Brazil power storage sector seeks support

Market: Electricity
15/03/24

Lower battery prices and increases to intermittent power generation could boost battery energy storage systems (BESS) in Brazil, reaching roughly 7.2GW of installed capacity by 2040 or higher with new regulations, according to a study by Brazilian consulting firm Clean Energy Latin America (CELA).

The storage sector is calling for more support in power auctions and a more favorable tax framework.

BESS investments remain incipient in Brazil and the rest of Latin America, but CELA estimates investments will reach $12.5bn/yr by 2040 in Brazil.

Investments in BESS systems have focused on areas that are not connected to the power distribution grid or those that have limited access to power, Sergio Jacobsen, the chief executive of BESS company Micropower Energy, told Argus.

If regulations for BESS systems change in favor of the technology, BESS capacity could soar to 18.2GW by 2040, CELA said.

Based on the current expansion of renewable power generation, grid operator (ONS) estimates that Brazil will have 50GW of unused energy during periods of peak generation. The ONS concluded that energy storage systems would contribute to more efficient use of generation resources. Even with the expansion of generation capacity, ONS is required to dispatch thermoelectric capacity during periods of peak demand, when wind and solar generation declines.

Brazil does not have regulations that encourage the use of BESS technology, but the government is expected to clear the way for these systems to be used in the future reserve capacity auction.

"The auction will be a watershed moment for BESS," Jacobsen said, because it would optimize Brazil's existing renewable power capacity.

The government announced public hearings to debate the terms of the reserve energy auction last week, but did not include BESS in the public consultation. The Brazilian association of energy storage solutions (ABSAE) is hoping to reverse this decision and has promised that the industry will invest up to R9.8bn if allowed to participate in the auction.

The inclusion of BESS technologies in the auction would help develop a local supply chain for batteries, including the exploration of lithium resources, according to ABSAE president Markus Vlasits.

The sector is also calling on the government to create regulations that would clear the way for BESS to take advantage of so-called revenue stacking, which allows these same systems to earn revenue simultaneously from multiple sources using the same capacity. This includes ancillary services, such as frequency control and peak-shaving, which reduce stress on the power grid during periods of high demand.

The sector is also calling on the government to adopt a more favorable tax regime for batteries. BESS technologies are taxed at around 70pc, which is much higher than taxation on thermoelectric plants, Jacobsen said.

"The government needs to level the playing field," Jacobsen said.

ABSAE is calling on the government to eliminate the industrial production tax (IPI) on battery storage systems and to include these systems in the special infrastructure incentive program, known as Reidi.

Demand for storage systems will also be driven by the upcoming auction for isolated regions. BESS projects have participated in previous auctions and several systems are already operating in remote regions of the Amazon basin.

Off-grid

Micropower is also active in supplying small-scale, off-grid systems to households located in remote regions of the Amazon basin that have little or no access to power.

The government's "light for the Amazon" program has earmarked funds to expand hybrid battery-solar systems for these households. The government has earmarked R2.5bn for rural electrification in 2024, with the goal of providing electricity to 500,000 households by 2026.

Last week, the government announced R1.2bn investment in Para state for the installation of nearly 30,000 battery-solar systems.

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