Brazil will install an impressive 115 gigawatts (GW) of new electricity capacity by 2034, driven largely by an increase in free market demand. According to the latest analysis from Wood Mackenzie, wind and solar power will be at the forefront of this expansion, with 61 GW of community and distributed solar and 24 GW of onshore wind projects expected to be added over the next decade.

The Wood Mackenzie report highlights a remarkable forecast increase in free market demand of over 100% within the next decade. Market liberalisation is encouraging competition between solar companies and distributed solar generation, particularly under the new remuneration system introduced by Law 14.300. However, the report points out that from 2028, full eligibility of private offtakers to access the free market is likely to slow the growth of distributed generation.

Marina Azevedo, Senior Power Analyst at Wood Mackenzie, commented: “Until the market is fully opened to residential customers, distributed solar power generation remains an increasingly lucrative business model, supported by high electricity tariffs. But in the long term, solar power is gaining room to expand, driven by growth in the battery sector and new requirements such as green hydrogen.”

Hydropower will continue to play a central role in the Brazilian electricity grid. However, by 2050, wind and solar power are expected to account for 71% of new supply growth. Distributed solar power generation in particular is expected to grow at a compound annual growth rate (CAGR) of 10% over the next decade. This scenario highlights the critical role of natural gas in ensuring system reliability, especially outside of sunshine hours, which in turn will drive up the average marginal cost of the system. The report notes that as the old power purchase agreements (PPAs) expire, existing gas prices will be aligned with LNG benchmarks.

Azevedo added: “The rise of variable renewables will pose major challenges for operators. The grid will require faster dispatch technologies that can be activated quickly when needed to meet additional load demands. A key impact will be increased price volatility. From 2030, hourly prices above $100/MWh are expected in over 20% of cases.”

Brazil’s energy market is facing a major transformation, driven by significant investments in wind and solar power. As the country moves toward a more competitive and sustainable energy future, the sector must adapt to the challenges posed by the rise of variable renewables and evolving market dynamics. The ambitious growth targets for the coming decade underscore Brazil’s commitment to improving its energy infrastructure and ensuring a reliable, high-quality electricity supply to its consumers.

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