Brazil is currently a country with one of the highest shares of renewables in the energy matrix. The Brazilian energy transition experience so far deserves attention from energy policy makers from countries trying to develop a decarbonization strategies and policies.

In Brazil, renewable sources already have a share of around 47% of the total energy supply (Figure 1) and around 90% of electricity generation in 2022. In the transport sector, biofuels (ethanol and biodiesel) represented around 21.5% of its total consumption in 2022 (EPE, 2023). In other words, the country has already managed to follow a good path in the process of decarbonizing its energy matrix.

Brazilian Experience in Energy Transition

The path taken by Brazil to date was initially motivated by the low availability of fossil fuel resources until the 2000s, when the country discovered large oil reserves. Brazilian reserves of coal, oil and natural gas were insignificant, and imports of fossil fuels were considered a major obstacle to the country’s economic growth. Policies for promoting the use of renewable resources aimed to reduce the country’s dependence on fuel imports. Technological policy was oriented towards replacing fossil fuels with renewable sources. This enabled Brazil to develop a complex and advanced innovation ecosystem in the energy sector and a supply chain of different renewable energy sources.

Currently, ethanol is sold at a mandatory 27% blend in gasoline and in pure form at all gas stations in the country. Thus, ethanol has already reached a market share of 50% in the otto cycle engine market. In the biodiesel market, Brazil launched a national program for Biodiesel produced from various types of raw materials, despite the dominance of soybean oil, together with the creation of mandatory mixing in mineral diesel sold at gas stations. The mixture started at 2% and gradually grew, reaching 12% of the diesel sold at gas stations today.

Regarding the electricity sector, renewable energy sources represent 86% of the 217 GW generating capacity, with emphasis on hydroelectric generation (109 GW), solar (32 GW) and wind (26.5 GW) and Bioenergy (16.8 GW). In 2022, renewable energy sources were responsible for 92% of the total energy consumed in the country.

This renewable generating park has been developed since the 1970s, which began with a policy to take advantage of the great hydroelectric potential, associated with the development of the integrated transmission system that currently has 183 thousand kilometers of transmission lines. Between the 1970s and 2010, the country built one of the largest integrated electrical systems in the world, with large hydraulic reservoirs, with a storage capacity equivalent to 4 months of consumption today. The integrated electrical system with storage capacity represents a facilitator for the integration of variable renewable sources from 2010 onwards.

It is also worth highlighting the strong advance in distributed solar generation, with the implementation of the net-metering system. The installed capacity in distributed generation in the country jumped from 0.4 GW in 2018 to 23 GW in July 2023.

Opportunities and challenges ahead

One of the most important technological trajectories in the energy transition process taking place around the world is the electrification of the economy. Different scenarios for the energy transition point to an increase in the share of electrical energy in the global energy supply from 20% to levels between 50% and 60% in 2050 (Irena, 2021).

Brazil has great potential to become a hub for attracting industrial investments in the context of the energy transition that is unfolding. Firstly, the country already has a decarbonized and diversified electricity matrix in terms of sources. Renewable generation sources have become arguably the most competitive for the expansion of the national electricity sector, which puts the country in a position of great competitive advantage for the production of green hydrogen. Bloomberg (2022) identified Brazil as the country with the potential to produce green hydrogen at the lowest levelized cost in the world in 2030 (Figure 2).

The large volume of quality energy resources gives Brazil a green generation potential that is much higher than the growth in demand for electricity in the coming decades (EPE, 2020). This potential allows Brazil to not only decarbonize its economy, but also export renewable energy, in the form of green hydrogen (through its carriers such as ammonia or methanol) or in the form of energy-intensive products such as steel, aluminum, urea and other products where hydrogen can competitively replace fossils as an industrial input.

However, to jump ahead in the green reindustrialization race it will be necessary to reform the current electricity sector, to allow for this new investment cycle. Several economic and regulatory issues will have to be addressed. Table 1 presents the main opportunities challenges for the country and short, medium and long-term.

Table 1 – Main challenges and opportunities for the energy transition via green electrification in Brazil