World Bank's Brazil roadmap says smart planning key to unleash major offshore wind potential

Brazil could have as much as 96GW of offshore wind capacity in place by 2050 under the most ambitious scenario set out by a key World Bank study published today (Tuesday), but the sector will need careful strategic planning to flourish on such a scale.

Brazil’s roadmap is notable for the vast scale of potential and an alignment of geological, logistical and economic factors, such as the the proximity of the prime offshore wind areas to populous demand centres, port locations and existing supply chains for onshore wind.

Overall technical potential was estimated at over 1,200GW, including 480GW of fixed foundation and 748GW of floating.

But the roadmap also addressed the challenges that a fledgling sector will face in a country with an electricity sector dominated by hydropower and where onshore wind, with a 20-years head start, will initially be about 50% cheaper.

Brazil has a regulatory bill for offshore wind that is slowly making its way through the national congress and has begun work on a marine spatial plan, but is yet to define its targeted polygons.

Geospatial and commercial analysis highlighted best potential in three macro areas of possible development in Brazil’s Exclusive Economic Zone (EEZ), in the northeast, southeast and south, respectively .

Assessments were based on presumed capital and operating expenditure and distance from shore, water depth and wind energy output.

These zones also boast suitable ports — respectively Pecem, Acu and Rio Grande — with scope for adapting to offshore wind with "relatively" minor upgrades.

Pecem is already used for the transport of locally manufactured wind turbine components for Brazil’s onshore sector and has been a proposed location for green hydrogen projects.

The modern industrial port complex of Acu, north of Rio de Janeiro, is already the focus of several potential offshore wind partnerships.

Offshore wind the new hydro?

The World Bank's commercial analysis of offshore wind potential in Brazil included consideration of the current dominance of hydroelectric power there, but this turned out to be less of a challenge than feared, and even a potential advantage.

Hydro currently meets 72% of Brazil’s electricity demand and unusually high reservoir levels have depressed power prices in recent years, causing problems for onshore wind producers.

But the World Bank study noted that net hydro generation capacity is not expected to expand significantly over the next 25 years and, with population growth and rising demand, its contribution to the grid is expected to fall to 46% by 2050.

Analysis in the report indicates that offshore wind is complementary to hydro as it is both countercyclical on a seasonal basis and has lower variability on an interannual basis, indicating that offshore wind output would be strongest in months when water levels are low

"Offshore wind, alongside onshore wind and solar, represents an interesting option not only to fill this gap but to serve as a mitigant for hydro’s interannual variability," the report stated.

The roadmap also got to grips with how offshore wind can work its way towards long-term competitiveness, despite facing competition from a 27GW onshore wind industry.

With high volume targets and appropriate conditions, the World Bank said the cost of offshore wind could fall from about $64 /MWh for the first projects — roughly 50% higher than onshore wind and solar — to $52-40/MWh by 2050, at which point it would be competitive with conventional forms of generation.

The World Bank report said Brazil could look to its own successful policy framework of support for onshore wind, called PROINFA, launched over 20-years ago, which laid the foundations of what is now one of Brazil's largest and lowest cost sources of electricity.

PROINFA was based fundamentally on concessionary financing through the Brazilian development bank.

The report noted that offshore wind will be more capital-intensive than Brazil's onshore sector if deployed at large scale and is likely to require more multilateral financing, complex finance structures and involvement of many actors from public and private financial institutions.

The roadmap also urged Brazil to ensure that initial seabed rights are allocated primarily on the basis of qualitative rather than price-based criteria that would ultimately inflate the costs of the project via the race to the bottom that was seen in New York.

Offshore wind allocation

"The high initial cost of the first offshore wind projects may require a modified approach whereby offshore wind is given a specific allocation, with the cost delta covered by ratepayers and, to the extent possible, concessional finance," the roadmap stated.

But the need for support is expected to diminish quickly, if Brazil pursues scale.

"Auctions may change in a few years to depend less on revenue support and more on the free market for energy sales, especially if Brazil achieves the more ambitions scaling up scenarios."

Although Brazil boasts a robust port infrastructure, including terminals and shipyards along its entire coastline, a robust ramp-up of offshore wind would require investments to facilitate construction, handling and marshalling.

Similarly, Brazil's supply chain for onshore wind "would require significant investment to be capable of supplying the much larger turbines expected for offshore wind", the report said.

"To facilitate this, it will be necessary to establish a supply chain action plan through dialogue with the industry. It is recommended that limited local content requirements – either explicit or through preferred funding from BNDES for qualifying manufacturers – be put in place initially as these would raise the price of the first projects.

"As the sector becomes established, local content incentives might be increased."

Although the complementarity of offshore wind with hydro and onshore renewables could help, the report suggested that ambitious scenarios are likely to require transmission upgrades and an improvement in grid flexibility through the local use of energy storage.

Think big

Brazil was urged to put in place a policy framework that will allow offshore wind to reach for the more ambitious scenarios, starting with the spatial plan and then the polygons that will allow the most advantaged regions to build up competitive clusters around ports, reducing LCoE along the way.

"The most critical first step in any emerging offshore wind market is to establish a clear energy strategy that signals the long-term role of offshore wind in the country’s energy future," the report stated.

The roadmap, which was the result of over three years in collaboration with Brazil's Mines & Energy Ministry and national energy planning entity (EPE).

“Electricity generation from offshore wind has great potential in Brazil. The MME has contributed to the development of this sector, supporting and debating the construction of an appropriate legal and regulatory framework to attract investments to the country, bringing jobs and income. The report presented by the World Bank, prepared in partnership with EPE and MME, presents itself as the main study that institutions can use and will deepen debates in the sector,” commented Brazilian energy minster Alexandre Silveira.

It included a mapping of risk and sensitivity of environmental and social challenges, and some of these were highlighted.

In the Northeast zone, significant artisanal and commercial fishing areas near to the zones were flagged as requiring careful consideration, as well as significant tourism activities.

In the Southeast zone, the report said significant offshore oil and gas activity represents both an opportunity for offshore wind, in terms of offshore servicing capacity, but also a challenge, in terms of coexistence and relatively intense marine traffic.

The South zone is located almost entirely within an ecologically or biologically significant area (EBSA) which increases the need for risk mitigation and careful designation of development zones.