Brazil has rapidly consolidated its position as one of the world’s renewable energy powerhouses, driven by an extraordinary boom in solar generation. According to Power Technology’s parent company, GlobalData, the country added nearly 12GW of new solar capacity in 2025 alone – solar now accounts for almost a quarter of Brazil’s entire electricity matrix.
Distributed solar has been particularly transformative, expanding from under 1GW in 2018 to 43.5GW at the end of 2025, making it the fastest‑growing power source in the country. Projections from the National Electric System Operator, the Electric Energy Trading Chamber and the Energy Research Company (EPE) indicate that installed distributed generation capacity could reach 64GW by 2029 – up from the previously estimated 56GW. The lion’s share of this power comes from rooftop solar projects, which have expanded rapidly thanks to falling costs of solar equipment.
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This rapid expansion has reshaped Brazil’s energy landscape, turning solar into a central pillar of its decarbonisation strategy and a major driver of new investment.
However, the successful expansion of Brazil’s renewable capacity has created new operational challenges. The surge in intermittent wind and solar generation has outpaced the country’s ability to absorb and transmit power, leading to a sharp rise in curtailment – forced reductions in renewable output due to grid constraints. Curtailment volumes are expected to continue rising in the coming years as new projects come online faster than transmission lines can be built.
Last year, roughly 20% of available solar and wind energy was lost due to curtailment in Brazil, according to an assessment by Volt Robotics. The study estimates that unused energy resulted in losses exceeding $6bn reais ($1.1bn). The situation reached its peak in October, when the average volume of curtailed energy reached 8,000MW.
BESS to the rescue
To address these mounting pressures, the Brazilian Government has begun implementing a broad package of reforms aimed at modernising the power sector and improving system flexibility. This includes investments in energy storage – namely, battery energy storage systems (BESS) – power transmission infrastructure and expansion in the country’s base power load, as well as initiatives aimed at boosting electricity demand.
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By GlobalDataAs part of these initiatives, the government is preparing the country’s first‑ever BESS auction. The auction, which was supposed to take place last year, is scheduled for April 2026 and aims to make more efficient use of Brazil’s existing renewable power resources while increasingly the reliability of power supplies.
The government expects strong interest from project developers, who are benefitting from falling battery prices. Companies that participate in the auction will be vying for ten‑year Capacity Reserve Power Contracts that are due to begin on 1 August 2028, according to the draft terms issued by the government in November 2025.
The draft terms require projects to have a minimum capacity of 30MW, be able to operate continuously for at least four hours and complete full recharge cycles within six hours. They also mandate a minimum charge‑discharge efficiency of 85%.
“Energy storage is viable and a major ally in the energy transition. It is a pathway to reducing losses, stabilising the system and keeping energy prices affordable,” Brazil’s Mines and Energy Minister, Alexandre Silveira, said recently.
Investors see the auction as a catalyst for unlocking a multibillion‑real market, with the potential to attract roughly $70bn reais in investments by 2034, according to the Brazilian Association of Energy Storage Solutions.
Upgrading base load and transmission in Brazil
In parallel, the government plans to hold several reserve power auctions in the first quarter of this year with the goal of securing additional firm capacity to support system reliability during peak demand or supply shocks. These auctions have become increasingly important not only because of the increase in intermittent power generation from wind and solar but also the lack of expansion of hydroelectric capacity.
Brazil’s power matrix has historically relied on hydropower to supply the bulk of its demand. However, there has been limited investment in new, large-scale hydroelectric plants because of environmental restrictions, in part because the rivers with significant power generation potential are located in the environmentally sensitive Amazon basin. While this has helped contribute to Brazil’s overwhelmingly renewable power grid, it has also made it vulnerable to drought.
The capacity reserve auction aims to draw from a broad range of power sources including natural gas and hydroelectricity.
Unlike previous capacity auctions, which restricted participation to thermal generators, the new framework developed for the upcoming auction will allow hydropower to compete. Under the terms of the auction, existing hydroelectric plants can expand capacity through the addition of new turbines, helping to bring new power generation online quicker and reduce environmental impact, while allowing these plants to deliver reliable baseload power without increasing emissions.
The auction will also contract fossil fuel projects, with a focus on natural gas-fired plants. This is part of the government’s strategy to increase demand for natural gas as it boosts domestic output, mainly from offshore, deep-water fields.
In addition to natural gas, the government also opted to allow coal-fired plants to participate in the tender. While the decision is controversial, the government justified the decision by arguing that these plants contribute to energy security, not only because they provide a reliable base power load but also because the coal is domestically produced. Coal represents just 1.4% of Brazil’s installed capacity.
The government is also seeking to address transmission bottlenecks, with the goal of facilitating the sale of power generated in north-eastern Brazil – which has the most favourable wind and solar generation potential – to consumers in the south-east of the country.
Brazil is entering one of its largest investment cycles in power transmission infrastructure, driven by the need to integrate new renewable generation, reinforce long‑distance corridors and modernise its grids.
This year alone, the government plans to hold two transmission auctions. The first auction, set for March 2026, is in the final phase of public consultation at ANEEL, the power regulator, and is expected to attract $5.7bn reais in investment for 888km of new transmission lines across 12 states. The second auction, planned for later in the year, is projected to mobilise more than $20bn reais for more than 3,500km of new lines, with final details to be released once the EPE completes its technical studies.
Expansion of the country’s power transmission infrastructure is expected to remain robust over the next decade, with the government estimating investments of up to $120bn reais through 2030.
Bolstering demand
At the same time, policymakers are pursuing demand‑side reforms to absorb excess renewable generation.
A key pillar of this strategy is attracting energy‑intensive industries including data centres. As part of this strategy, the government launched the Redata programme last year, which establishes a special tax regime for data centre investments. The initiative seeks to expand the country’s data storage and processing capacity and reduce reliance on foreign servers – an increasing concern as roughly 60% of Brazilian data is currently processed abroad.
Redata grants sweeping tax exemptions for capital goods used to build or expand data centres, including servers, cooling systems and power infrastructure. Federal taxes such as PIS/Pasep, Cofins and IPI will be suspended, and import duties removed for equipment not produced domestically. To qualify, companies must meet strict environmental rules – most notably, sourcing 100% of their electricity from renewable energy, either through power purchase agreements or self‑generation.
The government estimates that the incentives could attract $2tn reais in investment over the next decade and position Brazil among the world’s top three data centre destinations.
