Market Alert: Brazil’s Corporate Power Purchase Agreement (PPA) Opportunity

Contributed by: James Lewis, Director, Client Development, Global Renewables and Cleantech and Mathieu Piccin, Director of Energy and Sustainability Services - South America

James Lewis leads Schneider Electric’s cleantech advisory work in markets outside of the United States. James facilitates corporate PPAs in maturing renewable energy markets and also works with our clients to evaluate opportunities in emerging markets around the world.

Mathieu Piccin leads Schneider Electric’s energy and sustainability services in Latin America. These services encompass supply, efficiency and sustainability consulting for a broad range of industries and services corporations located from Argentina to Mexico.

How is Brazil’s energy market structured?

Brazil operates as a partially deregulated market, and between 60% and 70% of electricity generation currently comes from large hydropower.  Given hydro is inherently dependent on rainfall (which can create price volatility), wind and solar resources have expanded over the past years and currently represent a practical area of opportunity for sustainable and affordable additions to the country’s energy mix.

Large energy buyers in Brazil typically operate in a free market environment.  These larger consumers can purchase wholesale electricity and may be well-positioned to engage in renewable energy contract structures, such as power purchase agreements (PPAs).

Is there a PPA opportunity in Brazil for corporate buyers?

Yes, it is an opportune time for large energy buyers with load in Brazil to pursue PPAs.  Both global and experienced local renewable energy developers currently have a significant pipeline of wind and solar projects underway.  

There is also momentum in the corporate PPA market. Brazilian mining leader Vale, as well as multinationals like Dow Chemical and Anglo American, have each executed PPAs in this market.  The level of interest in our client base is significantly growing.

What types of PPA deals are you seeing in Brazil now?

There are different PPA structures that can be implemented in Brazil—depending on an organization’s goals and risk tolerance.  Both wind and solar opportunities are available, and terms typically range between 10-20 years (with an opportunity for shorter terms developing). 

Subject to an organization’s load, credit and other factors, we are currently seeing price savings ranging from $5 to $15 per MWh.  It is important to note that a PPA is subject to risks, including financial risk, and companies should therefore carefully consider all aspects before engaging in a PPA.

Many projects in the pipeline are in the North East.  If your organization’s operations are in the Southern part of the country, like many large Brazilian energy buyers, working with a trusted advisor can help you navigate the submarket risks involved when project location and consumption occur in different locales. 

What should organizations think about as they explore the Brazilian PPA opportunity further?

First, consider the dates of your environmental targets.  Many projects in Brazil currently have a COD of 2023 or 2024.  This timeline should be matched against your company’s unique objectives. 

It’s also wise to consider your short-term, free market purchasing strategy.  How will your organization evolve and optimize current procurement practices to include a PPA?  Our team at Schneider Electric has advised on over 8 GW of PPAs globally and supported hundreds of electricity buyers in Brazil through our team of local experts in São Paulo.  We can help you look holistically at your procurement strategy to achieve your economic and renewable energy objectives over the short-, medium- and long-term.

For organizations not quite ready for PPAs, we are seeing a growing supply of IRECs—another mechanism to meet your sustainability goals.  Brazil is also rich with carbon offset opportunities with empowering narratives to address Scope 1 and Scope 3 emissions reduction. 

If you’re interested in learning more about opportunities in Brazil, let’s have a chat.  Contact one of our experts here. 

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