Brazil: More than just ethanol?

The wind power market in Brazil is an untapped resource, ready to explode with the right mix of foreign developers, government incentives, and capital availability.

That was the message from a new report by Jorge De Rosa, an industry analyst with the Frost & Sullivan Energy & Environment and Chemical & Materials practices.

Brazil has the theoretical potential to produce 143 gigawatts of wind power, a potential $100 billion opportunity. That potential wind is concentrated along the country’s eastern coast, which holds 70 percent of the country’s population.

“We believe the potential might be even larger than that, however we see that Brazil still has some barriers and restraints,” De Rosa said.

Brazil is best known for its biofuel production. Together, the U.S. and Brazil produce 75 percent of the world's ethanol (see Officials lament U.S.-Brazil ethanol cooperation). That expertise has led to interest in bioplastics in Brazil (see Braskem claims first green polyethylene).

But Brazil has experienced a risk of power shortages in recent years because it is highly dependent on hydropower as its main source of electricity. Hydropower accounts for 84 percent of electricity, according to the U.S. government's Energy Information Administration.

“Wind power will not be a significant portion [of the overall energy supply], but no other power source will ever be significant because of the dominance of hydropower,” he said.

The country is looking to diversify its energy sources, as well as boost overall generation by at least 4.5 GW, De Rosa said.

“The wind power in Brazil could be an very interesting and complementary source due to the seasonality,” De Rosa said. “Wind power can supply energy in the dry season of Brazil, and vice versa.”

The opposite seasonality of hydro and wind is also driving the wind sector in Vietnam (see Vietnam's Cavico moves from hydro to wind).

Brazil had about 341 MW of installed wind power capacity—about 0.4 percent of the country's energy supply—at the end of 2008, after the sector experienced a significant spike starting in 2006 thanks to a new government program to boost wind, small hydro and biomass.

By comparison, the U.S. had 28,000 MW of installed wind power at the end of 2008, with a compound annual growth rate of 27 percent thanks to subsidies and other political and economic incentives, De Rosa said.

“America could be a case study for the Brazilians,” he said.

The 143 GW of potential wind power only incorporates wind farms on land.

“Offshore wind power will be in the very distant future,” De Rosa said. “We first have to develop onshore, and then maybe we can think about offshore wind technology.”

Also distant in the future is solar power or natural gas as major power sources, he said.

Unattractive pricing compared to other forms of energy has limited interest in wind power in Brazil—a situation De Rosa said could only be solved by government incentives or pricing strategies.Those could come as soon as November, in the range of about $100 per megawatt-hour.

Developers, OEMs and small-wind startups are already eyeing the potential in the Brazilian market (see Econergy International buying Brazil wind farm and Windation eyes commercial buildings for enclosed turbines).

The economic crisis has reduced foreign investment and access to credit in Brazil, which could slow the wind industry until 2010, De Rosa said.

The key could be spreading the risk among a number of entities, De Rosa said.

“We need better legislation, we need continuity of policies,” he said. “One good solution is combining forces. It’s very risky for one stakeholder to retain all the functions: asset ownership, developing projects, manufacturing equipment and technology, and of course trying to develop efficiency improvements.”

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