Brazil's burgeoning green energy sector, a global leader in renewable capacity additions, is grappling with a profound crisis, casting a shadow over the nation's role as host of the upcoming world climate summit. Despite its position as a staunch advocate for clean energy and having the cleanest energy mix among G-20 countries, the rapid expansion of wind and solar power has paradoxically led to significant market instability. This downturn is manifesting in corporate bankruptcies, debt restructurings, and widespread job losses, mirroring global challenges but exacerbated by specific domestic issues.
Recent casualties underscore the severity. 2W Ecobank SA, a wind energy producer, sought bankruptcy protection in April, while Rio Alto Energias Renovaveis SA, a solar project developer, pursued temporary creditor protection. Aeris, Brazil's largest manufacturer of wind turbine blades, also underwent significant debt restructuring following over 3,700 job cuts. These financial distress signals point to systemic issues including permitting delays, inadequate transmission infrastructure, supply chain disruptions, and elevated borrowing costs, with Brazil's central bank recently raising its basic interest rate to 15%.
A key factor is the critical shortage of transmission lines capable of absorbing the surge in daytime power generation from new wind and solar projects. This oversupply has forced grid operators, particularly the National Electric System Operator (ONS), to increasingly curtail output. While curtailment began in 2020, it intensified after a 2023 blackout and a transmission line collapse in February, with ONS projecting continued increases through 2029. Elbia Gannoum, president of Abeeolica, the national wind energy association, described the current period as "the worst of times" for Brazil's energy industry, emphasizing the unprecedented scale and duration of the crisis.
Further compounding the financial strain is a contentious regulatory shift. A 2023 rule from regulator Aneel drastically reduced the reimbursement for curtailed power, allowing companies to recoup only 3% of losses, a stark contrast to the full reimbursement previously mandated by a 2004 law and still afforded to thermal power plants. Absolar, Brazil's solar industry association, and Abeeolica are jointly suing Aneel, seeking recovery of an estimated 4.8 billion reais ($873 million) in incurred losses. Rodrigo Sauaia, CEO of Absolar, stressed the need for banks and investors, including Banco BTG Pactual SA, Banco Santander Brasil SA, BNDES, and Banco do Nordeste do Brasil SA, to collaborate with the industry through this "exceptional situation."
While some, like Fitch Ratings Inc.'s Thaina Cavalini, point to transmission as the primary bottleneck, Gannoum also highlights the impact of small-scale solar generators, which, benefiting from subsidies, contribute to daytime oversupply without facing the same curtailment regulations as larger producers. The government's plan to acquire batteries for grid storage has been postponed, and high taxes on such systems (up to 85%) deter private investment. This crisis, particularly acute in the wind sector due to its 80% domestic supply chain, threatens Brazil's net-zero by 2050 goal and underscores the complex challenges of integrating rapidly expanding renewable capacity into existing grid infrastructure.