Shelling out

Shell invests half a billion dollars in Brazil's clean energy market.

Shell recently announced a BRL 3 billion (USD 565 million) investment in clean energy markets in Brazil through 2025 via its local subsidiary, Shell Energy, the company’s division on decarbonisation. For Brazil, Shell’s investment consolidates its intention to become a leader in the carbon market. 

Shell’s investments in the renewables sector in Brazil are expected to focus on solar, wind-power, low carbon energy and thermal-based gas. Guilherme Perdigao, director of Shell Renewables Brazil said that the new gas law and the entry of new consumers into the free electricity market favoured the decision behind this latest investment. 

An energy market analyst in Brazil commented, “The rationale behind Shell’s investment is that economic growth in Brazil will increase the demand for electricity in the country. Brazil’s electricity consumption is very low compared to developed Western countries like the US and the EU (member states). Solar energy is the country’s fastest-growing energy source and natural gas, second. The business potential that a market like Brazil offers to energy companies is endless and Shell wants to tap into that.

“The business potential that a market like Brazil offers to energy companies is endless and Shell wants to tap into that.

Energy market analyst, Brazil

Shell is not the only oil major playing with renewables in Brazil, as an analyst at a Chinese wind power company in Brazil explained, “BP has followed a similar renewable energy strategy in Brazil through different means. In 2019, BP partnered with Bunge (a US agribusiness firm) by creating a bioenergy company to produce carbon-efficient biofuels. BP also has a Brazilian subsidiary which operates in the free electricity market and negotiates its energy supply contracts directly with suppliers. In March [2021], it signed a large contract to purchase wind power from Casa dos Ventos [a Brazilian renewable project developer]. Total also has almost 50 MW in wind energy in Brazil.

However, the administration led by President Jair Bolsonaro has not made any significant advances in domestic public policies on the matter, evidencing how the weaknesses of environmental policies can hinder investments in the country. Carbon credits from green initiatives are normally implemented in the fringes of government control, known as ‘voluntary markets’. 

Brazil continues to lag behind in renewable installation despite the country’s continental size and renewable energy potential. Furthermore, the credibility of Bolsonaro’s administration in implementing environmental policies has been compromised by the lack of government action and international criticism on its handling of the Amazon deforestation. State governments in Brazil have tried to fill this void as evidenced by the Governors for Climate, an initiative led by 18 State Governors which share initiatives and best practice to work towards the Paris Agreement goals.

“There are significant initiatives at state level to improve renewable energy sources. […] But real change to favour large multinational investments in the renewable sector will only come from federal plans.”

Energy market analyst, Brazil

The energy market analyst confirmed, “There are significant initiatives at the state level to improve renewable energy sources. Rio Grande do Sul has offered many facilities to promote the installation of wind power plants in the region with measures that contribute to the expansion and management of energy storage capacity or making more flexible the costs of operating wind power plants. But real change to favour large multinational investments in the renewable sector will only come from Federal plans.”

Could Brazil become a renewables power house? We would like to think so, but it will take a brave government to take the leap.

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