Energy Storage Report

Brazil has started to revise its decarbonization targets and climate change policies in sync with the new administration of President Lula, which began in January 2023. Previously, the country had pledged to reduce its greenhouse gas emissions by 37% by 2025 and by 50% by 2030, ultimately leading to the milestone of achieving net-zero emissions by 2050 under the Bolsonaro administration (World Economic Forum, 2023). In September 2023, these targets were revised to a 48% reduction by 2025 and 53% by 2030 compared to 2005 levels (Argus Media, 2023). In addition, a new target of achieving zero deforestation by 2030 was announced. It is estimated that the revised targets would require an investment of over $200 billion, more than double the $100 billion in funding that has been committed so far. Decarbonisation of the energy sector will remain a top priority in Brazil, with a target to achieve a 45% share of renewables in primary energy demand by 2030 will require 81GW of renewables capacity, excluding hydropower, within that timeframe (CIF, 2021). This is expected to trigger the buildout of utility-scale energy storage in the country, which has traditionally been skewed towards distributed storage.

For a long time, Brazil’s energy storage segment was not given priority in its policy and regulatory structure. This may have been due in part to the country’s predominantly hydropower-based power system. However, with the significant increase in renewable energy, there has been a shift in the scenario. Despite this, the response in terms of policy and regulations has been slow. Nevertheless, the growing adoption of renewables-based generation is leading to a reassessment of utility-scale storage’s role in managing the grid.

The Brazilian government announced in September 2023 that it is considering the feasibility of including energy storage in the upcoming power reserve auction scheduled to take place in the first half of 2024 (Reuters, 2023). Various options are being considered, including hybrid renewable energy projects with collocated storage capacity and standalone battery storage projects. In addition, battery storage is being considered as a replacement capacity for remote communities in the Amazon region, which were previously reliant on diesel generators. However, the development of the energy storage market is unlikely to occur significantly until regulatory changes are made public.

The regulator’s recent guidelines for the distributed generation segment could indirectly benefit battery storage. In January 2022, updated norms on distributed generation were introduced that require all capacities to be included under the net metering regime from 2023 onwards. This move will make it easier for solar PV-based prosumers, who inject net surplus generation back to the grid, to use battery storage. Under the previous regime (without net metering), such capacities would have had to pay fees to inject excess energy into the grid.

Development of the utility-scale energy storage market has been primarily driven by the regulator ANEEL through a 3-year R&D programme that started in 2016. There are 30 such projects, which include various storage technologies besides Lithium-Ion, to establish feasibility (BNAmericas, 2023). The first of these projects, a 30 MW/60 MWh BESS operated by the transmission system operator (TSO) ISA CTEEP, became operational in December 2022 (PV Magazine, 2022). The results from these projects as more become operational in the coming months and years will likely shape the regulations for grid-scale storage.

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Although the adoption of utility-scale storage projects has been slow, they are gradually gaining traction. TSO ISA CTEEP’s 30MW/60MWh project went online in December 2022 after receiving approval from the regulator ANEEL in 2021. The project was developed with an investment of $27 million and is allowed, under regulations, to generate annual income of up to $5 million by operating as a backup power source during peak electricity demand. This project is an example of “storage-as-a-transmission asset” and provides a less expensive alternative to traditional transmission lines (Energy Storage News, 2023). Another example is Vale’s 5MW/10MWh lithium-ion BESS project at a large port facility in Rio de Janeiro, launched in September 2020 (BNEF, 2020).

The pipeline of utility-scale solar PV projects in the country can be a significant driver of demand for grid-scale energy storage. This is because hybrid projects that combine solar and storage configurations are becoming more prevalent. The lack of timely grid connectivity can reinforce the need for linked-storage systems.

There are pilot projects underway to assess the feasibility of new storage technologies. A recent example is a 1MWh thermal energy storage project by an Israel-based company, Brenmiller Energy, in partnership with Fortlev, the largest provider of water storage solutions in Brazil. The project became operational in August 2022 and is a pioneering initiative in the region to use renewable-based (biomass in this case) thermal energy stored in crushed rocks for subsequent use in manufacturing processes as a process-heat application. The system can also discharge electricity based on a steam turbine.

Off-grid energy storage in Brazil presents more significant opportunities in the near term than the utility-scale segment. Battery-based energy is a competitive option in several Brazilian states due to the substantial difference between peak and off-peak tariffs. A study by consulting entity Greener (as of July 2022) found that for a typical commercial/industrial consumer, the difference between peak and off-peak tariffs in the state of Rio Grande do Norte stood at $R3.004/MWh. The study also found that battery storage translated to 36% savings on the tariff.