The Brazilian economy is bouncing back. While long-term perspectives still are unclear (Brazil has a huge potential, but institutions need to be reformed in order to allow for consistent future growth), it is evident the economy is now recovering from the worst economic crisis in the country’s history. Big opportunities will emerge from that.

Brazil needs to improve its infrastructure. Nevertheless, the Country has been underinvesting for decades and investments were almost paralyzed in recent years. As the economy recovers and grows, infrastructures will face additional stress. Power generation, transmission and distribution will be particularly affected.

The capacity for electrical power generation in Brazil is around ~160GW, for a country with ~209mi inhabitants and a GDP level of $8,600per capita. For the sake of comparison: the capacity in the US is 1,100GW, for a population of ˜327 mi inhabitants and a GDP level of $57,500 per capita. The bottom line is clear: Brazil will need energy to grow and, as it grows, will demand more energy.

Brazil’s energy matrix has a strong participation of hydro power: more than 60%. Two aspects should be noted in relation to this. First, as most of the Brazilian hydro potential was already used and hydro power plants have a significant environmental and social impact, the expansion of generation capacity will be hardly based on hydro. Second, hydrological regimes are changing due to climate change, bringing additional to energy prices.

As the economy recovers, energy consumption will go up and put pressure on electricity prices. Changes in climate will exacerbate that – Brazil already faced crisis in 2000 and 2015, when it faced one of the worts droughts in history. Electricity prices had a spike in 2015 and have not returned to pre-crisis levels.

Brazil is one of the 10 main wind power producers in the globe, but has very low participation in solar. Nevertheless, solar has reached a feasible price point for the Brazilian market and investments are starting to ramp up. The country also has invested in distributed biomass generation, specially in association to sugar-cane production and processing, but still wastes a lot of biomass.

The opportunity:

 

 

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