Brazil’s emerging offshore wind energy market offers opportunities

Bruce Beaubouef * Managing Editor

Globally, Brazil ranks among the top 10 largest economies (GDP, current prices from IMF), and it is the United States’ sixteenth-largest trading partner for total trade in goods. As such, it offers a growing market for experienced American exporters seeking to tap into its diversified economy.

Moreover, Brazil’s favorable view of technology, services, and brands coming from the United States also means opportunities for American companies seeking to enter the country’s emerging offshore wind energy market.

To get an overview of Brazil’s developing offshore wind energy market, Offshore spoke with Igly Serafim, Senior Commercial Specialist with the US Commercial Service in Brazil. Serafim offered her thoughts on the expected impact of Brazil’s new offshore wind energy legislation, and discussed the challenges Brazil is facing in developing its regulatory framework. She also offered a preview of future wind farm lease rounds.

Serafim also provided her thoughts on Brazil’s business climate, and the ways in which the US Commercial Service’s export resources can help qualifying American businesses find success in the Brazilian market.

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Offshore: What makes the Brazil offshore wind market an attractive market for US firms?

Serafim: Historically, Brazil has been a leader in renewable energy. The country’s electricity matrix has over 80% of its power generation from renewable resources, of which 51.7% is from hydropower. Brazil’s goal to diversify its renewable power generation and reduce its reliance on hydropower has resulted in exponential growth in recent years in solar power and onshore wind. By 2028, Brazil is expected to have over 44 gigawatts (GW) of installed wind capacity, accounting for 13.2% of the Brazilian electricity matrix, according to the Brazilian Wind Power Association. Offshore wind development could complement onshore wind, hydropower, and solar in Brazil. Brazil would like to decarbonize hard-to-abate sectors such as transportation and heavy industry. For that, it is looking into green hydrogen production, which will require a significant increase in its electricity generation.

In March 2023, Petrobras and Equinor signed an agreement to evaluate seven offshore wind projects offshore Brazil.

Brazil’s well-developed onshore wind power and oil and gas sectors are important precursors for the development of offshore wind projects. The country has mapped out 700 GW of offshore wind potential in areas with shallow waters of less than 50m in depth along a very long coastline (over 4,500 miles) and with significant wind speeds, over 8.5 meters per second in many areas.

Currently, Brazil has 78 offshore wind energy projects under review by the Brazilian Environmental Agency (IBAMA), which will represent 182 GW of capacity once installed. These projects are located in the Northeast, Southeast, and Southern regions of Brazil, aligning with the areas of highest electricity demand in urban centers and industrial areas along the coast.

Petrobras has submitted a request to Ibama to start the environmental licensing process for ten areas around Brazil’s coasts for offshore wind developments.

The country has three key ports located in the three potential regions for offshore wind. The ports have the capacity for expansion to accommodate a new offshore wind industry and are well located near the project areas.

Offshore: What is Brazil’s offshore wind strategic mission?

Serafim: Taking into consideration the recent expansion of offshore wind energy internationally, the Brazilian Energy Research Office – EPE, a state-owned enterprise linked to the Ministry of Mines and Energy, launched its Offshore Wind Roadmap in January 2020. EPE released at the end of June 2024 a second version of the Offshore Brazil Wind Roadmap, currently only available in Portuguese. In this new version, considerations were included regarding authorization for lease of ocean areas by the Brazilian Government for the exploration of offshore wind resources.

A summary of the Roadmap, in English, posted on the EPE website, identifies the following objectives: (i) to identify possible barriers and challenges in the development of offshore wind in Brazil; (ii) to provide recommendations on various aspects of developing the sector; and (iii) to better understand relevant aspects related to offshore wind.

Some of the Roadmap topics include offshore wind power potential assessment; technological aspects and costs; grid connection; legal and regulatory aspects; and environmental aspects.

It is important to emphasize that this study does not propose any kind of policy to subsidize the development of the offshore wind sector. Its primary focus is to establish a starting point for discussions on offshore wind’s potential role in generating energy in Brazil.

The Roadmap identified some challenges for the full development of the offshore wind sector, ranging from technical training of workers to environmental licensing adequacy, and offshore wind competitiveness, among others. The costs of implementing and operating offshore wind farms are generally high when compared to other energy sources already developed in Brazil but are expected to become more competitive over time.

According to the Roadmap, overcoming these challenges depends on the joint engagement of government, the private sector, and other interested parties. The most relevant challenge at this early stage of offshore wind development in Brazil is the lack of a regulatory framework, including regulations to meet the specific needs and requirements of the nascent sector.

Significant effort is underway to develop the groundwork for the offshore wind sector, including numerous studies that have already been undertaken. For example, environmental impact studies conducted by Brazil’s Environmental Agency outline requirements developers must meet, and a Brazilian Wind Power Association report highlights advantages as well as barriers to overcome for growing the offshore wind industry. In addition, a Brazilian Development Bank (BNDES) study on Maritime Spatial Planning is in its first phase in the south and will soon expand to the Northeast and Southeast.

Also, reinforcing Brazil’s long-term commitment to offshore wind development was the announcement by the Brazilian Secretary of Energy Transition and Planning at COP28 that Brazil has joined the Global Offshore Wind Alliance.

Offshore: Brazil currently has an offshore wind bill pending approval by the Senate, what are some key elements, and its potential impact?

Serafim: To address some of the uncertainties in the development of offshore wind energy in Brazil, private sector stakeholders have been asking for a legal and regulatory framework, which will establish the rules for the sector, and safeguard their investments and interests in these projects.

The Brazilian Government issued a Decree in January 2022, regarded as the first legislation to provide a regulatory framework for the allocation of physical spaces and the use of natural resources to generate electrical power from inland waters, territorial sea, exclusive economic zone and continental shelf under Brazil’s domain, a key development for offshore wind power generation projects in the country. Since then, the Brazilian National Congress has discussed other proposals regulated to the regulation of the offshore wind power. Most recently, Bill No. 11247/23 was proposed by the House of Representatives, which would regulate the assignment of seabed areas. After approval by the House of Representatives, the bill has been forwarded to the Senate for consideration. The pending legislation is significant, as Brazilian approval of the bill will help enable offshore wind projects to begin in earnest.

Offshore: What types of opportunities are there for US-based companies?

Serafim: As projects progress, Brazil is actively encouraging international companies to invest in the country. Several Brazilian states have very bold approaches to attracting international participants in the offshore wind sector. The state of Ceará, for example, has signed several Memorandums of Understanding with European and Chinese companies.

To date, there has been limited interest by US companies as they are primarily focused on the American market due to the significant growth of new projects there. This scenario should change as the American market matures, and Brazil is able to approve its policy and regulatory frameworks which will enable offshore wind projects to begin in earnest.

Even though Brazil has vast experience in the renewable energy and oil and gas sectors, it is working to develop specific expertise in offshore wind. As the country embarks into this new industry, it will rely on international experience to gain knowledge and avoid potential pitfalls.

Each phase of an offshore wind project presents different opportunities for small, medium or large American companies. In the early phases, there are opportunities in consulting and engineering services, ranging from environmental planning, marine services, assessment of wind potential, technology review, site design and others.

As the projects advance, the pre-construction phase will specify contracts for the different suppliers for components, including substations, wind turbines, foundations, cables, work centers (such as shipyards) and others. The construction phase is the most challenging and labor-intensive because it deals with the construction, installation, commissioning, and grid connection of the projects. Opportunities for American companies range from consulting and engineering to the supply of parts such as rotor blades, transmissions, pitch controls, hubs, main shafts, and mounting fixtures.

Offshore: Are there any upcoming offshore wind lease rounds?

Serafim: No lease rounds have been announced yet, mostly due to the pending approval of the Offshore Wind Bill No. 11247/23. Once the bill is approved and becomes law, local industry expects that the first auction will take place in 6 to 12 months.

It is important to note that, even though lease rounds have not been announced yet, the Brazilian oil and gas company, Petrobras, has announced two offshore wind pilot projects, with the support of state governments in Rio Grande do Norte (RN) and Rio de Janeiro (RJ).

Petrobras will use R&D funding to support these two projects. The RN project is being led by Brazil’s Institute for Innovation in Renewable Energy (ISI-ER) and is expected to receive approval from the environmental agency in the second half of 2024. This will be a twin-turbine 22-megawatt (MW) pilot offshore wind project located approximately 20 kilometers off the coast that aims to collect data on the performance of offshore wind technology through testing under actual operating conditions.

The RJ offshore wind pilot project will support the state’s energy transition goals to move from an economy based on the oil and gas industry. The project, which is currently in the environmental licensing phase, will be implemented in the northern part of the state, taking advantage of the Port of Açu’s infrastructure, and will have two turbines, generating 22 MW.

These two projects mark an important breakthrough in the field of offshore wind power and will provide valuable data to support future offshore wind power projects in Brazil.

Offshore: Do American firms have advantages compared to the international competition in the market?

Serafim: Brazilian companies will be looking for companies with expertise in dealing with the unique challenges present in Brazil. Even though Europe has much more experience in the offshore wind sector, Brazil and the United States share many similarities in the sector which can offer an advantage to American companies.

Both countries are very large with extremely long coastlines, which will require complex logistics and multiple developed ports. American companies have a deep understanding of the logistics of these types of complex projects. The expected average size of offshore wind projects in Brazil ranges between 1 to 5 GW each, very similar to projects under development on the East Coast of the United States.

Also, due to Brazil’s shallow-water coastline, the projects will use fixed-bottom technology, another similarity to the projects under construction in the United States. Most Brazilian urban areas and state capitals are located on the coast, close to the areas of potential offshore wind exploration, which is another similarity to American projects. Just as in the United States, Brazil expects that offshore wind projects will be led by private sector companies which will require significant investment.

Offshore: What are some export tips for US companies interested in entering the Brazilian market?

Serafim: Doing business in Brazil can be quite complex and we recommend that American companies have some prior export experience before exploring opportunities in this market. It is also extremely helpful to have a local partner in the country familiar with the business practices and business culture in the country. A local partner can also follow projects closely, develop local industry contacts, and let the US company know when the opportunity is ready for the company to pursue.

Offshore: How can the US Commercial Service and other federal agencies assist exporters in the Brazilian market?

Serafim: The US Commercial Service (CS), part of the US Department of Commerce’s International Trade Administration (ITA), can offer qualifying American companies significant support with their international trade efforts. Companies can find assistance through our Trade.gov/export solutions website and our 100+ CS Offices nationwide and locations in more than 80 international markets, including our offices in Brazil. Along with export counseling, services include:

Customized services such as matchmaking with international partners, targeted market research, market intelligence, trade show support, and real-time leads on opportunities in foreign markets.
Advocacy support to eligible US exporters, helping to level the playing field on behalf of US companies competing in foreign government projects or procurements against foreign firms.
Commercial diplomacy, where ITA works on behalf of a US business, or industry, or in support of broader national economic and commercial interests, directed at foreign authorities and carried out in an official US government capacity.

Lastly, the CS can provide information about and connect US businesses with other US Government agencies that offer several financing avenues for US exporters. In Brazil, the Export-Import Bank of the United States (EXIM Bank) offers project and structured financing to U.S. exporters and their Brazilian customers.