abound in the Americas Opportunities offshore wind market

Offshore wind in the Americas is still in its infancy but Brazil, Colombia and the US hold huge potential for partnerships, say Americas Senior Regional Analyst Pietro Ferreira and Research Intern Lucas Mitidieri of the EIC

Brazil

Tax incentives

Supportive regulatory framework

Tax benefits in certain free trade zones

Long-term power purchase agreements

Offshore wind is set to become Brazil’s next major business opportunity in the energy sector. Its Energy Research Office estimates that the country has offshore wind potential of 700GW in water depths of up to 50 metres, making it an attractive destination for fixed-bottom developments. Brazil’s offshore wind potential falls in three key areas: Ceará and Rio Grande do Norte in the North-East, Rio de Janeiro and Espírito Santo in the South East and Rio Grande do Sul in the South.

Who are the key players?

Developers are keen to tap into Brazil’s offshore wind potential.

There are currently 75 projects under evaluation by the federal environmental regulator Ibama, with a combined capacity of approximately 185GW. The companies behind these projects vary from established renewable energy players such as Iberdrola and BlueFloat Energy, to IOCs such as Equinor, Shell and TotalEnergies.

Some offshore wind projects under evaluation are associated with clean hydrogen, another emerging segment in Brazil. However, not all initiatives will proceed to the development stage, as the country’s own installed capacity currently stands at 192GW. Nonetheless, the growing number of projects under environmental evaluation prove developers’ strong interest in investing in this market.

Regulatory framework takes shape

Brazil’s regulatory framework for offshore wind development is still in the early stages. Although Ibama has already released terms of reference for environmental licensing of prospective projects, regulations covering the leasing of offshore wind areas are still pending. A draft bill addressing this gap was proposed by former senator and current Petrobras CEO Jean Paul Prates, and is currently awaiting approval by the Chamber of Deputies. Developers hope the bill will be passed in 2023, with the first auction for offshore wind areas expected to take place in the second half of 2024.

Why invest?

The Brazilian government actively encourages and promotes foreign investment to introduce greater innovation into the country’s economy and generate economic growth. Investment incentives include tax exemptions and low-cost financing, with no distinction made between domestic and foreign investors.

Colombia

Tax benefits, simplified regulations and improved infrastructure in free trade zones

Renewable energy incentives R&D incentives

Low-cost loans, grants and subsidies

Colombia, heavily reliant on hydropower, is eyeing offshore wind as its next major business opportunity and the centrepiece of its energy transition. A recent World Bank study revealed that the country could generate up to 50GW of offshore wind power in water depths of up to 70 metres. Moreover, it will likely lead the race for South America’s first offshore wind tender.

Colombia races ahead

Following its ambitious commitments to the energy transition, the Colombian government plans to organise the first offshore wind tender in the second half of 2023. With its abundant wind resources, the Caribbean coastline will be the primary focus of offshore wind investments. Energy Minister Irene Vélez has stated that the Atlántico department in the Caribbean zone has already been subdivided into six energy areas. The Bolívar department is also expected to be in the tender. Offshore wind development is strategically important for Colombia’s plans to become a regional green hydrogen leader. It intends to use some electricity generated through offshore wind facilities to produce green hydrogen for export to Europe.

Who are the key players?

EICDataStream currently tracks 12 offshore wind projects under evaluation in the country, with a combined capacity of 5GW. The companies involved in these projects are BlueFloat Energy and Copenhagen Infrastructure Partners (CIP), two major European players. BlueFloat is currently working on the Vientos Alisios project, which received pre-feasibility status in January 2021 and secured a guarantee for a 200MW connection to the national electricity grid. Meanwhile, CIP signed a memorandum of understanding with the city of Barranquilla in January 2022 for the Barranquilla offshore wind farm.

Grounds for optimism

Despite the potential for offshore wind energy in Colombia, the sector is still in its early stage. The country needs to more government support and more transmission constraints solved if it is to live up to its offshore wind promise. However, there is reason for optimism. With the right level of investment and support, the World Bank predicts that Colombia could generate up to 1GW of offshore wind energy by 2030, 3GW by 2040 and 9GW by 2050.

Why invest?

The Colombian government has implemented a series of initiatives, including the development of an offshore wind roadmap and hydrogen roadmap, among many others. These initiatives offer opportunities for UK companies with expertise in these areas.

To support and encourage foreign investment, Colombia offers free trade zone benefits, customs duty reductions or exemptions, VAT exclusions and incentives to invest in technology and innovation.