Brazil: Energy transition

Brazil occupies a notable position in the global energy transition. Compared with jurisdictions that remain focused on replacing fossil fuel-based generation, Brazil already has an energy matrix in which renewable sources account for approximately half of its primary energy supply and the vast majority of its electricity generation.

While utility-scale solar and onshore wind projects remain a significant part of the Brazilian market, the project pipeline is expanding beyond traditional renewable generation to include transmission infrastructure, energy storage, green hydrogen, and low-carbon fuel projects. Together, these sectors represent tens of billions of dollars in expected investment through 2030.

• Utility-scale solar: Large-scale photovoltaic projects continue to be developed across the northeast and in states such as Minas Gerais, Goiás, Bahia, and Piauí. Brazil has approximately 70 gigawatts (GW) of installed solar capacity and is expected to add close to five GW of new utility-scale capacity in 2026.
• Onshore and offshore wind: Brazil has significant wind resources, particularly in the northeast. While interest in offshore wind has increased, many projects currently under construction remain onshore, with growing emphasis on larger and hybrid wind-and-solar developments.
• Transmission infrastructure: Recent auctions have awarded projects involving more than 1,100 km of new transmission lines, reflecting efforts to address grid congestion and renewable curtailment.
• Energy storage: Following the approval of a regulatory framework in 2026, investment in battery projects, solar-plus-storage facilities, and grid-support assets could increase. Deployment may focus on regions affected by transmission constraints and curtailment.
• Green hydrogen and low-carbon fuels: Several projects are being developed around industrial-port complexes and renewable-resource hubs, particularly at Pecém, Ceará; Açu, Rio de Janeiro; and in Rio Grande do Norte. These include the Morro Pintado Project in Areia Branca, Rio Grande do Norte, on which DLA Piper is acting as international deal counsel. The project has been announced as an integrated green hydrogen and green ammonia project supported by wind and solar generation, with export-oriented logistics.

The sector has also been influenced by Brazil’s low-carbon hydrogen legal framework, which created Rehidro, a tax incentive regime for low-carbon hydrogen production, and Brazil’s Low-Carbon Hydrogen Development Program (Programa de Desenvolvimento do Hidrogênio de Baixa Emissão de Carbono, or PHBC), a development program designed to provide tax benefits to the industry over a five-year period.

The Brazilian Green Hydrogen Industry Association (Associação Brasileira da Indústria do Hidrogênio Verde, or ABIHV) has been an industry participant advocating for regulation, grid access, financing conditions, and public-private coordination to support the progression of announced projects from memoranda of understanding to final investment decisions. These projects focus on the production of green hydrogen, green ammonia, and electrofuels (e-fuels), largely for export markets. Proposed developments include electrolysis plants, ammonia export terminals, and supporting port infrastructure.

• Critical minerals: Brazil is also moving to strengthen its critical minerals strategy, including through Bill No. 2,780/2024, which would establish a National Policy on Critical and Strategic Minerals and has been reported by Federal Deputy Arnaldo Jardim. The topic has become a component of United Kingdom-Brazil energy-transition cooperation discussions. Deputy Jardim recently spoke in London at a DLA Piper-sponsored event on energy transition and critical minerals between the UK and Brazil, where Partner Ricardo Gardini de Andrade moderated a panel with Partners Paul Hardy and Titus Edjua (all London), alongside Executive Vice President of Sustainability of Vale SA, Grazielle Parenti. The discussion covered responsible mining, supply chain resilience, domestic processing, industrial policy, and the role of critical minerals in renewable energy, batteries, green hydrogen, and broader decarbonization technologies.
• Capacity and grid reliability projects: Recent capacity auctions support security of supply as renewable generation expands. The contracted projects are expected to involve private investment and support system reliability.

While traditional engineering, procurement, and construction arrangements; power purchase agreements; and project finance structures continue to be widely used in the Brazilian market, energy transition projects may involve new technologies, developing regulatory frameworks, and different revenue models. As a result, parties may face technology performance risks, offtake uncertainty, sustainability and certification requirements, and interface risks among multiple contractors. For projects focused on export markets, particularly in Europe and the UK, compliance with sustainability standards may also affect project bankability, financing, and long-term offtake arrangements.¹

These challenges may be addressed through risk allocation, performance guarantees, testing and commissioning procedures, long-term offtake arrangements, and change-in-law protections.

¹ For projects focused on European markets, compliance with sustainability, traceability, and certification requirements may become relevant to financing and offtake arrangements. Such requirements may arise from regulatory frameworks, including Regulation (EU) 2023/1115, the European Union Deforestation Regulation, as well as industry-specific standards applicable to low-carbon products and fuels.

Unlike wind and solar projects, technologies such as battery storage, green hydrogen, and e-fuels have limited operational track records in Brazil. This may create uncertainty regarding performance levels, operational efficiency, maintenance requirements, and integration with existing infrastructure.

Additional risks include battery degradation occurring faster than anticipated, electrolyzer performance below guaranteed levels, technology obsolescence, and interface failures between renewable generation, storage, and hydrogen production facilities. In Brazil, many of these technologies may initially depend on foreign suppliers for equipment, technical support, and specialized maintenance, creating additional operational and contractual challenges.

The risks may be mitigated through enhanced testing and commissioning procedures, performance guarantees, technology warranties, availability guarantees, long-term operation and maintenance agreements, phased deployment strategies, long-term offtake arrangements, and contractual mechanisms that allocate technology and regulatory risks among project participants.

As Brazil’s energy-transition pipeline expands, delivery pressures are increasingly linked to transmission availability, grid integration, supply chain constraints, and project execution in remote regions with high renewable potential.

The concentration of wind, solar, and emerging green hydrogen projects in the northeast has intensified pressure on transmission infrastructure, contributing to grid congestion and curtailment risks. At the same time, projects that depend on imported equipment, such as battery systems and electrolyzers, may remain exposed to procurement delays, logistics challenges, and exchange-rate volatility.

As the market for battery storage and green hydrogen develops, demand for specialized engineers, technicians, and contractors could also increase, particularly in regions where multiple large-scale projects are being developed simultaneously.

Green hydrogen developments may also require substantial investments in port, transmission, and export infrastructure, potentially increasing coordination challenges among developers, contractors, utilities, and public authorities. Environmental licensing and land-access processes can further affect project schedules.

These pressures may be mitigated through early engagement with transmission and permitting authorities, realistic project scheduling, proactive procurement strategies, and careful coordination among project stakeholders throughout the development and construction phases.

Beyond construction and technology-related risks, energy projects in Brazil may face challenges arising from regulatory changes, environmental licensing, and grid access constraints. These issues can affect project schedules, costs, and revenues, and may give rise to questions over delays, cost overruns, contractual performance, curtailment, dispatch restrictions, and regulatory compliance. Proactive management of these risks can support project development and implementation.

As energy transition projects in Brazil continue to be developed, project owners, contractors, lenders, investors, and other stakeholders may wish to focus on robust due diligence, clear risk allocation, early supply chain planning, and alignment with applicable decarbonization objectives.