Windfall in the South

Offshore wind farms in Brazil and Argentina could provide economic gains and help them hit renewable targets.

In Argentina’s southernmost city of Ushaia, winds are often so strong that the city council has started to string up ropes between buildings to help pedestrians walk in a straight line. The southern cone is one of the windiest areas in the world and governments in Argentina and Brazil are increasingly talking up the need to develop offshore wind farms. They’re expensive but they also offer a reliable, and sustainable, source of revenue for governments facing severe fiscal constraints. No surprise then that Brasília and Buenos Aires are keen.  

An energy consultant and former public official highlighted the opportunities, “Brazil and Argentina have enormous wind potential. World Bank research shows that Argentina alone could generate almost 2,000 GW in offshore wind energy – equivalent to almost 15% of the country’s annual energy consumption.”

“Brazil and Argentina have enormous wind potential. World Bank research shows that Argentina alone could generate almost 2,000 GW in offshore wind energy.”

Energy consultant and former public official, Argentina

These figures – impressive as they are – rest on the assumption that Buenos Aires invests in the infrastructure necessary to turn wind into electricity. Whilst Argentina is looking to install its first offshore wind turbine in its waters this year as it seeks to make inroads in the global green hydrogen market – there is little in the way of long-term planning. 

Wind farm infrastructure is extremely costly and requires deep technical expertise which often comes from abroad. Those companies involved in the development of relevant technology are few and therefore charge a premium. Argentina, with its high degree of economic volatility and policy uncertainty is not the most reliable and attractive market for these firms. 

The energy consultant remarked, “I believe that until more progress has been made in the installation and development of onshore wind farms, which in Brazil have been a precursor for offshore development, investors will remain cautious.”  

Brazil’s efforts are a little more promising. A climate researcher for a financial organisation explained, “Brazil has an offshore wind energy potential of 700 GW. To put this into perspective, Germany has 7.7 GW whilst the US has not yet reached 30GW. According to IBAMA (the Brazilian Institute of Environment and Renewable Natural Resources), Brazil already has 80 GW in 23 offshore projects which are in the process of obtaining environmental licences.” If things go smoothly, by 2024 Brazil will be in the top 10 offshore wind farm producers in the world.

“According to IBAMA, Brazil already has 80 GW in 23 offshore projects which are in the process of obtaining environmental licences.”

Climate researcher, financial institution

Both Brazil’s federal and state governments are keen to keep investment flowing into offshore wind farm developments and are sensitive to the concerns in the sector. One of the most notable concerns has been flimsy regulatory frameworks – a new framework is currently being developed with a view to publication later this year. The climate researcher said, “The approval of the new regulation will be crucial to attract investment to the country. Months ago, the World Bank said that Brazil needed a solid regulatory base and a clear political strategy to be appealing to long-term investors.” This will help to reassure investors who remain unsettled over ESG concerns. 

Some have taken the jump already – Servtec, one of Brazil’s largest green energy companies, signed a partnership contract this month with Macquarie Group, an Australian investor. The partnership will see the construction of five offshore wind farm projects, the largest of which is in Ceará, totalling an investment of some R$ 50 billion.  

In both Brazil and Argentina, international investors will look to see whether existing and pipeline developments have produced the returns that both countries believe they will.

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