and expand their production.
For 2018, the study estimated the amount of 165.5 million lease payments. The IBGE Regional IPM methodology was used to estimate the impact of these land lease payments made to families on the local economy. The main assumption is that the amount received by families for leasing would be used mainly for consumption of goods and services. Firstly, the relative importance of household spending aggregated into twelve macro sectors in the budget of Brazilian households living in rural areas was considered, as wind farms are usually located in rural areas. Secondly, the most recent data from IBGE Household Budget Survey (“POF”) (household consumption structure) were used.
Thus, considering 2018 data, land lease payments for expansion of the wind sector of around R$ 165.5 million per year have the potential to lead to an expansion of production in the Northeast and South Regions (added value) of around R$ 524.6 million, creating more than 8 thousand jobs and R$ 43.2 million in wages. In addition, R$ 45.4 million is collected in related taxes, almost R$ 25.5 million in ICMS and R$ 2.5 million in IPI. (Oliveira, Curi, Felini and Ficarelli, 2020).
The study also assessed an important benefit of wind energy, which is the low land occupation rate, concluding that even in a scenario where the wind turbines would be closer together, at least 92% of the area would be free for other activities, and this figure could be even higher depending on the layout of the wind turbines. (Oliveira, Curi, Felini and Ficarelli, 2020).
In February 2022, ABEEólica released a new study, “Estimates of the dynamic impacts of the wind sector on the Brazilian economy” which showed the impacts of wind investments on GDP, jobs and reduction of CO2 emissions. The report was prepared by Bráulio Borges, associate researcher at FGV-IBRE and senior economist at LCA Consultores.
The purpose of the study was to quantify the direct and indirect impacts of investments in wind energy on GDP, jobs and also on the reduction of CO2 emissions. “In the case of the impact on GDP, we start from the amount invested from 2011 to 2020, which was R$ 110.5 billion in the construction of wind farms. Using a methodology that calculates multiplier effects of different types of investments, we arrived at the amount of over R$ 210.5 billion referring to indirect and induced effects, for a total of R$ 321 billion. This means that every R$ 1.00 invested in a wind farm has an impact of R$ 2.9 on GDP, after 10 to 14 months, considering all effects”, explains Bráulio Borges, researcher responsible for the study.
The study also assessed the impact of these investments on employment. Considering previous research on the subject in other countries and in Brazil, as well as a more general scenario assessment, an estimate of almost 196,000 jobs between 2011 and 2020 was reached, or 10.7 jobs per MW installed during the construction phase of the wind farms. The study also points to an average of 0.6 jobs per MW installed for Operation & Maintenance. This is a figure that allows us to draw up some scenarios for the near future, since the sector has a good map of how much will be installed in the coming years. “Internationally, we work with figures ranging from 10 to 15 jobs per MW. With this figure of 10.7, we have a reasonably conservative estimate, and now we want to refine this data to get an even more detailed picture of what we create in terms of jobs across the country. Right now, we have almost 5 GW under construction across the country, so with this figure from the study, we know that more than 50,000 workers are currently building our future wind farms, in addition to more than 15,000 in Operation & Maintenance”, explained Elbia Gannoum, President of ABEEólica, at the launch of the study.
As a third point, the study assesses the impact of wind farms on reducing CO2 emissions and what this means in monetary terms. Between 2016 and 2024, the Brazilian wind sector will have avoided greenhouse gas emissions worth between R$ 60 and 70 billion. “It is important to explain the concept of “Social Cost of Carbon”, which attempts to quantify, in monetary terms, the economic costs associated with greenhouse gas emissions (such as carbon dioxide itself, methane, CFCs, among others). To estimate the Social Cost of Carbon, several prospective scenarios are built for countries’ GDP, considering different temperature scenarios and their impacts on economic activity. The differences between such scenarios are brought to present value and this generates the Social Cost of Carbon estimate, generally presented in US$ per ton of CO2 equivalent. Thus, the emissions avoided by the wind sector in monetary terms can be understood directly: a reduction in future Brazilian and global GDP of between R$ 60 and R$ 70 billion was avoided”, explains the researcher.
What our good winds mean, in addition to clean and reliable energy, is this: a true, tangible and measurable benefit for society through the improvement of such important indicators as the MHDI and GDP.
The discussion of energy transformation and the effects of energy on society has become even more crucial in the wake of the pandemic, which seems to have had the effect of opening humanity’s eyes even wider to the urgent need to combat global warming. And in this process, sources with no emissions of greenhouse gases and providing social, economic and environmental benefits, such as wind power, are our best bet. Furthermore, the conflict in Eastern Europe at the beginning of 2022 made clear the importance of countries investing in energy independence through sources such as wind and solar. For Brazil, the good news is that one of our main comparative advantages over the vast majority of countries is that we are an energy powerhouse with a great diversity of clean energies and, in the case of wind power, we also have one of the best winds in the world, which means very competitive energy. The energy of transformation is abundant in Brazil and it is our role to work for it.
This material was prepared by ABEEólica with the aim of summarizing the main information and figures on the development of wind energy in Brazil. If you need more information, please contact our press office at comunicacao@abeeolica.org.br
