Slow progress for Brazilian offshore wind

Brazil is only just beginning to develop an offshore wind market but there are some first movers who are already jostling for position at the start line.

The country does not have any operational offshore wind farms at utility scale, and only a few pilot projects in development. The market lacks legislation and a regulatory framework for the sector, the environmental permits process has yet to be streamlined, and there is not even an agreed and proven map of the total capacity to be built.

Many financiers and investors are skeptical of the logic of developing offshore wind in Brazil. The country has the fifth largest territory in the world and a relatively small population, so there is an abundant of land for onshore wind projects, which are cheaper and quicker to build.

These may not seem the most promising of circumstances but nevertheless several developers are attempting to develop offshore wind farms in Brazil.

Projects

There are at least seven offshore wind projects in the pipeline.

State-controlled oil and gas company Petrobras plans to develop the first of these projects called Ubarana, located in the Brazilian state of Rio Grande do Norte. It is adjacent to the company’s oil field of same name, in the Potiguar basin. 

By the end of 2019 the company had filed a request with the Brazilian institution that issues environmental permits, Ibama, and is now waiting for a response. The company expects to install one wind turbine 20km off the coast, in shallow waters 15m deep. With a capacity estimated between 6MW and 10MW, COD is expected in 2022.

Petrobras also signed an MOU in September 2019 with Norwegian energy company Equinor to study the possibility of joint development of offshore wind projects in Brazil, using the foreign company’s expertise in developing such projects in other jurisdictions such as the UK, Germany and Norway.

Meanwhile, BI Energia is trying to get environmental permits to install up to 59 wind turbines on the coast of Fortaleza, in the state of Ceara. Around 48 units would be installed in the ocean and the remaining 11 onshore. Ibama had originally rejected the first version of the environmental impact study and requested further details.

Rialma Energia is aiming to build the Caju offshore wind complex, in Maranhao state. Caju will consist of around 15 wind turbines, all offshore.

These are all small developments but larger projects are also being plotted. Eolica Brasil has started the development of the Asa Branca I offshore wind complex, located in the Ceara state. The company estimates that it will be possible to install 10 wind farms, with five turbines each. Total capacity could reach up to 400MW.

Neoenergia announced in January 2020 that it has started the process to get an environmental license to build three offshore wind projects. Located in Rio de Janeiro, Rio Grande do Sul and Ceara, the projects could total 9GW of installed capacity. This is the largest of the offshore wind complex being planned in Brazil.

Neoenergia intends to develop four 750MW offshore wind farms in each state, with each consisting of 50 wind turbines and four platforms with substations. The company also plans to build transmission lines and one onshore substation for each wind farm. The projects will be developed by Neoenergia’s Força Eólica do Brasil (FEB), and indirectly by Elektro Renovaveis, part of the same group.

Capacity

Despite Brazil boasting a coastline spanning approximately 7,500km, other geographical factors have slowed offshore wind . The country’s potential onshore wind capacity is estimated at three times the total power need, and with a very high average capacity factor, above most locations in the world.

“It means that our onshore energy is very competitive, and its abundancy is what explains why the country has not entered the offshore wind business yet, because it can be more expensive. Furthermore, technologically, these projects are more complex,” said Elbia Gannoum, CEO of the Brazilian wind energy association Abeeolica.

“We know that companies and the public government are mobilizing to develop this sector, which, in the opinion of ABEEólica, is very important as one of the frontiers of wind energy in Brazil,” she said.

On 22 January (2020), the research institution from the Ministry of Mines and Energy, EPE, issued an offshore wind roadmap. “EPE (…) has been implementing efforts to include this energy source in the perspectives of the Brazilian energy plan,” according to the document.

The offshore wind roadmap has identified the main barriers and challenges to the further development of the technology in the country. According to EPE’s study, Brazil would have the capacity to develop up to 697GW of offshore wind power in areas up to 50m deep.

Total installed capacity could, however, be a lot higher. Only in Ceara state – one of the most attractive regions due to elevated capacity factors (60% to 62%) – the potential is estimated at 117GW, according to a study developed by Camargo-Schubert, for wind farms from 5m to 50m deep, and from 2m to 45m away from the coastline.

Costs

Brazil does not have a legal framework defining rules for the production and commercialization of offshore wind, though there is a proposal for one under analysis by the government.

In January 2020, the Brazilian Institute of Environment and Renewable Natural Resources (Ibama) – the administrative arm of the Ministry of the Environment – opened a public consultation for the model to be used on the environmental impact studies for offshore wind farms. The consultation will be open until 9 April 2020. The goal is to define the federal environmental licencing process.

Without this regulatory framework it is unsurprising that some developers are not yet ready to pursue offshore wind projects in the country.

Victor Munoz, operating partner at energy projects developer Denham Capital, said that the company is still not planning to develop offshore wind in Brazil, but he believes that the sector will take off as soon as the regulation is better defined.

“This technology has been proven all around the world. The first time it is built in Brazil, the market is going to evaluate the costs. Once the costs are known, there will be an optimization of offshore projects. I don’t believe this industry will be huge in Brazil in the short-term, but it will be developed. What will determine the speed are the economics of the projects. If returns are interesting, more and more projects will get off the ground,” he said.

According to EPE’s study, current costs of offshore wind would be up to double the costs of onshore wind. However, the institution highlights that offshore wind projects can produce up to 50% more power than onshore wind farms. “In a long-term analysis, the costs, despite being higher, could be offset by the higher energy production, making these projects viable.” EPE pointed out that lowest costs for offshore wind are on par with the average CAPEX for hydropower projects and below the costs to build a new nuclear power plant.  

Infrastructure asset manager Igino Mattos, who is on the executive committee of Infra2038 and is a IDB consultant, is more skeptical. “Offshore is something that would be nice to have, but Brazil has so much undeveloped potential in solar and onshore wind, that offshore is something that will probably be really small in the country for years to come”.