# Integrated Country ApproachBrazil

Brazil has long recognized the significance of integrating renewable energy into its primary energy consumption mix. Since the 1970s, the country has achieved the highest share of renewable energy in the G20, driven by substantial investments in hydroelectric power and pro-ethanol initiatives as an alternative to oil in transportation. The country’s ambition is to grow renewable energy capacity and further diversify its energy sources (e.g., solar, wind), enhancing energy security, reducing carbon emissions.With abundant natural resources and a growing energy demand, Brazil aims to leverage its strategic geographic and climatic advantages to further expand its renewable energy sector, which requires attracting significant investment. The Inter-American Development Bank estimated to USD 47 billion the investment required for hydro, solar, wind and biofuels between 2020 and 2030.

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## Early auctions and power market structuring

Brazil established a solid framework to facilitate investment in renewable energy projects. As early as the 1990s, the country pioneered renewable energy auctions, leading to substantial participation in government-led solar and wind projects. Recognizing the limited capacity for government investment, Brazil later initiated a strategy of privatization to attract private sector investment. Steps surrounding market governance were taken to help ensure the independence of the electricity market regulator as well as effective coordination and alignment between various institutions in the power market with key regulatory bodies being established during this period, including ANEEL (the Regulatory Agency in 1996), ONS (the National Operator in 1998), CCEE (the Electric Energy Trade Chamber in 1999), and EPE (the Energy Planning Agency in 2004). These institutions created a robust framework to regulate contracts, facilitate auctions across all segments (generation, transmission, and distribution), and integrate a national system allowing for a higher percentage of renewable energy. In 2009, Brazil introduced a reverse auction system to further decrease the cost of renewable power versus feed-in-tariffs.


## Energy planning

The regulatory framework established in the 1990s provided the foundation for Brazil’s energy sector. It was complemented by robust and consistent energy requirement planning processes. In particular, Brazil's Energy Planning Agency (EPE) is responsible for long-term studies (up to 30 years) and the development of short- and mid-term plans (up to 10 years) for generation and transmission expansion, as well as concrete power plant projects to be auctioned. Auction planning is then executed on a 1-to-5-year timeline. This consistent short to long-term planning has been crucial in providing market predictability and de-risking investments, making Brazil an attractive destination for renewable energy investments.Since early 2000s, the Brazilian government has resorted to public policies to stimulate the biofuels market (tax differentiation between fossil fuels and renewables, mandatory mixing of anhydrous ethanol in gasoline and biodiesel in fossil diesel, inclusion of flex fuel vehicles, enabling the use of E100). In 2017, RENOVABIO established the Brazilian Policy for Biofuels and created a regulatory framework to revitalize the biofuels sector.


## Transmission infrastructure investments

Strategic planning steps taken by Brazil allowed to clearly estimate the required levels of investment in transmission infrastructure, which in turn, facilitated the ramp up of new renewable capacity integration and the serving of an increasing energy demand. Between 2018 and 2022, around USD 11 billion have been invested in transmission from private investors and the Brazilian Development Bank (BNDES). The Brazilian transmission industry is open to the private sector through concessions obtained in public auctions. In 2023 and 2024, Brazil organized three mega transmission auctions for around 12 billion USD and conducted studies that helped clarify the need for hydrogen infrastructure.


## Renewable capacity investments and de-risking mechanisms

To finance 123 GW of additional installed capacity between 2001 and 2023, +80% of which was renewable capacity, Brazil turned to the BNDES. The BNDES played a pivotal role as the ‘national platform’ for clean energy investment, facilitating blended finance with participation from Multilateral Development Banks (MDBs) and international institutions. BNDES was directly involved in 80GW out of the 123 GW additional capacity build out. Currency risk, however, has consistently been identified as an important barrier to foreign investments in the country. In 2023, the Inter-American Development Bank (IADB), in partnership with Brazil’s Ministry of Finance, initiated a hedge currency facility with the potential to mobilize coverage of up to USD 3.4 billion of investments associated with climate-related projects.As part of the strategic planning, Brazil identified the need for flexibility solutions as the energy mix is moving to an increasing share of intermittent renewable energy sources. In 2024, the country plans to hold auctions for reserved energy, to mobilize private investment in meeting the energy system load variations. It also planned auctions for isolated systems to provide energy solutions for 200 isolated systems in the Amazon, primarily powered by diesel.


## Innovative industries

In addition to facilitating the financing of clean energy projects, Brazil has set out to facilitate innovation in the energy sector, taking concreate policy steps to protect intellectual property rights and facilitate the patenting of innovations in clean energy. In 2012, it launched the Green Patents program to fast-track patent applications related to environmentally beneficial technologies. At the time of writing, Brazil’s Congress was working on regulations to structure and develop innovative clean energy industries including low-carbon hydrogen, technical studies for 700GW of offshore wind potential, and future fuels like Sustainable Aviation Fuel (SAF), green diesel for transportation, biomethane in Brazilian pipelines, and Carbon Capture, Utilization, and Storage (CCUS). The consideration of a carbon market was also on the table, enhancing the framework for sustainable energy investments.


## Impact/Outcomes

Brazil’s ambitious and structured approach to renewable energy has yielded significant outcomes. Between 2001 and 2023, the country has more than doubled its installed capacity of renewable energy.This can be explained by the importance of solid institutions, long-term planning, robust regulatory frameworks, and viewing energy as a driver for investment. The collaboration with international financial institutions and innovative auction mechanisms also facilitated the deployment of renewable energy projects.


## Additional Sources

EPE, Our Work, https://www.epe.gov.br/en/about-epe/our-workInter-American Development Bank, Brazil’s Ministry of Finance, IBD Plan to Create Heding Platform for Brazil’s Green Transformation Plan Investments, Decembre 2023, https://www.iadb.org/en/news/brazils-ministry-finance-idb-plan-create-hedging-platform-brazils-green-transformation-planIEA, Grid in Brazil: Mobilising private capital through a robust regulatory framework, https://www.iea.org/reports/brazil-case-study/grids-in-brazil-mobilising-private-capital-through-a-robust-regulatory-frameworkIEA, Implementation of bioenergy in Brazil – 2021 update, https://www.ieabioenergy.com/wp-content/uploads/2021/11/CountryReport2021_Brazil_final.pdf


### Explore Case Studies from Brazil

The Playbook of Solutions is an interactive online tool, referencing concrete, already implemented policy measures, de-risking tools and finance mechanisms that have successfully helped unlock finance for clean energy in the Global South.

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