Brazil will need more than R$ 670 billion in investments in its electricity sector by 2040 to support the next phase of system expansion , according to projections presented by Aurora Energy Research.
Of the total, around R$ 553 billion should be allocated to generation and R$ 117 billion to transmission , in a market that will require about 120 GW of new capacity during the period.
But the challenge is no longer just about adding generation capacity. Aurora warns that Brazil will need to accompany this growth with more transmission, grid capacity, storage, and other sources of flexibility to maintain security of supply and absorb an ever-increasing renewable energy penetration.
Looking ahead to 2030, the consultancy estimates a need for approximately 12 GW of flexibility and expects that at least 5 GW of BESS systems will be contracted through future capacity auctions.
The diagnosis was presented during the first edition of the Aurora Energy & Storage Summit Brazil , held in São Paulo, where more than 150 representatives of developers, utilities, banks and investors discussed how to finance the next Brazilian electricity cycle.
One of the main points of focus is curtailment , which Aurora stopped considering a temporary anomaly and began to consider a material risk to the investment.
The consultancy expects that grid expansions, demand growth, and the integration of batteries will allow for reduced power cuts toward the end of this decade. However, it cautions that the effects will remain highly dependent on the location of each asset.
Added to this is greater intraday volatility and modulation of generation , factors that are changing the way developers, buyers and financiers evaluate new projects.
In that scenario, Aurora believes that the contractual structures used during Brazil's first major renewable energy expansion are beginning to come under pressure.
Traditional baseload PPAs will need to evolve towards more sophisticated schemes, with a more precise distribution of risks among generators, buyers and creditors, particularly in the face of structurally high levels of curtailment and greater price volatility.
Aurora pointed out that other major international markets are already experiencing higher levels of volatility than Brazil, yet this hasn't halted renewable energy investments. According to the consulting firm, the challenge lies in supporting this scenario with better price signals and financial structures tailored to each project .
Brazil looks to batteries to address a capacity deficit from 2028
Storage appears to be one of the main responses to this new system configuration.
Brazil is still slightly behind other major renewable energy markets in battery deployment, despite the growing need for flexibility identified by Aurora.
The consultancy expects that at least 5 GW of BESS will be contracted through capacity auctions, although it is still not defined how much of the 12 GW of flexibility required by 2030 will ultimately be covered by batteries.
During the meeting, participants pointed out that the country is resorting to storage due to a specific system need: capacity deficits are expected as early as 2028 and other technologies could not be deployed at the same speed .
However, the advisability of maintaining technology-specific auctions in the long term was also discussed.
The debate points towards technologically neutral capacity products, better market signals, and new revenue streams that allow batteries to compete on the value they bring to the system, rather than relying exclusively on processes reserved for BESS.
Aurora also analyzed how the cost distribution of future storage auctions could affect renewable energy contracts. According to their calculations, the same battery purchase can either reduce or increase the cost of a PPA , depending on where the systems are installed, how much storage is contracted, and who ultimately bears that cost.
Despite these challenges, the consultancy projects that renewables will represent around 78% of Brazil's installed capacity in 2030 .
For Ana Barillas, managing director of Iberia and Latin America at Aurora Energy Research, Brazil is going through a turning point.
“ Hydroelectricity alone can no longer sustain the system, and the real challenge is not building renewables, but using the energy they produce efficiently ,” he said.
The next phase of Brazilian expansion will thus be marked by an investment exceeding R$ 670 billion , but also by a change in the nature of those investments: the 120 GW of new capacity must be complemented by networks, flexibility and storage capable of preventing greater renewable penetration from exacerbating curtailment and security of supply problems.