A bright future for offshore wind projects in Brazil

Authors: Marcelo Frazão and Maria Beatriz Gomes

Brazil is already a leading country when it comes to a diversified matrix of sustainable energy sources. In 2020, renewable energies corresponded to 48.4% of Brazil’s total energy consumption and 84.8% of electricity production. Wind energy currently represents 8.8% of the electricity production, following an exponential growth in wind energy generation over the past decade. In fact, from 2015 to 2020, wind energy generation more than doubled, from 21,625 GWh to 57,051 GWh, and continues to grow.

The numbers are even more impressive considering that they only reflect onshore wind generation and that the potential for offshore wind energy Brazil is substantial.  The country has geographical, climate and market conditions that are favorable to offshore wind projects, such as:

• 7,367km (i.e., approx. 4,577 miles) of coastline and a massive technical potential, estimated at around 700GW – 50m depth, for the development of offshore wind energy. The states of Ceará, Espírito Santo, Rio de Janeiro, Rio Grande do Norte and Rio Grande do Sulare specially recognized for their substantial wind potential.

• The experience with the value chain of the onshore wind sector presents an opportunity for the development of the value chain of the offshore wind energy sector. It is possible to find in Brazil wind turbine assembly units, local manufacture of components and subcomponents for onshore wind powers, which enables the country to offer goods and services in all phases of an offshore wind project.

• The local knowledge acquired from offshore oil and gas projects can contribute to the development of the offshore wind industry. The local expertise in operations in deep and ultra-deep waters of the oil and gas sector paves the way to the development of offshore infrastructure, from foundations and structures, project management and working with moving cables or seabed surveys.

The Brazilian government has been working to create a regulatory framework. On 15 June 2022, Decree No. 10,946/2022 (“Decree”), which was published earlier this year and regulates the exploration of offshore wind energy in Brazil, enters into force.

The Decree represents an important milestone for the industry. Until the publication of the Decree, companies interested in developing offshore wind projects could only rely on expectations or analogies deriving from the onshore wind energy regulations (e.g., Normative Resolution No. 876/2020). While some offshore wind projects in Brazil have already obtained preliminary licenses based on onshore wind regulations, soon enough the market realized that there are too many incompatibilities between onshore and offshore projects and that demands a specific regulatory framework for the latter.

The Decree establishes that the exploration rights shall be granted through the assignment of the use of maritime areas, authorized by the Ministry of Mines and Energy (“MME”) and formalized by means of an onerous assignment contract for the use of public real estate property. For the development of research and technological activities related to offshore wind generation, the assignment of use shall be made without the payment of a granting fee.

The use of the area may be assigned through a planned assignment by the government, with the offer of prisms to private parties following a bidding procedure, or through an independent assignment, in which private companies may request to the MME for the exploration of specific prisms, provided that previous studies are carried out.

Similar to what is required from oil and gas companies, the interested parties must prove that they have sufficient technical, operational, economic-financial, and legal capacity to guarantee the implementation of the project, the operation and the decommissioning of activities. The bidding winner shall be the company that presents to the government the proposal with the highest economic return for the prisms.

In addition, the Decree establishes that the National Electric Energy Agency (“ANEEL”) must authorize the activities. Thus, the assignment of use of the prisms does not suffice for the development of the project. Complementary regulations by ANEEL are still required to establish the authorization proceedings. The MME may also delegate to ANEEL powers to enter into the assignment contracts.

The assignment of use of the prisms also depends on the issuance of a Prior Interference Declaration (“DIP”), which aims to identify if there are any interferences of the prism in other facilities or activities.

The DIP must be issued by (i) the National Petroleum Agency (“ANP”) which regulates oil and gas offshore production activities; (ii) the Navy Command considering the installations will be floating in the Brazilian sea; (iii) the Air Force Command considering the possible interference in air operations; (iv) IBAMA to confirm the existence of other environmental licensing proceedings in the area; (v) ICMBio considering the activities’ potential environmental impacts; (vi) Ministry of Infrastructure to evaluate the compatibility with the ports and sea transportation plans; (vii) Ministry of Agriculture, Livestock and Supply in view of potential impacts to fishing activities; (viii) Ministry of Tourism to assess the impacts to tourism; and (ix) the National Telecommunications Agency (“ANATEL”) to avoid conflicts with communications areas and systems.

MME shall issue complementary rules to the provisions of the Decree within 180 days from the date that the Decree comes into effect. We also expect that each governmental authority described in the Decree will create its own sets of regulations in the near future.

There is still work to be done, from the regulatory perspective, for the offshore wind projects to become a reality in Brazil. But that should not take long to occur. The market has shown significant appetite to invest, with around 54 under licensing phase, and the Brazilian Government seems to be aware of that opportunity. There is a bright future for offshore wind projects in Brazil.