What’s next for Brazil’s power sector? Auctions, policies and risks in 2025

New auctions and political disputes are set to shape Brazil’s electric power sector in 2025.

At the same time, renewable energy generators will face a challenging scenario due to operational restrictions.

The key highlight is the backup capacity tender. After a two-year hiatus, Brazil is resuming this type of auction, which is designed to ensure energy security amid increasingly frequent droughts and the growing share of intermittent sources in the national grid.

Scheduled for June 27, the auction will contract both new and existing gas- and biofuel-fired plants, as well as existing hydro plants. In the latter case, projects that expand their installed capacity with new generating units will be eligible to participate.

Also confirmed for this year are an A-5 auction, an isolated system auction, A-1/A-2 auctions and a transmission auction, while the first battery tender remains under study.

Meanwhile, political and market disputes over various energy-related issues are expected to intensify in the coming months.

One reason is that critical bills approved by congress in 2024 are now entering the implementation phase, with regulatory agencies such as electric power watchdog Aneel and oil and gas regulator ANP defining their positions.

Key examples include legislation on offshore wind, green hydrogen and carbon credits and the energy transition (Paten) bill.

Challenges surrounding the expansion of solar and wind power in the grid are also expected to persist, particularly curtailments, which have disrupted investment plans, and power flow inversion in distributed generation (DG).  

In terms of infrastructure projects, a major milestone this year will be the long-awaited start of operations for the Tucuruí transmission line, which will connect Roraima – the last Brazilian state not yet linked to the national power grid. This will coincide with Roraima resuming power imports from Venezuela after more than six years. The electricity exchange is currently undergoing testing.

Also slated to come online this year are major thermoelectric projects, including the GNA II and Novo Tempo Barcarena plants.  

Meanwhile, the federal government is expected to decide soon on the future of the controversial  Angra 3 nuclear power project.

Construction of the country’s third nuclear plant has been stalled since the 1980s due to financial, political, administrative, technical and regulatory issues, as well as corruption scandals.

According to development bank BNDES, completing the plant would cost 23bn reais (US$3.8bn), while abandoning the project would cost 21bn reais.

Investment risks

Mandatory generation cuts are among the biggest challenges Brazil’s PV solar and wind power sectors are expected to face in 2025.

Solar power, which has just surpassed 53GW in installed capacity, is also grappling with higher import tariffs on solar panels and growing taxation of DG.

Ronaldo Koloszuk, chairman of Absolar’s board, noted that 2024 was an especially difficult year for the sector, with distributors rejecting new solar system connections due to power flow inversion in distributed generation.

Meanwhile, centralized generators suffered significant revenue losses, making it difficult to meet contractual obligations and threatening investment in new solar projects.

“For both segments, the recent increase in the import tax on solar panels has raised concerns and dissatisfaction, as it hampers the growth of solar technology in Brazil,” Koloszuk said.

This challenging environment explains why investment in the solar power sector is projected to decline by nearly 30% in 2025 compared with 2024.

In a statement released on Tuesday, Abeeólica, Brazil’s wind power industry association, warned that the overturning of an injunction guaranteeing compensation for generators affected by curtailments will deter investors.

The association cited market data showing losses due to non-reimbursement for power cuts ranging from 2% to 5% per month in some cases, while in others, losses have averaged between 10% and 20% per month – or even as high as 60% in certain regions.

Abeeólica further stated that the court ruling, which stemmed from a lawsuit filed by Aneel, directly impacts the market value of affected companies.

“Banks financing projects will factor this risk into their analyses, which will affect the availability of credit lines, alter company credit ratings and create obstacles to securing new financing,” the association warned.