Over the next 10 years Brazil is planning to spend around R$260 billion to increase its electricity generation capacity by around 50,000MW. New investment is in turn expected to fuel the growth of local supporting industries, such as electric motors generators and transformers, electricity distribution and control apparatus and wind turbines.
Increasing Capacity of Renewable Energy
According to the government-run Energy Research Company (EPE), wind energy capacity will increase from 1,805MW to 17,463MW in 2022, which will push its share of the total energy mix to nearly 10%. Hydro power, the largest category in renewable energy, is also undergoing some major developments. Brazil is building the Belo Monte dam in the north of the country, which will be the third largest hydro power plant globally. It is expected that over the next decade this investment will boost electricity capacity by 34,000MW, so that total hydro power capacity will reach 119,013MW.
Brazil’s Power Generation Capacity 2012-2022
Source: Euromonitor International from EPE (Energy Research Company)
Impact of Transmission System Development
Brazil plans to extend its local transmission network by an additional 40,000km, a 35% increase in comparison to the current length of the system. The main company participating in the ANEEL (Agency of Electrical Power) auctions regarding transmission expansion is Eletrobrás, the largest local utilities company. Via its subsidiaries, the company is involved in several transmission expansion projects, like the 600 kV Coletora Porto Velho-Araraquara 2 (RO/MT/GO/MG/SP), among others.
Brazil has relatively strong electrical component and apparatus industries. Thus, building new transmission lines is expected to drive growth of domestic industries such as electric motors, generators and transformers and cable and wire manufacturing. However, the electricity distribution and control apparatus industry is weaker as over half of the market is accounted for by imports from China, Germany and other countries. This means that orders from the transmission developers might touch both domestic and foreign companies, and so local providers will have to find ways to compete with foreign suppliers.
Electrical Machinery and Components Manufacturing in Brazil by Category 1997-2017
Source: Euromonitor International
Impact of Increasing Wind Electricity Production
As it is planned to further increase the number of wind power farms, the demand for wind turbines is expected to increase over the next decade. The significant expansion of wind farms is planned to take place on the southern coast of Brazil and in the northern states. According to the 10-year energy plan, the largest density of wind plants will be in the northern states of Rio Grande do Norte and Ceará. This expansion is good news for local manufacturers, especially those such as Wobben, which specialises in producing and installing wind turbines. Although currently nearly half of all engines and turbines (42% of total demand) are imported from China, Germany, the US and other countries, Brazil’s government is considering increasing import taxes on Chinese products, which would support local manufacturers. Due to an increase in demand, we expect the turbines category to post a CAGR of 10% over 2012-2017.
Growth of Engines and Turbines Industry and Subcategories 1997-2017
Source: Euromonitor International
The increase in renewable energy capacity in Brazil is highly appraisable. It will have a direct effect in terms of lower carbon footprint and lower CO2 emissions, which Brazil is aiming to achieve. It will also directly impact the supporting domestic industries of electric equipment and engines for the transmission and generation of electricity. Looking further down the supply chain, it can be expected that the entire economy will be stimulated via an increase in employment and productivity. There are, however, some concerns regarding the environmental impact of the new hydro plant at Belo Monte and its effect on the region’s ecosystems. If these concerns are addressed by the government, the 10-year energy plan will bring both direct and indirect benefits to Brazil’s energy and supporting industries.