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8 March 2023

Petrobras eyeing $70bn push into 14.5 GW of Brazilian wind farms

Brazilian oil giant, Petrobras, which is 64% state owned, has signed a letter of intent with Norwegian project developer, Equinor, to explore the feasibility of seven different offshore wind projects around Brazil’s coast.

The seven projects would amount to 14.5 GW of capacity which is believed to require Petrobras to fork out around $70 billion. This agreement comes as an extension to the partnership signed between Petrobras and Equinor in 2018, and had its scope expanded beyond the two wind farm opportunities – Aracatu I and II (located on the coastal border between the states of Rio de Janeiro and Espírito Santo) – initially planned. In addition to these two projects, the new agreement includes an assessment of the viability of the following proposed wind farms: Mangara (on the coast of Piauí), Ibitucatu (coast of Ceará), Colibri (on the coastal border between Rio Grande do Norte and Ceará), and Atobá and Ibituassu (both on the coast of Rio Grande do Sul). A total of seven projects, all planned to begin operation in 2028.

All in all, Brazil is currently benefiting from 22GW of onshore wind. If these seven farms will in fact see the light of day as soon as 2028, the Latin American country will sit at 36.5GW of onshore and offshore wind capacity and will most likely be close to doubling its capacity by 2030 compared to today.

With the majority share of electricity coming from hydro, Brazil only has around 100TWh of fossil-based electricity to replace – less than a sixth of all its total generation figure. But that’s the least of its worries. Brazil currently exports around 490 million barrels of oil per year. And it can’t do it as cheaply as all the rich Middle Eastern states. With an impending collapse of the global oil industry only 10 to 12 years away, Brazil will be glad that it changed its leadership recently with a more green orientated president in Lula da Silva which in turn will mean that deals like this one will be more likely.

Such oil exporters like Mexico, Brazil and the Middle Eastern states, need to find an alternative stream of GDP (gross domestic product) and fall in line with the fact that the world’s industries are in a process of electrification.

Brazil is highly dependent on hydro power generation, like most of the continent, but with large global increases in capacity not likely and plenty of maintenance work on the horizon, an an almost permanent drought in Brazil, hydro won’t hold its leading position among renewables for much longer. Based on our analysis as part of our flagship report, APE 3.0 (Annual Primary Electricity 3.0), Rethink believes that around 2030 both wind and solar will overtake hydro, only a few years after the two overcut nuclear, to sit atop of the renewables generation charts.

Recent bottleneck issues in the wind industry have caused a slowdown in turbine installation rates. With less than 90GW installed in 2022, the wind industry is losing speed compared to solar which is believed to have manufactured over 300GW worth of solar panels in 2022 alone, all which are due to be installed in 2023.

Brazil can benefit from both wind and solar massively, with hydro being a cornerstone only for the time being and just a few new nuclear plants being discussed. Any way you look at it, Brazil can position itself in a great spot to take advantage of the potential that the continent of South America has when it comes to hydrogen production. Not far from Brazil, Chile is regarded as one of the key spots for green hydrogen production due to its favorable wind and solar resources which will drive down the price of the green fuel close to $1/kg.