Brazil promises high return on renewable energy – 03/09/2024 – Market

Turkish Fatih Birol, 65, executive director of the IEA (International Energy Agency), states that Brazil is one of the countries that promises the most returns to local and international investors in renewable energy projects.

According to him, the country is one of the best positioned in the world to take advantage of this market, which has been experiencing a boom in recent years.

Investments in the area are expected to triple clean energy generation capacity in 130 countries by 2030, generating an additional 3,700 GW. Solar and wind energy — the most promising in Brazil — will be responsible for 95% of global expansion.

In the area of ​​biofuels, which represents half of the global renewable matrix, Birol sees great opportunities for Brazilian ethanol, especially in the areas of aviation and maritime transport.

“As we say in Turkey, investors don’t go to a country just because of the beautiful color of its eyes. They want to get returns, high returns. And Brazil, with all its resource potential in bioenergy, solar, wind and hydrocarbons , promises high returns”, he states.



Mr. was in Brazil at the beginning of February. How were the conversations with President Lula and how will the AIE support Brazil’s presidency at the G20 and COP30? Furthermore, how can the agency help to make the energy transition fair and inclusive?
I received a very warm welcome from President Lula and his ministers. To be honest, when it came to discussing global issues of energy, climate and development, I felt right at home. Because my visions are very aligned with what Brazil would like to achieve.

As I told President Lula, I believe that the next two years, this year and next, will be an incredible opportunity for the world to see that Brazil is back at the center of international affairs for energy, climate, geopolitics and foreign relations. With the G20 presidency first, followed by COP30.

There are critical areas, and I have suggested that three of them are important. First, how can we build an innovative mechanism so that clean energy financing in developing countries is supported by modernized and reformed international institutions and rich countries. This is an area in which Brazil can play a very important role.

The second area is that bioenergy is a very important part of our ways of addressing climate change. At the same time, it is a blind spot in the global energy and climate debate. When we talk, for example, about renewable energy, everyone talks about solar and wind.

But when we look at today’s numbers, of all global renewable energy production, 50% is bioenergy; and 50% are solar plus wind, hydroelectric, geothermal. Even with 50% in bioenergy, it does not receive the recognition it deserves.

Let’s work together to identify and create new market opportunities for bioenergy and biofuels globally. And at the same time, work together to create an international scientific consensus on bioenergy sustainability criteria.

The third is a humanitarian problem, where millions of people do not have access to clean cooking. They use wood and agricultural waste for cooking. Especially in Africa, this is a big problem for women because it causes respiratory illnesses while cooking, which is one of the two main reasons for premature death in women. Let’s work on it. These are the three general lines: financing, bioenergy and energy for poor people.

Mr. mentioned biofuels. How could Brazil expand its foreign sales of ethanol to the rest of the world? Mr. Do you see a global market for ethanol forming?

Yes, there is a huge opportunity. And we believe that biofuels can play an important role in the coming decades, especially in the aviation and maritime industry, because this is the most important solution to address decarbonization efforts for aviation and shipping. But to do this we need two things.

First, create new markets. I would expect, for example, from the G20 and COP30, that there will be strong signals from governments so that there are some mandates [metas de descarbonização] for the aviation industry as well as the shipping industry to ensure they use bioenergy.

In some countries, the sustainability benefits of bioenergy are questioned. And we need to work together to get a scientific consensus on this. And we have some suggestions, plans that we are sharing with the Brazilian government, and also working with the Indian government. India also places a lot of emphasis on bioenergy.

But I see that this is a very important way for Brazil to export more bioenergy in the future. And the fact that space for road transport is shrinking for bioenergy [por causa dos veículos elétricos]we need to look at aviation and navigation.

Our numbers show that we could see up to a tenfold increase over the next five years in Brazil’s bioenergy exports if we can resolve these two points. That is, creating markets through mandates, new markets in the world and across sectors, and, secondly, having a scientific consensus on the benefits of sustainability.

Mr. emphasized that we need, of course, investments to expand the market. But the macroeconomic environment in Brazil is sometimes difficult. Large budget deficits, high public debt, high interest rates and exchange rate risks. Could this limit foreign investment?

I’m the head of the IEA, but also chair of the Energy and Climate Industry Council at the Davos World Economic Forum. I can easily estimate what the energy industry and investors are thinking. I believe that Brazil, with the new government, is building significant confidence, both in terms of macroeconomic stability and in terms of political stability.

We see high interest rates around the world. I don’t think this is a structural problem. It’s a technical issue, and I don’t believe it will be a reason to scare away investors, because the potential is enormous.

As we say in Turkey, investors don’t go to a country just because of the beautiful color of its eyes. They want to get returns, high returns. And Brazil, with all its resource potential in bioenergy, solar, wind and hydrocarbons, promises high returns.

That said, there are also challenges that the Brazilian government needs to face, especially to minimize bureaucratic steps so that investors have a friendlier environment. But, overall, I see Brazil as a key country for energy investments in the coming years.

The latest IEA report on renewable energy shows an increase in investment and generation capacity [3.700 gigawatts adicionais até 2030]. But the biggest bottleneck is transmission. How can we overcome this challenge, given that generation projects are generally private, and transmission investments are state-owned?
Around the world, many governments give great encouragement to renewable energy, especially solar and wind. And we have a huge amount of new renewable capacity coming in. But they forgot one thing. How this renewable energy will reach customers, homes, industry. And this is creating a huge bottleneck.

In 2023, we had a record addition of renewable capacity, more than 500 gigawatts. But there are three times that, 1,500 gigawatts, in ready renewable projects. But because we don’t have enough capacity for transmission and distribution, they can’t connect to the network. This is economically criminal, because it’s something like if you build the most beautiful car in the world, sustainable, very fast, comfortable, but forget to build the roads for that car.

We’ve built a lot of renewable energy, but governments around the world haven’t built the grid. But people are waking up, and Brazil is one of the countries that woke up very quickly. You had the big auction in 2023 [com previsão de investimentos de R$ 21,7 bilhões em transmissão], and I’m told they’re planning another one this year, around March. I believe that auctions are key mechanisms for attracting investments in emerging countries.

I think Brazil can be seen as an example of good practices for coordinating public and private investments. We cannot leave everything to the public sector. Brazil’s opening to public-private participation has resulted in greater private sector involvement than in many other emerging countries. Brazil is heading in the right direction.

Like mr. Do you see the prospects for the production of green hydrogen? The IEA report states that, of all announced projects, only 7% of proposed renewable generation capacities are expected to come into operation in 2030. How difficult is the area?

I speak to all governments around the world. And usually when I talk about different topics of energy, oil, renewables, nuclear, hydrogen, carbon capture, there are always different views. But when it comes to hydrogen, I see that everyone loves hydrogen.

So this is a little unusual, to be honest. But at the same time, announcing hydrogen projects does not mean that we will have hydrogen as part of our energy matrix so quickly. I’m telling many governments, government leaders in Europe or Asia, Latin America, that we should not expect hydrogen, in the short to medium term, to have a significant share.

Because we need to create demand to develop hydrogen. That’s a point. The second is that its cost is still significantly higher than the alternatives. Therefore, there is a need for governments — and many of them have already started — to announce support programs. Green hydrogen will not be part of our energy matrix in a short period of time. Costs will still have to decrease significantly.

Fatih Birol, 65

Born in Ankara, Turkey, he is an energy specialist and has served since 2015 as executive director of the International Energy Agency (IEA). He chairs the Energy and Climate Industry Council of the Davos World Economic Forum. He has a degree in energy engineering from Istanbul Technical University and a master’s and doctorate in energy economics from the Technical University of Vienna.