Offshore Wind Development Program SCENARIOS FOR OFFSHORE WIND DEVELOPMENT IN BRAZIL FUNDED BY: © 2024 July | International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved This work is a product of the World Bank with contributions given by the staff and consultants listed in the Acknowledgments. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of the World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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Examples of components can include, but are not limited to, tables, figures, or images. All queries on rights and licenses should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; e-mail: pubrights@worldbank.org. PRODUCTION CREDITS Copy Editor | Hue Communications LLC Designer | Hue Communications LLC Images | Vestas Wind Systems A/S, Ørsted All images remain the sole property of their source and may not be used for any purpose without written permission from the source. CONTENTS Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X Scenarios for Brazil Offshore Wind Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . XII 1 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . XIII 2 Scenarios for Offshore Wind in Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2.1 Scenarios Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2.2 Challenges and Potential Implications of the Scenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 3 Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Supporting Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 4 Offshore Wind Contribution to the Grid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 4.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 4.2 Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 4.3 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28 4.4 Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 5 Technical Potential Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 5.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 5.2 Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 5.3 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56 5.4 Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 6 Preliminary Environmental and Social Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 6.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 6.2 Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 6.3 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 6.4 Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 7 Port and Logistics Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 7.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 7.2 Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 7.3 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 7.4 Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 Contents I 8 Supply Chain Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 8.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 8.2 Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 8.3 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 8.4 Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 9 Economic Impact Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144 9.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144 9.2 Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144 9.3 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146 9.4 Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 10 Capacity Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152 10.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152 10.2 Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152 10.3 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152 10.4 Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 11 Permitting and Regulatory Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166 11.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166 11.2 Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166 11.3 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 11.4 Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 12 Health and Safety Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 12.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 12.2 Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 12.3 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186 12.4 Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192 13 Cost of Energy Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 13.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 13.2 Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 13.3 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203 13.4 Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208 II Scenarios for Offshore Wind Development in Brazil 14 Offshore Wind and Hydrogen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209 14.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209 14.2 Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209 14.3 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210 14.4 Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219 15 Role for Public Financial Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221 15.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221 15.2 Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221 15.3 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221 15.4 Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229 16 Procurement of Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 16.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 16.2 Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 16.3 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .232 16.4 Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238 17 Project Bankability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240 17.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240 17.2 Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240 17.3 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241 17.4 Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244 18 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247 Appendix A—Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257 Appendix B—List of Organization Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262 Appendix C—Geospatial Maps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264 Appendix D—Brazil’s Priority Biodiversity Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266 Appendix E—Regulatory Framework Gap Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320 Appendix F—Cost of Energy Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332 Appendix G—Hydrogen Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336 Contents III LIST OF FIGURES Figure 1.1 Monthly Capacity Factors (2015-2022) for Offshore Wind and Hydro in Brazil. . . . . . . . . . . XIV Figure 1.2 Proximity of Offshore Wind Zones to Population . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . XV Figure 1.3 Relative LCoE Within the Three Designated Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . XVI Figure 1.4 Impact of The Three Scenarios. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . XVIII Figure 2.1 Main Criteria for Definition of Offshore Wind Areas of Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Figure 2.2 Regions of Interest for Offshore Wind Development in Brazil. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Figure 2.3 Assumed Annual Installed And Cumulative Operating Capacity in the Three Scenarios in Brazil, 2030–2050. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Figure 2.4 Offshore Wind Development Expected Timeline For Brazil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Figure 2.5 LCoE Estimates for Offshore Wind Projects in Brazil from 2030 to 2050. . . . . . . . . . . . . . . . . 15 Figure 4.1 Schematic Representation of the Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Figure 4.2 Population Growth, Average Power Generation, and Consumption for Brazil. . . . . . . . . . . . . . 28 Figure 4.3 Electric Power Generation and Consumption Per Region and Per Power Source for Year 2022—Brazil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Figure 4.4 Population Concentration and Areas of Offshore Wind Development. . . . . . . . . . . . . . . . . . . . 30 Figure 4.5 Regions of Primary Interest for Offshore Wind Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Figure 4.6 Net Capacity Factor (Normalized Power) for Hydro, Onshore Wind, and Offshore Wind. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Figure 4.7 Monthly Profiles Of Capacity Factor At The P90 Percentile (CF 90) And Historical Peaks Of Demand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Figure 4.8 Hourly Profiles of Capacity Factor at the P90 Percentile (CF P90) and Historical Peaks of Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Figure 4.9 Net Capacity Factor (Normalized Power) for Solar, Onshore Wind, and Offshore Wind. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Figure 4.10 Monthly Profiles of Capacity Factor at the P90 Percentile (CF P90) and Historical Peaks of Demand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Figure 4.11 Hourly Profiles of Capacity Factor at the P90 Percentile (CF P90) and Historical Peaks of Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Figure 4.12 Net Capacity Factor (Normalized Power) for Hydro, Onshore Wind, and Offshore Wind. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Figure 4.13 Monthly Profiles of Capacity Factor at the P90 Percentile (CF P90) and Historical Peaks Of Demand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Figure 4.14 Hourly Profiles of Capacity Factor at the P90 Percentile (CF P90) and Historical Peaks of Demand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Figure 4.15 Monthly Capacity Factors (2015-2022) for the Whole Country of Brazil . . . . . . . . . . . . . . . . 43 Figure 4.16 Dolwin 1 Offshore Converter Station. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Figure 4.17 Q/Pmax-V Curve as Required from Renewable Generation in Brazil. . . . . . . . . . . . . . . . . . . . . 47 IV Scenarios for Offshore Wind Development in Brazil Figure 4.18 Requirements for the Synthetic Inertia Mechanism. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Figure 4.19 Requirements for the Synthetic Inertia Mechanism. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Figure 5.1 Macro-Areas for Offshore Wind Development in Brazil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Figure 5.2 Levelized Cost of Energy (LCoE). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Figure 5.3 Registered Projects as of November 2023—Northeast. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Figure 5.4 Registered Projects as of November 2023—Southeast. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Figure 5.5 Registered Projects as of November 2023—South. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Figure 5.6 Grid Infrastructure—Northeast. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Figure 5.7 Grid Infrastructure—South and Southeast. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Figure 5.8 Substation Capacity 2027—Northeast. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Figure 5.9 Substation Capacity 2027—South And Southeast. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Figure 6.1 LPAS—Northeast. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Figure 6.2 LPAS—South And Southeast. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Figure 6.3 Sensitive Marine Species—Priority Areas for Biodiversity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Figure 6.4 IUCN Important Marine Mammals Areas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Figure 6.5 Bird Migration Routes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Figure 6.6 Bird Congregatory Areas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Figure 6.7 Brazil Index of TCA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 Figure 6.8 Shipping Density and Ports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 Figure 7.1 Schematic Representation of the Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 Figure 7.2 Main Ports and Optional Ports/Shipyards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 Figure 8.1 Schematic Representation of the Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 Figure 8.2 Offshore and Onshore Wind Power Plant Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 Figure 8.3 Offshore Wind Turbine Components. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 Figure 8.4 Substation Components. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 Figure 8.5 Project Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 Figure 8.6 Brazilian Onshore Wind Supply Chain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 Figure 8.7 Turbine. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 Figure 8.8 Balance of Plant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 Figure 8.9 Installation and Commissioning. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 Figure 8.10 Operation, Maintenance, And Service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140 Figure 8.11 Units of Turbines, Blades, Monopiles Required for Each Scenario by 2050 . . . . . . . . . . . . . . 141 Figure 8.12 Raw Material Required for Each Scenario by 2050. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142 Figure 9.1 Offshore Wind Growth and Local Content Scenarios. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144 Figure 9.2 FTE Years 2030-2050 in #1 Base Case Scenario and Low Local Content. . . . . . . . . . . . . . . 148 Figure 9.3 FTE Years 2030-2050 in #1 Base Case Scenario and High Local Content. . . . . . . . . . . . . . . 148 Contents V Figure 9.4 FTE Years 2030-2050 in #2 Intermediate Scenarioand Low Local Content. . . . . . . . . . . . . 149 Figure 9.5 FTE Years 2030-2050 in #2 Intermediate Scenario and High Local Content. . . . . . . . . . . . 149 Figure 9.6 FTE Years 2030-2050 in #3 Ambitious Scenario and Low Local Content. . . . . . . . . . . . . . . 150 Figure 9.7 FTE Years 2030-2050 in #3 Ambitious Scenario and High Local Content. . . . . . . . . . . . . . . 150 Figure 10.1 Schematic Representation of the Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152 Figure 10.2 Percentage of Employment in Offshore Wind. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 Figure 10.3 Breakdown of Job Creation Across a Standard 500 MW Offshore Wind Project with 25-Year Lifetime. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 Figure 10.4 High-Level Overview of Skill Areas with Synergies Between O&G and Offshore Wind. . . 156 Figure 10.5 Skills Overlap from Offshore O&G Industry to Offshore Wind Energy and Other Offshore Renewables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 Figure 11.1 Schematic Representation of the Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166 Figure 11.2 Prism Analysis Parameters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 Figure 11.3 Planned Assignment Proceeding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169 Figure 11.4 Supporting Information by Interested Party. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169 Figure 11.5 Independent Assignment Proceeding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170 Figure 11.6 Dip Decision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171 Figure 12.1 Brazilian Regulatory Outlook for Offshore Wind Operations. . . . . . . . . . . . . . . . . . . . . . . . . . 186 Figure 13.1 Overview of Dnv’s LCoE Modeling Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 Figure 13.2 High-Level Overview of Renewables. Architect Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196 Figure 13.3 Location of The 11 Representative Projects Across the Three Regions. . . . . . . . . . . . . . . . . 197 Figure 13.4 Monthly Average Wind Speed—Northeast Region (1997-2021). . . . . . . . . . . . . . . . . . . . . . . . 199 Figure 13.5 Monthly Average Wind Speed—South Region (1997-2021). . . . . . . . . . . . . . . . . . . . . . . . . . . 199 Figure 13.6 Monthly Average Wind Speeds—Southeast Region (1997-2021). . . . . . . . . . . . . . . . . . . . . . 200 Figure 13.7 LCoE Estimates of Bottom-Fixed Projects from 2030 To 2050. . . . . . . . . . . . . . . . . . . . . . . . 204 Figure 13.8 LCoE Estimates of Floating Projects from 2030 To 2050. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205 Figure 13.9 Representative Array Cable Layouts in Selected 2030 (Left) and 2050 (Right) Scenarios. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206 Figure 13.10 LCoE Comparison of Bottom-Fixed and Floating Project by Region (2040 COD, #1 Base Case). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207 Figure 13.11 Variation of Bottom-Fixed LCoE to Key Project Parameters (2030 Averages Used as a Default Case) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208 Figure 14.1 Schematic Representation of the Steps of the Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209 Figure 14.2 Pecém Complex (Example). Source: CIPP, 2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 Figure 14.3 Hydrogen Integration with Offshore Wind Farms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212 Figure 14.4 H2 Production Versus Renewable Energy Installed Capacity in Brazil . . . . . . . . . . . . . . . . . 215 Figure 14.5 Levelized Cost of Hydrogen Forecast for Fixed Offshore Wind in Brazil. . . . . . . . . . . . . . . . 216 Figure 14.6 Levelized Cost of Hydrogen Forecast for Floating Offshore Wind in Brazil. . . . . . . . . . . . . . . 217 VI Scenarios for Offshore Wind Development in Brazil Figure 14.7 Levelized Cost of Hydrogen for Three H2 Hubs in Brazil, 2030 and 2050. . . . . . . . . . . . . . . 218 Figure 15.1 Schematic Representation of the Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221 Figure 15.2 BNDES Investment in Energy Generation Project (2005-2023), Wind vs. All Other Sources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 Figure 15.3 BNDES Investment in Energy Generation Project (2005-2023), Wind, All Other Sources vs Offshore Wind Growth Scenarios Required Investment by 2050. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 Figure 15.4 Overview of Green Bonds Market in Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227 Figure 15.5 Capital Required for Each Offshore Wind Growth Scenario by 2050. . . . . . . . . . . . . . . . . . . 230 Figure 16.1 Schematic Representation of The Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 Figure 16.2 Typical Qualitative Evaluation Criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237 Figure 17.1 Schematic Representation of the Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240 Figure 17.2 Requirements for Bankability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245 LIST OF TABLES Table 2.1 Offshore Wind Growth Scenarios by 2035 and 2050. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Table 2.2 Characteristics of the 3 Defined Macro-Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Table 2.3 Reference Values for Each of the Scenarios. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Table 2.4 Supply Chain Main Comments and Readiness Level. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Table 2.5 Impact of Offshore Wind Development Scenarios in Public Financing in Brazil. . . . . . . . . . . . . 17 Table 4.1 Brazilian Power Generation Plants in Operation (Year 2023) Grouped by Energy Source. . . . 29 Table 4.2 Power Generation Plants Currently Operational in Rio Grande do Sul Grouped by Source. . . . 31 Table 4.3 Highlights in The Comparison Between Hydro and Wind Power for Rio Grande do Sul. . . . . . 33 Table 4.4 Power Generation Plants Currently Operational in Ceará Grouped by Energy Source. . . . . . . 35 Table 4.5 Highlights in the Comparison Between Solar Power and Wind Power for Ceará. . . . . . . . . . . . 37 Table 4.6 Power Generation Plants Currently Operational in Rio de Janeiro Grouped by Energy Source. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Table 4.7 Highlights in the Comparison Between Hydro and Wind Power for Rio de Janeiro. . . . . . . . . . . 41 Table 4.8 Adequacy of Offshore for the Supply of Ancillary Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Table 5.1 Basic Technical Parameters for the Three Macro Areas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Table 5.2 Area Occupation of Offshore Wind Projects in Each Development Scenario. . . . . . . . . . . . . . . 69 Table 6.1 Potential Sensitivity Scale for E&S Considerations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Table 6.2 Initial Stakeholder Engagement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Table 6.3 E&S Risk Matrix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Table 6.4 Comparison Between Ibama TOR and WB EHS Guidelines for Wind Energy. . . . . . . . . . . . . . . 96 Contents VII Table 7.1 Offshore Wind Farm Selected Development Phases and the Role of Ports. . . . . . . . . . . . . . . . 102 Table 7.2 Main Parameters for the Evaluation of Ports for Offshore Wind in Brazil. . . . . . . . . . . . . . . . . 103 Table 7.3 Categories for Ports Gap Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 Table 7.4 Gap Analysis for the Main Ports—Bottom-Fixed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 Table 7.5 Gap Analysis for the Main Ports—Floating. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 Table 7.6 Rag Scale Ffor Gap Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 Table 7.7 Bottom-Fixed Gap Analysis of Optional Ports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 Table 7.8 Floating Gap Analysis of Optional Ports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 Table 7.9 Summary of Necessary Improvements and Indicative Investment for Offshore Wind Support. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 Table 8.1 Categorization of Packages (Tier 1), and Services and Components (Tier 2) . . . . . . . . . . . . . . . 121 Table 8.2 Assessment Criteria. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 Table 8.3 Brazilian Supply Chain Assessment Results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 Table 8.4 Potential Suppliers for Each Service or Component. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126 Table 8.5 Readiness Level (Weighted Score)—Sorted from Highest to Lowest. . . . . . . . . . . . . . . . . . . . . . 127 Table 8.6 Turbine and Blades Manufacturers in Brazil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 Table 8.7 Overview of Global Wind Turbine Nacelle Facilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 Table 9.1 Capital Expenditure and Local Content Percentages by Project Component. . . . . . . . . . . . . . 146 Table 9.2 National Gross Value Added in Million USD In 2050 for Each Capacity Scenario. . . . . . . . . . . 147 Table 9.3 FTE Results During Key Years for Each Capacity and Local Content Scenario. . . . . . . . . . . . . 147 Table 10.1 Reference Initiatives in Training and Education. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159 Table 10.2 Estimated Direct Employment Associated with Construction for Offshore Wind Brazilian Scenarios (FTEavg Jobs-Year Per GW Installed)—Private Sector. . . . . . . . . . 161 Table 11.1 Authorities Involved in the Issue of Dips. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170 Table 11.2 Differences Between Offshore Wind Power Decrees and Bill of Laws Under Discussion. . . . 177 Table 11.3 Legal Framework Referred in Decree 10,946/2022. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 Table 11.4 Bidding Criteria in Different Brazilian Regulated Sectors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 Table 12.1 Relevant H&S Legislation and Guidance Documents (UK/Worldwide). . . . . . . . . . . . . . . . . . . 189 Table 12.2 Relevant World Bank ESS2 Guidance Topics and Related Brazilian Regulations . . . . . . . . . . 191 Table 12.3 Summary of Brazilian Authorities Capacity and Roles Related to Health and Safety. . . . 193 Table 13.1 Key Project Specific Assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198 Table 13.2 Technical Design Parameters for Future COD Years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201 Table 13.3 Techno-Economic Learning Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201 Table 13.4 O&M Learning Factors Assumed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 Table 13.5 Capex, Opex, and Net AEP Estimate Ranges for the Scenarios Modeled. . . . . . . . . . . . . . . . 203 Table 14.1 Solutions for Hydrogen Production from Offshore Wind. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212 VIII Scenarios for Offshore Wind Development in Brazil Table 14.2 Estimate of Hydrogen Production and offshore wind Installed Capacity in Brazil in 2030 and 2050. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213 Table 14.3 List of GH2 Projects in Brazil (2023). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214 Table 14.4 Comparison Between LCOH of Different Sources (References), USD/KGH2. . . . . . . . . . . . . 219 Table 15.1 Examples of Climate Funds in Brazil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226 Table 15.2 Color Matrix for Tax and Policy Incentives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228 Table 15.3 Tax and Policy Incentives Potentially Applicable to Offshore Wind Projects. . . . . . . . . . . . . 228 Table 16.1 Options of Procurement of Renewable Energy in Brazil (up to 2023). . . . . . . . . . . . . . . . . . . . 233 Table 16.2 Approaches to Auctions in Other Countries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234 Table 17.1 Color Matrix of Potential Impacts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240 Table 17.2 Insights on Main Bankability Aspects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242 Table D.1 Area Covered by Legally Protected Areas with Marine or Coastal Components in Brazil. . . 270 Table D.2 Ramsar Sites. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271 Table D.3 KBAs/IBAs in Brazil with Marine or Coastal Components and Associated Priority Biodiversity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274 Table D.4 Significance of EBSAs in Brazil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276 Table D.5 List of LPAs and IRAs Overlapping EBSAs in Brazilian EEZ with Total Overlap Areas in Hectares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277 Table D.6 Summary of LPA And IRA In Brazil with Marine or Coastal Components. To Avoid Double-Counting, Overlapping Sites are Combined in a Single Row. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279 Table D.7 Threatened and Near Threatened Species of Marine Mammals According to IUCN and National Redlists. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292 Table D.8 Main Congregations Identified by the Report on Migration Routes and Areas of Congregation for Shorebirds (Data Extracted from the Report on Migration Routes and Congregations). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295 Table D.9 Most Important Sea Turtle Nesting Beaches / Regions (Werneck et al. 2018). . . . . . . . . . . . 296 Table D.10 Conservation Action Plan for Sharks and Rays—Strategic Areas. . . . . . . . . . . . . . . . . . . . . . 299 Table D.11 Summary Table of Digitized Spatial Data to be Included in Exclusion and Restriction Zone. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303 Table F.1 DNV Renewables.architect Regional Soil Profiles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334 Table F.2 DNV Renewables.architect Site-Specific Input Parameters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335 Table G.1 GHG Emissions of Technologies Involving GH2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336 Contents IX ACKNOWLEDGEMENTS This report is a product of the Energy and Extractives Practice of the Latin America and Caribbean region of the World Bank (WB) and one of a series of offshore wind roadmap studies commissioned by the World Bank Group (WBG) under the Offshore Wind Development Program [1], funded by the Energy Sector Management Assistance Program (ESMAP), in partnership with the International Finance Corporation (IFC, the private sector arm of the WBG). This study was executed by DNV in association with legal experts, Vieira Rezende Advogados and Magalhães Reis Figueiró Advogados. Additionally, The Biodiversity Consultancy contributed with a country-level biodiversity assessment. The report was overseen by Sean Whittaker (Principal Industry Specialist, IFC), Rebeca Doctors and Michael Peter Wilson (Energy Specialists, WB), and Carolina de Mas Serrat (Offshore Wind Advisor, WB). Contributions were also made by Pernille Skyt (Offshore Wind Advisor, WB), Carlos Costa (Senior Energy Economist, WB), Pierre Audinet (Lead Energy Specialist, WB), and Christopher John Lloyd (Offshore Wind Advisor, WB). We also thank Guido Couto Penido Guimarães (energy consultant, WB) and Felipe Sgarbi (senior energy specialist, WB) for their contribution to the revision of the report. Peer review was carried out by Ana Fontes (Investment Officer, IFC), Patricia Marcos Huidobro (Senior Climate Change Specialist, WB), Claudia Ines Vasquez (Lead Energy Specialist, WB), and Jari Vayrynen (Senior Energy Specialist, WB). We are thankful for their time and feedback. We express our profound gratitude to Ministério de Minas e Energia (MME) and Empresa de Pesquisa Energética (EPE) for the collaboration on this project. In particular we would like to thank the following individuals: Mariana de Assis Especie (Advisor to the Minister, MME), Karina Araujo Sousa (Director of the Energy Transition Department, MME), Patricia Naccache Martins da Costa (General Coordinator of Low carbon Energies, Technologies and Innovation, MME), Natalia Hoffmann Ramos (Technological and regulatory monitoring coordinator, MME), Alexandre da Costa Pereira (Infrastructure Specialist, MME), Gustavo Pires da Ponte (Technical Advisor, EPE), Amanda Vinhoza (Energy Research Analyst, EPE), Nathalia Tavares (Energy Research Analyst, EPE), Helena Portugal Goncalves da Motta (Energy Research Analyst, EPE), Andre Makishi (Energy Research Analyst, EPE), Marcos Vinicius G. da Silva Farinha (Deputy Head, EPE), Veronica S. M. Gomes (Energy Research Analyst, EPE), Daniel Dias Loureiro (Energy Research Analyst, EPE), and Robson O. Matos (Energy Research Analyst, EPE). X Scenarios for Offshore Wind Development in Brazil We are truly thankful to a wide range of stakeholders that provided feedback during the report consultation process, including BNDES (Banco Nacional de Desenvolvimento Econômico e Social), IBAMA (Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais Renováveis), ANEEL (Agência Nacional de Energia Elétrica), ANP (Agência Nacional do Petróleo, Gás Natural e Biocombustíveis), ONS (Operador Nacional do Sistema Elétrico), Ministério do Meio Ambiente e Mudança do Clima (MMA), Ministério de Pesca,IBP (Instituto Brasileiro de Petróleo e Gás), ABH2 (Associação Brasileira de Hidrogênio), Port of Pecem, and Port of Acu. We are equally thankful to Equinor, TotalEnergies, Corio, Copenhagen Offshore Partners (COP), Neoenergia, Corio Generation, Vestas, EDF Renewables, and Petrobras, among others, for participating in the industry consultation. We warmly thank Elbia Gannoum, Matheus Noronha, and Juliana Lima from ABEEolica, for their tremendous support throughout the preparation of this report. We would like to recognize the efforts of the wider DNV team and their Porto Alegre and Rio de Janeiro offices for their dedication and enthusiasm. In particular, we would like to warmly thank Daniela Ribeiro (Principal Engineer, DNV), Thiago Coriolano (Offshore Wind Engineer, DNV), Tchiarles Coutinho Hilbig (Market Manager Brazil, DNV), and Unai Otazua (Head of Section, Project Engineering, Southern Europe, Latin America, Middle East, and Africa, DNV) for having led the project preparation. We are also very thankful to all the DNV team that worked in preparing this detailed report: Juan Morales (GIS), Carlos Ramallo (GIS), Luca Lisciotto (Environmental Engineer), Juan Portillo (Offshore Wind Engineer), Marta Gonzalez (Offshore Wind Technical Lead), Ari Biggart (Offshore Project Engineer), Leonardo Barriatto (Senior Engineer, Project Dev), Miguel Morgado Pereira (Grid Expert), Andre Pauferro (Senior Engineer, Offshore and M/D), Gutyerre Saldanha (Local Content Analyst), Mariana Bardy (Senior Principle, HSE Risk Management), Eduardo Bolonhez (Consultant, Energy Markets), Andrea Ximena (Consultant, Energy Markets), and Makenzie Sheerer (Engineer, Analytics). Also, a warm thank you to Thiago da Silva (Vieira Rezende Advogados) and Gerusa Magalhaes (Magalhães Reis Figueiró Advogados) for their support on permitting and regulatory reviews. The report was produced under the overall guidance of Maria Marcela Silva (Regional Director for Latin America and the Caribbean, WB), Johannes Zutt (Country Director of the World Bank in Brazil, WB), Demetrios Papathanasiou (Global Director, WB), Gabriela Elizondo Azuela (Practice Manager for Latin America and the Caribbean, WB), Chandrasekar Govindarajalu (Practice Manager of ESMAP, WB), and Luis Alberto Andres (Infrastructure Sector Leader, WB). Finally, we thank the ESMAP donors for their engagement on this study. Acknowledgements XI SCENARIOS FOR OFFSHORE WIND DEVELOPMENT IN BRAZIL XII Scenarios for Offshore Wind Development in Brazil 1 EXECUTIVE SUMMARY Brazil possesses an abundance of natural resources that contribute to meeting its energy demand. Thanks to a traditional base of hydroelectric power and the more recent development of onshore wind and solar, Brazil enjoys one of the world’s cleanest and most cost-competitive generation mixes. Brazil also happens to have one of the world’s best offshore wind resources, with a technical potential of over 1,200 Gigawatts (GW), including 480 GW of fixed foundation potential (at water depths less than 70 m) and 748 GW of floating foundation potential (at water depths from 70 m to 1,000 m). This offshore wind resource is vigorous, consistent, geographically diverse, and located close to demand centers; all factors that suggest that offshore wind could figure prominently in the country’s long-term energy mix. At the same time, the first offshore wind projects will have a higher cost of generation than onshore projects and require a significant ramp-up in national capacities if Brazil is to compete with established markets in Europe or even new markets in the Americas. This leads to an obvious question: Why would Brazil seek to develop offshore wind at scale when it already has so many options from which to choose? The answer will ultimately be provided by policymakers and stakeholders seeking to chart a long-term path to Brazil’s energy needs while also meeting objectives around climate mitigation, energy security, electricity affordability, and economic development. This Scenarios for Offshore Wind Development in Brazil is intended to inform that decision making by outlining the challenges and opportunities associated with different offshore wind development pathways from a technical, commercial, economic, environmental, and social perspective. The report does not advocate for one path over another; rather it provides a vision for a future under different growth scenarios and describes what would be required to make each scenario a reality, depending on the path chosen. This report was prepared with the aim of supporting the government of Brazil in setting public policies towards its energy transition by looking at offshore wind development. The report was initiated by the World Bank (WB) and the International Finance Corporation (IFC) under the umbrella of the World Bank Group’s Offshore Wind Development Program, and was done in collaboration with the Brazil Ministry of Mines and Energy (MME) and the Energy Research Office (EPE). Founded in 2019, the WBG’s Offshore Wind Development Program aims to accelerate offshore wind development in emerging markets. This report was funded by the World Bank Group’s Energy Sector Management Assistance Program (ESMAP) and Blue Economy Program (PROBLUE). RATIONALE FOR OFFSHORE WIND IN BRAZIL There are a variety of reasons why Brazil might choose to pursue offshore wind development at scale. Offshore wind as “Brazil’s new hydro.” Although hydro currently satisfies 72 percent of Brazil’s electricity demand, projections indicate that net hydro generation capacity will not expand significantly over the next 25 years. In the face of expected population growth and rising demand, hydro’s contribution to the grid is therefore expected to fall to 46 percent by 2050. Offshore wind— alongside onshore wind and solar—represents an interesting option not only to fill this gap but to serve 1 Executive Summary XIII as a mitigant for hydro’s interannual variability. Analysis in this report indicates that offshore wind is particularly complementary to hydro as it is both countercyclical on a seasonal basis and has lower variability on an interannual basis. Figure 1.1 compares actual hydro output with simulated offshore wind output over a seven-year period, indicating that offshore wind output would be strongest in months when water levels are low. The analysis also suggests that the year-on-year variability of offshore wind is expected to be much lower than hydro output in much of the country. As such, if deployed at scale then offshore wind may serve as an “energy hedge” against unusually dry years such as those observed in the past decade. In this case, offshore wind may take its place alongside hydro as an intrinsic part of the country’s clean generation base. FIGURE 1.1 MONTHLY CAPACITY FACTORS (2015-2022) FOR OFFSHORE WIND AND HYDRO IN BRAZIL. Simulated Offshore wind CF Historical hydro power CF 70% 65% Net capacity factors (CF P50) 60% 55% 50% 45% 40% 35% 30% 25% 20% Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Source: DNV Long-term cost-competitiveness and price stability. Offshore wind is currently one of the most cost-competitive sources of new generation in developed markets such as Europe and China. However, in new markets such as Brazil, the initial cost of the first projects is expected to be significantly higher. Analysis in this report suggests that with high volume targets and appropriate conditions, the cost of offshore wind could fall from US$64 per MWh for the first projects (roughly 50 percent higher than onshore wind and solar) to US$52 to 40 per MWh by 2050, at which point it would be competitive with conventional forms of generation. This situation is not dissimilar to the historic case of onshore wind in Brazil which was initiated through PROINFA over 20 years ago and is now one of Brazil’s largest (at 30 GW installed capacity as of 2024) and lowest cost generation sources. It is worth noting that there are expected to be regional variations in offshore wind cost, with the cheapest tariffs expected in the Northeast region, having the highest wind speeds in Brazil. Generation close to demand to reduce transmission losses. Brazil’s favorable offshore wind resources are located relatively close to shore and tend to be clustered around large population centers. As illustrated in Figure 1.2, strong offshore wind zones in the Northeast, Southeast, and Southern regions are near to large cities including Rio de Janeiro, Fortaleza, and Porto Alegre. Locating generation close to demand can in principle reduce transmission losses, provided adequate regional supply-demand balance is maintained. Note that higher amounts of offshore wind may lead to congestion at a local level if demand is not high enough or evacuation capacity is insufficient. This could be potentially mitigated at a local level by adding storage, or by adding demand (e.g., green hydrogen (GH2) production). XIV Scenarios for Offshore Wind Development in Brazil FIGURE 1.2 PROXIMITY OF OFFSHORE WIND ZONES TO POPULATION. Offshore wind as a foundation for GH2 production. Brazil has announced ambitious targets for GH2 production with a focus on major ports such as Pecém and Açu that may serve both domestic and international markets by the creation of hydrogen hubs. To be eligible to participate in and be competitive with international GH2 markets, Brazil will require a substantial buildout of renewable power, particularly in the face of flat hydro capacity and limitations in onshore wind and solar expansion. Analysis in this report suggests that if Brazil wants to satisfy five percent of global GH2 demand by 2050, it would require close to 100 GW of new renewables; offshore wind may satisfy a significant portion of this demand, particularly if built near designated GH2 hubs. Economic development and job creation. Brazil has a long history of both offshore oil and gas production and large-scale development of onshore wind. These sectors provide useful starting points for offshore wind development, from the perspective of existing infrastructure, supply chain, and human resources. Indeed, the offshore wind industry in much of Europe started from a similar base less than 20 years ago. Analysis in this report suggests that Brazil could, under the most ambitious offshore wind development scenario, see the creation of over 516,000 Full-time Equivalent (FTE) jobs by 2050, accompanied by a National Gross Value Add (GVA) of US$168 billion. BRAZIL’S OFFSHORE WIND POTENTIAL Through a preliminary geospatial analysis, this report identified three macro areas of possible offshore development within Brazil’s Exclusive Economic Zone (EEZ). Figure 1.3 presents relative Levelized Cost of Energy (LCoE) across each area, reflecting the relative expected capital expenditure (CapEx) (as a function of distance from shore, water depth), operating expense (OpEx) (largely as a function of distance from shore), and energy output (as a function of wind speed). It is clear that each area represents significant potential, albeit with different levels of attractiveness from a price standpoint. 1 Executive Summary XV FIGURE 1.3 RELATIVE LCOE WITHIN THE THREE DESIGNATED AREAS. Northeast. This area has some of the best offshore wind conditions in Brazil, with areas of 7 to 10 m/s average wind speed at 100 m a.s.l. in shallow waters relatively close to the coastline. Total potential is 356 GW across a technically viable seabed area of 89,000 km2. Several of the most favorable zones are in proximity to the Port of Pecém which would be suited for the development of offshore wind projects with minor to moderate upgrades. At the same time, there are significant artisanal and commercial fishing areas near to these zones, as well as significant tourism activities. As such, it is expected that social sensitivities will be high, requiring careful consideration. Southeast. This area has good potential for both fixed and floating wind, with areas of 8 m/s average winds and a total potential of 340 GW across a seabed area of 85,000 km2. This area also hosts significant oil and gas activity concentrated in deeper waters, which represents both an opportunity for offshore wind (through use of existing infrastructure) and a challenge (coexistence with platforms). The area also sees relatively intense marine traffic which would require careful planning to avoid undue interference with major shipping lanes. XVI Scenarios for Offshore Wind Development in Brazil South. This area represents the largest seabed (165,000 km2) and has good wind speeds over 8 m/s in shallow waters close to major industrial demand centers. It has the highest technical potential of all three areas (660 GW). However, it is located almost entirely within an Ecologically or Biologically Significant Area (EBSA) which increases the need for risk mitigation and careful designation of development zones. It is clear that Brazil has sufficient technical potential (i.e., area and wind resource) for offshore wind development at scale. As a next step, it is necessary to refine the commercial potential which accounts for constraints and exclusions that limit the developable areas. This includes social constraints (e.g., tourism and fisheries), environmental constraints (i.e., minimizing impact on sensitive biodiversity), and commercial constraints (i.e., areas where the resulting LCoE would be so high as to render them non- feasible). This report provides analysis to inform these constraints through a pragmatic Marine Spatial Plan (MSP) or a targeted sectoral spatial planning required to designate specific polygons for offshore wind development. As such, it does not specify “go” and “no go” areas, but rather provides risk and sensitivity mapping from an environmental, social, and commercial perspective. SCENARIOS FOR OFFSHORE WIND DEVELOPMENT The analysis underpinning this report is based on three potential growth scenarios for offshore wind development in Brazil. The most notable impacts of the three scenarios are summarized in Figure 1.4. #1 Base Case. This scenario considers modest growth of offshore wind in line with projections from the EPE Offshore Wind Roadmap, which projects 4 GW operational in 2035 and 16 GW by 2050, at which point offshore wind would represent 3 percent of the country's total generation. This represents an investment of US$40 billion by 2050, and an average rate of installation of a little less than 1 GW per year. Given Brazil’s expansive coastline, this would represent a utilization of only 1.2 percent of the available seabed. Given distribution of resources, it is likely that a majority of this development would occur in the Northeast region, although this would depend on constraints around tourism, fisheries, and grid evacuation capacity. The modest levels of growth would be unlikely to trigger significant investments in associated infrastructure (ports, vessels, and grid) and manufacturing (turbines, foundations, cabling, balance of plant, etc.). Under this scenario, offshore wind development would be dwarfed by onshore wind and solar development as well as existing hydro and thermal production. The #2 Intermediate and #3 Ambitious scenarios were not established (and have not been tested) through energy system modeling, which is recommended in due course. They have been based on high-level assumptions of the offshore wind capacity needed to decarbonize the Brazilian economy and reach net-zero goals. #2 Intermediate. This moderate-growth scenario looks at a future where offshore wind starts to play an important role in Brazil’s energy mix, with 8 GW by 2035 and 32 GW by 2050 at which point it would represent 6 percent of the country’s total generation capacity. Under this scenario, offshore wind takes up only 2.3 percent of the technically feasible seabed. Here, the installed capacity would be more evenly distributed in the three target areas, likely driven by transmission upgrades that facilitate evacuation to major demand centers and port upgrades to allow both construction/marshalling and operations and maintenance. These investments are justified by a steady rollout of 1.8 GW per year of projects with a total CapEx of US$80 billion. 1 Executive Summary XVII #3 Ambitious. This scenario considers a future where offshore wind is a key contributor to Brazil’s power mix, accounting for nearly one-fifth of the country’s generation mix by 2050 with 96 GW of installed capacity. Here, offshore wind becomes a common sight along the coast in all three areas, occupying 7.1 percent of the technically feasible seabed. This scenario was designed with the objective to place Brazil as a major country in offshore wind development and considers what offshore wind capacity will be needed to reach electrification and industrial decarbonization targets, in particular renewable energy needs for the expected GH2 demand by 2050. This scenario would require a total CapEx of US$240 billion and an average installation rate of 5.3 GW per year, which would be a far greater new build rate than any country at present, except for China. As a reference, in 2022 only 2,460 MW of offshore wind was added across all of Europe (well behind China with 5 GW). Annual additions of 5.3 GW would require—and drive—substantial upgrades to existing infrastructure and new manufacturing capacity additions, resulting in US$168 billion of gross cumulated value added and 6 million cumulated FTE years from 2028 to 2050. FIGURE 1.4 IMPACT OF THE THREE SCENARIOS. Base Case scenario 3% Fraction of electricity supply by 2050 Intermediate scenario 6% Ambitious scenario 19% 1,100 turbines Number of turbines by 2050 2,100 turbines 6,400 turbines 16 GW Offshore wind operating by 2050 32 GW 96 GW 57 thousand FTE/year (with low local content) Local employment created by 2050 175 thousand FTE/year 516 thousand FTE/year (with low high local content) US$15 billion National gross value added by 2050 US$55 billion US$168 billion CHALLENGES AND OPPORTUNITIES OF OFFSHORE WIND This report demonstrates that offshore wind can play an important role in Brazil’s energy future. However, there are a number of key challenges that will impact the nature of this development; each is a function of the path that the country chooses to take. High initial cost. It is certain that the first offshore wind projects will have a relatively high initial cost as the industry establishes the foundations for the sector and “learns by doing.” To close this cost gap, Brazil will need to explore options for concessional finance of both public and private sector portions of the projects. It will also need to ensure that initial seabed rights are allocated primarily on the basis of qualitative rather than price-based criteria that would ultimately inflate the costs of the project. It is expected that the costs would remain high in the #1 Base Case scenario, whereas a rapid fall in LCoE would be seen in the #3 Ambitious scenario. XVIII Scenarios for Offshore Wind Development in Brazil Access to financing. Brazil has built its existing onshore wind industry primarily through a strong role of the National Bank for Economic and Social Development (Banco Nacional de Desenvolvimento Econômico e Social, BNDES). The offshore wind industry is different than onshore if deployed at scale; that is, it is a much more capital-intensive sector requiring complex finance structures and involvement of many actors from public and private financial institutions. Under the #1 Base Case scenario, it is expected that BNDES would continue to take a lead role given the relatively modest CapEx requirements. Under the #3 Ambitious scenario, commercial banks and international financial institutions would be expected (and required) to take a leading role. Procurement. Brazil has traditionally secured power through target-year-based, technology-neutral regulated auctions, as well as—more recently—bilateral Power Purchase Agreements (PPAs). The high initial cost of the first offshore wind projects may require a modified approach whereby offshore wind is given a specific allocation, with the cost delta covered by ratepayers and—to the extent possible— concessional finance. It is expected that auctions may change in a few years to depend less on revenue support and more on the free market for energy sales. Under the #3 Ambitious scenario and regular procurements, it is expected that this delta would be quickly reduced. Grid integration. Experience in other countries suggests that significant offshore wind development may lead to congestion (either overloads or voltage excursion issues) at a local level if connected to transmission systems with limited evacuation potential. Here, the complementarity of offshore wind with hydro and onshore renewables would have an impact on power evacuation, although this would be less pronounced in certain regions. At higher penetration levels such as those foreseen under the #2 Intermediate and #3 Ambitious scenarios, it is likely that transmission upgrades will be required. There would also be a role for greater grid flexibility through the local use of energy storage to manage short-term over- and under-supply. Increased demand from GH2 and e-fuel production may also serve to reduce grid impacts. Environmental and social considerations. The Environmental & Social (E&S) considerations for offshore wind are different than those for onshore wind in terms of both receptors and affected populations, which in the case of offshore wind include fishers, marine traffic, and other sea users. Pressure on marine biodiversity, especially avifauna, marine mammals, and turtles might rise with an increase in maritime traffic. In the #1 Base Case scenario, there would be relatively little impact given the low usage of the available seabed. Under the #2 Intermediate scenario, the impacts will be greater, particularly if development extends into the Southern area, as offshore potential is located almost entirely within an EBSA. In the #3 Ambitious scenario, coverage of the seabed (7.1 percent) would be significant enough to drive higher-level concerns around E&S sensitivities. In these cases, it will be critical to align Environmental and Social Impact Assessment (ESIA) requirements with World Bank and IFC Performance Standards and conduct early consultations with affected communities. It is also recommended to conduct E&S sensitivity mapping to inform and complement spatial planning processes. Ports and logistics. Brazil boasts a robust port infrastructure, including terminals and shipyards along its entire coastline. However, at present none of these ports are able to meet the demands of an offshore wind project, particularly from the perspective of construction and marshalling. Under the #1 Base Case scenario, there would be little port development required as the buildout scale and associated CapEx would not be sufficient to drive these investments. However, under the #2 Intermediate scenario, investments would be required in key regional ports identified in the three areas (e.g., Pecém, Açu, and Rio Grande) where upgrades on quayside bearing capacity and storage area are needed for both cargo handling and marshalling activities. 1 Executive Summary XIX Supply chain. Brazil has developed a robust supply chain for onshore wind (generally 3 to 6 MW turbines); this would require significant investment to be capable of supplying the much larger turbines expected for offshore wind (15 MW+). Under the #1 Base Case scenario, it is unlikely that this would occur as the volumes of new offshore wind plants would be insufficient to drive new manufacturing capacity. Conversely, under the #3 Ambitious scenario there would be a substantial shift in the supply chain as manufacturers ramped up production of the larger turbines and established more of a presence near port infrastructure as many offshore wind components cannot be transported over land. To facilitate this, it will be necessary to establish a supply chain action plan through dialog with the industry. It is recommended that limited local content requirements (either explicit or through preferred funding from BNDES for qualifying manufacturers) be put in place initially as these would raise the price of the first projects. As the sector becomes established, local content incentives might be increased. Green Hydrogen. With its predominantly hydropower base, Brazil is in a good position to become a leading producer of GH2 (particularly in Europe where recent directives set that at least 90 percent of the mix needs to be from renewable energy for the hydrogen production to be considered “green”). Offshore wind may contribute to this ambition provided that it is built at scale and its costs drop quickly enough for the resulting Levelized Cost of Hydrogen (LCoH) to reach competitive levels. Analysis in this report suggests that offshore wind-based LCoH may fall to around US$3 per kgH2 for bottom-fixed offshore wind by 2050. The viability of this LCoH on export markets would depend on market prices. RECOMMENDED APPROACH Polic nd fr m work — 2023-2026 - D finition of n r str t nd polic t r ts - Conduct lon -t rm pow r s st m mod llin - Conduct t r t d s ctor l pl nnin - D t rmin l sin nd r v nu support D liv r — 2024-2031 Succ ssful - Ass ss nd impl m nt rid up r d s ( rid up r d s impl m nt d continuousl ) offshor wind - Ass ss nd impl m nt port up r d s industr - Suppl ch in support nd d v lopm nt, includin c p cit buildin First comm rci l proj cts — 2032 - P rmittin nd n in rin - Procur m nt ( uctions) - Fin ncin , construction, nd op r tion As described in the World Bank Group’s Key Factors reporti, the most critical first step in any emerging offshore wind market is to establish a clear energy strategy that signals the long-term role of offshore wind in the country’s energy future. It is clear that each of the three potential paths ahead represent a widely diverse outcome for Brazil. Under the #1 Base Case scenario, offshore becomes a very minor part of the energy mix and does not drive substantial economic change. Conversely, the #3 Ambitious scenario represents a widespread change from an economic, commercial, technical, and E&S perspective. In developing a long-term strategy, it is suggested that policymakers and stakeholders consider the following: i https://www.esmap.org/key-factors-for-successful-development-of-offshore-wind-in- XX Scenarios for Offshore Wind Development in Brazil ■ Offshore wind could be “Brazil’s new hydro” but only if it is built at scale, consistent with the targets set out under the #2 Intermediate or #3 Ambitious scenarios. ■ Brazil will need to invest heavily in transmission network expansion, port development, and manufacturing capacity if it wants to achieve the #2 Intermediate or #3 Ambitious scenarios, as pre-conditions for offshore wind development. As such, Brazil may want to consider focusing auctions for multiple areas within proximity of designated ports to allow for shared investment costs and to lower the LCoE across projects on a regional basis. ■ Brazil will need to act quickly to build on current interest, particularly in light of market conditions that are reducing investor appetite for non-core markets. Investors will require a clear path to market, including a process to gain seabed exclusivity and the possibility of participating in initial offshore wind-specific auctions. ■ Given offshore wind’s long development timeline, Brazil should move early to complete E&S sensitivity mapping and designate initial zones for offshore wind development. This report aims to evaluate offshore wind potential and possible growth scenarios for offshore wind in Brazil, through a broad view of current capabilities, potential synergies, necessary changes, and actions to inform decision-making. It is a first step in assessing how this source could be developed in the country, its opportunities and challenges, and most importantly, how to get there through a set of 45 actionable recommendations by topic. The Brazilian offshore wind development scenarios report is structured as follows: ■ Scenarios report summary • Section 1: Executive Summary. • Section 2: Description of three scenarios proposed for this study and the challenges and potential implications for offshore wind development in Brazil. • Section 3: Recommendations for offshore wind development in Brazil. ■ Supporting Information • Sections 4–17: Analysis covering key aspects of the future of offshore wind in Brazil. ■ Appendices ■ Appendix A to G provide additional supporting information, including maps, reports, analysis, and methodologies related to biodiversity, regulatory framework, and hydrogen, among others. 1 Executive Summary XXI 2 SCENARIOS FOR OFFSHORE WIND IN BRAZIL 2.1 SCENARIOS OVERVIEW Brazil has a long track record of using investment decision models (MDI) to plan the expansion of the electricity mix, with the main objective of obtaining the minimum investment and operational cost. This task is mainly under the responsibility of EPE on behalf of the MME. EPE prepared PEN 2050 [10], in which one scenario (S15) includes the possibility of introducing offshore wind in the energy matrix. This scenario is considered as #1 Base Case scenario in our analysis. Furthermore, there are two additional scenarios developed in the present report, #2 Intermediate and #3 Ambitious, which assume a significantly larger development of offshore wind in the country based in part on the expected increase in demand for GH2 globally to meet net-zero targets by 2050. Table 2.1 presents the proposed scenarios and respective expected installed capacity in 2035 and 2050. The #2 Intermediate and #3 Ambitious scenarios were not established (and have not been tested) through energy system modeling, which is recommended in due course. They have been based on high- level assumptions of the offshore wind capacity needed to decarbonize the Brazilian economy and reach net-zero goals. The #2 Intermediate scenario was designed to represent a mid-point between #1 Base Case and #3 Ambitious, and was based on the Deep Decarbonization of the Energy System scenario, presented in the World Bank Country Climate and Development Report (CCDR) for Brazil [11], which analyzes different scenarios for Brazil’s net-zero path for 2050. The #3 Ambitious scenario was designed to position Brazil as a major player in offshore wind development and considers the higher offshore wind capacities which will be needed to reach electrification and industrial decarbonization targets, in particular renewable energy needs for expected GH2 demand by 2050. Analyses, political decisions, and integrated resource planning will be necessary to conceive and structure the low carbon energy path that is most beneficial for Brazil. It is noted that the actual volumes of installed offshore wind may differ substantially from the scenarios evaluated in this section, both in terms of overall quantum and phasing across future decades, which will be subject to long-term Brazilian government strategies for offshore wind through its offshore wind growth targets. 1 Scenarios for Offshore Wind Development in Brazil TABLE 2.1 OFFSHORE WIND GROWTH SCENARIOS BY 2035 AND 2050. #1 Base Case #2 Intermediate #3 Ambitious 2035 4 GW 8 GW 16 GW 2050 16 GW 32 GW 96 GW Rationale This scenario is model-based It is assumed that offshore It is assumed that offshore and is taken from PNE 2050 wind is a priority in Brazil wind is a priority in Brazil (EPE) [10], scenario S15, which to cover expected increased to cover a significant part of considers a 20 percent CapEx electricity demand, in part from GH2 demand to meet net zero reduction up to 2050. expanded GH2 demand. targets by 2050. This figure is similar to the In this scenario, offshore offshore wind capacity foreseen wind capacity (96 GW) would in the Deep Decarbonization of be equivalent to supplying the Energy System scenario 3 percent of H2 global demand conducted in the CCDR (of (16 Mt H2/year). 28 GW). The estimates were derived The estimates were derived from the BNDES study [12]. from the BNDES study [12], which uses the Net Zero Emissions scenarios from the International Energy Agency (IEA) as reference. Overview To meet this scenario, To meet this scenario, To meet this scenario, offshore wind would represent offshore wind would represent offshore wind would represent approximately 3 percent approximately 6 percent of approximately 19 percent of of the total expected installed the total installed electrical the total installed electrical electrical generation generation capacity by 2050 generation capacity by 2050 capacity by 2050 as as forecasted in PNE 2050. as forecasted in PNE 2050. forecasted in PNE 2050. In this case, the offshore wind capacity is equivalent to serving 1 percent of GH global demand. Another reference is the study prepared by the Centro Brasileiro de Relações Internacionais (Brazilian Center for International Relations—CEBRI), which estimates that Brazil should reach between 21 and 32 Mt of hydrogen production by 2050, of which approximately 4 Mt H2/year are for export [13]. Please note that the scenarios are intended to provide an initial understanding of the capabilities required, the actions to be taken, and the possible positive impacts in the country if the offshore wind market scales up. It only presents possible growth paths based on the Brazilian potential and expected net-zero targets, both at the national and international levels. As such, they are not intended to be detailed forecasts based on a long-term expansion planning model that considers the evolution of sources based on a least-cost approach. 2.1.1 Areas of Interest Three macro areas of possible offshore development within Brazil’s EEZ have been identified through a preliminary geospatial analysis, where geographical, physical, and technical aspects have been considered. These three areas have been defined using the following main criteria, based on the best practices and experience in the sector for offshore wind development. 2 Scenarios for Offshore Wind in Brazil 2 FIGURE 2.1 MAIN CRITERIA FOR DEFINITION OF OFFSHORE WIND AREAS OF INTEREST. Wind speed Bathymetry Distance to coast > 7 m/s (100m a.s.l.) < 1,000 m depth < 200 km TABLE 2.2 CHARACTERISTICS OF THE 3 DEFINED MACRO-AREAS. NORTHEAST SOUTHEAST SOUTH macro-area 89,000 km2 macro-area 85,000 km2 macro-area 165,000 km2 This area has mostly a depth This region has great potential for This area has a significant share between 0 and 70 m, with both fixed and floating offshore with depths of less than 70 m. Still, possibilities for bottom-fixed wind solutions, despite the fact more than half of the area is deeper technology. All the projects that all the registered projects are than 70 m. submitted to IBAMA (Instituto in the bottom-fixed area. All the registered projects, except Brasileiro do Meio Ambiente e This region has intense oil and gas one, are in areas with less than dos Recursos Naturais (Brazilian activity that is more concentrated 70 m of depth, allowing for bottom- Institute of Environment and in deeper water regions. This, fixed technology. Renewable Natural Resources)) are however, could represent an This area is almost entirely within within the bottom-fixed area. opportunity to integrate offshore an EBSA, as discussed in Section 6. Additionally, this zone is the closest wind and O&G (Oil and Gas) aimed to the shoreline with exception at decarbonizing operations. of multiple smaller areas of Marine traffic is also intense in this shallow waters (islands) located region, especially due to the O&G further away. activities. Further comments are Social and environmental provided in Section 6. sensitivities have great relevance, which are discussed in more detail in Section 6. There is also a possibility for joint development with hydrogen projects, as many projects are concentrated in this region, especially in the state of Ceará. Further comments are provided in Section 14. The installed capacity for each scenario would only require a small percentage of the total seabed identified across the combined macro areas: #1 Base Case—16 GW by 2050 would occupy 1.2 percent of the total combined macro-area identified. #2 Intermediate—32 GW by 2050 would occupy 2.3 percent of the total combined macro-area identified. #3 Ambitious—96 GW by 2050 would occupy 7.1 percent of the total combined macro-area identified. Therefore, Brazil has enough maritime space for the development of offshore wind projects, even when considering an ambitious scenario of 96 GW. This reality is particular to Brazil and different than many other countries, which have limited areas with suitable conditions. 3 Scenarios for Offshore Wind Development in Brazil Going forward, maritime spatial planning and engagement with stakeholders for the sustainable and adequate development of Brazil’s maritime region is essential and must be conducted following best practices. Figure 2.2 presents the preliminary identified offshore wind macro-areas. Note that the potential development risks within these macro areas, associated to environmental and social considerations, as well as interactions with other marine uses, are thoroughly discussed in Section 6 and are not depicted in the following figure. FIGURE 2.2 REGIONS OF INTEREST FOR OFFSHORE WIND DEVELOPMENT IN BRAZIL. 2 Scenarios for Offshore Wind in Brazil 4 From these areas, it will be necessary to apply a series of constraints to determine the actual developable area. These constraints may include: ■ Fishing areas with commercial interest; ■ Military areas or zones of military exercises; ■ Environmental considerations, including more detailed information on key biodiversity areas and threatened species; ■ Social considerations, such as visual impact and tourism activities; ■ Detailed geology assessment with more information on the lithology under the seabed as well as tectonic activity; and ■ Enabling infrastructure, such as grid capacity and port facilities (assessments included in Sections 4 and 7). A preliminary analysis of these constraints has been carried out in Section 6. However, it should be noted that more detailed assessments will be necessary to understand the actual implications of these constraints. For this, a MSP is useful. The Brazilian MSP planning and execution is under the Comissão Interministerial para os Recursos do Mar (CIRM) responsibility and is mainly led by the Navy and the Ministério do Meio Ambiente e Mudança do Clima (MMA). The MSP is part of an initiative called Plano de Levantamento da Plataforma Continental Brasileira (Brazilian Continental Shelf Survey Plan LEPLAC). The Brazilian MSP is divided into four regions (South, Southeast, Northeast, and North). The most advanced initiative is the MSP for the South region for which the MSP work commenced in early 2024 and will take three years to be completed. In addition, in November 2023, the procurement process for the Southeast and Northeast MSP was launched. For the Southeast MSP work, the contract was awarded in early 2024, also with a three-year timeline to be completed. For the Northeast and North regions, MSP work will be initiated later in 2024/2025. Once the expected additional marine protected areas are identified, the MSP process should also consider Brazil's recent 30x30 target commitment, to transform 30 percent of the sea waters into protected areas. This will impact which areas are identified as potential areas for offshore wind development. The South and Southeast MSPs are currently being financed by BNDES (BNDES FEP) while the Northeast MSP has the support from the Fundo Brasileiro para a Biodiversidade (FUNBIO). 5 Scenarios for Offshore Wind Development in Brazil 2.1.2 Volumes Figure 2.3 shows the assumed annual and cumulative installed offshore wind capacity for the three development scenarios. FIGURE 2.3 ASSUMED ANNUAL INSTALLED AND CUMULATIVE OPERATING CAPACITY IN THE THREE SCENARIOS IN BRAZIL, 2030–2050. 96.0 88.0 Cumulative Installed Capacity (GW) 80.0 72.0 64.0 56.0 48.0 40.0 32.0 24.0 16.0 8.0 0.0 30 50 40 38 36 39 48 28 29 46 49 33 35 34 43 32 45 44 42 37 47 31 41 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Base case Intermediate Ambitious Source: DNV In all cases, the starting point for offshore wind project installation is set in year 2032. The scenarios show a smooth, upward trend in cumulative installed capacity, assuming regular auction calendar to be run by the Brazilian government. However, actual annual installation rates can be expected to vary due to auction size and timing. Experience from established markets is that offshore wind development timescales are significantly longer than for onshore wind and solar projects. Figure 2.4 shows an estimated program for a representative offshore wind project. In Brazil, pre-development activities are already progressing (mainly pre-feasibility studies), as well as maturation of offshore wind regulations and laws. To achieve an installation year of 2032 for the first offshore wind projects in Brazil, the first tender should be launched at the latest in early 2025. To deliver offshore wind successfully, a well-coordinated effort is required across the government. The magnitude and scale of this collaboration will quickly increase once areas have been allocated and project developers seek to make progress. A designated offshore wind working group is good practice as it helps to bring structure and formality to the multi-agency collaboration. This will help early on in the discussions and decision making required to establish the foundations for this new industry, and will also help as the industry progresses and new challenges are encountered. The formation of a working group will also help provide more confidence to the offshore wind industry that the government is being proactive in planning and addressing risks. 2 Scenarios for Offshore Wind in Brazil 6 7 Source: DNV Phase 1: Phase 2: Phase 3: Activity Preparation Initiation Industrialization 2031 2047 2027 2024 2042 2044 2023 2025 2032 2034 2043 2045 2033 2035 2026 2029 2046 2049 2028 2041 2048 2036 2039 2038 2040 2030 2037 2050 1 Policy and Frameworks 1.1 Establish strategy, policy, and targets 1.2 Develop an MSP including OSW 1.3 Determine leasing and revenue support 1.4 Establish key frameworks and responsabilities 1.5 Issue first leases (e.g., via competition) 1.6 Implement revenue support for early projects 2 Infrastructure and Delivery 2.1 Assess and implement grid updates 2.2 Assess and implement port upgrades Scenarios for Offshore Wind Development in Brazil 2.3 Supply chain support and development 3 Early Adopter Projects 3.1 Leasing 3.2 Permitting and high level engineering 3.3 Access to revenue support 3.4 Procurement and detailed engineering 3.5 Construction and operation 4 Commercial Projects 4.1 Leasing 4.2 Permitting and high level engineering 4.3 Access to revenue support FIGURE 2.4 OFFSHORE WIND DEVELOPMENT EXPECTED TIMELINE FOR BRAZIL. 4.4 Procurement and detailed engineering 4.5 Construction and operation Energy Policy Council—CNPE) to create a working group for the development of offshore wind. Brazil’s MME has recently been working through the Conselho Nacional de Política Energética (National 2.2 CHALLENGES AND POTENTIAL IMPLICATIONS OF THE SCENARIOS The three scenarios (#1 Base Case, #2 Intermediate, and #3 Ambitious) proposed in this report represent significantly different landscapes and imply a large variety of challenges for the country in terms of electrical grid, supply chain, ports infrastructure, labor, permitting, and regulatory aspects of environmental and social impacts. Sections below present an initial summary of the implications that the development of the offshore wind industry could bring to Brazil for each scenario. Further details are provided in Sections 4 to 17. The table below indicates some reference values for each of the scenarios, which demonstrates the difference in magnitude between them. These topics will be addressed throughout the next sections, as well as their potential implications. TABLE 2.3 REFERENCE VALUES FOR EACH OF THE SCENARIOS. Key Aspects by 2050 Unit #1 Base Case #2 Intermediate #3 Ambitious Fraction of electricity supply % of total supply 3% 6% 19% Offshore wind operating GW 16 32 96 Average capacity installed per year GW/year 0.9 1.8 5.3 Capital required bi US$ 40 80 240 2.2.1 Offshore Wind Contribution to the Grid When assessing the potential contribution of offshore wind generation and its role in managing variability, different trends were observed at the regional level. ■ In the South region, offshore wind farms demonstrated remarkable similarity to onshore wind farms but with slightly improved efficiency and with exceptionally low inter annual variability, making it a dependable source of renewable energy for the region. ■ In the Southeast region, the energy landscape depends heavily on thermal power plants, with limited onshore wind capacity, and therefore offshore wind emerges as a promising option to increase renewable energy generation in the region. ■ In the Northeast region, minimal variability in solar photovoltaic generation was observed on a monthly basis, making it a stable energy source. Moreover, the complementarity between solar and wind (onshore and offshore) power in this region was evident, with wind farms reaching peak generation during periods when solar plants experience night-time downtime. At a national level, the investigations also revealed regional variations in power generation and consumption. Notably, the North and Northeast regions exhibited surplus energy within their respective electric systems, while the Southeast and South regions, exhibited deficits of energy. Numerical simulations of offshore wind power generation suggest that, on a national scale, both onshore and offshore wind efficiencies are anticipated to be comparable. Furthermore, offshore wind power has the potential to complement the seasonal variation of hydropower, thereby potentially mitigating its variability on a national scale and supporting balancing the surplus and deficits of energy. 2 Scenarios for Offshore Wind in Brazil 8 Offshore wind energy also appears as a promising solution for Brazil’s electric grid challenges, helping address the energy trilemma. Generating electricity offshore, closer to demand points, reduces transmission losses and complements other renewables like solar photovoltaic (PV). This analysis shows offshore wind’s potential in Brazil’s transition to an even more sustainable and reliable grid. Regional analysis highlight its efficiency, reliability, and grid integration benefits. It is noted that significant offshore wind development may lead to congestion (either overloads or voltage excursion issues) at a local level especially if connected to less developed grids, given the size of offshore wind plants, especially in scenarios #2 Intermediate and #3 Ambitious. Energy storage on the grid and enabling flexible demand is a challenge that will have to be addressed in a system with a high penetration of renewables. The strategic use of batteries to manage short-term over- and under-supply, as well as green hydrogen and e-fuels generation for longer periods, will be potential solutions for providing this flexibility. 2.2.2 Preliminary Environmental and Social Considerations The E&S considerations for the development of offshore wind are different than those for onshore wind in terms of receptors, which in the case of offshore wind also include fishers, shipping, and many other sea users. However, the concept and process of Environmental and Social Impact Assessment (EIA) have strong parallels. Furthermore, Brazil has a historical offshore O&G industry which means that offshore developments and some of their potential E&S impacts are familiar to the different stakeholders. The availability of E&S data concerning the marine environment is not always sufficient and could be a potential constraint that could slow offshore wind developments or result in misleading assessments on potential impacts. Local studies covering different E&S topics will be needed during EIA and MSP preparation. On this matter, the Brazilian MSP is currently under development and aims to organize the maritime space, its specific uses, and the environmental data available as well. Some of the constraints associated with offshore wind projects, which will need to be assessed for a more accurate analysis of the potential capacity, include fishing areas, military areas, environmental and social considerations, geology assessment, enabling infrastructure, etc. When evaluating these constraints and considering the three scenarios identified in Section 2, the following considerations regarding the E&S impact can be made: ■ #1 Base Case—With relatively low seabed coverage, it will be possible to build offshore wind farms in areas of low E&S sensitivity under this Scenario. The gradual installation of offshore wind capacity will limit cumulative impacts during construction activities and will allow social considerations to be managed more carefully due to the low development pressure. ■ #2 Intermediate—Under this Scenario, it will still be possible to build offshore wind farms in areas of low E&S sensitivity. However, relatively more active construction activities will intensify maritime traffic and potentially cause low to moderate biodiversity disturbance. The gradual capacity installation will limit cumulative impacts, which might increase towards 2050 when installation efforts will become more sustained. Social pressure on affected communities might become a concern if not carefully managed with the increase of the development efforts. 9 Scenarios for Offshore Wind Development in Brazil ■ #3 Ambitious—Concerning site selection, potential E&S impacts for this scenario will be moderate to high, but there will still be the possibility to build offshore wind farms in areas of low E&S sensitivity by applying mitigation measures to reduce the impacts. However, maritime traffic will be intensified, especially towards 2050, increasing the risk of possible cumulative impacts on biodiversity, fisher communities, and other maritime operations. Pressure on marine biodiversity, especially birdlife, marine mammals, and turtles, might increase, with consequent increments in the fatality rates, biodiversity displacement, and disturbance of feeding, breeding, and spawning areas. Social acceptance and mitigation measures and solutions might be strained under the pace of the construction effort which will be relatively intense. 2.2.3 Ports and Logistics Infrastructure Brazil boasts a robust port infrastructure, encompassing ports, terminals, and shipyards along its entire coastline. However, it is essential to note that currently, none of these ports have the necessary readiness to meet the construction demands of an offshore wind project. Necessary improvements required would include, among others, increasing handling capacity and crane reach, increasing bearing capacity of storage and quayside areas, increasing the number of cranes, or increasing the maximum water depth. Based on this, the following considerations about ports and logistic infrastructure can be made regarding the three scenarios defined in this report: ■ #1 Base Case—Considering construction time between two to three years per project, there may be a business case for selected Brazilian ports to make investments in the necessary upgrades. ■ #2 Intermediate—In this context, there will likely be a business case to explore all three macro regions and thus justify upgrading infrastructure and capabilities for the three main ports identified. Besides, the steady and high growth rate for offshore wind will likely demand a dedicated area in the port to handle storage, pre-assembly, and loading operations. ■ #3 Ambitious—A key driver for this scenario will be the production of GH2 which is in line with the development plans of the main Brazilian ports. The combination of offshore wind and GH2 could make a strong business case for the development of required capability in the identified main ports to support both industries. Moreover, other smaller ports (or even new ports) may be candidates to absorb part of the demand for construction activities and work together with main ports to deliver offshore wind projects according to the expected timescale. Further details regarding port infrastructure in Brazil is provided in Section 7. 2.2.4 Supply Chain In recent years, Brazil has built a strong technological capability in energy projects through its extensive experience both in onshore wind and oil and gas industries. The country has a well- established supply chain which covers all development stages from project management, engineering, legal support, transmission/distribution, permitting, regulatory compliance, and geotechnical expertise up to installation and operation. This existing set of infrastructure, workforce, knowledge, 2 Scenarios for Offshore Wind in Brazil 10 and experience forms a solid base upon which Brazil can start to work on solutions to answer the challenges for offshore wind. This report establishes the following categorization list of the supply chain, as well as presented services and components for offshore wind. After the initial assessment of the Brazilian supply chain, it can be concluded that the industry is well placed to start developing offshore wind projects, although additional work and investments will be required to supply components and installation works. TABLE 2.4 SUPPLY CHAIN MAIN COMMENTS AND READINESS LEVEL. Supply Chain Readiness Main Comments Package Level Project Even though Brazil offshore wind is at a very initial stage, it can draw from development well-established infrastructure sectors such as onshore wind and O&G. Aspects such as Legal, Consenting, and Regulatory require local expertise because they are strictly related to national policies, regulations, and standards. In relation to site surveys, these are standard practices for both HIGH O&G and onshore wind sectors, and therefore, can benefit from various experienced local providers. In overall terms, despite having strong technological capabilities in the country, all activities in the project development package will require some investment, mainly in qualifications and new skills, to meet offshore wind needs. Turbines As a result of local content policy stimulated by the BNDES FINAME (Financiamento de máquinas e equipamentos (Financing Fund for the Acquisition of Machinery and Equipment)) program, during the development of the onshore wind sector in Brazil, top international onshore wind turbine manufacturers are present in the country, however this currently corresponds only to onshore wind facilities which perform nacelle and hub assembly. The Brazilian manufacturer WEG has also shown its interest in larger wind turbines and has announced a cooperation agreement with Petrobras to develop a 7.X MW onshore platform. Furthermore, several Chinese Wind Turbine Generator (WTG) manufacturers have indicated their interest to participate in the development of the offshore industry in Brazil. MEDIUM Blades, towers, and other small component suppliers have local facilities in Brazil and supply components for the top turbine manufacturers referred above. However, despite the experience gained with onshore wind projects, all these local suppliers will face significant challenges when it comes to offshore wind, given the size of equipment and the different operational conditions. An example of this is the blades, where latest offshore wind turbine models use blades over 100 m long, compared to the longest onshore blades of 80 m. In the case of the onshore wind energy industry, the local manufacturing of wind turbines has led to the development of national suppliers which are important players across the complex wind supply chain and may have the potential to support offshore wind industry as well. Balance of plant Main balance of plant elements in an offshore wind farm correspond to foundation structures, cable array and export cable, offshore substation, and onshore infrastructure. In this sense, there are many Brazilian or international companies located in Brazil, and with significant experience in LOW the offshore industry, which could supply solutions or materials and components. However, Brazilian companies do not have experience in offshore wind yet, and therefore, participation of international companies with specific experience in offshore wind will still be required. 11 Scenarios for Offshore Wind Development in Brazil Supply Chain Readiness Main Comments Package Level Installation and The supply of this service is mainly associated with the availability of commissioning vessels. There are international companies with offices in Brazil which have installation vessels for offshore wind operating worldwide. However, their main activity in the country is most often related to O&G, and there are no LOW vessels currently in Brazil which are capable, or have the potential, of being used for offshore wind installation works. Therefore, Brazil will need to rely on vessels operating globally until such a local fleet is established. Operation, It is expected that the Brazilian market will be able to draw synergies from maintenance, the Maritime and O&G experience to cope with asset management and and service logistics to provide an adequate operation and maintenance of the wind HIGH turbines and balance of plant. Operation, maintenance, and services are likely to be carried out locally, drawing on existing capabilities in related fields. Decommissioning Decommissioning presents various challenges, including limitations of vessel technology, and absence of specific regulations, thereby increasing the uncertainty of the process. For example, the same vessels deployed in installation activities will, most likely, be required to remove turbine components, foundation, and energy cables. Current investment risk is high due to uncertainties in the MEDIUM scope of activities that will be required, but standard practices will be set as the industry becomes more mature. In this sense, Brazil has already some experience with the decommissioning activities of onshore wind farms and O&G platforms as well. The industry in Brazil will likely face a significant challenge to develop a mature supply chain due to the large deployment volumes expected for all three scenarios. Yet, the country can be expected to navigate the challenges ahead thanks to its well-established industry serving general energy and infrastructure projects, paired with a clear auction calendar to provide visibility of long-term targets. Section 8 provides a more detailed evaluation of the current capability and gaps of the Brazilian local supply chain to manufacture and deliver components and services required for the successful implementation of offshore wind projects. 2.2.5 Economic Impact Analysis The potential for job creation and direct investment are the main parameters to reflect the economic impact of offshore wind in Brazil. An analysis of these parameters has been performed under the three scenarios established in Section 2 and for two different Brazilian local content assumptions (low and high), considering opportunities at different stages of the industry, including development, project planning, wind turbine and foundation supply and installation, electrical infrastructure, and operation. The more offshore wind capacity is installed through time, the more revenue is generated, which in turn increases the Gross Value Add (GVA) and FTE years of employment. In addition, with local content increasing through time, higher FTE years will be created. As a reference, the #1 Base Case scenario and low local content scenario result in over US$15 billion in cumulated national GVA and 614,000 FTE years from 2028 to 2050. While the #3 Ambitious scenario and high local content scenario results in over US$168 billion in national gross cumulated value added and 6 million cumulated FTE years from 2028 to 2050. 2 Scenarios for Offshore Wind in Brazil 12 In terms of annual values, the annual GVA for the three different capacity scenarios and for the two local content scenarios, ranges from US$2.3 billion to 9.4 billion in 2035 and from US$2.1 billion to 8.6 billion in 2050. And in the case of annual FTE years, this ranges from 26,000 to 183,000 FTE years in 2035 and from 57,000 to 516,000 FTE years in 2050. Further details of the results of GVA and FTE analysis are provided in Section 9. 2.2.6 Capacity Building The rapid growth of the offshore wind sector requires a balance between the demand and supply of skills and competencies, to avoid shortages and assure the availability of human resources. This can only be achieved through close coordination between industry, government, and training institutions to attract broader and more diverse candidates for the future workforce. In this regard, understanding what talents would be required, or at what rate they will be developed, is critical for all stakeholders to enable an effective progress of the industry. Regarding the current existing capacity in the country, the Brazilian O&G sector has the human resources, industrial facilities, and technological experience to deal with the specific complexity of offshore energy projects through re-skilling programs. On the public sector, investment is required to train public servants in designing and managing this emerging industry for Brazil. A core team with full-time dedication will need to be appointed to drive the effort and build on the learning from other international institutions such as The Crown Estate. Additionally, dedicated personnel from all the ministries and agencies that are expected to play a role will have to be appointed to coordinate with the industry on key matters such as grid permitting, environmental authorizations, environmental and labor related supervision and control, economic activities supervision, higher/technical education, or value-added tax (VAT) public programs, among others. Also, it is noted that currently there is a global lack of professionals to support the expected offshore wind deployment rates, which require specific and qualified training for both private and public sectors in Brazil. This shortage of professionals is a worldwide recognized challenge for the sector, which may represent an opportunity for Brazil. Due to the large potential observed for all three scenarios, Brazil has the opportunity to become a reference country in the sector worldwide and export professional services to other offshore wind markets. Further details of capacity building aspects are provided in Section 10. 13 Scenarios for Offshore Wind Development in Brazil 2.2.7 Permitting and Regulatory Framework As of February 2024, the legal and regulatory framework in Brazil—Decree 10.946/2022, Ordinance 52/2022, and Ordinance 3/2022—aims to regulate the transfer of offshore areas for the installation of plants for power generation. Although it is not the legal framework of the offshore industry, the provisions contained in such regulations are based on provisions found in ordinary laws that deal with the maritime space and the institutional model of the power sector, including the grants required for the exploration of activities such as power generation. Regarding the legal framework, the Bill of Law 11.247/2018 (PL 576/21) is under discussion in the Brazilian Congress. This bill has already been approved in the House of Representatives on 29 November, 2023 and is currently being analyzed by the Senate with a different ID number (5.932/2023). The legal framework is common to all scenarios and is an important mechanism to provide legal security for all stakeholders. Despite this, it is important to consider relevant aspects that may impact the offshore industry development cycle. Recommendations and good practices for an offshore wind regulatory framework are discussed in Section 3 below. A detailed assessment of the permitting, regulatory, consenting, and legal framework for offshore wind is provided in Section 12, to outline both the existing processes and identify specific gaps where work is needed to provide an appropriate framework for offshore wind project development. 2.2.8 Health and Safety Based on the existing framework in Brazil on regulations for H&S, it is understood that, in general, existing regulations will be applicable for offshore wind, specifically the ones that are not industry specific. For more complex installations where, for instance, permanent manning or helidecks are required, O&G industry and marine regulations (e.g. those from Ministry of Labor & Employment and Navy) may be taken as a starting point for defining specific regulations for the offshore wind sector in Brazil. Even though it is known that O&G activities have different H&S risks associated with them due to the presence of pressurized hydrocarbons, these regulations have been used as a starting point for offshore wind H&S standards in other markets. It is important to note that Brazil’s current national legislation is quite complete and continuously updated, covering aspects from the different life cycle phases for an installation, from construction to operation. Additionally, international standards and directives that Brazil is signatory of are reviewed to ensure best practices are incorporated into local regulations. 2.2.9 Cost of Energy Analysis As mentioned previously, Brazil has a long track record of using MDIs to plan the expansion of the electricity mix, where minimizing investment and operational cost is considered for scenarios of interest. Therefore, economic viability of offshore wind relative to other energy sources (both fossil fuel and low carbon emissions) will likely be a pivotal aspect in the development of offshore wind in Brazil over the coming decades. 2 Scenarios for Offshore Wind in Brazil 14 A detailed assessment was performed for the three macro-areas presented in Figure 2.2. A total of 11 “representative project” locations were selected across these three regions and site-specific data was collected for each location. This data was combined with assumptions of technological developments in 2030, 2040, and 2050 (increase of turbine size from 15 up to 25 MW, and bottom-fixed vs floating structures) and were run using Renewables. Architect tool (DNV’s in-house suite) for wind design and cost-modeling, totaling over 100 individual scenarios. As a result, bottom-fixed offshore wind LCoE projections show a significant reduction over the period from 2030 to 2050, with LCoE projected to decline between 19 to 36 percent from US$64/MWh in 2030 to US$41 to 52/MWh in 2050. Floating offshore wind experiences a 24 to 50 percent reduction in LCoE across the time period, going from US$124/MWh in 2030 to US$62 to 94/MWh in 2050. FIGURE 2.5 LCOE ESTIMATES FOR OFFSHORE WIND PROJECTS IN BRAZIL FROM 2030 TO 2050. 140.00 120.00 LCoE (2023 USD/MWh) 100.00 80.00 60.00 40.00 20.00 0.00 #1 Base Case #2 Intermediate #3 Ambitious #1 Base Case #2 Intermediate #3 Ambitious Bottom—fixed structure Floating structure 2030 2040 2050 It is noted that LCoE values in Figure 2.5 represent ranges for all the regions in Brazil. However, when assessing LCoE by region (Northeast, Southeast, and South), it was observed that the higher wind resource in the Northeast region was the main driver in achieving a lower LCoE than in the Southeast and South regions. The LCoE projections, shown in Figure 2.5, present what this study considers reasonable ranges given the assumptions made. However, it is stressed that at the time of publication there is significant uncertainty over the next several years in the cost of energy and cost of commodities critical to wind farm component fabrication, installation, and operation and maintenance. Also, there is an uncertainty on the impact that a large offshore wind market may have on the LCoE. Large projects and higher growth scenarios (#2 Intermediate and #3 Ambitious) are expected to bring cost reduction benefits available at scale as can be seen in Figure 2.5. Competitive auctions typically favor larger projects for this reason. Further details on the assumptions made and results of this LCoE analysis are provided in Section 13. 15 Scenarios for Offshore Wind Development in Brazil 2.2.10 Offshore Wind and Hydrogen Hydrogen production, particularly GH2 (produced using renewable energy), has been presented as a key strategy to achieve global net-zero emissions by 2050. In this context, there is a growing demand for energy to produce GH2, which represents an opportunity for renewable energy sources, such as offshore wind. Offshore wind and GH2 present several synergies that can support their adoption, such as a reduction in transmission costs and losses or avoiding curtailment and providing flexibility to the system. Specifically in the context of Brazil, the GH2 projects announced until 2031 already pose a considerable energy demand challenge, reaching 14 GW of renewables' installed capacity. Considering the current supply from the grid, this demand can represent an even greater challenge, especially in the Northeast region where the points of interconnection have very limited or no spare capacity by 2027. Regarding the Levelized Cost of Hydrogen (LCOH), the estimates for generation from offshore wind in 2050 (US$2.9 to 3.3/KgH2) are in a comparable range with the results for onshore wind and solar (US$2.2 to 3.2/KgH2). However, it is important to highlight that costs for onshore wind and solar are also expected to decline by 2050. In this scenario, Brazil's investment in GH2 produced with offshore wind would support Brazil's strategy to export GH2 and derivatives to the European Union (EU), being in line with the Delegated Act 27 from the EU, which mandates renewables to account for at least 90 percent of the energy mix for qualifying GH2 production. Further details of the potential for hydrogen generation are provided in Section 14. 2.2.11 Role of Public Financial Support The offshore wind industry, as a capital-intensive sector, will likely require finance structures with involvement of many stakeholders from public and private financing to equity investments, green bonds, or tax and policy incentives. In the case of Brazil, BNDES is involved in the development and construction of almost all large infrastructure projects in the country, through the provision of financial support. And in the case off the offshore wind industry, it is expected that BNDES will play a similar role. This financing from the national bank is often linked to establishing a local content requirement, which in some industries can be rather strict. However, for offshore wind, where the supply chain is very international while the local industry is not yet fully developed to address the needs of local projects, it is expected that these local content requirements would be relaxed to allow for international and experienced companies to participate. For example, BNDES has recently released local content rules for renewable hydrogen and battery storage systems that consider a progressive requirement for local content over the years based on the expected development of the local supply chain. Also, the Brazilian national government should provide greater certainty to financing and debt risk assessments, by providing certainty in regulatory framework, including potential incentives (provided they do not impose additional costs to the end consumer), and clear visibility in long-term policies. 2 Scenarios for Offshore Wind in Brazil 16 The preliminary assessment performed in this report, estimates that the need for investment under each scenario until 2050 may vary significantly, as shown in Table 2.5. It is also noted that each development scenario may have a different impact on how public financing may evolve. TABLE 2.5 IMPACT OF OFFSHORE WIND DEVELOPMENT SCENARIOS IN PUBLIC FINANCING IN BRAZIL. Capacity (GW) / Scenario Comments on impact in each development scenario Investment 2050 • Only large players would enter the market. 16 GW • Mainly involvement of BNDES. #1 Base Case US$40 billion • No prioritization of long-term policies from the Brazilian government. • Low flow of foreign investment. • Clear conditions in Brazilian market to promote investment. 32 GW • BNDES finances with participation of multilaterals and commercial/ #2 Intermediate US$80 billion private lenders. • Subsidies and incentives to promote the growth of the industry. • Great openness of the market to diverse sources of financing. 96 GW • BNDES to lead financing market but to mobilize large amount of #3 Ambitious US$240 billion funds from international lenders/investors/multilaterals. • Strong international interest in Brazilian market. Further details of public financial support are provided in Section 15. 2.2.12 Procurement of Energy The procurement of renewable energy in Brazil evolved from initial Feed-In-Tariffs in the PROINFA program (2002) to regulated energy auctions, i.e., competitive bidding processes which started in 2009. As of 2024, there is also the possibility to sign bilateral PPAs under the ACL (Ambiente de Contratação Livre (Free Contracting Market)). Regulated energy auctions are the most common mechanism for procurement of renewable energy in Brazil and this led the country to be one of the leaders in terms of implementation of public programs to promote renewable energy generation. The competitive bidding process has been extensively applied in Brazil to adjudicate new generation authorizations onshore, and consequently, it is recommended to continue this approach for offshore wind. Considering the three scenarios identified in this report, it is expected that the volume and frequency of the auctions would have to be adapted to each case. ■ #1 Base Case scenario: it is expected that there will be 5 to 10 operational offshore wind farms by 2035 and about 16 to 32 offshore wind farms by 2050. The frequency of auctions to have an operational installed capacity of about 5 GW should consider tenders awarded at the latest in 2028 to achieve the goal by 2035. So, annual or bi-annual auctions are both deemed adequate. Auction designs are expected not to change significantly over time due to the limited offshore wind capacity target of this scenario. 17 Scenarios for Offshore Wind Development in Brazil ■ #2 Intermediate and #3 Ambitious scenarios: annual auctions would likely be required under both scenarios. It is expected that there will be between 12 to 32 operational offshore wind farms by 2035 and between 32 to 70 offshore wind farms by 2050. Scenario #3 Ambitious will likely require many projects larger than 1 GW. For this large-scale development, it could be expected that auctions may change their design in a few years to depend less on revenue support and more on the free market for energy sales. And, as the offshore wind supply chain becomes more established, local content requirements may increase. Further details of procurement of energy are provided in Section 16. 2.2.13 Project Bankability Despite the good potential for offshore wind development in Brazil, it is fundamental to ensure that projects reach an international standard of bankability. For this, the offshore wind industry and government need to assess the risks associated with its implementation and evaluate the mitigation actions required. A bankable project requires confidence from lenders, and to provide that confidence a project needs to prove that it can be developed, constructed, and operated with limited and mitigable risks from a technical, environmental, regulatory, financial, and legal point of view. When considering the three scenarios described in this report, the following impact on bankability could be expected: ■ All scenarios may struggle in early stages in terms of financing services, which is expected to change gradually after the first offshore farm starts generating and delivering electricity. ■ Better financing conditions can be expected as the industry scales, consolidates and matures. Therefore, #2 Intermediate and #3 Ambitious scenarios will likely achieve better financing conditions faster than #1 Base Case scenario. ■ Higher local content of the supply chain is expected to be achieved in a shorter period under the #2 Intermediate and #3 Ambitious scenarios, which might bring extra benefits as greater local engagement and a more robust local supply chain mitigate risks associated with deliveries. Further details of project bankability are provided in Section 17. 2 Scenarios for Offshore Wind in Brazil 18 3 RECOMMENDATIONS Based on the analysis carried out throughout this report, the following recommendations are intended to contribute to the development of the offshore wind industry in Brazil in a sustainable, rapid, and efficient way. Practices and recommendations must be aligned with the different stakeholders and competent bodies. For each recommendation, the implementing entity or department is noted in [bold]. Vision and Volume Targets 1. Provide predictability to the private sector by including offshore wind in the ten-year expansion plan and adding offshore wind to a long-term auction calendar. [Brazilian government] 2. Establish a dedicated offshore wind working group to formalize multi-agency collaboration. [Brazilian government] Offshore Wind Contribution to the Grid 3. To quantify eventual needs for development and reinforcement of the transmission infrastructure in Brazil, there is the need to conduct steady-state analysis in the relevant network planning, and dynamic analysis in Root-Mean-Square (RMS) and eventually Electromagnetic Transient (EMT) domains. Further studies may be required for individual cases, for example, power quality and in particular harmonic analysis. The results and conclusions will provide valuable inputs for the Transmission Expansion Plans (i.e., Programa de Expansão da Transmissão (PET) / Plano de Expansão de Longo Prazo (PELP)). [Brazilian government] 4. Offshore wind can also potentially have a relevant role in the provision of ancillary services. Currently, there is not a competitive ancillary service market in Brazil, and the current approach is very focused on obtaining ancillary services for hydro power. It is advisable to have further research, public discussions, and initiatives on the future evolution of ancillary services provision in Brazil and eventual ancillary service market rules. [Brazilian government] Preliminary Environmental and Social 5. Improvement of the Terms of Reference [16] and the EIA procedural practices, to align with the World Bank Environmental and Social Framework (ESF) and Good International Industry Practice (GIIP). [IBAMA] 6. Implementation, at a federal level, of requirements and obligations related to Strategic Environmental and Social Assessment (SESA), which will be helpful to offshore wind developers in the design phase and to the relevant institutions for the developments of the wider MSP. [Brazilian government] 7. Early identification of areas (offshore and onshore) where development activities might impact sensitive biodiversity and social attributes and thereby create sensitivity maps, which can inform and complement subsequent SESA and MSP. Sensitivity maps can also inform scoping of project-specific EIA-targeted baseline surveys, leading to early indication of E&S risks, mitigation requirements, complexity, and cost. [Brazilian government] 19 Scenarios for Offshore Wind Development in Brazil 8. Improvement of the data quantity and quality regarding marine E&S considerations and allow public access to these datasets on a governmental centralized online portal. [Brazilian government] 9. Improvement of the involvement of local stakeholders (e.g., fishermen, indigenous peoples, and local communities) in the MSP process to identify possible exclusion areas related to social considerations, for example organizing focus groups including all communities that might be affected by the proposed development zones. This would also allow the correct identification of the affected communities, identify risks of economic displacement, and create knowledge related to artisanal fishing areas that can inform future project design and EIAs. [Brazilian government] 10. Preparation to follow the ILO 169 for traditional communities’ consultation, during the environmental permitting process, as it may be required by Public Prosecutors. [Brazilian government] [Developers] Port and Logistics Infrastructure 11. In collaboration with the respective ports, conduct in-depth studies to assess the current port conditions and the potential upgrades and extensions of the existing infrastructure that might be required to handle all equipment and components required for offshore wind. [Brazilian government] [Developers] 12. Evaluate the possibility of auctioning multiple areas near a specific port to allow for shared investment costs and reduce the LCoE across projects. Despite the presence of available areas and technical conditions for upgrades in several ports, this recommendation aims to alleviate the economic impact of the inaugural project awarded in a forthcoming offshore wind lease auction, which has the risk to shoulder the entire cost of port expansion for operation. [Brazilian government] [Developers] Supply Chain Analysis 13. Establish an action plan and long-term public policies that include the local industry and its ability to meet the government’s vision and volumes. This plan must identify Brazil’s industrial skills and capabilities and include proper instruments for promoting local industry that, at the same time, can favor the country’s growth without slowing down the expansion potential of offshore wind projects (e.g., due to strict local content policies that can significantly impact the time and cost of implementing offshore wind projects). [Brazilian government] 14. Establish regular and appropriate dialog with the industry and respective associations (e.g., ABEEólica and IBP) to absorb lessons learned from the development of the onshore wind and offshore O&G industries in shaping policies for the offshore wind industry. It is also important to consider bilateral cooperation with countries at a more advanced stage of offshore wind development to share good practices and lessons learned. [Brazilian government] [Industry associations] 15. Establish an industrial development plan that considers offshore wind generation as part of growth plans for new industries (e.g., low-emission steel production, GH2 electricity supply, and low-emission industrialization). [Brazilian government] 3 Recommendations 20 Capacity Building 16. Reinforce, review, and create Educational Programs at different levels (vocational educational training and university programs). [Brazilian government] [Educational Institutions] [Developers] [Suppliers] 17. Identify transferable skills from other industries, foster higher standardization of skill certifications, and create strategic supporting programs to improve professional skills with a focus on offshore wind energy, promoting proactively reskilling and recertification processes. [Brazilian government] [Educational Institutions] [Developers] [Suppliers] 18. Create communication campaigns to raise public awareness regarding offshore wind energy, sensitizing the population on the use of offshore wind resources. [Brazilian government] [Educational Institutions] [Developers] 19. Foster an ecosystem of innovation oriented to offshore wind energy, by promoting entrepreneurship training and support in networks creation involving multiple stakeholders from industry, education and training institutions, and research and development centers. [Brazilian government] [Educational Institutions] [Developers] 20. Enable equality and social inclusion through specific measures and ensure gender balance in the criteria regarding training and vocational training for the professional profiles demanded by the sector. [Brazilian government] [Educational Institutions] [Developers] [Suppliers] 21. Create dedicated teams based on a detailed assessment of the public workforce needs associated with all public organizations involved in planning, regulation and permitting, projects’ approval, control and supervision, and electricity market regulation related to offshore wind projects. [Agencies involved in regulatory and permitting process]. Permitting and Regulatory Framework 22. Bidding Criteria: It is advisable to specify the potential criteria in a legal framework, with the selection process adhering to the options outlined within the relevant law’s boundaries. Nevertheless, the ultimate determination of bidding criteria within the tender protocol, using criteria authorized by the law, offers the granting authority more flexibility and the ability to adapt to industry advancements. For instance, in initial projects, some criteria may seem overly rigorous, while applying the same criteria at a more advanced industry stage may appear reasonable to the market. In addition, it is advisable to follow qualitatively based criteria against price-based competitive processes, especially for a country’s first seabed tender rounds. Among others, in a qualitative approach, the following parameters could be assessed: capability, commitment, project deliverability, sustainability, financial strength, and supply chain plan. [Brazilian government] 23. Incentives: Considering Brazil's relatively higher taxation in comparison to other markets, certain tax benefits that are currently applicable to other industries could be replicated for this new industry, such as IPI (Imposto sobre Produtos Industrializados (Brazilian tax on industrialized products)), PIS and COFINS (Programa de Integração Social/Contribuição para Financiamento da Seguridade Social (Program of Social Integration/Contribution for the Financing of Social Security)), ICMS (Imposto de Circulação de Mercadorias e Serviços (Brazilian tax on the circulation of merchandise and services)), and REIDI (Regime Especial de Incentivos para o Desenvolvimento da Infraestrutura (Special Regime for 21 Scenarios for Offshore Wind Development in Brazil Infrastructure Development)). Apart from existing tax incentives, there is also potential to create a new special regime connected to tax treatments covered by the Repetro-Sped regime. [Brazilian government] 24. Coordinated exploration of offshore wind areas: Regulating industries involved in the exploration of natural resources often necessitates specific rules to prevent the occurrence of the “rule of capture.” This rule refers to a situation where one licensee aggressively exploits certain natural resources to the detriment of other projects dependent on those resources. For instance, in the oil and gas sector, such practice negatively impacts the production from a reservoir, possibly damaging it and reducing its productive life. As such, many jurisdictions have mitigated this scenario by mandating joint exploration of oil and gas fields encompassed by multiple licenses, a practice known as unitization. In the onshore wind industry, a similar challenge exists, but in offshore wind, its prevention relies on the actions of granting authorities. Some recommended best practices and strategies include advanced wind farm layout planning, site-specific assessments, strategic turbine placement, coordinated development zones, regular stakeholder consultation, robust regulatory framework, and transmission infrastructure planning. [Brazilian governments] [Developers] [Agencies involved in regulatory and permitting process] 25. Government take: All frameworks related to offshore wind power under discussion in Brazil propose a specific type of government take to be adhered to by licensees. Regardless of the government take chosen in the end, it is advisable that the regulatory framework grants discretionary authority to the licensing body to adjust the applicable government take for each tender. Given that the offshore wind power industry is expected to have some competitiveness challenges at the beginning, enabling the licensing body to modify the financial burden based on the circumstances will allow the government to make the areas more appealing for investment in different circumstances. In this regard, the recommendation is to include the concept of government take in the regulatory framework, but to defer the final rate or levy decision to the tender protocols instead of rigidly specifying it within the regulatory framework itself. [Brazilian government] Health and Safety Analysis 26. Develop instructions to operators on the minimum requirements, from existing regulatory frameworks that are appropriate for offshore wind. As a starting point, there is indication that specific regulations for offshore wind are needed, specifically with regards to personnel health and safety. [Brazilian government] [Brazilian wind energy associations] 27. For aspects related to Operational Safety, in case requirements similar to ANP Regulation 43—SGSO are applied for offshore wind, authorities with more experience in this issue, such as ANP, may share best practices with the authority responsible for offshore wind. [ANP and other experienced authorities] 28. There are specific concerns about safety on airspace, due to the impact offshore wind structures have on airports and helicopter operations (mainly to offshore O&G installations). Even though current regulation for controlled airspace obstacles includes requirements for onshore wind farms, it should be revised to consider the impact from offshore wind farms. [Brazilian government] 3 Recommendations 22 Offshore Wind and Hydrogen 29. Investment in studies and preparation of strategic plans for both offshore wind and hydrogen, including energy supply, availability, and infrastructure close to the production centers, among others. [Brazilian government] [Wind and H2 energy associations] 30. Planning of electric transmission and interconnection infrastructure in regions closer to potential hydrogen hubs. [Brazilian government] [ONS] Role for Public Financial Support 31. Create credibility by establishing mechanisms in the electricity market that encourage financial interest in offshore wind projects, such as including offshore wind in the long-term planning, having dedicated auctions or mechanisms with economic incentives in the market such as dispatch priority. [Brazilian government] 32. Mobilize available capital worldwide and have access to international investment funds with interest in the energy transition agenda. For this, it is required that the country establishes clear regulatory and market plans to attract investors, and at the same time, maintains the focus on the environment and people as part of a sustainable development. [BNDES] 33. National banks should collaborate with private sector developers to ensure shared risk and facilitate the bankability of projects. Also, multilateral development banks may need to be involved in the early stages of projects to catalyze the market by reducing the risks that may compromise the realization of projects, such as ancillary infrastructure, like transmission and logistics infrastructure, ports, and preparatory works. [National banks] [Multilateral development banks] 34. Developers should seek the involvement of national banks to provide concessional financing alternatives and work with government agencies in a timely manner to ensure that: 1) the needs of the projects are met; 2) the most critical phases of the projects are addressed; and 3) costs are reduced for pioneer projects. [Developers] 35. Continue pushing for the achievement of climate change targets, which will lead to the opening of funds or bonds by public finance entities to finance projects related to the energy transition and the decarbonization of the grid. [Brazilian government] [Private finance entities] 36. Instead of mandating restrictive Local Content Requirements, it is recommended to progress with policies that: help local supply chains to learn, grow, and be more efficient; support collaboration with overseas companies; establish large-scale markets with stability and visibility; develop industrial policies supporting internationally competitive supply chains; and establish transparent, robust, and bankable frameworks consistent with the global market [6]. Such measures would enable both a strong offshore wind market and a strong local supply chain. [Brazilian government] Options for Procurement of Energy 37. Set long-term fixed price or premium tariff (with or without the use of Renewable Energy Certificates (RECs)) power purchase agreements: Long-term offtake agreements derived from the energy auctions in the regulated market would provide predictability of revenues and increase confidence among stakeholders (developers, investors, borrowers/lenders, etc.) for a faster and stronger development of the offshore wind industry. [Brazilian government] 23 Scenarios for Offshore Wind Development in Brazil 38. Application of price and non-price criteria for the energy auction: Price and non-price criteria are strongly recommended for offshore wind auctions. Non-price criteria (NPC) have risen in importance and are gaining traction globally as a strategic measure to foster national economic development, wealth, and environmental protection. Among these criteria, it could be included environmental protection, contribution to the development of skilled workforce, experience in offshore wind, deliverability of projects, innovation actions, low carbon emissions footprint, and local supply chain development. An appropriate scoring design share between the price and non- price criteria is also advisable for Brazil, in this sense a ratio of 70/30 (as recommended in the EU) is considered acceptable. [Brazilian government] 39. Application of penalties based on the non-attained milestones in the auctions: The application of penalties against project milestones is perceived as a key approach to increase the commitment of developers to follow the agreed upon schedule and to reduce some risks (e.g., delays, non- deliverability of the project). [Brazilian government] 40. Establishment of similar (tax) incentives as the ones applied for onshore wind (e.g., zero import taxes on wind turbine components.), low or no leasing fees for the offshore areas, and government- led network and interconnection adaptations to absorb the new production, are important elements that should be clarified while designing the auctions. [Brazilian government] Bankability 41. Developers should perform required studies and investigations and use publicly available information to perform feasibility assessment and identify risks that may impact projects at an early stage so they can take corresponding mitigation actions. [Developers] 42. BNDES should engage with international finance entities to share knowledge and understand what financial instruments have been used for offshore wind projects in other countries. This will help in designing financial instruments for supporting the early offshore projects in Brazil. [BNDES] 43. The Brazilian government and BNDES should give workshops about the national plans and expectations for the offshore wind industry and communicate about specific requirements for bankability of offshore wind farms. Also, BNDES should propose financial instruments and financial conditions for financing offshore wind projects. [Brazilian government] 44. The Brazilian government should communicate on long-term strategies for offshore wind development and launch dedicated auctions for offshore wind, bringing comfort to developers and the procurement of offshore and setting a pipeline of projects. [Brazilian government] 45. The Brazilian government and BNDES should set gradual local content requirements, ensuring there is a supply chain in place ahead of time. Setting strict local content requirements in the beginning would limit the viability of the first projects by causing significant delays or by increasing the final cost. Local content requirements could be increased with time as the country develops a local supply chain. [Brazilian government] [BNDES] 3 Recommendations 24 SUPPORTING INFORMATION 25 Scenarios for Offshore Wind Development in Brazil 4 OFFSHORE WIND CONTRIBUTION TO THE GRID 4.1 PURPOSE This section aims to provide insights into the benefits that offshore wind installations in Brazil may offer to the electric grid in terms of supplying power to specific locations during times of low and high demand under certain scenarios. The main focus is to investigate how offshore wind can potentially support the grid and mitigate the seasonal and interannual variability in Brazil’s generation, becoming another source of electricity that can aid in the replacement of fossil fuels. The analysis has also considered the potential role of offshore wind in providing ancillary services to enhance the stability of the grid. 4.2 METHOD Historical hourly data [17] for electric power generation and energy consumption across various regions in Brazil were assessed, spanning from January 2000 to December 2022. In this analysis, power generation data was normalized for each source, enabling direct comparisons between them. This normalization process involved calculating the specific capacity factor for each power source. The capacity factor is a ratio that compares the actual energy output generated by a power plant to the maximum energy that it could have produced had it operated continuously at its peak rated capacity throughout the same timeframe. This metric offers insights into the efficiency and dependability of a power plant or energy resource over a defined period. FIGURE 4.1 SCHEMATIC REPRESENTATION OF THE METHODOLOGY. Historical power generation and Complementarity Capacity factor consumption data and and + variability normalization Simulated offshore assessments wind power generation 4 Offshore Wind Contribution to the Grid 26 After processing and filtering the dataset to remove inaccurate or incomplete records, various percentiles relating to the probability of the capacity factor surpassing certain levels were quantified. A percentile serves as a statistical gauge, indicating where a particular value stands relative to the rest of the dataset. In the context of energy production, it is used to characterize the amount of energy a specific resource can generate with a given level of confidence. The notion of exceedance probability pertains to the likelihood of a specific value being exceeded. The evaluation of net capacity factors of the historical generation and their probabilities of exceedance was conducted with specific attention to hourly and monthly generation profiles for the distinct power sources. The offshore wind power generation data utilized for this study were generated through numerical simulations involving the operation of theoretical offshore wind farms at each designated location. While these wind farms are hypothetical, they were conceived to encompass all the cutting-edge technical aspects at the time of this investigation. The turbine layouts analyzed for each specific region were carefully designed, and the wind farms were assumed to employ bottom-fixed technology. To establish the spatial distribution of the steady-state background freestream wind resource, data was drawn from the Global Wind Atlas (GWA) version 3.0 [18]. Additionally, time-series data of hourly wind resource sourced from publicly available reanalysis datasets like ERA-5 were combined with numerical models to generate two decades’ worth (20 years) of credible offshore wind power generation datasets on an hourly basis for each specified area. Based on the estimated power generation results, several other factors potentially influencing the regular operations of offshore wind farms were considered. These included wind farm availability, transmission losses, operational curtailments, and wind turbine underperformance. In total, the combination of these four factors was deemed to result in a 12 percent reduction in the gross energy production of the offshore wind farms simulated by DNV. This assumption was applied uniformly across all the different areas investigated. The aerodynamic interactions between these theoretical wind farms and the atmospheric wind streams were modeled on a site-specific basis using engineering models, which aimed to quantify wake effects and blockage phenomena. Specifically, the Eddy Viscosity model based on work conducted by Ainslie was employed [19] [20], with corrections for the large wind farm effect [21] [22] and for the blockage effect. The power generation data was also utilized to quantify the inter-annual variability (IAV) of each power source. The IAV, or normalized standard deviation, is a statistical measure employed to gauge the extent of variability in a dataset while accounting for the mean (average) value. This is computed by dividing the standard deviation of the data by the mean, resulting in a dimensionless measure representing the relative variability within the dataset. The normalized standard deviation serves as an indicator of the degree of variability in the yearly power generation values around the mean. A higher normalized standard deviation suggests that the annual power generation values exhibit greater variability in relation to the mean, while a lower value indicates more consistent or stable annual generation. 27 Scenarios for Offshore Wind Development in Brazil IAV in electric power generation can be influenced by various factors, including weather patterns, economic conditions, technological advancements, regulatory changes, and more. Understanding and analyzing this variability is important for energy planners, policy makers, and stakeholders to make informed decisions about energy infrastructure, resource allocation, and sustainability goals. It is noted that nuclear and combustion-based thermal power plants do not exhibit any natural correlation with climatic factors such as rainfall, wind, and solar irradiance. Actually, it can be said that there is an artificial inverse correlation between thermal and renewable plants because the deployment of these thermal plants is predominantly driven by human decisions. Historically in Brazil, thermal power plants have been utilized to bridge the gaps between renewable energy generation and electricity demand, wherever and whenever these gaps emerge in the national electric grid. Due to this rationale, evaluating or documenting the natural variability within historical thermal power datasets, as well as the potential benefits of new thermal power plants to enhance the electric grid falls outside of the scope of the present study. Consequently, the assessments and outcomes presented in the following sections exclude thermal power generation. 4.3 RESULTS 4.3.1 Panorama of the Power Generation and Electric Energy Consumption In the national context, historical data reveals a significant correlation between population growth and the evolution of electric power generation during the last two decades. This relationship is depicted in Figure 4.2. According to the data, Brazil’s population has steadily increased, reaching a peak of approximately 203 million people in the year 2022. Concurrently, the national electric power generation also reached its peak of over 70 GWavg (GWmedios) throughout the same year. FIGURE 4.2 POPULATION GROWTH, AVERAGE POWER GENERATION, AND CONSUMPTION FOR BRAZIL. 80.0 210.0 205.0 Population [millions of people] 70.0 200.0 Electric power [GW avg] 195.0 60.0 190.0 50.0 185.0 180.0 40.0 175.0 170.0 30.0 165.0 20.0 160.0 0 8 6 9 3 5 4 2 20 7 22 1 0 8 6 9 3 5 4 2 21 7 1 0 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Power generation [GW avg] Power consumption [GW avg] Population [millions of people] Source: Brazilian Institute of Geography and Statistics (IBGE [23]) and the National Electric System Operator (ONS [17]), DNV. 4 Offshore Wind Contribution to the Grid 28 Furthermore, when comparing electric power generation and consumption data by region (Figure 4.3), different generation-consumption balances are observed in each region. Notably, the North and Northeast regions of Brazil exhibited a surplus within their respective regional electric systems. On average, throughout 2022, power generation in these regions exceeded local demand by 8 GW. And this surplus of energy was transmitted to the Southeast, Central, and South regions, to address their individual regional electricity deficits. FIGURE 4.3 ELECTRIC POWER GENERATION AND CONSUMPTION PER REGION AND PER POWER SOURCE FOR YEAR 2022—BRAZIL. 45.0 40.0 13.2% 40.1 35.0 Power [GW avg] 30.0 33.6 10.7% 2.0% 25.0 2.4% 20.0 15.0 15.0 10.0 12.1 71.6% 10.8 11.3 10.9 5.0 6.2 0.0 North Northeast Southeast South and Central Hydro power Wind power Region Thermal Average power generation [GW avg] in 2022 Solar PV Average power consumption [GW avg] in 2022 Nuclear Source: ONS [17], DNV. While hydropower generation accounted for over 71.6 percent of Brazil’s total electricity demand in 2022 (Figure 4.3), in terms of total installed capacity, hydroelectric power represents about 53.1 percent of the nation’s overall rated capacity. Table 4.1 presents the breakdown of rated capacity per power source for Brazil in 2022, where thermal power plants constitute approximately 23.9 percent of the country’s power matrix in this context, followed by onshore wind farms in the third position, representing around 13.6 percent of Brazil’s installed capacity. TABLE 4.1 BRAZILIAN POWER GENERATION PLANTS IN OPERATION (YEAR 2023) GROUPED BY ENERGY SOURCE. Power source Number of plants Rated capacity [GW] Weight Hydro (>30 MW) 215 103.2 53.1% Thermal 3,037 46.4 23.9% Onshore wind 947 26.5 13.6% Solar photovoltaic 18,175 9.7 5.0% Small hydro 426 5.8 3.0% Nuclear 2 2.0 1.0% Very small hydro (<1 MW) 710 0.9 0.5% Total 23,512 194.4 100.0% Sources: ANEEL [24], DNV. 29 Scenarios for Offshore Wind Development in Brazil Generating electric energy far from points of demand poses several challenges to a nation’s power grid. For example, it can lead to increased transmission losses, high infrastructure costs, and grid instability. It might also disrupt the reliability of supply, cause timing and synchronization challenges, and compromising energy security. Figure 4.4 illustrates the geographical distribution of Brazil’s population, as recorded by the Instituto Brasileiro de Geografia e Estatística (Brazilian Institute of Geography and Statistics) (IBGE) [23] in 2022. The areas hosting offshore wind projects that have applied for environmental permits to the IBAMA [25] are also depicted in the map. FIGURE 4.4 POPULATION CONCENTRATION AND AREAS OF OFFSHORE WIND DEVELOPMENT. Source: IBGE [23], IBAMA [25], DNV. A significant number of offshore wind projects proposed along the Brazilian shoreline are concentrated in areas with high population density and a substantial demand for electricity. This holds true for projects in the Southeast region of Brazil, near the coast of Rio de Janeiro, RJ. Given their proximity to the largest centers of energy consumption in the country, potential offshore wind farms installed in this region would represent a highly advantageous step toward bridging the physical distance between power generation and consumption in the country. Generating electric energy near points of demand reduces transmission losses and enhances reliability. While the final electricity cost depends on various site-specific variables, in general, approaching energy production and consumption can also lower infrastructure costs. This approach enables a rapid response to changes in demand, bolsters energy security, and effectively integrates renewable sources. As further detailed in other parts of this study, these areas of high concentration of preliminary offshore wind projects registering for environmental permits also benefit from three additional characteristics: high wind speed levels (Section 5), port infrastructure nearby (Section 7), and relatively shallow coastal waters (Section 5), as illustrated in Figure 4.5. For these reasons, following subsections focus on these three regions of Brazil: South (coast of Rio Grande do Sul), Southeast Region (coast of Rio de Janeiro), and Northeast Region (coast of Ceará). 4 Offshore Wind Contribution to the Grid 30 FIGURE 4.5 REGIONS OF PRIMARY INTEREST FOR OFFSHORE WIND DEVELOPMENT. Source: IBAMA [25], GEBCO[26], DNV. 4.3.1.1 Coast of Rio Grande do Sul The electric power matrix for the state of Rio Grande do Sul, in the South region of Brazil, is presented in Table 4.2. Similar to what is observed at a national level, hydropower is dominant in this federative unit. TABLE 4.2 POWER GENERATION PLANTS CURRENTLY OPERATIONAL IN RIO GRANDE DO SUL GROUPED BY SOURCE. Power source Number of plants Capacity [GW] Weight Hydro (>30 MW) 17 4.8 49.9% Thermal 139 2.2 22.9% Onshore wind 81 1.8 19.1% Small hydro 54 0.7 7.2% Very small hydro (<1 MW) 64 0.1 0.7% Solar photovoltaic 43 0.0 0.2% Total 398 9.6 100.0% Source: ANEEL [24], DNV. 31 Scenarios for Offshore Wind Development in Brazil After processing the thousands of hourly power generation data points following the methodology described in Section 4.2, the monthly and hourly net capacity factor profiles have been calculated for three different power sources: hydropower, onshore wind, and offshore wind. These results are presented in Figure 4.6 in the form of P10, P50, and P90ii probability of exceedance levels. FIGURE 4.6 NET CAPACITY FACTOR (NORMALIZED POWER) FOR HYDRO, ONSHORE WIND, AND OFFSHORE WIND. H dro pow r—historic l n r tion monthl profil H dro pow r—historic l n r tion hourl profil 1.00 1.00 0.90 0.90 0.80 0.80 0.70 0.70 0.60 0.60 0.50 0.50 0.40 0.40 0.30 0.30 0.20 0.20 0.10 0.10 0.00 0.00 00 00 00 00 00 0 0 0 0 0 0 0 l n r n v b t p c g ar ay ju :0 :0 :0 :0 :0 :0 :0 ap oc no de au ja fe ju se 2: 4: 6: 8: 0: m m 12 14 16 18 10 22 20 Onshor wind pow r—historic l n r tion monthl profil Onshor wind pow r—historic l n r tion hourl profil 1.00 1.00 0.90 0.90 0.80 0.80 0.70 0.70 0.60 0.60 0.50 0.50 0.40 0.40 0.30 0.30 0.20 0.20 0.10 0.10 0.00 0.00 l n r n v b t p c g ar ay ju 00 00 00 00 00 0 0 0 0 0 0 0 ap oc no de au ja fe ju se :0 :0 :0 :0 :0 :0 :0 m m 2: 4: 6: 8: 0: 12 14 16 18 10 22 20 Offshor wind pow r—simul t d monthl profil Offshor wind pow r—simul t d hourl profil 1.00 1.00 0.90 0.90 0.80 0.80 0.70 0.70 0.60 0.60 0.50 0.50 0.40 0.40 0.30 0.30 0.20 0.20 0.10 0.10 0.00 0.00 l n r n v b t p c g ar ay ju ap oc no de au ja fe ju se 00 00 00 00 00 0 0 0 0 0 0 0 m m :0 :0 :0 :0 :0 :0 :0 2: 4: 6: 8: 0: 12 14 16 18 10 22 20 P90 P50 P10 P90 P50 P10 Source: DNV. ii The P90 value represents the level of annual generation that is predicted to be exceeded 90 percent of the time over a year. The same logic applies to P10 and P50. 4 Offshore Wind Contribution to the Grid 32 It is worth highlighting that the variability inherent in these historical power generation data is not solely attributable to natural resources such as wind, rainfall, and water levels. Since these datasets encompass large-scale power plants, they are also influenced by the historical dispatches of the national grid operator (ONS (Operador Nacional do Sistema Elétrico (National Power System Operator)). The net capacity factor profiles of various power sources demonstrate distinctive characteristics, highlighting that hydropower generation exhibits the greatest variability, both on an hourly and monthly basis. For instance, the normalized standard deviation in the monthly time series (representing inter-monthly variability) is approximately 34 percent for hydropower, 24 percent for onshore wind, and 18 percent for offshore wind. This metric signifies the maximum variation range from month to month. The hourly time series exhibit similar trends. Most onshore wind farms in the Rio Grande do Sul region are positioned near the coastline. Consequently, it is unsurprising that historical onshore wind power profiles and simulated offshore wind power generation profiles exhibit remarkable similarity. Notably, amidst this resemblance, it is essential to underscore that offshore wind profiles demonstrate slightly reduced variability compared to their onshore counterparts in this region. This observation reflects a positive aspect of offshore wind generation. Furthermore, the comparison between historical onshore wind generation and projected offshore wind generation for the region yields another positive insight. Offshore wind facilities display higher net capacity factors, implying more efficient power generation than their onshore counterparts. This efficiency can be attributed not only to the abundant atmospheric wind resources offshore of Rio Grande do Sul, but also to the utilization of more modern wind turbines and wind farm control technologies. Table 4.3 offers additional insights derived from the comparison of normalized power generation across various sources. This comparison includes a quantification of the IAV associated with each source. Notably, the data underscores that offshore wind power enjoys an exceptionally low level of IAV in contrast to other power sources. This positions offshore wind power as a dependable power generation alternative for the region. TABLE 4.3 HIGHLIGHTS IN THE COMPARISON BETWEEN HYDRO AND WIND POWER FOR RIO GRANDE DO SUL. Hydro power Onshore wind power Offshore wind power Source of data Historical measurements Historical measurements Numerically simulated Monthly peak October October October Monthly low April February February Hourly peak 19:00 22:00 22:00 Hourly low 03:00 09:00 08:00 Average net capacity factor 0.51 0.34 0.43 Inter annual variability (IAV) 21.3% 11.8% 5.6% Source: DNV. Figure 4.7 and Figure 4.8 illustrate how the simulated offshore wind power generation at the P90 probability of exceedance level compares with the historical regional peaks of electricity demand, both on a monthly and hourly basis. The historical profiles for the normalized onshore wind power generation and the hydropower generation are also presented at the P90 level. 33 Scenarios for Offshore Wind Development in Brazil FIGURE 4.7 MONTHLY PROFILES OF CAPACITY FACTOR AT THE P90 PERCENTILE (CF 90) AND HISTORICAL PEAKS OF DEMAND. 0.60 20000 19000 Peak energy demand MWh 0.50 Net capacity factor (CF) 18000 0.40 17000 16000 0.30 15000 14000 0.20 13000 12000 0.10 11000 0.00 10000 jan feb mar apr may jun jul aug sep oct nov dec Peak load RS—MWh Offshore wind CF P90 Hydro CF P90 Onshore wind CF P90 Source: DNV. FIGURE 4.8 HOURLY PROFILES OF CAPACITY FACTOR AT THE P90 PERCENTILE (CF P90) AND HISTORICAL PEAKS OF DEMAND. 0.60 20000 Peak energy demand MWh Net capacity factor (CF) 19000 0.50 18000 0.40 17000 16000 0.30 15000 14000 0.20 13000 0.10 12000 11000 0.00 10000 00 0 00 00 00 00 00 00 00 10 0 11 0 12 0 13 0 14 0 15 0 16 0 17 0 18 0 19 0 20 0 21 0 22 0 23 0 0 1:0 0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 0: 2: 3: 4: 5: 6: 7: 8: 9: Peak load RS—MWh Offshore wind CF P90 Hydro CF P90 Onshore wind CF P90 Source: DNV. State-specific demand levels were estimated based on regional electric load datasets. The findings depicted in these past two figures vividly demonstrate the significant potential of offshore wind power generation along the coast of Rio Grande do Sul. This potential stands as a promising solution to meet the local electricity demand and address the disparity between power generation and consumption in the Southern region of Brazil, particularly within the state of Rio Grande do Sul. This assertion is reinforced by the low variability observed in offshore wind power generation, both on an hourly and monthly basis. 4 Offshore Wind Contribution to the Grid 34 4.3.1.2 Coast of Ceará The electric power matrix for the state of Ceará, located in the Northeast region of Brazil, is presented in Table 4.4. In contrast to the national level observations, hydropower generation is absent within this region. Instead, the power generation matrix is predominantly composed of onshore wind farms, succeeded by thermal plants utilizing fossil fuels, and large-scale solar (photovoltaic) power stations. TABLE 4.4 POWER GENERATION PLANTS CURRENTLY OPERATIONAL IN CEARÁ GROUPED BY ENERGY SOURCE. Power source Number of plants Capacity [GW] Weight Onshore wind 100 2.6 47.3% Thermal 30 2.1 37.9% Solar photovoltaic 34 0.8 14.9% Total 164 5.5 100.0% Source: ANEEL [24], DNV. Upon applying the methodology outlined in Section 4.2 to analyze numerous hourly power generation data points, the monthly and hourly net capacity factor patterns for three distinct power sources have been computed: solar photovoltaic, onshore wind, and offshore wind. These outcomes are displayed in Figure 4.9 using the P10, P50, and P90 probability of net energy exceedance thresholds. FIGURE 4.9 NET CAPACITY FACTOR (NORMALIZED POWER) FOR SOLAR, ONSHORE WIND, AND OFFSHORE WIND. Sol r PV pow r—historic l n r tion monthl profil Sol r PV pow r—historic l n r tion hourl profil 1.00 1.00 0.90 0.90 0.80 0.80 0.70 0.70 0.60 0.60 0.50 0.50 0.40 0.40 0.30 0.30 0.20 0.20 0.10 0.10 0.00 0.00 0:00 2:00 4:00 6:00 8:00 10:00 12:00 14:00 16:00 18:00 20:00 22:00 ay v ar r n b n l g p t c ju ap oc no de au fe ja ju se m m Onshor wind pow r—historic l n r tion monthl profil Onshor wind pow r—historic l n r tion hourl profil 1.00 1.00 0.90 0.90 0.80 0.80 0.70 0.70 0.60 0.60 0.50 0.50 0.40 0.40 0.30 0.30 0.20 0.20 0.10 0.10 0.00 0.00 0:00 2:00 4:00 6:00 8:00 10:00 12:00 14:00 16:00 18:00 20:00 22:00 ay v ar r n b n l g p t c ju ap oc no de au fe ja ju se 35 Scenarios for Offshore Wind Development in Brazil m m Offshor wind pow r—simul t d monthl profil Offshor wind pow r—simul t d hourl profil 0.20 0.20 0.10 0.10 0.00 0.00 0:00 2:00 4:00 6:00 8:00 10:00 12:00 14:00 16:00 18:00 20:00 22:00 ay v ar r n b n l g p t c ju ap oc no de au fe ja ju se m m Onshor wind pow r—historic l n r tion monthl profil Onshor wind pow r—historic l n r tion hourl profil 1.00 1.00 0.90 0.90 0.80 0.80 0.70 0.70 0.60 0.60 0.50 0.50 0.40 0.40 0.30 0.30 0.20 0.20 0.10 0.10 0.00 0.00 0:00 2:00 4:00 6:00 8:00 10:00 12:00 14:00 16:00 18:00 20:00 22:00 ay v ar r n b n l g p t c ju ap oc no de au fe ja ju se m m Offshor wind pow r—simul t d monthl profil Offshor wind pow r—simul t d hourl profil 1.00 1.00 0.90 0.80 0.80 0.70 0.60 0.60 0.50 0.40 0.40 0.30 0.20 0.20 0.10 0.00 0.00 0:00 2:00 4:00 6:00 8:00 10:00 12:00 14:00 16:00 18:00 20:00 22:00 ay v ar r n b n l g p t c ju ap oc no de au fe ja ju se m m P90 P50 P10 P90 P50 P10 Source: DNV. Figure 4.9 illustrates the minimal variability characteristic of solar photovoltaic electric energy generation. This consistency is evident in both monthly and hourly profiles. Solar plants in the Northeast region of Brazil exhibit remarkably low standard deviations in their net capacity factors. This proximity implies that the P10, P50, and P90 generation levels closely align. Such behavior is not unexpected and is not unique to this region, as solar irradiance remains a highly stable energy source from a human timescale perspective. Another noteworthy observation from Figure 4.9 is that solar plants without batteries have a net capacity factor of 0 during night-time periods. This contrasts with wind farms in the same region. The power generation from the extensive fleet of onshore wind turbines in the northeast of Brazil generally reaches its peak in the late afternoon and maintains above-average levels during the early evening, which makes solar and wind a very suitable match in terms of complementary renewable power sources. 4 Offshore Wind Contribution to the Grid 36 As for the findings along the Coast of Rio Grande do Sul, the coastal waters of Ceará are poised to host more powerful and efficient offshore wind farms compared to the existing fleet of onshore wind farms in the same area. This heightened efficiency can be attributed not only to the abundant atmospheric wind resources offshore of Ceará but also to the utilization of modern wind turbine technology. Numerical simulations conducted by DNV also suggest that the hourly variability in offshore wind power generation will be slightly lower than its onshore counterpart, a positive outcome in terms of grid reliability. The Northeast region of Brazil experiences a semi-arid climate, characterized by high temperatures and low and irregular rainfall. The windiest months in this region typically occur during the dry season, which usually occurs in the second semester of the year. The primary reason for the increased windiness during these months is related to the regional atmospheric circulation patterns. The northeast trade winds, which are part of the Hadley Cell circulation, play a significant role. During the dry season, there is a pronounced high-pressure system over the South Atlantic Ocean, known as the South Atlantic High. This high-pressure system strengthens the northeast trade winds as they blow from east to west across the northeast region of Brazil. The increased windiness is also associated with the Intertropical Convergence Zone (ITCZ). During the dry season, the ITCZ tends to move southward, bringing with it the potential for stronger winds. Table 4.5 offers additional insights derived from the comparison of normalized power generation across various sources. This comparison includes a quantification of the IAV associated with each source. TABLE 4.5 HIGHLIGHTS IN THE COMPARISON BETWEEN SOLAR POWER AND WIND POWER FOR CEARÁ. Solar power Onshore wind power Offshore wind power Historical Historical Numerically Source of data measurements measurements simulated Monthly peak October September September Monthly low March April March Hourly peak 11:00 17:00 18:00 Hourly low 23:00 07:00 02:00 Average net capacity factor 0.25 0.37 0.43 Normalized annual standard 7.4% 11.2% 10.4% deviation (IAV) Source: DNV. Figure 4.10 and Figure 4.11 demonstrate the comparison between simulated offshore wind power generation at the P90 probability of exceedance level and historical regional peaks of electricity demand. This comparison is done on both a monthly and hourly basis. Additionally, the normalized profiles of onshore wind power generation and solar photovoltaic generation at the P90 level are also showcased. 37 Scenarios for Offshore Wind Development in Brazil FIGURE 4.10 MONTHLY PROFILES OF CAPACITY FACTOR AT THE P90 PERCENTILE (CF P90) AND HISTORICAL PEAKS OF DEMAND. 1.00 2300.0 0.90 2250.0 Peak energy demand MWh 0.80 Net capacity factor (CF) 2200.0 0.70 0.60 2150.0 0.50 2100.0 0.40 2050.0 0.30 2000.0 0.20 0.10 1950.0 0.00 1900.0 jan feb mar apr may jun jul aug sep oct nov dec Peak load CE—MWh Solar CF P90 Onshore wind P90 Offshore wind P90 Source: DNV. FIGURE 4.11 HOURLY PROFILES OF CAPACITY FACTOR AT THE P90 PERCENTILE (CF P90) AND HISTORICAL PEAKS OF DEMAND. 1.00 2500.0 0.90 2400.0 Peak energy demand MWh Net capacity factor (CF) 0.80 2300.0 0.70 0.60 2200.0 0.50 2100.0 0.40 2000.0 0.30 1900.0 0.20 0.10 1800.0 0.00 1700.0 00 0 00 00 00 00 00 00 00 10 0 11 0 12 0 13 0 14 0 15 0 16 0 17 0 18 0 19 0 20 0 21 0 22 0 23 0 0 1:0 0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 0: 2: 3: 4: 5: 6: 7: 8: 9: Peak load CE—MWh Solar CF P90 Onshore wind P90 Offshore wind P90 Source: DNV. State-specific demand levels were estimated based on regional electric load datasets. As shown in Figure 4.10 and Figure 4.11, onshore and offshore wind power generation in Ceará exhibit comparable monthly and hourly patterns. However, during the second semester of the year, which is known as the windiest period, offshore wind sustains higher P90 capacity factor peaks. It is also worth highlighting that the hourly offshore wind generation profile aligns more closely with the hourly energy demand profile of Ceará than the onshore wind generation. It is important to note the nearly consistent distribution of hourly offshore wind power generation, which underscores its reliability as a local electricity source to meet demand. 4 Offshore Wind Contribution to the Grid 38 4.3.1.3 Coast of Rio de Janeiro The power distribution structure for the state of Rio de Janeiro, situated in the Southeast region of Brazil, is outlined in Table 4.6. Contrary to the overarching trend at the national scale, the prevalence of hydropower is not evident within this state. Instead, the regional electric power matrix in Rio de Janeiro primarily relies on combustion and nuclear- based thermal power plants, with only a minor presence of onshore wind power, exemplified by the sole operational wind farm known as project Gargau. In this context, offshore wind has the potential to play a pivotal role in significantly augmenting the representation of renewable power sources within this region. TABLE 4.6 POWER GENERATION PLANTS CURRENTLY OPERATIONAL IN RIO DE JANEIRO GROUPED BY ENERGY SOURCE. Power source Number of plants Capacity [GW] Weight Thermal 156 7.0 67.8% Nuclear 2 2.0 19.3% Hydro (>30MW) 5 1.0 9.9% Small hydro 18 0.3 2.6% Onshore wind 1 0.0 0.3% Very small hydro (<1 MW) 20 0.0 0.2% Solar Photovoltaic 12 0.0 0.1% Total 214 10.3 100.0% Sources: ANEEL [24], DNV. Following the application of the methodology outlined in Section 4.2 to analyze an extensive dataset comprising thousands of hourly power generation data points, the monthly and hourly profiles of net capacity factors have been computed for three distinct power sources: hydropower, onshore wind, and offshore wind. These findings are visually represented in Figure 4.12, illustrating the probability of capacity factor exceedance levels denoted as P10, P50, and P90. FIGURE 4.12 NET CAPACITY FACTOR (NORMALIZED POWER) FOR HYDRO, ONSHORE WIND, AND OFFSHORE WIND. H dro pow r – historic l n r tion monthl profil H dro pow r – historic l n r tion hourl profil 1.00 1.00 0.90 0.90 0.80 0.80 0.70 0.70 0.60 0.60 0.50 0.50 0.40 0.40 0.30 0.30 0.20 0.20 0.10 0.10 0.00 0.00 0:00 2:00 4:00 6:00 8:00 10:00 12:00 14:00 16:00 18:00 20:00 22:00 ay v ar r n b n l g p t c ju ap oc no de au fe ja ju se m m Onshor wind pow r – historic l n r tion monthl profil Onshor wind pow r – historic l n r tion hourl profil 1.00 1.00 39 0.90 Scenarios for Offshore Wind Development in Brazil 0.90 0.80 0.80 0.70 0.70 0.60 0.60 0.20 0.20 0.10 0.10 0.00 0.00 0:00 2:00 4:00 6:00 8:00 10:00 12:00 14:00 16:00 18:00 20:00 22:00 ay v ar r n b n l g p t c ju ap oc no de au fe ja ju se m m Onshor wind pow r – historic l n r tion monthl profil Onshor wind pow r – historic l n r tion hourl profil 1.00 1.00 0.90 0.90 0.80 0.80 0.70 0.70 0.60 0.60 0.50 0.50 0.40 0.40 0.30 0.30 0.20 0.20 0.10 0.10 0.00 0.00 0:00 2:00 4:00 6:00 8:00 10:00 12:00 14:00 16:00 18:00 20:00 22:00 ay v ar r n b n l g p t c ju ap oc no de au fe ja ju se m m Offshor wind pow r – simul t d monthl profil Offshor wind pow r – simul t d hourl profil 1.00 1.00 0.90 0.80 0.80 0.70 0.60 0.60 0.50 0.40 0.40 0.30 0.20 0.20 0.10 0.00 0.00 0:00 2:00 4:00 6:00 8:00 10:00 12:00 14:00 16:00 18:00 20:00 22:00 ay v ar r n b n l g p t c ju ap oc no de au fe ja ju se m m P90 P50 P10 P90 P50 P10 Source: DNV. The net capacity factor profiles of different power sources exhibit distinct characteristics, with hydropower generation showing the highest variability, both on an hourly and monthly basis. This variability becomes apparent when examining the larger gaps between the various percentiles of the net capacity factor, as depicted in Figure 4.12. Like observations made in other regions, the profiles of onshore and offshore wind power generation in Rio de Janeiro are remarkably similar. This similarity can be attributed to the location of the sole onshore wind farm near the Atlantic coast, effectively operating under an almost offshore-like environment. Furthermore, when comparing historical onshore wind generation with projected offshore wind generation for the region, an encouraging trend emerges. Offshore wind facilities consistently achieve higher net capacity factors, indicating more efficient power generation than their onshore counterparts. This enhanced efficiency can be attributed not only to the abundant offshore wind resources near Rio de Janeiro, but also to the utilization of more modern and more efficient wind turbine technology. Table 4.7 provides additional insights obtained from the comparison of normalized power generation across various sources. This comparison includes an assessment of the IAV associated with each source. Notably, the data highlights that offshore wind power exhibits an exceptionally low level of 4 Offshore Wind Contribution to the Grid 40 IAV compared to other power sources. This positions offshore wind power as a reliable and consistent alternative for power generation in the region. TABLE 4.7 HIGHLIGHTS IN THE COMPARISON BETWEEN HYDRO AND WIND POWER FOR RIO DE JANEIRO. Hydro power Onshore wind power Offshore wind power Source of data Historical measurements Historical measurements Numerically simulated Monthly peak February January January Monthly low September May April Hourly peak 20:00 16:00 18:00 Hourly low 06:00 09:00 10:00 Average net 0.57 0.28 0.40 capacity factor Normalized IAV 20.1% 13.2% 7.2% Source: DNV. Figure 4.13 and Figure 4.14 provide visual representations of the simulated offshore wind power generation at the P90 probability of exceedance level in comparison to the historical regional peaks of electricity demand, both on a monthly and hourly basis. Additionally, the historical profiles for normalized onshore wind power generation and hydropower generation are included at the P90 level for reference. FIGURE 4.13 MONTHLY PROFILES OF CAPACITY FACTOR AT THE P90 PERCENTILE (CF P90) AND HISTORICAL PEAKS OF DEMAND. 0.60 8600.0 8400.0 Peak energy demand MWh 0.50 Net capacity factor (CF) 8200.0 0.40 8000.0 0.30 7800.0 7600.0 0.20 7400.0 0.10 7200.0 0.00 7000.0 jan feb mar apr may jun jul aug sep oct nov dec Peak load RJ—MWh Hydro CF P90 Onshore wind P90 Offshore wind P90 Source: DNV. 41 Scenarios for Offshore Wind Development in Brazil FIGURE 4.14 HOURLY PROFILES OF CAPACITY FACTOR AT THE P90 PERCENTILE (CF P90) AND HISTORICAL PEAKS OF DEMAND. 0.50 9000.0 0.45 8500.0 Peak energy demand MWh 0.40 Net capacity factor (CF) 0.35 8000.0 0.30 0.25 7500.0 0.20 7000.0 0.15 0.10 6500.0 0.05 0.00 6000.0 00 0 00 00 00 00 00 00 00 00 11 0 12 0 13 0 14 0 15 0 16 0 17 0 18 0 19 0 20 0 21 0 22 0 23 0 0 1:0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 0: 2: 3: 4: 5: 6: 7: 8: 9: 10 Peak load RJ—MWh Hydro CF P90 Onshore wind P90 Offshore wind P90 Source: DNV. State-specific demand levels were estimated based on regional electric load datasets. 4.3.1.4 National Level Similar historical datasets, akin to those utilized in the regional assessments discussed in the previous subsections, were employed to explore the historical relationship between hydro and wind power generation throughout the entire country of Brazil. Figure 4.15 illustrates the historical capacity factor for all wind farms and hydropower plants operational in Brazil from 2015 to 2022. Before 2015, the onshore wind industry was in the process of building its capacity, with less than five gigawatts of power commissioned across the country. During this period, a strong correlation between wind and hydropower generation was not discernible. However, after 2015, a robust monthly correlation emerged, with a Pearson’s coefficient (R²) exceeding 0.6 for the entire dataset and 0.8 for selected years. In essence, over the past decade, hydro and wind power have proven to be highly complementary on a nationwide scale. This synergy is particularly pronounced during the second semester of each year when onshore wind power traditionally peaks. This phenomenon is attributed to the concentration of wind farms in the Northeast region of Brazil. During this period, the region experiences lower rainfall and higher temperatures, constituting the dry season. This season is often associated with higher wind speeds and the prevalence of trade winds blowing from the southeast, which are generally stronger and more consistent during dry conditions. 4 Offshore Wind Contribution to the Grid 42 FIGURE 4.15 MONTHLY CAPACITY FACTORS (2015-2022) FOR THE WHOLE COUNTRY OF BRAZIL. Simulated Offshore wind CF Historical onshore wind CF Historical hydro power CF 70% Net capacity factors (CF P50) 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Source: DNV. In addition to the historical onshore wind and hydropower generation data, offshore wind power generation was also simulated at the national level. For this purpose, it was assumed in the numerical simulation domain that modern offshore wind farms operated simultaneously in the South, Southeast, and Northeast regions of Brazil. The blue bars shown in Figure 4.15 reflect the overall capacity factor resulting from the aggregation of all these virtual projects. In this national-level assessment, the offshore wind capacity factor series for the South region received a weighting factor of 40 percent, while the series simulated for the Northeast region was also allotted 40 percent. Additionally, the series simulated for the Southeast region was assigned a 20 percent weighting factor. These weighting factors were determined arbitrarily, taking into consideration the available area of each offshore basis. However, it is important to acknowledge that the future spatial distribution of offshore wind power is uncertain. There may be variations in installed capacity across regions, which could mildly affect the behavior of offshore wind power at the national level. For the three specific coastal regions of Brazil investigated earlier, the net capacity factor potentially achievable by offshore wind farms exceeded that delivered by onshore wind farms in those same areas. However, at the national level, as indicated by the simulations conducted by DNV, this difference is unlikely to persist. As illustrated in Figure 4.15, onshore and offshore wind efficiencies are projected to be very similar, with a long-term median (P50) net capacity factor fluctuating around 42 percent in both cases. It is noteworthy, though, that at the national scale, the seasonal variation in offshore wind power could complement the historical seasonal behavior of hydropower. When one peaks, the other is at its minimum. Therefore, at the national level, offshore wind power generation holds significant potential to mitigate the variability in hydropower generation. 43 Scenarios for Offshore Wind Development in Brazil 4.3.2 Grid Aspects The following subsections introduce the technology of offshore wind farms from a grid perspective, their capabilities and how they can fit the Brazilian reality, both in terms of compliance with local requirements and regarding possible participation on ancillary services and system support. Detailed analyzes on network reinforcement needs, however, still need to be conducted for different scenarios of offshore wind capacity. 4.3.2.1 Offshore Wind Farm Technical Capabilities Wind farm capabilities to achieve grid code compliance and, thus, eventual participation in ancillary services to further support the grid is dependent on the equipment existing on the windfarm (hardware) and respective control (software). Focusing on the wind turbines, modern wind farms employ essentially two major groups regarding their electrical features [27]: 1. Double fed induction generators (DFIG); and 2. Full scale converter machines. In the current offshore wind market, there is one turbine technology which appears as dominant among multi-MW modern offshore wind turbines, since it is proposed by main manufacturers such as Vestas, Siemens-Gamesa, and General Electric. This is the permanent magnet synchronous generator (PMSG), interfaced to the grid by means of a back-to-back converter. This approach can be used to increase the rated power of the wind turbine and offers efficiency and reliability. One or more converters can be turned off for higher efficiency when the wind speed is low and in case of failure in one converter, the turbine can continue to operate at a reduced capacity. Nevertheless, having several converters in parallel leads to complexity in the configuration and control of the turbines. Wind turbines equipped with PMSG are normally able to comply with most grid codes at an international level. The presence of a synchronous generator coupled to a full converter helps overcome issues in reactive power and voltage control in steady-state and in presence of disturbances in the system (voltage dips). Requirements around inertia and frequency control must be addressed by two levels of control, i.e., at turbine level and at farm level via the power plant controller. The interactions of offshore wind farms with the grid will depend not only on the turbine’s hardware and controls (at turbine and farm level), but also from the way these plants are connected to the grid. Wind farms can be connected to the onshore grid via alternating current (AC) or high voltage direct current (HVDC) connections. These two cases are very different and while AC connections can certainly be viable and are presently in service, HVDC affirms itself as a better alternative to connect several GW or clusters of offshore wind farms. From a grid perspective, the impacts of offshore wind farms have obvious similarities with the ones associated to onshore developments. However, there are some relevant differences: 1. Normally, an average offshore wind farm has a much higher installed capacity than an average onshore one. This means that the sudden loss of part or all the generation associated to an offshore wind farm has a much higher impact on system balance and stability. Onshore wind farms have a spread of installed capacity from tenths to hundreds of MW, while offshore wind farms are typically larger than 500 MW and the biggest ones in operation have an installed capacity above 1 GW. 4 Offshore Wind Contribution to the Grid 44 2. Offshore wind farms are distant from their interconnection points onshore. This means there are normally cables with several tens of km connecting them. If this connection is made on AC, there maybe a number of issues associated with the occurrence of resonance at higher or lower frequencies (known as subsynchronous resonances). HVDC connections can solve these issues and add further possibilities to offshore wind farms, as described in the following subsections. 4.3.2.2 Offshore Wind Farms Connection: AC and HVDC AC transmission is well known and has been the mainstay of power system worldwide. It is, however, known to have the following relevant limitations when it comes to offshore wind connection: 1. Active power transmission is limited by voltage stability and transient stability limits; 2. Losses in percentage increase with the length of the AC links, plus reactive power flow heats the conductors and contributes to losses; and 3. The practical length of the connections is limited by the capacitances of the cables and the charging currents associated to them. Too long cables require compensation, which results in additional equipment and complexity in terms of planning and operation. In the case of submarine cables, it is normally not feasible to transmit power in AC over 100 km of distance. For distances between 50 km and 100 km there should be a cost-benefit analysis considering both CapEx and OpEx to decide between the AC and HVDC alternatives. From the two dominant HVDC technologies (line-commutated converter (LCC) and voltage source converter (VSC)), VSC is the one actually being applied in offshore wind projects. One of the main reasons for this is that it requires less components, which consequently lead to more manageable logistics and installation in offshore converter stations. VSC HVDC transmission solves the mentioned technical limitations of AC systems, has lower losses, and allows for other relevant features such as: 1. Active power transmission and reactive power become effectively decoupled. Reactive power is not consumed or generated by the link. The converters on each AC side can consume or deliver reactive power, as per their P-Q capability curves. 2. Can be connected and operate in a stable way in weak grids (low short-circuit power). AC systems connected to weak grids are very vulnerable to disturbances since these can give rise to unacceptable excursions in voltage and frequency. This is an important feature for offshore wind farms that are many times connected on shore at remote locations. 3. Black-start capability. Using any DC voltage source, such as the capacitors on the DC side of the converter stations, the converters can generate an AC voltage waveform within specified frequency and amplitude ranges. This feature helps the grid recover after a blackout by providing a voltage reference to grid following generation (almost all renewable generation presently installed is grid following) allowing for power to be re-established, in their vicinity, while the synchronous generators in the system recover from the blackout. In Brazil this feature may seem less relevant than in other countries, due to the dominant presence of hydro power in the generation mix. Hydro power is very fast to resynchronize to the grid (as long as water is available) and thus provides fast recovery from blackouts. In countries with a slow generation mix, dominated by steam boilers (nuclear or coal fired for example), this advantage is more relevant. However, even in Brazil, this capability could potentially become more often required in case of more frequent/severe droughts associated to climate change. 45 Scenarios for Offshore Wind Development in Brazil As an example, Figure 4.16 shows the Dolwin 1 offshore converter station, off the coast of Heede, Germany. This HVDC link consists of a symmetric monopile with 800 MW rated power, with a length of submarine cable of 67.5 km and an onshore underground cable of 90 km. FIGURE 4.16 DOLWIN 1 OFFSHORE CONVERTER STATION. Source: TenneT Finally, with the advances in DC current interruption, the multi-terminal (meshed) HVDC grids concept becomes feasible and is presently being planned for deployment. For example, in Europe the planned offshore energy hubs in the North Sea, contemplated in the Esbjerg Declaration [28], consisting of 65 GW of offshore wind by 2030 and 150 GW by 2050, will make use of HVDC links to: 1. Connect the different energy hubs to each other and to the load centers in the signatory countries (Belgium, Netherlands, Germany, and Denmark) and to GH2 production plants offshore. 2. Strengthen the connections between different countries via an offshore grid, contributing to security of supply in Europe and power price uniformity. This concept could be applied in Brazil, if multi-GW offshore wind farms are planned next to each other (forming clusters), to guarantee a reliable evacuation of the generated power to shore. 4.3.2.3 Brazilian Grid Code Requirements The Brazilian grid code, in particular the part related to the requirements for the connection of renewable generation to the transmission grid [29], is well aligned with international practice. The wind turbines offered by main manufacturers involved in the offshore wind business (exposed to grid code requirements in several countries and continents) should have no problems to comply with the requirements of the Brazilian grid code. Nevertheless, the following aspects would be the most relevant and challenging for renewable facilities to comply with: 4 Offshore Wind Contribution to the Grid 46 1. Q/Pmax-V curve: The Q/Pmax-V curve required in Brazil is shown below. The issue with this requirement, as with all voltage related requirement is that it is not enough for the turbines to comply with it individually. Compliance with this requirement is verified at the point of common coupling, and therefore it is influenced by the design of internal network. The correct approach to design should take these requirements into account, especially the extreme points of the curve identified in red in the figure below. The Power Plant Controller (PPC) also has a role in the fulfillling of this requirement. FIGURE 4.17 Q/PMAX-V CURVE AS REQUIRED FROM RENEWABLE GENERATION IN BRAZIL. V Connection point 110% 105% 100% 95% 90% Q / Pmax -0.329 0 0.329 FP = -0.95 FP = 0.95 Source: ONS [29] 2. Synthetic inertia: Wind turbines have rotating mass, so there is a certain inertia to them, but normally further control provisions are required for the turbines to be able to comply with this requirement, since the converters decouple mechanical from electrical quantities. This additional provision is called synthetic or virtual inertia, since it is a control action designed to mimic the physics of inertia. Therefore, any turbine acquisition in Brazil, must consider this capacity. The requirement is essentially to have the turbines contribute with at least 10 percent of their nominal power, for a minimum period of 5s when in case of underfrequency events consisting of deviations above 0.2 Hz, as per Figure 4.18. FIGURE 4.18 REQUIREMENTS FOR THE SYNTHETIC INERTIA MECHANISM. WTG output power variation 5s 10% Prated 0.2 Hz factivation Frequency Source: ONS [29] 47 Scenarios for Offshore Wind Development in Brazil 3. Undervoltage ride-through and reactive current support: In line with international practice, the Brazilian system operator has defined an under (and an over) voltage ride-through curve (Figure 4.19). The requirement is valid both for symmetrical (three-phase) and asymmetrical faults (phase-phase, phase-ground, phase-phase-ground). Modern wind turbines should be able to remain connected for voltage dips (and voltage swells), as per this curve. The challenge comes from the need to inject reactive power to support the grid during the mentioned voltage dips. This depends not only on the turbines and their control, but also on the design of the internal network. The requirement is to supply reactive current equal to the pre-fault current for voltage dips with residual voltage inferior to 50 percent. It is particularly challenging to fulfill this requirement for unbalanced dips since there have been instances where the converter control looks at the decrease in positive sequence voltage to decide the amount of reactive current to inject. For example, in the case of a phase-ground fault, although the faulty phase can see a residual voltage inferior to 50 percent, the positive sequence voltage remains above and the control may not enter the required control mode, i.e., reduce active current to zero and inject all the possible reactive current. FIGURE 4.19 REQUIREMENTS FOR THE SYNTHETIC INERTIA MECHANISM. Voltage (pu) 1.2 1.1 1 0.9 0.85 0.2 Time(s) 0 0.5 1 2.5 5 Source: ONS [29] 4.3.2.4 Ancillary Services Supply in Brazil In Brazil, there is presently no competitive market for ancillary services. However, ancillary services are defined and used by the Operador Nacional do Sistema (National System Operator—ONS). Those services are stated in Aneel Resolution n. 1.030/2022 [30] and detailed in ONS Grid Procedures [31], with main services summarized hereafter: ■ Primary frequency control: This is a mandatory service for all generators connected to the National Interconnect System. There is no commercial retribution associated to it as the associated cost is implicit in the energy price. Given the voltage levels typically considered in offshore wind farms, it is to be expected that this service will be required. Specific conditions for wind plants grid connection and primary frequency control are stated in ONS Grid Procedures, submodule 2.3 [32]. 4 Offshore Wind Contribution to the Grid 48 ■ Secondary frequency control: The power plants must be integrated in the AGC (Automatic Generation Control) to provide this service. This service is contracted by means of dedicated agreements (CPSA) between the system operator and the generating plant. The annual revenue is regulated and therefore defined by ANEEL (Brazilian energy regulatory body). According to ONS Grid Procedures submodule 2.10 [29], hydro and thermal plants are allowed to integrate AGC, although these services are currently provided only by hydropower plants. ■ Reactive power support: This service is related to consumption or production of reactive energy for voltage control. It Is currently classified between plants that provide reactive energy while producing active power and plants with synchronous condenser mode (with dedicated operation to provide this service). For the first group, the service is stated in grid connection requirements, while for the second group the service is contracted by the ONS through specific agreement (CPSA), and the selected plants are allowed to receive variable revenue (with regulated tariff) to cover operation and maintenance costs. This service can also be supplied by transmission assets like synchronous condensers. Under Brazilian regulation and specifically under Resolution n. 1030/2022, actions like reduction of active power to inject reactive power are not remunerated. So essentially offshore wind promoters should focus on grid code compliance to be able to provide the necessary reactive power when required, without any reduction of active power supply. ■ Black start: As the name indicates, this service consists of the capacity of a power plant to start full operation without any support from the grid, and is further subdivided into Partial Black Start and Integral Black Start. The first case is related with the ability to start generation without grid energy consumption and in the second, the ability to supply energy to auxiliary services from generator terminals, maintaining spinning and excitation. Plants that are able to do so can be selected by the system operator to help in system restoration after a blackout. The annual revenue is regulated and therefore defined by ANEEL. ■ Complementary dispatch for maintenance of power reserve: For now, this ancillary service relates to the dispatch of thermal power plants to maintain a certain level of reserve in the system when the secondary reserve provided by hydropower plants is used. This is the classical service attributed to fully dispatchable power plants, therefore it is unlikely that offshore wind will participate in this service, even in the future. In future power systems there will be other technologies more suited to provide this service, for example battery energy storage systems. Table 4.8 summarizes views on the fitness of offshore wind to provide the mentioned services. 49 Scenarios for Offshore Wind Development in Brazil TABLE 4.8 ADEQUACY OF OFFSHORE FOR THE SUPPLY OF ANCILLARY SERVICES. Service Remuneration Supply by offshore wind Primary Not applicable. This Yes. Any turbine with pitch control should in principle frequency control service is mandatory. be able to supply this service. Possible. The wind farm needs to be integrated in the AGC, and therefore obey the requirements to do so in terms of communication systems and controllability. Moreover, to supply this service the windfarm must Yes. Regulated contract reduce its active power yield. The use of offshore wind Secondary between the power plant for secondary frequency control needs to be carefully frequency control and the system operator. evaluated, since the power availability depends of wind natural resource. Normally this service requires fully dispatchable control with a guaranteed resource (like hydropower plants), mainly because it is associated with safety of grid operation. Yes. Regulated contract Yes. The turbines used in offshore wind farms are Reactive power support between the power plant usually capable of providing this service. and the system operator. Possible. If the connection to shore is made through an Yes. Regulated contract HVDC link or if the converters in the wind turbines are Black start between the power plant grid forming, then black start is potentially possible, and the system operator. although a considerable control challenge. Presently this is a research topic. Nevertheless, given its hydro power dominated energy mix, the majority of the plants providing ancillary services to the system are currently hydropower plants. This has both technical and economic implications, since these plants respond very quickly and do not have fuel costs associated to this provision (at most there is an opportunity cost). However, as more renewable generation is installed bringing higher uncertainty to system operation and as the availability of water is also more prone to variation (for example due to climate change), there might be opportunities for other technologies to provide ancillary services. This will bring technical, but mostly regulatory and market design related needs. The current revenue from some Ancillary Services in Brazil is very low and this may lower the economical attractiveness of offshore wind projects. Brazilian authorities are conscious of the needs and the challenges associated to the provision of ancillary service as more non- dispatchable renewable generation is installed in the system. EPE released a technical note [33] in 2021 discussing the need to decouple ancillary service supply from specific technologies, considering the future development of the power system. An activity roadmap is proposed, including debates and consultation about future market instruments which will imply changes to the regulatory framework in Brazil. 4 Offshore Wind Contribution to the Grid 50 4.4 DISCUSSION A comprehensive analysis of offshore wind energy’s potential to contribute to the Brazilian electric grid was conducted. The primary objective was to assess how offshore wind installations could help mitigate the challenges of variability and intermittency associated with renewable energy sources, such as hydro, onshore wind and solar, in Brazil’s electricity generation landscape. The analysis utilized historical data, numerical simulations, and advanced engineering models to evaluate the feasibility and benefits of offshore wind energy integration. One of the key insights from the analysis is the close relationship between population growth and electric power generation in Brazil over the last two decades. As the population steadily increased, so did the demand for electricity, reaching a peak of over 70 GWavg in 2022. According to forecasts by IBGE [34], Brazil’s population is expected to continue growing at a progressively decreasing rate until around 2050, projecting a peak between 220 and 230 million people before a subsequent decline. This trend underscores the importance of exploring reliable and sustainable sources of energy to meet the growing electricity demand in the country. It is worth highlighting that the ongoing electrification process of Brazil’s power matrix will further contribute to boosting this electricity demand over the coming decades. The investigations also revealed regional variations in power generation and consumption. Notably, the North and Northeast regions of Brazil exhibited surplus energy within their respective electric systems, with power generation exceeding local demand by 8 GW on average throughout 2022. This surplus energy was transmitted to other regions, addressing their electricity deficits. The analysis of specific regions (coast of Rio Grande do Sul, coast of Ceará, and coast of Rio de Janeiro) provided valuable insights into the potential of offshore wind energy. In the case of Rio Grande do Sul, offshore wind farms demonstrated remarkable similarity to onshore wind farms, but with slightly improved efficiency. Additionally, offshore wind power exhibited exceptionally low IAV, making it a dependable source of energy for the region. In Ceará, minimal variability in solar photovoltaic generation was observed, making it a stable energy source. Moreover, the complementarity between solar and wind power in this region was evident, with wind farms reaching peak generation during periods when solar plants experienced night-time downtime. The coastal waters of Ceará showed great promise for hosting efficient offshore wind farms, thanks to abundant wind resources and modern technology. In the Southeast region of Brazil, the energy landscape of Rio de Janeiro leans heavily on thermal power plants, with limited onshore wind capacity, offshore wind emerges as a promising option to increase renewable energy in the region. The analysis shows that offshore wind offers efficient and stable power generation. It exhibits less variability compared to other sources, making it a reliable option for meeting Rio de Janeiro’s electricity demand. At the national level, the historical relationship between hydro and onshore wind power generation in Brazil exhibits a robust monthly correlation. This synergy between hydro and wind power becomes especially pronounced in the second half of each year, characterized by dry conditions and elevated 51 Scenarios for Offshore Wind Development in Brazil wind speeds across most of the nation’s territory. Numerical simulations of offshore wind power generation suggest that, on a national scale, both onshore and offshore wind efficiencies are anticipated to be comparable. Furthermore, offshore wind power has the potential to complement the seasonal variation of hydropower, thereby potentially mitigating its variability on a national scale. Offshore wind energy is a promising solution for Brazil’s electric grid challenges, helping address the energy trilemma. Generating electricity offshore, closer to demand points, holds the potential to reduce transmission losses and to complement other renewables like solar PV. Integration aligns with sustainability goals and boosts local economies. This analysis shows offshore wind’s potential in Brazil’s transition to an even more sustainable and reliable grid. Regional analyzes highlight its efficiency, reliability, and grid integration benefits. The turbines typically used in offshore wind farms are not expected to have any issues complying with the Brazilian grid code. If coupled with technologies like HVDC they could potentially improve system resiliency, providing for example black start capability. Depending on the size of the offshore wind farms or their clusters, Brazil could consider HVDC offshore grid concepts, in a similar way to what is being planned in the North Sea. This would be an interesting way to have large windfarm clusters connected to shore in a reliable way, but a final decision depends on detailed techno-economic analysis. While in Europe the offshore grid is used not only to connect wind farms to shore, but also to achieve more interconnections between different countries, in Brazil the sheer distances involved, even between different states, will reduce or eliminate this advantage. Offshore wind will have impacts that can be classified into generation system impacts and also grid impacts. It is not possible to quantify them properly without several dedicated studies. At an overall generation system level, it is important to check how reliability of supply or generation adequacy (for example, measured in terms of Loss of Load Expectation (LOLE)) are affected by the deployment of offshore wind, especially in scenarios #2 Intermediate and #3 Ambitious, since more renewable generation normally means the displacement of dispatchable conventional generation, namely synchronous generation. The deployment of storage systems may help mitigate this issue. At the grid level, there are multiple issues to consider, namely: ■ Reinforcement and expansion needs both at a regional level and country wide: Offshore wind may lead to congestion (either overloads or voltage excursion issues) at a local level especially if connected to less developed grids, given the size of offshore wind plants, especially in scenarios #2 Intermediate and #3 Ambitious. This is normally related with the lack of load close to the point of connection of offshore wind. So, the issue can be potentially mitigated by adding load at a local level, for example storage systems or H2 production, or at a national level by using transmission corridors which will take the power generated in a given location to the location of consumption. Brazil has significant experience with the establishment of HVDC corridors which serve precisely this purpose. The severity of this issue will depend significantly on how offshore wind is distributed along the country. For example, it is expected that a concentration of offshore wind in the northeastern states of Brazil would originate more grid issues as compared to a concentration on the south. But again, the severity of these issues is scenario dependent (offshore wind development, rest of generation system development, and grid reinforcement/expansion) and can only be quantified via a dedicated study. In more moderate penetration scenarios, offshore wind may potentially reduce investment needs, compensating for local load growth. 4 Offshore Wind Contribution to the Grid 52 ■ Dynamic stability: Faults in the grid or the sudden disconnection of large power plants, especially in a system with a lot of non-synchronous generation may endanger stability margins and lead to risks of blackout (in a country as large as Brazil these can typically be state-wide and not nation-wide). Offshore wind penetration means less synchronous generation will be online. The consequences of this to angular stability and frequency excursions in case of faults in the grid or sudden loss of generation need to be investigated via dedicated studies for the several scenarios being considered. To mitigate this risk, it may be required to add inertia to the system, using for example synchronous condensers equipped with flywheels or battery systems to provide virtual inertia (as long as they stay connected to the grid during frequency and voltage excursions). ■ Grid code updates may also be required to include in the grid requirements around issues like: a. Sub-synchronous resonance studies: The connection of offshore wind, which essentially constitutes of power electronics interface generation associated to long cable systems, can originate complex control interactions with nearby synchronous generation (known as sub-synchronous torsional interaction (SSTI)) or with other power electronics controllers, for example, those in HVDC links (known as sub-synchronous control interaction (SSCI)). These need to be studied for every project or at least for every suspicious case which may be identified by the ISO (for example, proximity to series compensated transmission lines or to generators with known oscillatory modes in relation to other generators). To quantify eventual needs for development and reinforcement of the transmission infrastructure in Brazil, there is a need to conduct at least, but not limited to, the previously mentioned system studies namely: a. Steady-state analysis (in the relevant network planning horizons—for example 2030 and 2035) considering several scenarios of load/generation development in N-0, N-1, and N-2 con- tingencies (when applicable). This study should take into account the most likely locations of offshore wind farms and look at issues such as voltage profiles in the grid, voltage stability, and needs for reactive power compensation. b. Dynamic analysis in RMS and eventually EMT domains (advisable in the massive presence of inverter-based resources and networks with low short-circuit ratio). This should add clarity on the eventual need for improved oscillation damping and in general dynamic support to system which can be provided by technologies like synchronous compensators or STATCOMs. Further studies may be required for individual cases. For example, power quality and in particular harmonic analysis, become more relevant when long cables such as the cables to shore from offshore windfarms are connected to weak networks (low short-circuit ratio). The results and conclusions will provide valuable inputs for the Transmission Expansion Plans (i.e., Programa de Expansão da Transmissão (PET) / Plano de Expansão de Longo Prazo (PELP)). 53 Scenarios for Offshore Wind Development in Brazil 4.4.1 Recommendations The following recommendations are made to support understanding of the contribution offshore wind could make to the Brazilian electrical grid: ■ To quantify eventual needs for development and reinforcement of the transmission infrastructure in Brazil, there is the need to conduct steady-state analysis in the relevant network planning, and dynamic analysis in RMS and eventually EMT domains. Further studies may be required for individual cases, for example, power quality and in particular harmonic analysis. The results and conclusions will provide valuable inputs for the Transmission Expansion Plans (i.e., Programa de Expansão da Transmissão (PET) / Plano de Expansão de Longo Prazo (PELP). [Brazilian government] ■ Offshore wind can also potentially have a relevant role in the provision of ancillary services. Currently, there is not a competitive ancillary services market in Brazil, and the current approach is very focused on obtaining ancillary services for hydropower. It is advisable to have further research, public discussions, and initiatives on the future evolution of ancillary services provision in Brazil and eventual ancillary service market rules. [Brazilian government] 4 Offshore Wind Contribution to the Grid 54 5 TECHNICAL POTENTIAL ASSESSMENT 5.1 PURPOSE The purpose of this section is to provide an overview of the possibilities of offshore wind development in Brazil, based on technical criteria, deriving from this information the areas with potential for offshore wind development. All these criteria are presented in a series of maps that provide spatial information and allow readers to understand the limitations of each area. 5.2 METHOD In order to identify the preliminary areas for offshore wind development in Brazil, the following steps were taken: ■ Identification of the technical potential for offshore wind in the country (Section 5.3.1) In this first step, offshore macro areas within the Brazilian EEZ that fulfill the minimum site conditions criteria in relation to mean wind speed (at least 7 m/s at 100 m height above sea level), bathymetry (range between -1,000-0 m a.s.l., being -70 m the maximum water depth for bottom- fixed farms), and distance to shore (maximum distance of 200 km) have been identified. ■ Calculation of comparative LCoE within the macro areas (Section 5.3.2) A simplified LCoE model has been defined to highlight the most suitable areas for development of offshore wind projects in the country from a financial perspective. This model is based on parameters linked to technical potential (wind speed, bathymetry, and distance to coast), as well as other factors such as mean wave height and distance to grid. The values obtained from the model are intended for comparison purposes only. For an accurate LCoE estimate, a site-specific analysis, with more detail, must be conducted, as outlined in Section 13. ■ Registered projects and grid infrastructure (Section 5.3.3) Projects registered with IBAMA [25] were added to the maps, as well as information on existing and planned electrical infrastructure (transmission lines and substation) [35] and a map showing the spare capacity in onshore substations by 2027 [36]. A more complete analysis of other restrictions (environmental and social, ports infrastructure, and overlap with other activities, such as O&G) is presented in Section 6. 55 Scenarios for Offshore Wind Development in Brazil 5.3 RESULTS 5.3.1 Identified Macro-areas Three differentiated potential macro-areas have been identified in the Brazilian coast through the application of the first step of the methodology described in Section 5.2. These areas are named Northeast, Southeast, and South, based on their relative position along the shoreline. The basic statistics for the macro-areas are summarized in Table 5.1. TABLE 5.1 BASIC TECHNICAL PARAMETERS FOR THE THREE MACRO AREAS. Parameter Northeast area Southeast area South area Comment Bottom- Bottom- Bottom- Floating Floating Floating fixed fixed fixed The Northeast and Southeast areas are very similar in Area (km2) 68,931 20,814 26,822 58,985 65,973 99,565 size. The South area is approximately twice as large as these areas. There are important Range of variations in the wind wind speeds 7 to 10 7 to 9.8 7 to 9.3 7 to 8.6 7 to 9.3 7 to 9.3 conditions along the coast (m/s) at and within the macro-areas, 100m a.s.l. as shown in Figure 5.1. Water depth is mainly under -70 m in the Northeast area (which is suitable for bottom- fixed wind farms) and a mixture of values under and above this depth in the other Mean two macro-areas (which bathymetry 25 489 38 294 35 253 translates into feasibility (m a.s.l.) for both bottom-fixed and floating technologies). Range of water depths has been limited between 0 and -1,000 m, as described in the methodology. The 3 macro-areas are parallel to the coastline with lengths of approximately 1,000 km. The Northeast area has several smaller feasible areas disaggregated from the main zone. The South area is the Mean farthest and has a coastal distance to 29 73 28 110 37 94 lagoon that has also been shore (km) included because of its size. Range of distance to shore has been limited between 0 and 200 km. To note though that the farther the wind farms from the shoreline, the higher the costs of electrical infrastructure. Source: DNV. 5 Technical Potential Assessment 56 Figure 5.1 shows the wind speed and bathymetry in the three macro-areas. More detailed figures can be found in Appendix C. FIGURE 5.1 MACRO-AREAS FOR OFFSHORE WIND DEVELOPMENT IN BRAZIL. Source: ArcGIS online, GWA [18], INDE [37] [38], GEBCO [26]. 57 Scenarios for Offshore Wind Development in Brazil 5.3.2 Heat Mapping Based on LCoE Behavior The LCoE (Levelized Cost of Energy) is a metric that measures the lifetime costs of a project divided by its energy production. This value allows the comparison of different technologies or projects from a financial point of view taking into account variations in project size, capital cost, capacities, or life spans, among other parameters. The simplified LCoE used at this stage, is a high-level estimation for mapping and comparison purposes at a national level based in a series of assumptions regarding the turbines, foundations, installed capacity, and other main parameters. As this is a country-level simplified LCoE analysis, a color scale is provided among the different areas rather than absolute LCoE values so the regions with an expected higher LCoE cost can be easily identified. As can be observed in Figure 5.2, the lowest LCoE values are in the areas closer to the coast, especially due to bathymetry. The Northeast area has a wide strip of low LCoE; however, the overall polygon is relatively smaller when comparing to other regions due to the shorter continental shelf area and rapid increase of the water depth. The Southeast area has its lowest LCoE values close to the northeast area of the state of Rio de Janeiro and southeast of the state of Espírito Santo, mainly due to the high wind speeds combined with shallow waters. Finally, the South area has the biggest suitable polygon, with lower LCoE values in areas close to the coast. A more detailed LCoE assessment can be found in Section 13. 5 Technical Potential Assessment 58 FIGURE 5.2 LEVELIZED COST OF ENERGY (LCOE). Source: ArcGIS online, GWA [18], INDE [37] [38], GEBCO [26], EPE [35]. 59 Scenarios for Offshore Wind Development in Brazil 5.3.3 Projects Registered and Grid Infrastructure Projects registered in the Environmental Agency (IBAMA) In all the three macro-areas, there are several tens of offshore wind projects (around 90 projects by January 2024) with open environmental licensing process [25], with the Northeast and South areas being the most sought-after (see Figure 5.3). This is a good indicator of the interests for developing offshore wind projects in the country. Currently, all projects are in areas with water depths shallower than 70 m, appropriate for bottom-fixed technology. There is just one project in the Southern area which is affected by deeper bathymetry and would need floating technology according to the depth criteria. Projects are mostly distributed along the Northeastern and Southern macro-areas because of the lower water depths, allowing for bottom-fixed technology. Grid infrastructure and substations capacity (2027) According to information from EPE [35], there are planned high-voltage grid lines and substations until 2033. This planned infrastructure is included in the following figures and in Appendix C. The high-voltage grid infrastructure is in general terms present at short distance from the sea along the Brazilian coast. In some specific points, there are gaps without grid connection, many of them being filled in the future planned grid infrastructure. Figure 5.8 and Figure 5.9 present the spare capacity of onshore substations in the year 2027. These data are published by the ONS [36] and are only available over a 5-year horizon. There are several substations over 1,500 MW in the three macro-areas with some gaps in the eastern part of the Northeast macro-area and in the northern part of the Southeast one. 5 Technical Potential Assessment 60 FIGURE 5.3 REGISTERED PROJECTS AS OF NOVEMBER 2023—NORTHEAST. Source: ArcGIS Online, IBAMA [25], INDE [37] [38], GEBCO [26]. 61 Scenarios for Offshore Wind Development in Brazil FIGURE 5.4 REGISTERED PROJECTS AS OF NOVEMBER 2023—SOUTHEAST. Source: ArcGIS Online, IBAMA [25], INDE [37] [38], GEBCO [26]. 5 Technical Potential Assessment 62 FIGURE 5.5 REGISTERED PROJECTS AS OF NOVEMBER 2023—SOUTH. Source: ArcGIS Online, IBAMA [25], INDE [37] [38], GEBCO [26]. 63 Scenarios for Offshore Wind Development in Brazil FIGURE 5.6 GRID INFRASTRUCTURE—NORTHEAST. Source: ArcGIS Online, EPE [35], INDE [37] [38]. 5 Technical Potential Assessment 64 FIGURE 5.7 GRID INFRASTRUCTURE—SOUTH AND SOUTHEAST. Source: ArcGIS Online, EPE [35], INDE [37] [38]. 65 Scenarios for Offshore Wind Development in Brazil FIGURE 5.8 SUBSTATION CAPACITY 2027—NORTHEAST. Source: ArcGIS Online, EPE [35], ONS [36], INDE [37] [38]. 5 Technical Potential Assessment 66 FIGURE 5.9 SUBSTATION CAPACITY 2027—SOUTH AND SOUTHEAST. Source: ArcGIS Online, EPE [35], ONS [36], INDE [37] [38]. 67 Scenarios for Offshore Wind Development in Brazil 5.3.4 General Conclusion Throughout the geospatial analysis that has been carried out, where geographical, physical, and technical aspects have been considered to evaluate each of the defined macro-zones, the following conclusions have been reached in general terms and for each specific macro-area. Three areas of possible offshore wind development have been identified within the Brazil EEZ. These three areas have been defined with the following criteria: ■ Minimum wind speed of 7 m/s at 100 m height a.s.l.; ■ Maximum bathymetry of -1,000 m; and ■ Maximum distance to coast of 200 km. These macro-areas are distributed along the Brazilian coast, one being in the Northeast and the other two in the South and Southeast. All of them have a considerable size: approximately 89,000 km2 in the Northeast area, 85,000 km2 in the Southeast, and 165,000 km2 in the South area. The Northeast area has the particularity of having many islands or sandbanks with shallower bathymetry to develop offshore wind projects whereas the South area has a large lagoon that has also been considered in the analysis. From the defined macro-areas, it will be necessary to subtract the effect of the different restrictions associated with social, environmental, and further technical sensitivities. A preliminary analysis of these constraints has been carried out in this report, in Section 6. The infrastructure regarding the grid network shows that this is distributed along the country coastline. The grid network is relatively accessible; however, spare interconnection capacity needs to be better evaluated for the medium to long term. Northeast macro-area—This area has mostly 0 to 70 m depth, with great possibilities for bottom- fixed technology. All the registered projects are within the bottom-fixed area. Additionally, this zone is the closest to the shoreline with exception of the many smaller areas of shallow waters (islands or sandbanks) located further away. Southeast macro-area—This region has great potential for both bottom-fixed and floating, despite that all the registered projects are located in the bottom-fixed area. South macro-area—This area has a great part above 70 m depth and a slightly greater area under this depth. All the registered projects are located under 70 m depth, allowing for bottom-fixed technology, except one, at the time of the writing this report. 5 Technical Potential Assessment 68 5.4 DISCUSSION Brazil has considerable offshore wind technical potential that could accommodate a significant build- out, even considering an ambitious scenario of 96 GW. This reality is particular and different from many countries that intend to develop offshore wind farms and have limited areas with suitable conditions for the development of offshore wind farms. If both minimum site conditions criteria (windspeed and bathymetry) and other potential restrictions are considered, the estimated area occupation of the offshore wind farms in each of the scenarios assessed in this report represents a small percentage with respect to the total available area (Table 5.2). Preliminary analysis indicates that to develop the 16 GW by 2050 (#1 Base Case scenario), only 1.2 percent of the extension of the identified macro-areas combined will be required. Under the #3 Ambitious scenario, only 7.1% of the available area would be required. TABLE 5.2 AREA OCCUPATION OF OFFSHORE WIND PROJECTS IN EACH DEVELOPMENT SCENARIO. Scenario Capacity installed by 2050 % occupied of total identified macro-area #1 Base Case 16 GW 1.2% #2 Intermediate 32 GW 2.3% #3 Ambitious 96 GW 7.1% 69 Scenarios for Offshore Wind Development in Brazil 6 PRELIMINARY ENVIRONMENTAL AND SOCIAL CONSIDERATIONS 6.1 PURPOSE The purpose of conducting this preliminary E&S analysis was to identify and assess the potential E&S impacts across the Brazilian coast for offshore wind development, which shall be addressed in greater detail during further social-environmental studies and assessments. The analysis included an assessment of potential impacts on protected and key biodiversity areas, natural habitats, sensitive marine species, shipping and navigation, visual impact, and fishing among others. 6.2 METHOD The applicable national laws, policies, regulations, and E&S considerations associated with the development, installation, and operation of offshore wind projects, have been reviewed with a focus on offshore rather than onshore aspects. This included information provided by The Biodiversity Consultancy (Appendix D—Brazil’s Priority Biodiversity Values). The current section will only identify and assess E&S conditions relative to the potential offshore wind development in general. Further detailed studies, surveys, and consultations in relation to E&S considerations will be required to be undertaken by the government, stakeholders, and project developers. Future studies and surveys should include the consideration of cumulative impacts between projects. These will be required both at a countrywide planning level (e.g., marine spatial planning) and at a project-specific level (during the EIA process) between projects in the same area. The identified macro-areas for offshore wind development in Brazil shown in Table 6.1 have also been included in the maps in this section to show their location relative to specific E&S constraints. The sensitivity scale shown in Table 6.1 has been used to show the potential impact of offshore wind on key receptors. TABLE 6.1 POTENTIAL SENSITIVITY SCALE FOR E&S CONSIDERATIONS. Category Description Low Offshore wind development is unlikely to have any impact on the E&S considerations. Medium Offshore wind development has the potential to have impacts on the E&S considerations. High Offshore wind development has the potential to have significant impacts on the E&S considerations. It is to be noted that even in the case of significant impacts the application of appropriate mitigation and compensation measures may reduce the potential sensitivity. 6 Preliminary Environmental and Social Considerations 70 The scale has been assigned for each potential E&S consideration identified, based on the following: ■ The availability of data; ■ The extent and consequences of the potential impacts of offshore wind developments; ■ Possible regulatory constraints; and ■ Inputs from early stakeholder engagement activities. The potential sensitivity scale takes into account possible impacts arising from both the construction and operation phase of the project and provides an overall risk assessment of potential impacts that refer to the macro-areas. These potential impacts have to be carefully evaluated based on a combination of experience and knowledge from MSP and EIA studies to verify their applicability to the macro-areas. Construction and operation mitigation measures, which are not considered in this risk assessment, may be implemented to assess the potential residual impacts of the projects. 6.2.1 Stakeholder Engagement Stakeholder engagement is a key process in identifying possible E&S constraints that could affect offshore wind developments. As part of the preparations for the analysis, initial stakeholder engagement was carried out with the 18 stakeholders listed below, to discuss priority topics for the development of offshore wind in Brazil, including E&S topics. TABLE 6.2 INITIAL STAKEHOLDER ENGAGEMENT. List of stakeholders involved in the inception mission Associação Brasileira de Energia Eólica (ABEEólica) Vestas Instituto Brasileiro de Petróleo e Gás (IBP) TotalEnergies Neoenergia Copenhagen Offshore Partners (COP) Empresa de Pesquisa Energética (EPE) Instituto Brasileiro de Meio Ambiente (IBAMA) Ministério de Minas e Energia (MME) Agência Nacional de Energia Elétrica (ANEEL) Banco Nacional de Desenvolvimento Econômico e Social (BNDES) Operador Nacional do Sistema Elétrico (ONS) Corio Generation Ministério da Pesca e Aquicultura Port of Pecém Port of Açu Equinor Associação Brasileira do Hidrogênio (ABH2) 71 Scenarios for Offshore Wind Development in Brazil The engagements resulted in a general positive consensus on IBAMA’s Terms of Reference (ToR)iii [16]. Several stakeholders suggested that a general E&S initial screening and risk assessment is undertaken prior to lease auction in a specific area. Concerns were raised about community sensitivity, especially regarding fishermen. The inputs from Brazilian stakeholders (Table 6.2) have been assessed for their relevance and incorporated into the E&S considerations of the current assessment, to ensure it is in line with GIIP. Information from the stakeholder engagement contributed to the qualitative evaluation of the ratings provided for each E&S consideration. Another topic highlighted by several stakeholders was the importance of the MSP, given the increasing interest of using ocean areas for different purposes: tourism, fishing, navigation routes, ports, and O&G exploration, among others. See Section 6.3.3 for more information. Given the importance of E&S considerations in different phases of an offshore wind farm development, further stakeholder engagement will be needed to identify all possible risks associated with the developments. This should include government agencies (MMA, MME, IBAMA, etc), universities, research institutes, NGOs, long-term projects (Mar Brasil, TAMAR, etc.), local communities, indigenous peoples, and international stakeholders to ensure that the different perspectives are adequately assessed. Stakeholder engagement should be an integral and important part of future MSP and EIA processes. 6.2.2 E&S Standards In identifying E&S considerations and risks in relation to offshore wind, the World Bank Environmental and Social Framework (ESF) [39] has been considered. The ESF consists of ten core environmental and social standards (ESS) as listed below: ■ ESS1: Assessment and Management of E&S Risks and Impacts ■ ESS2: Labor and Working Conditions (further details provided in Section 1) ■ ESS3: Resource Efficiency and Pollution Prevention and Management ■ ESS4: Community Health and Safety (H&S) ■ ESS5: Land Acquisition, Restrictions on Land Use, and Involuntary Resettlement ■ ESS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources ■ ESS7: Indigenous Peoples/Traditional Local Communities ■ ESS8: Cultural Heritage ■ ESS9: Financial Intermediaries ■ ESS10: Stakeholder Engagement and Information Disclosure The WB requirements, such as the ESF, have also been compared to the current EIA process implemented in Brazil, to identify compliance and gaps. iii These ToR consolidate the scope required by the Environmental Impact Report regarding the construction of offshore wind farms, which must then be presented to IBAMA to conduct an environmental feasibility analysis of the projects. These ToR have been drafted after three years of public consultations, webinars, and technical support from European experts and represent the main guideline to be followed in Brazil for assessing environmental and social impacts of offshore wind farms. 6 Preliminary Environmental and Social Considerations 72 6.3 RESULTS The key E&S considerations are outlined in Table 6.3, divided into the three proposed macro-areas for offshore wind development: Northeast (NE), Southeast (SE), and South (S). A detailed discussion for each E&S consideration is reported in Sections 6.3.1 to 6.3.3. Spatial data layers used in the analysis are outlined in Appendix C. The risk ranking considered the extension of the macro-areas compared to the different E&S considerations and the available information from different data sources and stakeholder engagement. The ratings considered in Table 6.3 are related to potential negative impacts only. Offshore wind developments also bring positive impacts on social and environmental considerations; these are only briefly highlighted in this section. TABLE 6.3 E&S RISK MATRIX. Rating Definition, potential offshore wind Consideration Category NE SE S impacts, and possible best practices A. Protected Environmental High Medium High Environmentally designated protected areas Areas and Key at regional, national, and international Biodiversity level, such as those included in the Sistema Areas (KBAs) Nacional de Unidades de Conservação da Natureza (Brazilian System of Protected Areas) (SNUC), with different level of protection (either strict protection or sustainable use), natural monuments, Ramsar sites, KBAs and EBSAs, including related critical habitats. Offshore wind development during pre- construction and construction phases can cause displacement, cause habitat changes, and pose a threat to marine and surrounding biodiversity due to noise and disturbances, as well as reduced water quality. During operational phase, the main potential impacts are the presence of turbines and related structures, which can disturb marine species and avifauna. Best practices include avoiding the most sensitive areas, and implementing management practices utilizing best available technologies for minimizing impacts. 73 Scenarios for Offshore Wind Development in Brazil Rating Definition, potential offshore wind Consideration Category NE SE S impacts, and possible best practices B. Natural Environmental High Medium Medium Natural habitats such as coral reefs habitats ecosystems, mangroves, seagrass beds, coastal islands, and oceanic islands. Natural habitats of importance are mainly found in near-coastal and coastal areas. Construction in coastal areas and marine ecosystems can lead to direct loss or disturbance of benthic biodiversity in coastal areas and marine ecosystems, smothering of benthic habitats, change in water characteristics, or reduced water quality from erosion and pollution incidents. Indirect effects could include interruption or changes to natural coastal processes such as tidal flows and sediment movement. Introduction of marine invasive species from the vessels can potentially be a risk. Best practices include avoiding the most sensitive areas and implementing best management practices to reduce the risk of impacts. C. Sensitive Environmental High High High This includes marine mammals (whales, marine species dolphins, walrus), sharks, rays, turtles, seahorses, and other marine species sensitive to survey, construction, and operational activities, including endangered species. Includes critical habitat determined by the presence of sensitive marine species. Underwater noise, disturbances, pollution (e.g., in the form of increase turbidity), exposure to electromagnetic fields, and light produced during offshore wind construction and operation can impact especially sensitive marine species causing changes in feeding and breeding patterns through habitat disturbance or disruption. Furthermore, increased marine traffic during construction and operation phases might increase vessel collisions with sensitive species. Best practices include avoiding the most sensitive areas and reducing construction efforts during specific breeding periods, implementing best management practices, and utilizing best available technologies for minimizing impacts. 6 Preliminary Environmental and Social Considerations 74 Rating Definition, potential offshore wind Consideration Category NE SE S impacts, and possible best practices D. Bats and Environmental High High High Habitats for resident and migratory bird birds species, particularly intertidal feeding grounds and high-tide roost sites which support populations of threatened species. Particularly important for nearshore areas. Includes critical habitat determined by the presence of endangered avifauna. The development of offshore wind can pose a significant risk to migratory birds through the risks of turbine collision, wind farm barrier effects, disturbance, habitat displacement, and disruption to feeding ground. Best practices include avoiding sensitive areas (such as BirdLife International Important Bird Areas (IBAs) and Ramsar zones) and reducing construction efforts during specific breeding periods, implementing best management practices, and utilizing best available technologies for minimizing impacts. E. Artisanal Social High High High Comprises commercial fishing areas and commercial and small-scale fisheries for individual fishing grounds households or communities. In many countries, larger fishing vessels are not permitted to enter offshore wind farms, driving changes to fishing areas and practices, though changes in risk perceptions are in some cases softening such restrictions. Impacts on artisanal fishing are also expected. Best practices include early and continuous engagement and consultations with local communities and fishermen to minimize potential impacts and develop co-existence. 75 Scenarios for Offshore Wind Development in Brazil Rating Definition, potential offshore wind Consideration Category NE SE S impacts, and possible best practices F. Aquaculture Social Medium Low Low Areas for coastal and marine aquaculture at different licensing stage. Impacts are mainly related to the offshore wind construction phase, where activities can cause noise and vibrations impacts to the marine environment. Possible local water quality reduction and potential for water pollution could result in potential economic displacement through reduced yields. Best practices include optimized siting of offshore wind farm areas, early and continuous engagement and consultations with aquaculture owners and local communities to minimize potential impacts. G. Landscape Social High Medium High Significant viewpoints (landscape, and seascape seascape, or visually significant landforms/ structures) that will be affected by the visual impact of offshore wind developments. Particularly important for nearshore sites. Presence of other offshore infrastructure (e.g., O&G) that could already lower the landscape value should be taken into consideration. Impacts can relate to the presence of infrastructure, but also flicker and shadow effects changing as turbine rotors rotate. Best practices include consideration of sensitive receptors and optimizing the siting of OW (e.g., by increase the distance to shore). H. Historical and Social Medium Medium Medium Tangible and intangible cultural heritage, cultural areas shipwrecks, and cultural heritage. Offshore wind construction can pose risks to potential offshore artifacts, that may have cultural or tourist value. Visual considerations are also relevant. Best practices include proper pre-investigations of the seabed and establishment of buffers to identified historical and cultural areas. 6 Preliminary Environmental and Social Considerations 76 Rating Definition, potential offshore wind Consideration Category NE SE S impacts, and possible best practices I. Indigenous Social Low Low Low Indigenous lands and settlements. areas Onshore facilities, such as substation, cables, and over headlines needed for the offshore wind development can potentially impact indigenous peoples. Few indigenous sites are in the coastal areas of the three macro-areas. These must be considered in the planning and design phase of the onshore facilities. Due to their low density and the options for locating away from the indigenous peoples areas impacts are not expected to be significant. Best practices include early and continuous engagement and consultations with indigenous communities to minimize potential impacts. J. Tourism areas Social High High Medium Tourism areas consist of beaches, hotels, natural areas, cultural heritage buildings, locations for water activities such as diving, surfing, recreational fishing, boating, sailing, and cruise ships. Construction activities could cause disturbance and nuisance to touristic activities. Visual impacts are also relevant to consider. Best practices include consideration of how to best avoid negative impacts and ensure co-existence. K. Ports and Technical Medium High Medium Ports of different size and shipping routes shipping routes for different range of vessel sizes. Impacts might arise during construction phase due to increased marine traffic and potential temporary disruption of some routes. During operation phase larger vessels will not be permitted to enter offshore wind farms, potentially leading to changes of navigation routes. The presence of WTGs will increase the collision risk. Road traffic due to construction of onshore facilities might also impact local areas. Best practices include early and continuous engagement and consultation with planning and port authorities, shipping stakeholders and local communities to reduce impacts and risks. 77 Scenarios for Offshore Wind Development in Brazil Rating Definition, potential offshore wind Consideration Category NE SE S impacts, and possible best practices L. Military areas Technical - - - No information available. M. Aviation Technical Medium High Medium This includes local and international airports, flight paths, and related radar systems. Particularly important for nearshore sites. Potential impacts are risk of collision and interference with radar instrumentation. Best practices include early and continuous engagement and consultation with civil aviation authorities and stakeholders to minimize potential impacts and risks. N. O&G Technical Low Medium Low Offshore O&G infrastructures and activities exploration/production areas. Possible interference with existing operations and future explorations, including the need for designating safety areas around the facilities. Best practices include constant engagement and consultation with O&G authorities and players. O. Energy and Technical Medium Medium Low Offshore transmission lines and fiber-optic communication cables (FOC). Note that there is currently infrastructure no data available for this. Restrictions related to safety areas could reduce the available area for the anchoring of vessels, and the development of any type of activity that involves contact with the seabed. Best practices include early and continuous engagement and consultation with relevant authorities. 6 Preliminary Environmental and Social Considerations 78 6.3.1 Main Concerning Points As presented in Table 6.3 above, the main concerning aspects related to E&S consideration and potential impacts caused by offshore wind development are the following: A. Protected Areas and Key Biodiversity Areas (KBAs) B. Natural habitats C. Sensitive marine species D. Bats and birds E. Artisanal and commercial fishing grounds G. Landscape and seascape J. Tourism areas K. Ports and shipping routes M. Aviation Other considerations like “F. Aquaculture,” “H. Historical and cultural areas,” “I. Indigenous areas,” “L. Military areas,” “N. O&G activities,” or “O. Energy and communication infrastructure,” might also be impacted by offshore wind development, but according to the preliminary assessment, the impacts are likely to be small or can be avoided by proper siting of the offshore wind areas. Regarding “L. Military areas,” no information is publicly available and specific and confidential engagement with the Ministry of Defense would be needed to clarify if there could potentially be issues and impacts affecting the siting of offshore wind farms. The following subsections presents details on the main E&S considerations identified. 6.3.1.1 A. Protected Areas and Key Biodiversity Areas (KBAs) Aspect Comments Legally LPAs in Brazil comprise 30.3 percent of the country’s total land and 26.8 percent of the protected country’s marine and coastal areas respectively [40]. areas (LPAs) From an administrative point of view, these can be managed by government (national, state, or local), by private landowners or correspond to indigenous areas. In terms of conservation objectives and level of restriction, the range of LPA types in Brazil is divided in two groups: Strict Protection and Sustainable Use. Most of the marine and coastal LPAs in Brazil are “Sustainable Use” areas. Within these, the least restrictive designation is “Environmental Protection Area,” where developments and economical activities are regulated through the environmental licensing process. Offshore wind development will likely not be compatible with conservation objectives for areas with a more restrictive designation (e.g., ecological station, biological reserve, national parks, etc). The three proposed macro-areas for development of offshore wind are overlapping some LPAs (Figure 6.1 and Figure 6.2) with a small percentage of coverage of the area. Other LPAs border the macro-area on the coast and would need to be taken into consideration in future local studies such as EIAs and MSP. 79 Scenarios for Offshore Wind Development in Brazil Aspect Comments Ramsar sites Ramsar sites are wetlands of international importance that have been designated under the criteria of the Ramsar Convention on Wetlands for containing representative, rare, or unique wetland types, or for their importance in conserving biological diversity. At NE, macro-area Ramsar areas occupy a very small part of the zone, while at SE, no Ramsar zones are observed. However, for S macro-area, potential impacts might need to be considered for near-coast offshore wind developments. KBAs KBAs have been designated to cover the most important places in the world for species and their habitats. Sites qualify as KBAs if they meet one or more of 11 criteria, which are broadly aligned with IFC PS6 criteria for Critical Habitat, although KBA criteria are wider, and therefore not all KBAs will qualify as Critical Habitat. All IBAs are also classified as KBAs, although some would not meet the updated global KBA standard, and therefore might be treated as regional or national KBAs. All existing Alliance for Zero Extinction (AZE) sites are also KBAs. Another subset of KBAs are Marine IBAs, designated by The BirdLife Global Seabird Program. Marine IBAs can include seabird breeding colonies, foraging areas around breeding colonies, non-breeding (usually coastal) concentrations, migratory bottlenecks, and feeding areas for pelagic species. Brazil has 275 KBAs, of which 19 have marine or coastal components and overlap with the country’s EEZ. Most of these sites were designated based on their international significance for breeding or migrating waterbirds and seabirds, or for some restricted-range highly threatened bird species associated with coastal ecosystems (mainly mangroves) and are therefore both KBAs and IBAs. Most of the KBAs overlap at least partially with the LPAs. No AZE is observed at any of the three offshore wind macro-areas and KBAs occupy very small portions. EBSAs EBSAs are discrete areas supporting the healthy functioning of oceans and the services that they provide. The areas are identified by the government based on criteria defined by the Conference of the Parties (COP 9) to the Convention on Biological Diversity. The criteria does not include quantitative thresholds, but in principle they have aspects common with WB/IFC Natural Habitats definition and Critical Habitat criteria and therefore constitute an important high-level planning consideration for offshore wind development. EBSAs in the three macro-areas: NE: EBSAs cover part of the main area and most of external small areas. SE: EBSAs cover a small area in the north. S: EBSAs cover most of the area. UNESCO World According to IFC Standards, developments are prohibited in UNESCO Natural and Mixed Heritage World Heritage Sites. UNESCO MAB Reserves are terrestrial, marine, and coastal ecosystems Natural Sites designated as “learning areas for sustainable development.” These are areas for testing interdisciplinary approaches for understanding and managing changes and interactions between social and ecological systems, including conflict prevention and management of biodiversity. Each site promotes solutions reconciling the conservation of biodiversity with its sustainable use. No impact is expected from these sites on the macro-areas since no core zones of UNESCO- MAP is overlapping the areas. The closest core zone is bordering the S macro-area. 6 Preliminary Environmental and Social Considerations 80 FIGURE 6.1 LPAS—NORTHEAST. Source: ArcGIS Online, INDE [37], [38], MMA [40]. 81 Scenarios for Offshore Wind Development in Brazil FIGURE 6.2 LPAS—SOUTH AND SOUTHEAST. Source: ArcGIS Online, INDE [37], [38], MMA [40]. 6 Preliminary Environmental and Social Considerations 82 6.3.1.2 B. Natural Habitats Aspect Comments Natural The coastal and oceanic areas of Brazil can be subdivided into eight marine ecoregions. Such habitats a variety of conditions leads to a great diversity of habitats and ecosystems. Four of these important natural marine and coastal habitats, for which data were available, and include coral reefs ecosystems, mangroves, seagrass beds, coastal islands, and oceanic islands which are described below. Coral reefs Coral reefs extends through 3,000 km along the Brazilian coastline, and they are primarily distributed along the northeastern coast and are less common on the continental shelf in the northern part of the country (influenced by muddy sediments from the Amazon River). Brazilian reefs comprise two groups of reefs: nearshore and offshore reefs. Nearshore reefs occur on the inner continental shelf and are either adjacent to the coast or are a few kilometers from the shoreline. Coral reefs are present in small areas of offshore wind NE macro-area whereas no coral reefs habitat is present in the SE and S macro-areas. Mangroves Along the coast of Brazil, the distribution of mangroves is discontinuous, covering an area of 9,600 km2—the third largest mangrove area worldwide, in a single country. They occur from the state of Amapá to Santa Catarina state. Due to the high occurrence and important habitats, they provide attention should be taken for nearshore offshore wind developments. Seagrass beds Seagrass meadows and submerged aquatic vegetation occur all along the Brazilian coast, but species distribution, abundance, and dynamics are affected by physical drivers, particularly the coastal geomorphology, oceanography, and regional climate and hydrology. Based on the available data, seagrass beds are not present in any of the three macro-areas. However, studies should be undertaken to confirm this before specific offshore wind areas are developed. Coastal and Coastal and marine islands habitat have been identified by Serviço Geológico do Brazil (SGB) oceanic islands within a collaboration project (Projeto Batimetria) with the ANP. Coastal and marine habitats are important for bird species. These are gathering areas which host endangered bird species, endemic species and are with high dynamics due to the different natural impacts. All three macro-areas have coastal and oceanic islands in the vicinity and in the S macro-area these coastal and oceanic islands are present within small parts of the area. 83 Scenarios for Offshore Wind Development in Brazil 6.3.1.3 C. Sensitive Marine Species Aspect Comments Priority Areas Áreas Prioritárias para Conservação da Biodiversidade (Priority Areas for Biodiversity) are for Biodiversity areas defined for the purpose of implementing public policies, programs, projects, and activities under the responsibility of the federal government. These areas are classified by the biodiversity importance and the priority of actions. Areas defined with a high level of priority will have stricter environmental licensing or requirements and restrictions than areas with a lower priority. The majority of the area of each of the three offshore wind macro- areas is characterized by extremely or very high biodiversity importance, with high and very high (in some cases extremely high) priority of actions. To understand the importance of a specific area detailed biological surveys should be undertaken and the siting of offshore wind developments should be carefully assessed. Marine Offshore wind developments can impact different mammal species, influencing both their mammals occurrence and feeding and breeding success. Detailed studies should be undertaken as part of the early planning phase to assess if offshore wind developments can be permitted in the specific areas. IUCN Important Marine Mammals Areas (IMMAs) has been identified for the South America region in 2023. The design of IMMAs aims to capture critical aspects of marine mammal biology, ecology, and population structure and they encompass vulnerability, distribution, abundance, special attributes, and key life cycle activities. The NE macro area is slightly overlapping four IMMAs on the eastern and western borders (Guianas to Amazon Outflow, Fernando de Noronha, Northeastern Brazil Antarctic Minke Whale Breeding Habitat, and Paraíba Coast). The SE macro area is completely included in five IMMAs (Abrolhos Bank, Northern Espírito Santo Coastal Waters, Southwest Atlantic Humpback Migratory Corridor, Northern Rio de Janeiro, and South Brazil Bight). The S macro area is overlapping for about half of its area (along the coast and along the offshore border) with three IMMAs (Southwest Atlantic Subtropical Continental Slope and Canyons System, Southern Brazil and Uruguay Coastal Ecosystems, and Slope Front of the Argentine Shelf). Figure 6.4 presents the affected areas. Turtles Offshore wind developments could significantly affect the turtles reproductive and feeding areas, therefore a thorough consideration should be given to these species both in the marine spatial planning for offshore wind developments and more site-specific impact assessment, also considering the impacts on the sediment supply to coastal areas. CONAMA Resolution 10/1996 identifies important beaches for sea turtles’ reproduction. Impacts on these beaches should be considered in the project impact assessment. Furthermore, 01/2011/IBAMA/ICMBio sets restriction periods for several O&G activities in defined priority areas for sea turtles’ conservation; these areas and restriction periods can be used as a guidance and good practice for reducing construction impacts of offshore wind farms. Fish All macro-areas are characterized by the presence of several threatened species (sharks, seahorses, rays, etc.), which should be considered both in the MSP for offshore wind developments and in more site-specific impact assessments. 6 Preliminary Environmental and Social Considerations 84 FIGURE 6.3 SENSITIVE MARINE SPECIES—PRIORITY AREAS FOR BIODIVERSITY. Source: ArcGIS Online, INDE [37], [38], IBGE [41]. 85 Scenarios for Offshore Wind Development in Brazil FIGURE 6.4 IUCN IMPORTANT MARINE MAMMALS AREAS. Source: : ArcGIS Online, INDE [37], [38], IUCN [42], The Biodiversity Consultancy. 6 Preliminary Environmental and Social Considerations 86 6.3.1.4 D. Bats and Birds Aspect Comments Bats Brazil hosts approximately 15 percent of the world’s bat diversity with 181 distinct species. They are mostly gregarious animals that form large colonies, inhabiting different places, such as caves, attics, hollow trees, and abandoned houses, located considerable distances from offshore areas. There is limited data on bats in the marine environment. A study of SEER (U.S. Offshore Wind Synthesis of Environmental Effects Research) of 2022 highlighted that similar seasonal activity patterns exist between land based and offshore acoustic monitoring studies. While wind farms are known to affect bats, this is more commonly associated with onshore facilities and the impact from offshore wind is not expected to be significant. Despite this, during future studies for MSP and EIAs, ecological surveys for bats should be carried out to ensure that bats are properly considered, and any impacts mitigated, if necessary. Birds Combining global and national red lists, 27 species of threatened seabirds and shorebirds (Orders Procellariiformes and Charadriiformes) have part of their distribution in the Brazilian EEZ. Only the Tristan Albatross is considered CR by IUCN while national assessment also lists Audubon’s Shearwater, Wandering Albatross, and Trindade Petrel as Critically Endangered. Albatrosses and petrels are among the most oceanic seabirds, rarely approaching land, except for breeding. Multiple species carry out extensive migratory movements that cover thousands of kilometers. Shorebirds are those that depend on wetland habitats and seek food in the intertidal zones and margins of aquatic bodies, especially coastal lagoons, and estuaries, although they may occupy a diversity of habitats. These include many migratory species. The migrations occur in the autumn and spring of each year, when thousands of individuals cross the northern and southern hemispheres to escape the winter in breeding sites, generally in the Northern Hemisphere, and overwinter at sites in Brazil. The report on migration routes and areas of congregation of migratory birds in Brazil published by CEMAVE/ICMBio describe five migration routes, listed below: • Atlantic route—along Brazilian coast from Amapá to Rio Grande do Sul • North-Eastern route—diversion of Atlantic route, from São Marcos Bay (Maranhão) and Parnaíba mouth (Maranhão/Piaui), through inland Northeastern region, to Bahia coast • Central Brazil route—another diversion of Atlantic route, from Amazonas River and Marajó archipelago, following Tocantins and Araguaia rivers, through Central Brazil, and south to Paraná River valley in São Paulo • Central Amazon / Pantanal route • Eastern Amazon route A significant number of Brazilian shorebirds are part of a global population of species that breeds in the Arctic and migrates to South America every year. About 30 species follow the same pattern and congregate in flooded areas along Brazilian coast. Some of these routes, especially the Atlantic route, could be overlapping areas for offshore wind developments. Figure 6.5 shows the route maps. Endangered bird species are found in the majority of the areas of the three offshore wind macro-areas. Only in the NE area there is a critical habitat located, near São Luis. CEMAVE report about migratory bird congregation areas identified several sensitive areas along the whole Brazilian coast [43]. It is suggested to also take this report into consideration when assessing the impacts on birds. 87 Scenarios for Offshore Wind Development in Brazil FIGURE 6.5 BIRD MIGRATION ROUTES. Source: ICMbio [44]. FIGURE 6.6 BIRD CONGREGATORY AREAS. Source: CEMAVE [45]. 6 Preliminary Environmental and Social Considerations 88 6.3.1.5 E. Artisanal and Commercial Fishing Grounds Aspect Comments Artisanal Offshore wind development is likely to impact fishing activities depending on the location and and scale of the developments. The fishing activities that are prevented from using the offshore commercial wind area, will need to go to new areas, which can involve a risk of having to go further offshore fishing and/or to areas that are already being used or are important for biodiversity. Early and grounds continuous engagement with local fishing communities is key to understand the potential socio- environmental impact and investigate in ways of mitigation, compensation, and co-existence. Regarding data on fishing activities and the importance for the local community, Brazil faces certain challenges. For example, in Brazil, most fishing vessels do not have geographical monitoring systems, which makes mapping navigation routes, trawling transect, etc, difficult; also, catches and landings are not registered, so there is no data on the caught fish species or the monetary value of the catch. However, it can be assumed that part of the fish is for the subsistence of communities and to supply the local market (families, restaurants, etc.). Based on the available data, fishing activities are more intense in the areas along the South and Southeastern coast, whereas a lesser effort appears in the Northeast area. However, as highlighted during the early consultations, artisanal fishing practices are still relevant, especially in the NE area, where some communities have expressed their opposition to offshore wind farm developments. Artisanal fishing communities and indigenous peoples depending on artisanal fishing practices for their sustainment should be identified and engaged already in the early planning phases. 6.3.1.6 F. Aquaculture Aspect Comments Aquaculture Aquaculture involves cultivating aquatic organisms such as fish, crustaceans, molluscs, and aquatic plants within controlled environments, primarily for commercial and public purposes. Marine aquaculture spans various settings, including cages located in the sea, brackish water ponds, fish pens in shallow bays, as well as suspended water columns. The introduction of offshore wind projects near aquaculture sites can disrupt marine ecosystems and impact the aquaculture businesses and those working in this industry. Therefore, evaluating the feasibility of coexistence between aquaculture and offshore wind developments can be essential in areas with important aquaculture activities. While biological studies have demonstrated general feasibility of co-locating marine aquaculture and offshore wind projects, challenges on socio-economic and technical fronts need to be addressed. 6.3.1.7 G. Landscape and Seascape Aspect Comments Landscape Offshore wind development may affect the aesthetic value of landscapes and seascapes, and especially those near heritage and cultural sites, tourism locations, and forest areas that are seascape protected under the local and national legislations. Visual intrusion is clearly more important for nearshore developments, and shadow flickering might also be an issue. Presence of other existing offshore infrastructure (e.g., O&G platforms) should also be taken into consideration in assessing the possible impacts, as an already anthropized landscape or seascape is less vulnerable than one without any previous anthropic intrusion. In other jurisdictions, landscape and seascapes are often protected by legislation, and developers must follow official guidance on how to assess impacts from offshore wind farms, often involving wide consultation and photomontage representations. In IBAMA’s ToR, the developer should establish a minimum distance from the coast based on reference studies [46], [47], which correlate the sensitivity of the coast with the adequate distance from the offshore wind farm to minimize the visual impact. To justify the minimum distance from the coast the developer must assess the potential impacts of the project and the recommended distance for mitigation. As mentioned in the ToR, these references are only indicative and specific landscape and visual impact studies will need to be carried out during the environmental licensing phase. 89 Scenarios for Offshore Wind Development in Brazil 6.3.1.8 H. Historical and Cultural Areas Aspect Comments Historical and Historical and cultural areas include tangible and intangible heritage, shipwrecks, and other cultural areas marine cultural heritage sites. In many countries the developer is required to implement protection zones around identified marine heritage sites or objects. There is no overall legal requirement in Brazil for establishing protection zones, but this is expected to be handled on a case-by-case basis in the environmental licensing phase. During project design phase and geophysical surveys, the developers should consult archaeological records and ensure that geophysical surveys, including video with Remote-Operated-Vehicle (ROV) and/or divers, are undertaken in areas with potential interests. The results of the surveys should be shared with experts (e.g., universities and museums) to establish if there are sites and/or objects that need to be protected from the offshore wind development. 6.3.1.9 I. Indigenous Areas Aspect Comments Indigenous Indigenous areas are LPAs in Brazil, which are not included in the SNUC, since they are owned areas and managed by indigenous peoples with support from the government Indigenous Foundation (Funai). According to WDPA data, coastal and marine indigenous lands cover less than 100,000 hectares. Indigenous areas are categorized as “Sustainable Use.” The main impacts of offshore wind developments could derive by the onshore facilities, such as substations, cables, and overhead lines, which may impact indigenous peoples and land. However, few indigenous sites are in the coastline in front of the three macro-areas. 6.3.1.10 J. Tourism Areas Aspect Comments Tourism areas Tourism is an important pillar of Brazil’s economy, providing 2.2 million direct jobs, accounting for 2.6 percent of the country’s total employment in 2019. Tourism areas, closely linked with the coast, comprise beaches, hotels, natural areas, cultural heritage buildings, and locations for water activities such as diving, surfing, kite surfing, recreational fishing, boating, sailing, and cruise ships. Rio de Janeiro, São Paulo and Florianopolis are the most visited cities in the country. Brazil attracts tourists also for the numerous beaches spread along its coast, from south to north. International experience suggests that offshore wind developers avoid areas with important tourism activities as they are often site-specific and provide numerous jobs (adding economic and social value). The development of offshore wind is likely to have different effects on tourism at each site, depending on its nature (city tourism, nature observation, etc.). A study [48] was conducted to measure the tourism sector in Brazil through an index of Tourism Characteristic Activities (TCA) of Brazil. Figure 6.7 illustrates the significant contributions of the TCA to the states of the Northeast region, highlighting Rio Grande do Norte, Ceará, and Bahia. The state of Rio de Janeiro also appears in a prominent position, which highlights the importance of sun and beach tourism to the country. Considering the three macro-areas, the potential impacts on tourism activities are assessed to be highest in the NE, compared to SE and S. In the S the potential impacts on tourism activities are expected to be less relevant for the development of offshore wind. 6 Preliminary Environmental and Social Considerations 90 FIGURE 6.7 BRAZIL INDEX OF TCA. Source: [48] 6.3.1.11 K. Ports and Shipping Routes Aspect Comments Ports and An important aspect for offshore wind development is the proximity to ports and this will be shipping key for a successful build out of offshore wind. With vicinity to ports and shipping routes also routes follows a potential higher risk for accidents and collisions. This can be mitigated by exclusion zones and minimum safety zones during construction and operational phases. The SE macro-area is affected by important maritime routes, with a high density of maritime traffic. These routes cross the macro-area in a longitudinal direction and are headed to ports such as Rio de Janeiro, Açu or Vitória. The other two macro-areas (NE and S) have lower activity of marine traffic. Section 7 presents further details on ports and logistic infrastructure. 91 Scenarios for Offshore Wind Development in Brazil FIGURE 6.8 SHIPPING DENSITY AND PORTS. Source: ArcGIS Online, AIS Lloyds Intelligence, ANTAQ, INDE [37], [38]. 6 Preliminary Environmental and Social Considerations 92 6.3.1.12 L. Military Areas Aspect Comments Military areas No information available. 6.3.1.13 M. Aviation Aspect Comments Aviation Wind turbines pose a risk to aviation activities and could compromise air safety, by way of physical obstruction in zones of lower height flights, radar interference, and potential negative effects on the performance of communication and navigation systems. The risk is highest in areas around air traffic control centers (radars), airports, aerodromes, and air traffic zones. Numerous aviation related sites exist in Brazil and the majority is sited near the coast and the larger cities. These may constitute obstacles to the offshore wind development. ANAC (National Agency of Civil Aviation) is responsible for regulating and supervising air services, aeronautical processes, auxiliary services, civil aviation security, facilitation of air transport, and other civil aviation activities. The NE macro-area is affected by the airports inFortaleza, Natal, and João Pessoa. The SE macro-area is affected by the airports in Vitória, Macaé, São Pedro da Aldeia, Rio de Janeiro and Cabo Frio. The S area is affected by the airports in Florianópolis and Porto Alegre. There might be other smaller airports, air traffic zones, etc., which can be affected by offshore wind development. To reach a complete view on the possible restrictions regarding aviation, engagement with ANAC is recommended. This, combined with experiences from other countries with offshore wind development should indicate if specific exclusion zones and site- specific restrictions linked to aerial zones, for instance in the turbine tip height, will be required in certain parts of the three macro-areas. 6.3.1.14 N. O&G Activities and Mining Rights Aspect Comments O&G O&G activities in Brazil include offshore O&G infrastructures and exploration/production activities areas, and mining concession areas. The presence of these infrastructure or areas planned for and mining future concessions could mean exclusion areas for offshore wind developments. Liaison with rights ANP (Brazilian National Agency of Petroleum, Natural Gas and Biofuels) and major sector players such as Petrobras, TotalEnergies, and Equinor in early stage of planning offshore wind development areas is highly recommended to identify possible constraints and safety areas around infrastructures and pipelines. 6.3.1.15 O. Energy and Communication Infrastructures Aspect Comments Energy and In addition to O&G infrastructure, submarine energy cables and communication communication infrastructure (FOC) may be present offshore. It is international good practice to maintain a infrastructures buffer distance around these infrastructures, to prevent possible damages. These could lead to reduction of the available area for the anchoring of vessels, and the development of any type of maritime activity that maintains total or partial contact with the seabed. Specific information about such energy and communication infrastructures has not been made available for any of the three macro-areas. It is suggested to liaise with the relevant authorities in early stages of the design to identify possible exclusion areas. 93 Scenarios for Offshore Wind Development in Brazil 6.3.2 Associated Facilities and Onshore Impacts In the context of ESS1 (Assessment and Management of Environmental and Social Risks and Impacts), associated facilities are those facilities or activities that are not funded as part of the project and are: a) Directly and significantly related to the project; b) Carried out, or planned to be carried out, contemporaneously with the project; and c) Necessary for the project to be viable and would not have been constructed, expanded, or conducted if the project did not exist. All three requirements will need to be met in order to be considered an associated facility. Modifications and/or expansions of existing infrastructure may also be considered as associated facilities if they meet the criteria. Associated facilities in relation to offshore wind developments could include new or upgrades to existing ports, construction or upgrades of roads and access points, and new substations or grid lines, among others. These facilities will generate their own impacts on the environment and the communities, which will need to be assessed and mitigated during licensing. Cumulative impacts may also arise when impacts of the associated facilities will overlap with each other or with the offshore wind development. In the planning and development of offshore wind mirroring impacts deriving from associated facilities and other onshore activities, should be assessed and mitigated. Stakeholder engagement with local and coastal communities would play an important role in the identification of possible issues and how they can be mitigated. 6.3.3 Status of the Marine Spatial Planning The Brazilian MSP planning and execution is under the Interministerial Commission for Sea Resources (CIRM) responsibility and is mainly led by Navy and MMA. The MSP is part of an initiative called Plano de Levantamento da Plataforma Continental Brasileira (Brazilian Continental Shelf Survey Plan—LEPLAC). The Brazilian MSP plan is divided in four regions (South, Southeast, Northeast, and North).iv The most advanced initiative is the MSP for the South region for which the MSP work commenced in early 2024 and will take three years to be completed. In addition to that, in November 2023, the procurement process for the Southeast and Northeast MSP was launched. For the Southeast MSP work, the contract is expected to be awarded in mid-March 2024, also with a three-year timeline to complete the MSP. For the Northeast and North regions MSP, work will be initiated later in 2024/2025. iv Note that while the nomenclature is similar, MSP areas and the development areas (NE, S, SE) provided in this report are not the same. 6 Preliminary Environmental and Social Considerations 94 6.3.4 Comparison with WB EIA Requirements 6.3.4.1 Brazil Basis EIA is an integral part of the environmental licensing process and a crucial regulatory instrument at all levels of government in Brazil. EIA is mentioned in the Brazilian Constitution (Art. 225 sec. 1(IV)) and its legislative framework includes different laws and decrees (Supplementary Law No. 140 of 2011; Federal Law 6938 of 1981; Decree 99274/1990; Federal Law 9.985/2000; Decree 4340/2002; Federal Law 10650/2003). EIA regulations in Brazil are set by different resolutions of the National Environmental Council (CONAMA), the most important being Resolution 01/1986 and its expansion in 1997. General and sectoral guidelines are also available. IBAMA, the environmental agency in charge of the environmental licensing at federal level, released in November 2020 the Terms of Reference for EIAs for offshore wind farms. Environmental licensing, and EIA supporting it, are mandatory procedures for all projects with potentially significant environmental impacts, although the regulation does not define what “significant impacts” are. Resolution 01/1986 establishes the minimum EIA scope (expanded in 1997), including: ■ Environmental impacts; ■ Cumulative impacts; ■ Social impacts; ■ Cultural impacts; ■ Health impacts; ■ Economic impacts; and ■ Others. The same Resolution mandates analysis of reasonable alternatives. According to an OECD analysis of the EIA practices, however, alternatives are rarely seriously considered, given that the analysis only occurs after the conception phase of the project. Public hearings are also mandatory when requested by more than 50 people, the public prosecutor’s office, or the environment agency. However, as highlighted in an OECD report of 2021 [49] meaningful public participation is not frequent. Post-license monitoring is also regulated by Resolutions 01/1986 and 237/1997, but is barely implemented. Furthermore, there are no specific procedures for evaluating transboundary impacts. A study concerning the licensing practices in the four Southeastern states (Minas Gerais, São Paulo, Rio de Janeiro, and Espírito Santo) identified that some phases of the environmental licensing procedure are frequently omitted [50]. This is a result of reclassification of potential impacts caused by projects from “intense” to “moderate” or “minimum,” which exempts the project from a full impact assessment study. There is no obligation of SESA in Brazil. Some states implemented it in their legislations, but in many cases the effectiveness of SESAs is relatively limited. To improve SESAs in the future both methodology and quality of the assessments should be improved. 95 Scenarios for Offshore Wind Development in Brazil 6.3.4.2 WB Basis WB EIA process is driven by the ten ESS for projects seeking bank investment financing, as listed in Section 6.2. Specific guidance for wind energy projects is provided in the Environmental, Health, and Safety Guidelines (EHSG) [51] for Wind Energy, published by WB (IFC) [51]. WB requires stringent implementation of all ESS to ensure that projects are environmentally and socially sound, are sustainable, and address potential risks and impacts. Among the requirements, emphasis is put also on stakeholder engagement and alternative analysis. 6.3.4.3 Comparison Although the EIA legislative and regulatory framework in Brazil is quite wide, these are based on local standards while the WB ESS and EHSG follows GIIP, with prevention measures and best practices specific for wind energy projects. A first alignment to international best practice was done with the publication of IBAMA’s ToR for offshore wind farms. On paper, Brazil requirements meet most of the WB standards with respect to the environmental and socio-economic impacts to be analyzed, the assessment of alternative, public hearing processes, and cumulative and transboundary impact studies. However, the implementation of most of these requirements, such as the assessment of alternatives and the transboundary studies, is lacking. Stakeholder engagement through public hearing processes in often ineffective and post-license monitoring implementation is generally low. Table 6.4 provides a high-level comparison between the IBAMA ToR and the content of the WB EHS Guidelines for Wind Energy [51]. The guidelines are considered GIIP in managing key impacts associated with offshore wind development and have been developed in the context of the Environmental and Social Framework [39] of the World Bank Group. TABLE 6.4 COMPARISON BETWEEN IBAMA TOR AND WB EHS GUIDELINES FOR WIND ENERGY. Area ESHG Wind—Topic IBAMA ToR Topic Covered? Landscape, Visual impacts to be assessed based on the Seascape, and  Covered landscape sensitivity; visual modeling. Visual Impacts Noise characterization (terrestrial and underwater), underwater noise modeling Environmental required for construction phase; approach considering technical standards dealing Partially Noise  with maximum parameters of negative covered externalities for noise. No specific quantitative requirements, if not in the cited legislation. 6 Preliminary Environmental and Social Considerations 96 Area ESHG Wind—Topic IBAMA ToR Topic Covered? Considers avifauna and chiropterophauna, fish, marine mammals, and sea turtles Biodiversity  Covered for offshore environments; also including different marine habitats. Shadow flicker is not specifically cited, being usually not significant for offshore wind developments; however, luminosity and artificial lights during both construction and Partially Environmental Shadow flicker  operation phase are included. covered In some cases (e.g., in case of nearby projects or structures) a shadow flicker study may be required. Turbidity during construction, effects on biodiversity; consider technical standards Water quality  Covered dealing with maximum parameters of negative externalities for water quality. Working at heights  Not applicable Working over water Topics related to Occupational Health  Not applicable and Safety (OHS) do not fall within OHS Working in remote thecompetence of IBAMA, and therefore,  Not applicable locations are not included in the ToR. Lifting operations  Not applicable Ice throw not covered, but refers to cold Blade and ice throw climate and with a very low risk; blade throw  Not covered not included. Use of airspace to be characterized at Aviation  Covered different altitudes. Consider technical standards dealing Marine navigation with maximum parameters of negative  Covered and safety externalities for navigation safety; exclusion Community zone from other maritime activities. H&S Electromagnetic Partially interference and Electromagnetic impact on biodiversity.  covered radiation Fences and access, including navigation Partially Public access routes used with signage; not including  covered general public safety aspects. Abnormal load Partially Site access.  transportation covered Emissions and Part of the CEMP.  Covered effluent Part of the CEMP; Noise and Vibration Noise  Covered Monitoring Program. Monitoring and Part of CEMP; Degraded Areas Recovery Performance Environmental Program; Disturbance and Rescue of  Covered monitoring Fauna; Project for Prevention and Control of Exotic Species. Operation phase biodiversity Biota Monitoring Program  Covered monitoring 97 Scenarios for Offshore Wind Development in Brazil Area ESHG Wind—Topic IBAMA ToR Topic Covered? Topics related to Occupational Health and Safety (OHS) do not fall within the OHS guidelines  Not applicable competence of IBAMA, and therefore, are not included in the ToR. Topics related to Occupational Health Monitoring and and Safety (OHS) do not fall within the performances Accident and competence of IBAMA, and therefore, are not  Not applicable fatality rates included in the ToR Further discussions on this matter can be found in Section 1. Part of CEMP; Risk Management Program / Partially OHS monitoring  Emergency Action Plan. covered 6.4 DISCUSSION The E&S considerations for the development of offshore wind are different to those for developing onshore wind in terms of receptors, which in the case of offshore wind include fishers, shipping, and other sea users. However, the concept and process of EIA is similar. Furthermore, Brazil has an historical offshore O&G industry which means that offshore developments and some of their potential E&S impacts are familiar to the different stakeholders. The availability of E&S data concerning the marine environments is not always sufficient and detailed enough. This could be a potential constraint which could slow offshore wind developments or result in misleading assessments of potential impacts. Local studies covering different E&S topics will be needed during EIA and MSP preparation. On this matter the MSP is currently under development and aims to organise the Maritime space and its specific uses, as well as useful environmental data. Some of the constraints which will need to be included for a more accurate assessment of the potential capacity are the following: ■ Fishing areas with commercial and artisanal interest; ■ Military areas or zones of exercises; ■ Environmental considerations, including more detailed information on the key biodiversity areas and threatened species; ■ Social considerations, such as visual impact and tourism activities; ■ Detailed geology assessment with more information on the lithology under the seabed, the tectonic activity and possible changes of the ocean’s hydrodynamical conditions; ■ Enabling infrastructure, such as grid capacity and port facilities (initial assessments included in this report); and ■ Other uses of marine space. 6 Preliminary Environmental and Social Considerations 98 The preliminary comparison of local standards and practices shows shortfalls compared to WB requirements and GIIP. The release of IBAMA’s ToR improved the guidance of the government about the EIA process, but gaps seem to be still present especially when considering the implementation of the regulations (e.g., insufficient consideration of alternatives, poor application of stakeholder engagement and low participation, lack of effective monitoring) [49]. SESA are not mandatory in Brazil. Some states started implementing SESA, but often the effectiveness has been relatively low. Given the outcome of the consultation undertaken for this study, where different stakeholder highlighted the need of a general E&S initial screening and red-flag identification focused on large areas, implementation of SESA at a national level could help the development of the offshore wind industry. The gaps and absence of alignment between local standards and practices related to EIA compared to WB requirements and GIIP risks leading to: ■ Adverse E&S impacts; ■ Delays to financing of projects; and ■ Damage to the reputation of the industry, slowing investment opportunities, and future growth prospects. Considering the three scenarios identified in Section 2, the following considerations regarding E&S impact can be made: ■ #1 Base Case: E&S impacts for this scenario will be quite contained, since it will be possible to build the offshore wind farms in areas considered as low risk. The gradual installation of offshore wind capacity will limit cumulative impacts during construction activities and will allow social consideration to be managed more carefully due to the low development pressure. ■ #2 Intermediate: E&S impacts for this scenario will also be quite contained concerning the site selection, since it will be possible to build the offshore wind farms in areas considered to be low risk. Construction activities will intensify maritime traffic and potentially cause a low-moderate biodiversity disturbance. The gradual capacity installation will limit cumulative impacts, which might increase towards 2050 when installation efforts will get more sustained. Social pressure on affected communities might become a concern if not carefully managed with the increase of the development efforts. ■ #3 Ambitious: Concerning site selection, E&S impacts for this scenario will be moderate but still contained, since it will be possible to build the offshore wind farms in areas considered as low-to- moderate risk. Maritime traffic will be however intensified, especially towards 2050, increasing the risk of possible cumulative impacts on the biodiversity, fisher communities and other maritime operations. Pressure on marine biodiversity, especially avifauna, marine mammals, and turtles, might increase, with consequent increments in the fatality rates, biodiversity displacement, and disturbance of feeding, breeding, and spawning areas. Social acceptance and mitigation measures and solutions might not stand the pace of the construction effort which will be quite intense, and potentially high social impacts may occur if not carefully managed. 99 Scenarios for Offshore Wind Development in Brazil 6.4.1 Recommendations Based on the results and the discussion in this section, the following recommendations are made regarding E&S aspects of developing offshore wind in the three macro-areas: ■ Improvement of the ToR and the EIA procedural practices, to align it to the requirements compared the World Bank ESF and GIIP. [IBAMA] ■ Implementation, at a federal level, of requirements and obligations related to SESA, which will be helpful to offshore wind developers in the design phase and to institution for the developments of the wider MSP. [Brazilian government] ■ Early identification of areas (offshore and onshore) where development activities might impact sensitive biodiversity and social attributes and thereby create sensitivity maps, which can inform and complement subsequent SESA and MSP. Sensitivity maps can also inform scoping of project-specific EIA-targeted baseline surveys, leading to early indication of E&S risks, mitigation requirements, complexity, and cost. [Brazilian government] ■ Improvement of the data quantity and quality regarding marine E&S considerations and allow public access to these datasets on a governmental centralized online portal. [Brazilian government] ■ Improvement of the involvement of local stakeholders (e.g., fishers, indigenous peoples, local communities) in the MSP process to identify possible exclusion areas related to social considerations, for example organizing focus groups including all communities that might be affected by the proposed macro-areas. This would also allow the correct identification of the affected communities, identify risks of economic displacement and create a more capillary knowledge related to artisanal fishing areas that can inform future project design and EIAs. [Brazilian government] ■ Preparation to follow the ILO 169 for traditional communities’ consultation, during the environmental permitting process, as it may be required by public prosecutors. [Brazilian government] [Developers] 6 Preliminary Environmental and Social Considerations 100 7 PORT AND LOGISTICS INFRASTRUCTURE 7.1 PURPOSE The development of offshore wind energy requires robust and efficient ports and logistics infrastructure to support installation activities, storage, marshalling, pre-assembly of components, operation and maintenance services, and decommissioning of offshore wind farms. This section aims to provide a comprehensive analysis of port infrastructure for the development of both floating and bottom-fixed offshore wind projects in Brazil, assessing the readiness of the existing infrastructure for offshore wind projects and highlighting key areas that require attention and investment. 7.2 METHOD 7.2.1 Method Description A screening of Brazilian ports which could potentially support offshore wind development has been performed based on publicly available information, discussions with port administrations and local knowledge. The ports analyzed are depicted in Figure 7.2 and have been divided in two groups: main ports and optional ports, according to their size, country level relevance, and proximity to the planned development areas for offshore wind projects. The study was elaborated based on a set of requirements and assumptions considered necessary to meet the demand for the installation of an offshore wind farm, as described in Section 7.2.2. As a reference point, a typical offshore wind farm project of 1 GW has been considered. It should be noted that the suitability for O&M activities was evaluated in a simplified manner, as the requirements for these activities are generally less stringent compared to those for construction activities. Additionally, the investments needed to support operation and maintenance are typically lower and can be more easily justified due to the long operation lifespan of an offshore wind farm. FIGURE 7.1 SCHEMATIC REPRESENTATION OF THE METHODOLOGY. Screening of ports Set of criteria Discussion & (main ports and definition Recommendation optional ports) The assessment of the main ports is presented in Section 7.3.2, while a more high-level assessment and gap analysis of optional ports is presented in Section 7.3.3. 101 Scenarios for Offshore Wind Development in Brazil 7.2.2 Set of Criteria When it comes to offshore wind farm development, it is mandatory to have a port infrastructure that supports the entire installation (including storage, marshalling, and pre-assembly), O&M, and decommissioning phases, as summarized in Table 7.1. Ports also play a crucial role in supporting projects during both the planning (e.g., survey vessels, installation of wind measurement devices, etc.) and manufacturing phases (e.g., loading and unloading material for foundation fabrication, etc.). However, these activities are not the primary focus as they can be considered as regular port operations. TABLE 7.1 OFFSHORE WIND FARM SELECTED DEVELOPMENT PHASES AND THE ROLE OF PORTS. Offshore wind farm Role of port development phase • Storage of components including loading and unloading from the production facilities; Installation • Marshalling of turbines and foundations; and • Pre-assembly of turbines and foundations. • Storage of components including loading and unloading from the Operation and production facilities; Maintenance (O&M) • O&M base location (control room, offices, and other facilities); and • Berthing of O&M vessels. • Storage of components including loading and unloading from the Decommissioning decommissioned wind farm; and • Recycling. This infrastructure can be provided by the existing network of ports in the region, in some cases, taking advantage of installations that serve other industries such as oil and gas and shipping, or even by facilities created specifically to meet the needs of the offshore wind industry as observed in some places in the world like the UK [53]. To assess whether a port is suitable to support the necessary activities, its characteristics were compared to a set of technical criteria. These criteria include parameters such as vessel accessibility, required port space for storage of WTG components or assembled substructures (for bottom-fixed projects), floater assembly and WTG integration (for floating projects), and the O&M base, including warehouse, offices, and technical facilities. Table 7.2 displays the minimum technical criteria based on the state-of-the-art 15 MW turbines technology. 7 Port and Logistics Infrastructure 102 TABLE 7.2 MAIN PARAMETERS FOR THE EVALUATION OF PORTS FOR OFFSHORE WIND IN BRAZIL. Bottom-fixed Floating Topic Description minimum value minimum valuev 350 SWLviii 350 SWL Handling capacity (ton) (3,000 SWL desirable) (3,000 SWL desirable) Cargo Handlingvi/vii 1 x 350 SWL 1 x 350 SWL Cranes units (Qty) 1 x 3,000 SWL 1 x 3,000 SWL Area (Ha) 8 10 Storage Bearing capacity (t/m²) 15 15 Water Depth 10 12 Navigation Channels Minimum (m) Widths (m) 150 150 Quayside berthing (Qty) 1 1 Quayside length (m) 200 300 Quayside Bearing capacity (t/m²) 15 15 Water depth (m) 10 12 Air draft restrictions (m) 150 No restriction Customs Others Yes Yes clearance facilities O&M Yes Yes The rationale behind the criteria outlined in Table 7.2 is detailed below: ■ Equipment handling capacity: Crane reach and cargo handling capacity are important factors. A typical 350 tons handling capacity is expected. However, it can vary according to the specifications of each project. ■ Space/Area: It is expected that the selected port has a potential area of berthing space, room to maneuver for the vessels, a potential area for storage, as well as unobstructed airspace. ■ Ground bearing capacity: Port must have sufficient bearing capacity to accommodate the structures of the wind farm, the transit of vehicles and tools, and the operation of onshore loading and unloading equipment at the berth area. ■ Navigation channels: Comprise the quantity and respective widths and depths of the navigation channels to access the ports. ■ Water depth: Operational draft for vessels during marshalling phase could also be a constraint since it requires higher depths for the transportation of the structures. v Port requirements for floating wind vary significantly according to technology used (i.e., spar, semi-sub, etc.). The minimum values presented in Table 7.2 are representative for semi-submersible technology. vi For this assessment, it was not considered the lifting of offshore substation (OSS) topside in the marshalling yards (import scenario), and the heavy lifting operations can be done by the installation vessel. vii Lifting capacities may be provided by mobile or vessel cranes during load-out. viii SWL (Safe Working Load) is the maximum static load at a specified radius which a lifting appliance or item of loose gear is certified to lift for a specified operating condition. 103 Scenarios for Offshore Wind Development in Brazil ■ Air draft restrictions: Air draft restrictions refer to the limitations imposed on the height of vessels that can navigate through a particular port or waterway, referring to the vertical distance between the waterline and the highest point of a vessel, such as its masts, antennas, a cargo, and other structures. ■ Customs clearance facilities: Comprise the designated areas or operations within a port that are responsible for processing and facilitating the clearance of goods entering or leaving a country’s borders. 7.3 RESULTS 7.3.1 Port Infrastructure in Brazil The existing Brazilian port infrastructure is a combination of public and private owned ports and shipyards which attend to several different industries such as agriculture, mining and minerals, O&G, manufacturing and industrial goods, containerized cargo, cruise tourism, and renewables. Overall, it is a well-established infrastructure that has the potential to support the development of the offshore wind market, even though certain upgrades will likely be required. The development of offshore wind projects in Brazil requires ports in proximity to the defined macro- areas (Northeast, Southeast, and South). The influence area of a port is defined by a maximum distance of 400 km for bottom-fixed sites and 300 km for floating developments and determines its suitability for supporting offshore wind farm installation. Section 7.3.2 provides an initial assessment of the main industrial ports located within each macro-area (Main Ports), namely ports of Pecém, Açu, and Rio Grande. Additionally, a high-level assessment of other relevant ports (Optional Ports) is presented in Section 7.3.3 to provide a wider view of Brazil’s port infrastructure for the development of offshore wind projects. The following image illustrates the locations of the assessed Main Ports and Optional Ports. 7 Port and Logistics Infrastructure 104 FIGURE 7.2 MAIN PORTS AND OPTIONAL PORTS/SHIPYARDS. Source: Google Maps (2023). 7.3.2 Main Ports The Main Ports assessed in detail in this study are: ■ Port of Pecém (CE) ■ Port of Açu (RJ) ■ Port of Rio Grande (RS) The suitability of each port considering the need to upgrade existing infrastructure was assessed using the categories displayed in Table 7.3. It is important to highlight that the assessment has been performed based on public domain information and, therefore, may present deviations to current numbers and/or characteristics. TABLE 7.3 CATEGORIES FOR PORTS GAP ANALYSIS. Category Description Suitable for the development of a 1 GW offshore wind farm without upgrades. Potentially suitable for the development of a 1 GW offshore wind farm with minor upgrades. 105 Scenarios for Offshore Wind Development in Brazil Category Description Potentially suitable for the development of a 1 GW offshore wind farm with moderate upgrades. Not suitable or potentially suitable for the development of a 1 GW offshore wind farm with major upgrades. It is also important to note that the areas and terminals considered in this report may have commitments to be used for other activities in the medium and long term which may pose challenges to the development of offshore wind projects and conflict with other existing activities. Therefore, it is recommended that ports and developers engage at early stages of project development. This will allow sufficient time to plan the required upgrades and grant access to adequate areas according to each phase of the project. The gap analyses for the main ports are represented in Table 7.4 and Table 7.5 for bottom-fixed and floating respectively. TABLE 7.4 GAP ANALYSIS FOR THE MAIN PORTS—BOTTOM-FIXED. Port of Rio Topic Description Requirements Port of Pecém Port of Açu1 Grande 350 SWL Handling capacity (3,000 SWL 140 100 124 Cargo (ton) desirable) Handling2 1 x 350 SWL 2x 100 SWL 9 x 84-124 SWL Cranes units (Qty) 2 x 100 SWL 1 x 3,000 SWL 5 x 140 SWL 2 x 110 SWL 10 (TMUT) Area (Ha) 8 18.2 35 38 (onshore) Storage Bearing capacity 15 10 10 103 (t/m²) W.D. Minimum (m) 10 14 10 10.5 Navigation Channel Channels widths 150 Free 270/300 210/300 (min/max) (m) Quayside berthing 1 9 8 8 (Qty) Quayside length 200 280/336 500 260/900 (min/max) (m) Quayside Bearing capacity 15 10 10 101,3 (t/m²) Water depth 10 13.8/15.3 14.5 14 (min/max) (m) Air draft 150 No restriction No restriction No restriction restrictions Others Customs Yes Yes Yes Yes clearance facilities O&M Yes Yes Yes Yes Notes: 1- T-Mult terminal is being considered for Port of Açu. 2- For this assessment it was not considered the lifting of OSS topside in the marshalling yards. 3- It was assumed 10t/m2 due to the lack of available information. 7 Port and Logistics Infrastructure 106 TABLE 7.5 GAP ANALYSIS FOR THE MAIN PORTS—FLOATING. Port of Rio Topic Description Requirements Port of Pecém Port of Açu1 Grande 350 SWL Handling (3,000 SWL 140 100 124 Cargo capacity (ton) desirable) Handling2 Cranes units 1 x 350 SWL 2x 100 SWL 9 x 84-124 SWL 2 x 100 SWL (Qty) 1 x 3,000 SWL 5 x 140 SWL 2 x 110 SWL 10 (TMUT) Area (Ha) 10 18.2 35 38 (onshore) Storage Bearing capacity 15 10 10 103 (t/m²) W.D. Minimum 12 14 10 10.5 Navigation (m) Channel Channels widths 150 Free 270/300 210/300 (min/max) (m) Quayside 1 9 8 8 berthing (Qty) Quayside length 300 280/336 500 260/900 (min/max) (m) Quayside Bearing capacity 15 10 10 101,3 (t/m²) Water depth 12 13.8/15.3 14.5 14 (min/max) (m) Air draft No restriction No restriction No restriction No restriction restrictions Customs Others clearance Yes Yes Yes Yes facilities O&M Yes Yes Yes Yes Notes: 1- T-Mult terminal is being considered for Port of Açu. 2- For this assessment it was not considered the lifting of OSS topside in the marshalling yards. 3- It was assumed 10t/m2 due to the lack of available information. 107 Scenarios for Offshore Wind Development in Brazil PORT OF PECÉM Topic Description Complexo Industrial e Portuário do Pecém—CIPP is a joint venture formed by the Government Ownership of the State of Ceará and the Port of Rotterdam, one of the main ports in Europe. The Port of Pecém is in the Ceará state, in the municipality of São Gonçalo do Amarante, around 60 km west from the capital Fortaleza. It holds a strategic geographical location Location with rather short transit times to North America (New York), Europe (Lisbon), and Africa (Abidjan). It is an open-water maritime terminal, artificially sheltered by a breakwater. Energy (2 coal-fired power plants, 2 gas thermoelectric plants), wind Activities (2 wind blade factories), metallurgy, non-metallic mineral products (2 cement factories, 1 precast concrete plant), animal nutrition, and logistic services. Terminals PIER 1: PIER 2: TMUT: 5 berths (metallurgy / Berths 2 berths (Ore operation) 2 berths (LNG) container) Depth/Draft (m) 13.8-14.8 14.8-15.3 15.0 Vessel Lengths (m) 280-300 290-310 300 Bearing capacity Information not available Information not available 10 (t/m2) Navigation channel Depth (m) 18.5 21 8.9—11.9 Width (m) Free Free Free • Onshore yard open storage area: 38 Storage area (ha) • TMUT: 10 Max cargo handling capacity 140 (SWL ton) 7 Port and Logistics Infrastructure 108 Topic Description • Quayside area is probably not enough to assemble floaters. Floating • Berth depth might not be enough depending on type of foundation. requirements • Berth length and channel width are likely to be suitable. • Quayside and storage area bearing capacity needs to be improved. • Federal roads conservation status: • BR–116, BR-020, BR-222, all of them have their conservation status classified as “Regular.” Road access • State Roads: – CE-040 has its conservation status classified “Good” and “Excellent.” – CE-085 has parts classified as “Regular” and “Bad.” • In September 2021, the State of Ceará and a Chinese Energy Company signed a memorandum of understanding. The Chinese group intends to transform the Port of Pecém into an export center for wind turbines for offshore wind power plants both in Brazil and abroad. It has also been understood that Pecém Port has signed another memorandum of understanding for the development of offshore wind farms in the Ceará state. • Ceará state has promoted several incentives (PROVIN-Companies Operation Incentive Development and Program; PROADE-Program for Attraction of Strategic Enterprises; PIER-Incentive growth plan Program for the Renewable Energy Production Chain, PCDM-Incentive Program for Goods Distribution Centers) for the development of renewables energies on the state. • CIPP also has a “free-trade zone (FTZ)” (ZPE Ceará), where an incentive fiscal regime is in place, providing currency-related benefits for companies operating within this zone. There is also an industrial zone, that accommodates companies from sectors such as steelmaking, mining, O&G, and others. • There are 50ha available onshore for the development of new projects/industrial facilities. • There is an ongoing Memorandum of Understanding (MOU) with a Chinese Energy Company to consider Pecém Port as a marshalling and O&M operations player for wind farms projects in Brazil. • Several incentives are in place for the development of renewable energies in the state of Ceará. Advantages • Pecém has an industrial area of 19 ha that has a comprehensive existing infrastructure. Among the companies that are installed, there are metallurgical, logistic services, and one factory of wind blades. • The Pecém Complex also includes a free-trade zone, known as ZPE Ceará, which is fully integrated with the Port and provides tax benefits for companies established within its premises. • Cargo handling limitations due to cranes with a capacity of up to 140t, thus it will be necessary to rent/buy specific operational cranes for the marshalling activities. • Bearing capacity, both for onshore storage and offshore quayside, needs an upgrade to support the loads considered for offshore wind turbines. • Not informed bearing capacity of the two access roads which connect the offshore terminal to onshore yard. • Due the lack of information, the dimension of the road connection between onshore and Disadvantages offshore areas could be a constraint regarding maneuverability. • The port is an open water maritime terminal, artificially sheltered by a breakwater, but it still has a lack of protection against the meteoceanographic conditions. • Existing infrastructure is designed to serve the industries currently operating in the port, so it would be necessary to wait for the termination of the existing contracts to free up port space for offshore wind farms, or to make additional investments in infrastructure to support this new industry. Source: [54], [55], [73]. 109 Scenarios for Offshore Wind Development in Brazil PORT OF AÇU Topic Description Port of Açu is a partnership between Prumo Logística—EIG Global Energy Partners Ownership company—and Port of Antwerp International. Port of Antwerp is responsible for the management and development of Port of Açu, configuring a complete private partnership. The complex is located in Barra do São João, in the Rio de Janeiro State, and comprehends Location a total area of 130 km². The port is in operation since 2014 and is strategically located in the Southeast region of Brazil. Specialized in cargo activities such as solid and liquid bulk, general cargo, iron ore, and oil. Activities The port has been developed to combine industry and port logistic activities. Terminals Terminal 1: Terminal 2: 2 berths 3 berths 1 multi-purpose Berths 7 private terminals (iron mining activities) (oil related activities) terminal Depth/Draft (m) 18.5 21 8.8–11.9 12.5 Vessel Lengths (m) 300 340 183–230 250 Bearing capacity - - - 10 (t/m2)1 Navigation channel Depth (m) 24.5 10 13.9 Width (m) 230 120 270 Storage area (ha) TMUT: 18.2 / contiguous area: 26 Max cargo handling capacity TMUT: 100 (SWL ton) • Berth depth might not be enough. Floating • Berth length shorter than requirement (TMUT). requirements • Quayside and storage bearing capacity needs to be improved. • Channel width is likely to be suitable for terminal 2 (TMUT). • Federal roads conservation status: Road access – BR-101 has parts classified as “Good” and “Regular.” – BR-356 has parts classified as “Regular” and “Bad.” 7 Port and Logistics Infrastructure 110 Topic Description • A logistic condominium called Açu Condlog is being developed at the complex to bring suppliers, sub-suppliers, and service providers closer to the terminal operations. It offers a dedicated area of 210,000 m² located just a five-minute drive away from the port terminals. A Heliport is also being developed, providing efficient transportation to and from offshore platforms. The project includes a Truck Center to optimize terminal access and a convenience center called Estação Açu, offering support services and commercial offices. A hotel project is also underway to complement the range of services provided Development and by the port. growth plan • Port of Açu has signed a Memorandum of Understanding (MOU) with Fortescue Future Industries Pty Ltd (FFI), a subsidiary of Fortescue Metals Group Ltd (Fortescue), to develop hydrogen-based green industrial projects in Rio de Janeiro, Brazil. The MoU also lays the foundations for the development of on-site solar power generation projects, as well as offshore wind power projects off the coast of the states of Rio de Janeiro and Espírito Santo. According to The Port of Açu vision, one of the pillars is the industrialization of the port together with the operational energy transition projects of today and the green industries powered by renewable energy of tomorrow. • Developers have shown keen interest in establishing offshore wind farms in the Southeast of Brazil, particularly in the Port of Açu region. This has the potential to transform the area into a central hub for extensive, enduring projects. • The Port of Açu has an operational VTS center in compliance with NORMAN-26/DHN, being one of the two ports in Brazil to have an operational navigation system, which can help support offshore wind activities. • Memorandums of understanding (MoUs) with a focus on sustainability and energy transition, signed with companies such as EDF Renewables, Neoenergia, Shell, Advantages TotalEnergies, White Martins, Universal Kraft, and Equinor. • Committed to solutions for energy transition. It houses the first large-scale solar power plant in the state of Rio de Janeiro and is actively developing partnerships for hydrogen in the Southeast of Brazil. • There are 9,000 ha of port back land available for the installation of companies and industries. • Connection with SIN (national grid). • Terminal 1 is an open water maritime terminal. • The port has sheltered terminals. • Port of Açu does not have a free-trade zone (FTZ). • Açu port bearing capacity needs upgrade to support the weights considered for offshore Disadvantages wind turbines. • Cargo handling limitations due to cranes with a capacity of up to 100t, thus it will be necessary to rent/buy specific operational cranes for the marshalling activities. Notes: 1-Table shows bearing capacity only for TMUT as it is the terminal being considered for Port of Açu. Source: [56], [57], [58], [73]. 111 Scenarios for Offshore Wind Development in Brazil PORT OF RIO GRANDE Topic Description Rio Grande Port is administrated by Portos RS (port authority), a state- owned company responsible for organizing, managing, Ownership and supervising waterways port system in State of Rio Grande do Sul. Moreover, terminals in Rio Grande port are operated by private parties. The Rio Grande Port (or Porto de Rio Grande) is located in Rio Grande municipality in the state of Rio Grande do Sul. It is the southernmost Port in Brazil, located on the west bank of the North Channel Location (Canal do Norte), the natural outlet for the entire Lagoa dos Patos lagoon watershed. It gives access to Rio Grande do Sul state capital Porto Alegre and to several industries located at the banks of the lagoon. Activities Chemical, fertilizers, containerized cargo, wood, resin, grains (soybeans, rice, corn). Terminals Porto Velho: Porto Novo: Superporto: 7 berths (roll-on/roll-off, Berths 1 berth (non-operational) 4 private terminals containers, shipbuilding) Depth/Draft (m) 4.6 14 14.5 Vessel Lengths (m) 640 260-810 318-900 Bearing capacity Not available 10 10 (t/m2)1 Navigation channel Depth (m) 4.57 10.5 15 Width (m) 100 210 230 • Porto Novo: 35 Storage area (ha) • Superporto: 32 (Tecon) Max cargo • 124 (Porto Novo) handling capacity • 110 (Superporto/Tecon) (SWL ton) • Berth depth might not be enough. Floating • Berth length shorter than requirements except for Tecon. Requirement • Quayside and storage bearing capacity needs to be improved. HL Analysis • Channel width is likely to be suitable for Porto Novo and Superporto. 7 Port and Logistics Infrastructure 112 Topic Description • Federal/State roads conservation status: – BR- 293 and BR—392 have parts classified as “Good” and “Regular.” Road access – BR-116 conservation status is “Good.” – BR-471 has parts classified as “Good,” “Regular,” and “Bad.” – BR-101/RS-101 has parts classified as “Regular” and “Bad.” • The state of Rio Grande do Sul has some incentives for the development of renewable energy such as INVEST-RS-Investment attraction program in Rio Grande do Sul, Programa Estadual de Desenvolvimento Industrial (State Industrial Development Development and Program—PROEDI) or Fundo Operação Empresa do Estado do Rio Grande do Sul (Fund growth plan Operation Company of the State of Rio Grande Do Sul—FUNDOPEM/RS). • The port of Rio Grande has one of the largest port back areas in the country. It is home to the largest industrial district in the state of Rio Grande, which offers state tax benefits to those located there. It spans over 2,500 hectares of industrial area. • The lagoon facilitates communication among three significant ports, one of which is situated in the capital city of the state of Rio Grande do Sul. • The port of Rio Grande has one of the largest port back areas in the country. It is home to the largest industrial district in the state of Rio Grande, which offers state tax benefits to those located there. It spans over 2,500 hectares of industrial area. Advantages • The port is strategically located near the country's borders with Argentina and Uruguay, providing a prime geographical position. • The port of Rio Grande is located near a significant area of interest for the wind farm sector. • The port has sheltered terminals. • Port of Rio Grande does not have a FTZ. • The storage area of the port is mainly allocated for other operations. • Rio Grande port bearing capacity information was not found. It was considered Disadvantages 10t/m2 as a base case and, therefore, the port needs an upgrade to support the weights considered for offshore wind turbines. • Cargo handling limitations due to cranes with a capacity of up to 124t, thus it will be needed to rent/buy specific operational cranes for the marshalling activities Notes: 1-Bearing capacity assumed 10 ton/m2 due to lack of information. Source: [59],[60],[61],[62],[73]. Optional Ports/Shipyards In addition to the main ports that have been analyzed, there are other ports and shipyards that could also have potential to support offshore wind installation activities. While no detailed assessment is provided for these locations, a simplified gap analysis is included for a better understanding of each port’s capabilities. The following ports and shipyards have been considered based on their size and location along the coast of Brazil: ■ Port of Suape (PE) ■ Atlântico Sul Shipyard (PE) ■ Enseada Shipyard (BA) ■ Jurong Shipyard (ES) ■ EBR Shipyard (RS) 113 Scenarios for Offshore Wind Development in Brazil ■ Complex of Tubarão (ES) ■ Port of Itaqui (MA) ■ Port of Fortaleza (CE) The proposed gap analysis is derived from port evaluation parameters listed in Table 7.2 and categories displayed in Table 7.3. A RAG scale was used to indicate potential gaps, lack of information, or if no major gaps were identified as described in Table 7.6 below. The RAG scale was applied in the following sections for each port and shipyard. TABLE 7.6 RAG SCALE FOR GAP ANALYSIS. Topic Information not available. No major gaps identified. Gaps identified. Major gaps identified. Note: RAG = Red-Amber-Green The following gap analysis of optional ports has been performed based on existing public information and local knowledge and assesses main parameters for evaluation of ports potential capability to support bottom-fixed offshore wind development. It is noted that this is a qualitative evaluation of the ports and that for accurate assessment of required investments it is imperative to conduct an in-depth study in collaboration with the respective ports. TABLE 7.7 BOTTOM-FIXED GAP ANALYSIS OF OPTIONAL PORTS. Navigation Port Cat. Storage area Quayside Others channel Distance to Depth Area Depth Port of projects Suape (PE) Bearing Bearing Lifting/Cranes Width capacity capacity Distance to Depth Area Depth Atlântico Sul projects Shipyard (PE) Bearing Bearing Lifting/Cranes Width capacity capacity Distance to Depth Area Depth Enseada projects Shipyard (BA) Bearing Bearing Lifting/Cranes Width capacity capacity Distance to Depth Area Depth Jurong projects Shipyard (ES) Bearing Bearing Lifting/Cranes Width capacity capacity 7 Port and Logistics Infrastructure 114 Navigation Port Cat. Storage area Quayside Others channel Distance to Depth Area Depth EBR projects Shipyard (RS)1 Bearing Bearing Lifting/Cranes Width capacity capacity Distance to Depth Area Depth Complex of projects Tubarão (ES) Bearing Bearing Lifting/Cranes Width capacity capacity Distance to Depth Area Depth Port of projects Itaqui (MA) Bearing Bearing Lifting/Cranes Width capacity capacity Distance to Depth Area Depth Port of projects Fortaleza (CE) Bearing Bearing Lifting/Cranes Width capacity capacity Notes: 1- Potential air gap limitations due to presence of electrical lines. Source: [54], [63], [64], [65], [66], [67], [68], [69], [70], [71], [72]. TABLE 7.8 FLOATING GAP ANALYSIS OF OPTIONAL PORTS. Navigation Port Cat. Storage area Quayside Others channel Distance to Depth Area Depth projects Port of Suape (PE) Bearing Bearing Lifting/Cranes Width capacity capacity Distance to Depth Area Depth Atlântico Sul projects Shipyard (PE) Bearing Bearing Lifting/Cranes Width capacity capacity Distance to Depth Area Depth Enseada projects Shipyard (BA) Bearing Bearing Lifting/Cranes Width capacity capacity Distance to Depth Area Depth Jurong projects Shipyard (ES) Bearing Bearing Lifting/Cranes Width capacity capacity Distance to Depth Area Depth EBR projects Shipyard (RS)1 Bearing Bearing Lifting/Cranes Width capacity capacity Distance to Depth Area Depth Complex of projects Tubarão (ES) Bearing Bearing Lifting/Cranes Width capacity capacity 115 Scenarios for Offshore Wind Development in Brazil Navigation Port Cat. Storage area Quayside Others channel Distance to Depth Area Depth projects Port of Itaqui (MA) Bearing Bearing Lifting/Cranes Width capacity capacity Distance to Depth Area Depth Port of projects Fortaleza (CE) Bearing Bearing Lifting/Cranes Width capacity capacity Notes: Potential air gap limitations due to presence of electrical lines. Source: [54], [63], [64], [65], [66], [67], [68], [69], [70], [71], [72]. 7.4 DISCUSSION As observed in previous sections, Brazil boasts a robust port infrastructure, encompassing ports, terminals, and shipyards along its entire coastline. Three ports, namely Port of Pecém, Port of Açu, and Port of Rio Grande, stand out as potential locations to support offshore wind farm projects (Main Ports). However, it is essential to note that, currently, none of these ports have the necessary readiness to meet the demand of an offshore wind project. The gap analyzes conducted for the Main Ports revealed areas that require necessary improvements for each port, presented in Table 7.4 and Table 7.5. The following table presents a summary of the main improvements that require actions to allow the ports to support an offshore wind project. TABLE 7.9 SUMMARY OF NECESSARY IMPROVEMENTS AND INDICATIVE INVESTMENT FOR OFFSHORE WIND SUPPORT. Port of Pecém Port of Açu Port of Rio Grande Description • Handling Capacity/ • Handling Capacity/ • Handling Capacity/ of necessary Crane Reach Crane Reach Crane Reach improvements • Potential need to improve • Cranes units • Cranes units bearing capacity of the • Maximum water depth • Storage bearing capacity connection between • Storage bearing capacity • Quayside bearing offshore terminal and capacity • Quayside onshore yard bearing capacity • Cranes units • Storage bearing capacity • Quayside bearing capacity Average • 30-60 (upgrades) • 50-80 (upgrades) • 20-50 (upgrades) investment • 70-120 (build a new • 70-120 (build a new • 70-120 (build a new (US$million) terminal) terminal) terminal) The investment estimates presented above consider the upgrade of existing terminals or potentially the construction of a new terminal. It is important to highlight that the estimates are preliminary and represent only indicative figures; detailed studies need to be conducted for a more accurate result. 7 Port and Logistics Infrastructure 116 For bottom-fixed projects, the Main Ports identified in this assessment will need improvement in the following areas: ■ Cargo handling; and ■ Bearing capacity of quayside and storage area. Cargo handling capacity limitations derive from the challenge of lifting large and heavy components from WTG and foundation which are far more demanding than usual cargo. It can be addressed by renting or buying cranes with sufficient lifting capacity to perform load in/out operations. Moreover, the installation vessel’s crane could also support load out operations. Likewise, to meet the bearing capacity needed to accommodate the load from large pieces and cargo handling operations, all three Main Ports profiled in this section will need to make significant investments to improve load capacity at the quayside and storage area. In the case of floating offshore wind, port requirements are highly dependent on the employed foundation technology. For instance, semi-submersible technology is likely to demand more depth at berth area and navigational channel as its draft could be up to 20 m. Another example is the yard area needed which, in the case of floating foundations, will be governed mainly by the rate of floater production. Based on that, the high-level analysis for floating wind is only indicative of potential limitations and challenges considering current port infrastructure. The criteria are expected to become more certain as more floating wind projects come online in the next years and industry points towards the use of specific foundation technologies. By then, it is expected that industry standard has been set as more experience is gained from floating wind projects. The study also included additional ports and shipyards, referred to as Optional Ports. These locations—while not matching the scale of the Main Ports—hold significant importance, being suitable for some required construction and O&M activities for offshore wind farm projects. It is noted that necessary upgrades identified for Main Ports are aligned with the improvements required for Optional Ports in general. Considering the three scenarios identified in the Executive Summary, the following considerations regarding ports and logistic infrastructure can be made: ■ #1 Base Case: Considering construction time between two to three years per project, there may be a business case for selected Brazilian ports to make investments in the necessary upgrades. ■ #2 Intermediate: In this context, there will be likely a business case to explore all three macro regions and thus justify upgrading infrastructure and capabilities for all main ports identified. Besides, the steady and high growth rate for offshore wind likely will demand a dedicated area in the port to handle storage, pre-assembly, and load operations. ■ #3 Ambitious: A key driver for this scenario will be the production of GH2 which is in line with the development plans of the main Brazilian ports. The combination of offshore wind and GH2 could make a strong business case for the development of required capability in the identified main ports to support both industries. Moreover, other smaller ports (or even new ports) may also be candidates to absorb part of the demand for construction activities and work together with main ports to deliver offshore wind projects according to the expected timescale. 117 Scenarios for Offshore Wind Development in Brazil From the point of view of port authorities, there is a special concern about the long-term visibility for the development of offshore wind projects in Brazil, as this is a key-factor for their Master Plans, which points to the need for a specific long-term policy with stable targets for the growth of offshore wind in Brazil. For ports that have some degree of technical conditions to receive equipment for the installation and operation of offshore wind projects, those spaces are already occupied and used for other purposes with mid-long-term contracts, such as the transportation of gas, containers, iron and ore, among others. Notwithstanding, there are available areas accessible for the extension of ports to serve this new industry, but port representatives mentioned that these upgrades would require significant investments, varying according to the size of the projects and area needed. The size of the components (blades, towers, generators, and nacelles) being handled in those projects is considerable larger than the usual business installed in the port, and so, it might also require additional upgrades of the infrastructure in the surroundings, like port access and roads, in case blades, generators, and nacelle must be transported on the existent roads. Although port authorities did not communicate a specific timeline, the timing to begin the overhaul works would likewise be critical as upgrade works could require between three to five years to be completed. For an accurate assessment of the required investments, it is imperative to conduct an in-depth study in collaboration with the respective ports. An initial E&S screening is also recommended to ensure the works can be undertaken. Despite the presence of available areas and technical conditions for upgrades, the inaugural project awarded in a forthcoming offshore wind lease auction has the risk to shoulder the entire cost of port expansion for operation. To mitigate such an economic burden, it is suggested the auctioning of multiple areas within proximity of a certain port to allow for shared investment costs and lower the LCoE across projects. It is noted that all data were obtained from the public domain, and the data concerning bearing capacity and cargo handling capacity/crane reach exhibited the lowest level of reliability, if compared with other parameters. 7.4.1 Recommendations The following recommendations are made regarding development of ports and infrastructure: ■ In collaboration with the respective ports, conducting in-depth studies to assess the current port conditions and the potential upgrades and extensions of the existing infrastructure that might be required to handle all equipment and components required for offshore wind. [Brazilian government] [Developers] ■ Evaluate the possibility of auctioning multiple areas near a specific port to allow for shared investment costs and reduce the LCoE across projects. Despite the presence of available areas and technical conditions for upgrades in several ports, this recommendation aims to alleviate the economic impact of the inaugural project awarded in a forthcoming offshore wind lease auction, which has the risk to shoulder the entire cost of port expansion for operation. [Brazilian government] [Developers] 7 Port and Logistics Infrastructure 118 8 SUPPLY CHAIN ANALYSIS 8.1 PURPOSE The purpose of this section is to evaluate the current capabilities and gaps within the local supply chain for the manufacturing and delivery of components and services required for the successful implementation of offshore wind projects. The analysis involves mapping and assessing the potential to source the elements required for the offshore wind sector within the local context, aiming the formulation of strategies to address the identified gaps and strengthen the supply chain. Furthermore, the analysis also considers the growth scenarios for offshore wind, their respective installed capacity volumes in the upcoming decades, and the potential implications and challenges for the local supply chain. 8.2 METHOD This section presents a categorization of the supply chain and respective criteria. The methodology consists of: (1) categorizing the offshore wind supply chain in tier 1 packages and, within each package, a tier 2 level of services and components; and (2) establishing quantitative criteria to assess tier 2 activities readiness level. FIGURE 8.1 SCHEMATIC REPRESENTATION OF THE METHODOLOGY. Categorization of Establishing Categorization of offshore wind supply quantitative offshore wind chain in tier 2 level criteria to assess supply chain in of services and tier 2 activities tier 1 packages components readiness level 119 Scenarios for Offshore Wind Development in Brazil 8.2.1 Categorization In a simplified approach, the essential assets in wind farms consist of wind turbines (which include the rotor-nacelle assembly and support structure), the substation (which includes the topside and support structure), power cables, and the control station. Figure 8.2, Figure 8.3, and Figure 8.4 show a visual representation of the main assets and components that the supply chain should be able to provide. FIGURE 8.2 OFFSHORE AND ONSHORE WIND POWER PLANT ASSETS. Offshor wind pow r pl nt ss ts Onshor wind pow r pl nt ss ts Wind Wind turbin s Tr nsmission turbin s Pow r C bl Ass t Subst tion Subst tion Control Subst tion (offshor ) (onshor ) st tion (onshor ) Pow r C bl Ass t Arr Export Arr Pow r C bl Pow r C bl Pow r C bl Source: DNV [77]. FIGURE 8.3 OFFSHORE WIND TURBINE COMPONENTS. Onshor wind turbin s Rotor-N c ll Ass mbl Offshor wind turbin s Rotor-N c ll Ass mbl Tow r Support Tow r structur Tr nsition pi c Support Work pl tform Tow r Work pl tform structur Int rm di t Bo t l ndin pl tform Ext rn l J-tub s Sh ft W t rlin Bo t l ndin Grout d Substructur Found tion Int rn l J-tub s Scour prot ction S Floor Monopil Skirt Found tion Found tion Soil Und rb s routin J ck t Monopil Gr vit b s d L ttic Tubul r substructur substructur substructur tow r tow r Source: DNV [77]. 8 Supply Chain Analysis 120 FIGURE 8.4 SUBSTATION COMPONENTS. Offshor Subst tion Onshor Subst tion Topsid Found tion Sub-structur Support structur Found tion Source: DNV [77]. The established categorization list of the supply chain and presented services and components, used in the analysis, is based on previous offshore wind roadmaps published by the World Bank [74], [75], and [76], with some minor adjustments. TABLE 8.1 CATEGORIZATION OF PACKAGES (TIER 1), AND SERVICES AND COMPONENTS (TIER 2). Service or Package Description component Work by the developer and its supply chain including planning Project management consent, front-end engineering and design, project management, and procurement Engineering and Qualified design and consultancy firms for the development of consultancy engineering projects Legal, consenting, Project Qualified legal firms for the advisory and consulting and regulatory development Geophysical and Qualified firms to perform the surveys geotechnical surveys Metocean campaigns and Provision of wind measurement campaigns and environmental survey environmental survey Nacelle, hub, Supply of components to produce the nacelle and hub and their and assembly delivery to the final port before installation Supply of finished blades and their delivery to the final port Blades Turbine before installation Supply of tower sections and their delivery to the final port Tower before installation Turbine smaller items Supply of raw materials, bulk materials, accessories, and small parts 121 Scenarios for Offshore Wind Development in Brazil Service or Package Description component Foundation and Supply of foundations and substructure, and their delivery to the substructure final port before installation Array and export Supply of cables and their delivery to the final port before installation cable supply Balance of plant Offshore substation Supply of the completed OSS platform and foundation ready (OSS) supply for installation Onshore Supply of components and materials for the onshore substation infrastructure and the operations base Work undertaken in the final port before installation and the Turbine installation installation and commissioning of the turbines, including vessels Foundation Work undertaken in the final port before installation and the installation installation of the foundations, including vessels Installation and Array and export Installation of the cables, including route clearance, post-lay commissioning cable installation surveys, and cable termination OSS installation Installation of the OSS; includes commissioning of electrical system Onshore substation Installation of the onshore substation; includes civil works and installation commissioning of electrical system Wind farm administration and asset management, including Wind farm operation onshore and offshore logistics Turbine Operation, Work to maintain and service the turbines, including spare parts maintenance maintenance, and and consumables and service service Balance of Inspection and repair of foundations, inspection and repair plant maintenance or replacement of cables, and onshore and OSS maintenance and service and service Removal of all necessary infrastructure and transport to port; Decommissioning Decommissioning excludes recycling or re-use 8.2.2 Assessment Criteria In order to assess the supply chain, a multi-criteria approach was adopted. This approach considers four different criteria to estimate the potential of existing companies in Brazil to support offshore wind development. It also identifies drivers that could encourage new companies to invest locally. Each service or component of the offshore wind farm supply chain was individually analyzed based on four readiness assessment criteria, in a weighted scoring process. For all criteria, a score of 4 represents the highest level of readiness, and a score of 1 indicates the lowest. 8 Supply Chain Analysis 122 TABLE 8.2 ASSESSMENT CRITERIA. Criteria Individual score Description Weighting criteria No benefits in supplying Brazilian projects from 1 Brazil in terms of cost or risk Some benefit in supplying Brazilian projects from Benefits of 2 Brazil, but no significant impact on cost or risk using Brazilian 1 supply Work for Brazilian projects can be undertaken from 3 outside Brazil, but only with significant increased cost and risk 4 Work for Brazilian projects must be undertaken locally Capital investment requires long-term market 1 visibility with pipeline of projects >1 GW Capital investment requires market visibility and 2 some projects to be at or near Final Investment Investment Decision (FID) 2 risk Low investment threshold (30 ) M dium r din ss l v l ( 20-30 ) Low st r din ss l v l ( <20 ) TABLE 8.5 READINESS LEVEL (WEIGHTED SCORE)—SORTED FROM HIGHEST TO LOWEST. Service or component Weighted score Service or component Weighted score Legal, consenting, and regulatory 40 Tower 30 Onshore infrastructure 40 Nacelle, hub, and assembly 29 Onshore substation installation 40 Blades 29 Project management 39 Decommissioning 25 Array and offshore export Engineering and consultancy 39 21 cable supply Metocean campaigns and Array and offshore export 39 21 environmental survey cable installation Geophysical and Foundation supply 37 20 geotechnical surveys (monopile, jacket, and floating) Wind farm operation 36 Offshore substation installation 19 Turbine maintenance 33 OSS supply 19 and service Balance of plant maintenance 33 Turbine installation (offshore) 19 and service Turbine loose items 31 Foundation installation (offshore) 19 Offshore substation installation 19 127 Scenarios for Offshore Wind Development in Brazil 8.4.1 Current Brazilian Energy Market and Supply Chain Brazil has a well-developed energy market with major global and national players with comprehensive expertise in fields such as onshore wind, O&G, transmission/distribution, thermal and hydropower, and other energy related companies. In this context, potential synergies can be drawn to support the development of offshore wind, specially coming from onshore wind and O&G. In the onshore wind sector, the PROINFA program [7], further described in Section 16, laid the foundation for developing local wind turbine manufacturing capabilities and a robust wind supply chain. The success of onshore wind power in the country can be attributed to the rapid growth of an efficient domestic production chain, which initially had a local content rate of around 60 percent, but eventually reached 80 percent of wind turbine locally produced. Local manufacturing and assembly were driven indirectly by the financing rules of BNDES FINAME Program, which provides significant financial support, including up to 80 percent project financing for renewable energy endeavours at an annual interest rate of about 10 percent, which is attractive in the Brazilian market. While formal local content requirements were dropped off, they remained obligatory for developers seeking BNDES support, leading to the continued fulfillment of these requirements in practice. Additionally, manufacturers had to meet specific criteria for project financing, including tower and blade production in Brazil, nacelle assembly within the country, and hub assembly using domestically sourced material. Starting in 2012, BNDES updated its methodology to evaluate local content in wind turbines, introducing a Computerized Supplier Accreditation System (CFI) that allows producers to verify domestic products listed in the system and obtain certification of their domestic content index. This certification enables companies to market their products as domestically sourced. Currently, there are five turbine manufacturers registered in the CFI. Although the onshore wind industry has shown positive signs throughout its development and achieved significant milestones, more recently it has begun to show some difficulties. In 2022, GE announced the interruption of sales of wind turbines in Brazil and, in 2023, SGRE announced the interruption of its factory in Camaçari, Bahia. Additionally, TEN, a national producer of metal towers, has laid off 90 percent of its staff and has applied collective vacation policies during 2023. There are several factors that contribute to the challenges in the Brazilian supply chain, including demand for electricity, commercial aspects, competitiveness between companies, and public policies. One factor that has been discussed on industry forums is the tariff policy favoring local production over import of ready- made components. In the O&G sector, one of the largest players worldwide is Petrobras. This Brazilian company has over 70 years in the industry and comprehensive expertise in offshore technology development. Furthermore, other major international O&G players have established themselves in the country, such as Equinor, Shell, Total, BP, Chevron, Premier Oil, Repsol, and Sinopec, among others. To support O&G complex industry, many companies invested in local facilities and workforce capabilities to provide offshore logistics services, geophysical, geotechnical and metocean surveys, ship building, offshore cables manufacturing, Floating Production Storage and Offloading (FPSO) integration and other related engineering activities. Recently, O&G companies have established long-term strategies with ambitious goals towards energy transition, decarbonization of operations, and substantial investments in renewables. 8 Supply Chain Analysis 128 Over the years, Brazil has built a strong technological capability in energy projects drawing from its extensive experience both in onshore wind and O&G industries. Based on that, it can be affirmed that Brazil possesses a mature market backed up by a successful well-established supply chain which cover all development phases of an energy project development from project management, engineering, legal support, permitting, regulatory compliance, and geotechnical expertise up to installation and operation. This existing set of infrastructure, workforce, knowledge, and experience forms a solid base upon which Brazil can start to work on solutions to answer the challenges for offshore wind. 8.4.2 Project Development Brazil’s offshore wind project development can leverage the established infrastructure of onshore wind and O&G sectors. Figure 8.5 illustrates this potential, with each category scoring over 30 points. There are existing companies in Brazil responsible for the management of large onshore wind portfolios across different regions of the country. Some of these are multinational companies like Neoenergia (Iberdrola), Shell, and TotalEnergies which also have experience in the management of offshore wind projects in Europe. Brazilian existing onshore wind and O&G industries are supported by skilled engineering local companies. Besides the technical expertise, these local companies can minimize labor and logistics costs, and benefit from knowledge of local aspects as well. Legal, consenting, and regulatory works are to be carried out locally because they are strictly related to national policies and regulations, grid operator standards, environmental permits, and other tasks which require an understanding of local aspects. Much of this framework applies to onshore wind and O&G, hence there are consulting companies already well-positioned to offer services for offshore wind energy. Site surveys such as geophysical and geotechnical must also be undertaken locally as these activities are carried out on the project site. However, it is anticipated that specialized vessels will be brought from other locations to accommodate future projects, as the fleets for such services typically operate in global markets. Furthermore, these are standard practices for both O&G and onshore wind sectors, and, therefore, can benefit from various experienced local providers such as Fugro, TGS, OceanPact, and other companies which already have operations in Brazil. It is noted though that all activities in the project development package will require some investment, mostly in qualifications and new skills, to meet offshore wind needs, in project design, engineering, metocean, geophysical, and geotechnical campaigns and its specificities for the offshore wind industry. These skills improvement should be facilitated by the already existing offshore O&G industry which contributes to a high readiness level in this case. Further details are provided in Section 10. 129 Scenarios for Offshore Wind Development in Brazil FIGURE 8.5 PROJECT DEVELOPMENT. Engineering and Consultancy 40 35 30 25 Project 20 Geophysical and Management 15 Geotechnical Surveys 10 5 Metocean Legal, campaigns and Consenting, environmental survey Regulatory Source: DNV. 8.4.3 Turbine Brazil represents a developed wind market in South America and is the most developed market for onshore wind in the region. This may be partially explained as a result of local content policy stimulated by BNDES FINAME program. As a matter of fact, main western wind turbine manufactures have facilities in Brazil. The local manufacturing of wind turbines has led to the development of national suppliers which are important players across the complex wind supply chain and have the potential to support offshore wind industry as well. The turbine package can be divided into 4 parts: 1. Nacelle, hub, and assembly; 2. Blades; 3. Tower; and 4. Turbine small parts. As presented in Figure 8.6 and further discussed in this section, Brazil already has a relevant local supply chain to serve onshore wind industry. Most of the turbine and blades suppliers are in Bahia, Ceará and Pernambuco, as well as in WEG in Santa Catarina. 8 Supply Chain Analysis 130 FIGURE 8.6 BRAZILIAN ONSHORE WIND SUPPLY CHAIN. 131 Scenarios for Offshore Wind Development in Brazil From Table 8.6, it is possible to note that most of these manufacturers are located at considerable distances from the nearest ports which can create a logistical challenge considering that the components for offshore wind projects are considerably larger in size. TABLE 8.6 TURBINE AND BLADES MANUFACTURERS IN BRAZIL. Company State Distance to Vestas Ceará Pecém Port–80 km Salvador Port–55 km SGRE Bahia Enseada Shipyard–170 km Salvador Port–24 km Turbine Nordex Acciona Bahia Enseada Shipyard–160 km Salvador Port–50 km Goldwind Bahia Enseada Shipyard–174 km WEG Santa Catarina Itajaí Port–92 km Aeris Energy Ceará Pecém Port–21 km LM Wind Power Pernambuco Port of Suape–8 km Blades Salvador Port–60 km Sinoma Wind Power Bahia Enseada Shipyard–180 km Nacelle, hub, and assembly The most well-known offshore wind turbine manufacturers are present in Brazil with onshore facilities which perform nacelle and hub assembly, as presented in Figure 8.6. Vestas, a world leading company in the wind industry, has a facility in Aquiraz, Ceará, where it assembles the nacelle and hub for their onshore 2.X MW and 4.X MW platforms. Siemens Gamesa (SGRE) and General Electrics (GE) have facilities in Camaçari, Bahia, from where they also supply for onshore wind mainly in the Northeast region of Brazil. Moreover, Brazilian national WTG manufacturer WEG is located in Jaraguá do Sul, Santa Catarina, and provides onshore 2.X and 4.X MW platforms. It has also recently announced a cooperation agreement with Petrobras for the development of a 7.X MW onshore platform. Chinese WTG manufactures Ming Yang, Goldwind, Envision, and Sany have also indicated interest to participate in the development of the offshore industry in Brazil. Recently, Goldwind has announced an agreement with the state of Bahia to establish a factory and expressed interest in the future offshore wind market [79]. Initially, it is expected that these components will be sourced from abroad for the first offshore wind projects. Investment to upgrade existing facilities require long-term market visibility as it involves large sums of capital to be invested upfront. Nevertheless, from a technical point of view, the well-stablished onshore wind supply chain provides a solid starting point for building the necessary capabilities for offshore wind. Blades In recent years, the offshore wind industry has witnessed a significant increase in the size and capacity of wind turbines. For instance, the blade span for offshore wind turbines exceeds 100 m while the longest blades for current onshore turbines are approximately 80 m long. This significant increase in dimensions presents challenges in design, fabrication, handling, and transportation. 8 Supply Chain Analysis 132 Brazilian company, Aeris, stands out as the most well-known player in South America for blade manufacturing and provides services for major WTG manufacturers such as Nordex-Acciona, Vestas, Siemens, and WEG [80]. Its facilities are located in Caucaia, Ceará, near the Port of Pecém, which is already tailored to support blade handling and storage, as described in Section 7. Another well-known blade manufacturer, LM Wind, is located close to Port of Suape, Pernambuco, and was acquired by GE in 2016. Lastly, Sinoma Wind Power, a Chinese blade manufacturer, has been in discussions with Bahia government to install a facility in Camaçari, Bahia. Despite the existing infrastructure, blade manufacturers need a predictable project pipeline to justify investments on facilities upgrades and new production lines set-up. In that way, Brazil's current blade manufacturing is very well positioned close to well-structured port areas and possibly with available space to expand their installations. Tower Another component which has considerable increase in size for offshore wind is the tower. Manufacturing capabilities will need to be upgraded from onshore wind existing facilities to achieve design and strength requirements. Also, steel towers for offshore must be adapted to maritime conditions and require special coating protection. Logistical challenges arise from two key factors: the dimensions and weight of towers, and the fact that steel tower companies are located far from coastal areas. For instance, Torres do Nordeste (TEN) and Torrebras factories are located in countryside of Bahia, far from coastal areas and potential construction ports. Other steel tower suppliers are GRI Towers Brasil and ENGEBASA, and Nordeste Torres do Brasil. Also, concrete tower manufacturers could enter this market (i.e., for concrete platforms), but with a high barrier to investment. Nordex Acciona, Dois A Tower Systems and CTZ Eolic towers are some examples of local manufacturers of concrete towers. Although there is an existing business case for steel towers for onshore wind, facing challenges related to offshore wind supply will require a long-term predictable market to justify investments. Turbine small parts Turbine small parts could be supplied locally as WTG manufacturers in Brazil have mapped and qualified local suppliers for onshore wind industry. However, to adapt these smaller components to the offshore environment, it will be necessary to have at least some projects near FID. As a result, most components of the turbine package are in an intermediate readiness level, as summarized in Figure 8.7. This indicates Brazil’s potential to upgrade already installed facilities, primarily related to onshore wind, to meet the needs for a local wind turbine production. 133 Scenarios for Offshore Wind Development in Brazil FIGURE 8.7 TURBINE. Blades 40 35 30 25 20 15 10 Turbine Nacelle, hub 5 Loose items and assembly Tower Weighted Score Source: DNV. 8.4.4 Balance of Plant Monopile foundation Most offshore wind projects deployed worldwide use a monopile foundation. It presents an optimal, cost-effective solution for relatively shallow water (between 20 m and 70 m depth) and has a low design complexity. Monopiles consist of tubular sections rolled out of steel plates and then welded together. The diameter design for the large turbines is over 10 m and wall thickness of around 150 mm, which results on total weight up to 2,000 tonnes. At the time of this report, there is no monopile production in Brazil. Nonetheless, some Brazilian steel companies, such as Arcelor Mittal, Usiminas, Gerdau, Aço Cearense, have the potential and may wish to expand to supply steel plates for monopile manufacturing. The equipment for rolling out the steel plates is a critical bottleneck. Two Brazilian companies, DELP and Nuclep, could potentially perform this kind of operation. However, their capabilities have not been thoroughly evaluated. It is likely that there is a limitation in their capacity for serial production to meet a large demand. The costs to acquire such equipment are high, and investment in dedicated monopile facilities requires a predictable pipeline of projects. Jacket foundation Another type of foundation for offshore wind projects is three- or four-legged jacket foundation. This cross-braced and welded structure uses steel tubes, with each leg fixed to the seabed using steel pin piles of around 3 m in diameter. Jacket foundations are often used for deeper waters, in the range of 40 m to 60 m, or when soil conditions are not suitable for monopiles. 8 Supply Chain Analysis 134 Jackets have been extensively used in the O&G industry and requires less specialized or purpose-built equipment than monopiles foundations. Moreover, jackets could be a stronger case for local supply as they are less automated and could employ local skilled workforce. It is unlikely that the #1 Base Case scenario will induce the necessary investments for jacket facilities installations in Brazil. For jacket foundations, existing yards supplying the O&G industry may be potential suppliers. On the other hand, the #3 Ambitious scenario builds a strong business case for developing local jacket manufacturing facilities, given that there are already steel companies that can supply steel plates. Floating foundation Brazilian wind resource and seabed characteristics make a compelling case for bottom-fixed foundations. However, in a high growth scenario, there may be a demand for floating foundations to tap into wind resource potential in deeper water. O&G companies such as Petrobras, have initiated studies to develop floating foundations for offshore wind, as part of a program to meet with their sustainability and energy transition targets and decarbonize offshore oil platforms. Floating foundations are still in the early stage of development globally and national initiatives present a great opportunity to establish an industry-standard design for floating wind energy. Array and offshore export cable supply Offshore wind projects require specialized subsea energy cables to conduct the electricity produced by the WTG. This is typically achieved through inter-array cables (IAC) which connect strings of wind turbines to an offshore substation. In some cases, the connection can be done directly to an onshore substation, usually when project site is near to the shore. Most IAC are medium voltage alternated currents, either 33 kV or 66 kV, made of cross-linked polyethylene (XLPE). Export cables are high voltage (>100 kV), often alternate current and are considerably heavier than inter-array cables. They perform the interconnection of the offshore station to the land-based grid. The manufacturing of both IAC and export cables is highly specialized due to the challenges of offshore environment. There is only a limited number of suppliers worldwide and most existing suppliers prefer to expand operational facilities rather than invest in new ones, primarily due to low transportation costs. Companies in Brazil that manufacture subsea cables for the O&G industries, such as MFX, Prysmian, and Oceaneering, could leverage from the incentives of a high growth scenario to invest in the development of offshore energy cables, with the design requirements needed to ensure a safe and cost-effective solution. A low growth scenario may not be enough to induce this investment, and cable production would likely be sourced from existing suppliers abroad. OSS supply The OSS collects the power generated from the WTG and converts it to a higher voltage level which is integrated through the export cables into the grid. The OSS structure can be split in two parts: foundation and topside. 135 Scenarios for Offshore Wind Development in Brazil The foundation, often a jacket type foundation, supports all equipment housed in the topside such as transformers, switchgear, protection systems, etc. The considerations for the OSS foundation are the same as those for the WTGs. The topside is a complex system to design and integrate. Despite this, its fabrication and integration bears similarities to O&G floating platforms and FPSO units, albeit on a smaller scale. In a high growth scenario, experienced O&G companies like SBM Offshore could supply the topside part of an OSS locally, with investments to meet design requirements. Keppel Offshore & Marine, a global provider for OSS topsides which has yards in Brazil, could also manufacture this component locally. Regarding the electrical equipment inside the OSS, existing companies in Brazil which already supply the national electric market could potentially be suitable to supply for offshore wind. Onshore infrastructure Onshore infrastructure is composed of an onshore substation and operational base. The onshore substation is a very common component of power plants, distribution, and transmission systems. Brazil has several companies, such as ABB, Siemens, GE, WEG, and Schneider, which supply this equipment locally. No significant investment is necessary. The readiness scores presented in Figure 8.8, show that the onshore infrastructure received the highest score, the foundations and subsea cables reached an intermediate level, whereas offshore substation poses a more significant challenge for local supply, with a low readiness level. FIGURE 8.8 BALANCE OF PLANT. Array and offshore export cable supply 40 35 30 25 20 15 10 Foundation supply Onshore 5 (monopile, jacket infrastructure and floating) Offshore substation supply Weighted Score Source: DNV. 8 Supply Chain Analysis 136 8.4.5 Installation and Commissioning Turbine and foundation installation Bottom-fixed foundations (monopile and jacket) are typically installed using a jack-up vessel. This vessel, specifically designed for offshore wind projects, can be deployed both for foundations installations and turbines assembly at sea. Another form of carrying out monopile or jacket installations is to use a floating heavy lift vessel. In the case of floating foundations, turbines are likely to be assembled onto the floating foundation hull at the construction port and then transported to project site using tugs. As for wind turbines, due to the precision and stability needed in the assembly of its components, installation is performed solely with jack-up vessels. There are international companies with offices in Brazil, such as DEME, Jan de Nul, Hereema, Van Oord, and Boskalis, which have installation vessels for offshore wind operating worldwide. However, their main activity in the country is mostly related to dredging or O&G. Therefore, there are no vessels in Brazil which are capable, or have the potential, of being used for foundations installation. Nevertheless, the offshore wind industry has seen growing competition for these vessels in different regions of the world, a trend that is expected to continue. This could be potentially challenging for the Brazilian market, highlighting the importance of preparing appropriately for the offshore wind industry growth. An alternative would be to try to adapt O&G ships to perform this kind of activity. However, this is a difficult task that requires a large investment, especially because of the very specific design requirements which vary depending on the foundation type. In the #1 Base Case scenario, local investment in new vessel manufacturing may not be justifiable. Even in #3 Ambitious scenario, the country would need public policies aimed at shipyards and local producers to foster domestic production of this type of vessels. The need for purpose-built installation vessels, with limited potential from parallel sectors, results in a low readiness score for local companies to undertake installation activities, as seen in Figure 8.9. Array and offshore export cable installation Offshore cable installation employs specific vessels for cable laying. This is considered a technically challenging process that demands not only purpose-built equipment, but also experienced staff and a well-trained crew. Companies established locally, which install O&G pipelines and umbilicals, could enter this market due to the similarity in methodologies. A high growth scenario could attract companies operating in the O&G market to invest and expand their capabilities locally; however, in general, the use of vessels manufactured abroad is expected. OSS installation OSS installation involves its foundation, usually of the jacket type, and the topside. Jacket installation and foundations are both limited by the lack of purpose-built vessels for the installation. 137 Scenarios for Offshore Wind Development in Brazil The topside and all equipment that go inside it can add up to 2,000 tons. Therefore, its installation requires the use of a heavy-lift vessel. Although there are similarities between OSS foundation/topside and O&G platforms and FPSOs, the difference in size is considerable. The former presents a heavier and more challenging task to be performed. Onshore substation installation There are several existing companies in Brazil which already provide onshore substation installation and all related services for power plants, as well as for distribution/transmission companies. Readiness level for the supply of these components is very high, as shown in Figure 8.9. FIGURE 8.9 INSTALLATION AND COMMISSIONING. Foundation installation (offshore) 40 35 30 25 Turbine 20 Array and offshore installation 15 export cable (offshore) 10 installation 5 Onshore Offshore substation substation installation installation Weighted Score Source: DNV. 8.4.6 Operation, Maintenance, and Service Wind farm operation Operation of an offshore wind farm involves both asset management and offshore logistics to balance electricity production and costs for maintenances services. A control center shall be set for monitoring the performance of offshore WTGs and BoP. Furthermore, asset management must plan maintenance routines, manage replacement parts storage and supply, carry out environmental monitoring and ensure compliance with permits, and coordinate marine operations. For most of these activities, there are experienced local companies which manage onshore wind projects in Brazil. These companies also have the potential to handle offshore wind, in collaboration with farm owners and turbine manufacturers. The Brazilian market can also draw synergies from the Maritime and O&G experience to manager offshore logistics. O&M services utilize smaller vessels than those required for installation. These vessels can be divided in two categories according to their scope of activity. Crew transfer vessels (CTVs) transport maintenance personnel from the O&M base to the project site. They are fast, not 8 Supply Chain Analysis 138 equipped for staying long at sea and are often used for minor repairs and visual inspections. On the other hand, Service Operation Vessels (SOVs) can remain at the project site for a longer time to perform more time-consuming maintenance tasks. Additionally, helicopters can be used, depending on the O&M strategy and the project’s distance from the coast. In this context, Brazil’s large fleet and experience with helicopters supporting offshore O&G operations are beneficial Synergies from related fields and existing companies with expertise on wind farm operation and offshore logistics result in a high readiness score for this activity, as displayed in Figure 8.10. Turbine maintenance and service Turbine maintenance is typically handled by the supplier through long-term agreements of up to 15 years. Despite this, the entry barrier can be considered low as the main investment required is the training of local technicians. Brazil can benefit from a skilled workforce that already provides maintenance services for onshore wind. Qualification, specific certificates, and accreditations will be mandatory to ensure safe operations in physical demanding and harsh environments. In all three scenarios, turbine maintenance has the potential to engage local providers, primarily employing local technicians and vessels to transport them to the project site. However, the replacement of major components would require jack up vessels similar to those used for offshore WTG installation. The readiness score for turbine maintenance services, shown in Figure 8.10, reflects the potential to source a local workforce with adequate training and certification and enable them for offshore work. Balance of plant maintenance and service Maintenance and services for the BoP package cover foundations, array and export cables, and substations. Activities range from visual inspection with divers or Remotely Operated Vehicles (ROVs) for corrosion or structural defects, to geophysical surveys to check the integrity and placement of cables, which are one of the main failures in offshore wind projects. Inspection of offshore structures is a task which is already performed in the O&G offshore industry as well as geophysical surveys, to ensure pipelines remain in the correct position and are not disturbed by environmental conditions such as tides. Maintenance services for substations are common in the Brazilian market but will probably need to be adapted for the offshore environment. Most of the activities must be carried out on site and will likely employ local workforce, which may be supported by experts abroad. Operation, maintenance, and services are naturally to be carried out locally because the activities are very site related. There are potential benefits such as local knowledge, logistics and labor costs. Also, existing capabilities in related fields, specially experienced technicians, and procedures, result in a high readiness level for all components of the O&M package, as shown in Figure 8.10. 139 Scenarios for Offshore Wind Development in Brazil FIGURE 8.10 OPERATION, MAINTENANCE, AND SERVICE. Wind farm operation 40 35 30 25 20 15 10 5 Turbine Balance of plant maintenance maintenance and service and service Weighted Score Source: DNV. 8.4.7 Decommissioning The historical focus of the offshore wind industry has predominantly been on initiating and operating new projects, with insufficient attention given to the decommissioning phase. Decommissioning presents various challenges for offshore wind projects, including the unique marine environment, limitations of vessel technology, and the absence of specific regulations, thereby increasing the uncertainty of the process. For example, it is likely that the same vessels deployed in installation activities will be required to remove turbine components, foundations, and energy cables. The current investment risk is high due to uncertainties in the scope of activities that will be required, but standard practices will be established as the industry matures. Furthermore, decommissioning also encompasses recycling and reusing of materials. Some procedures, such as those for steel components are well-known, but other poses more challenging tasks, such as recycling of blades. In this context, Brazil already has some experience with the decommissioning activities of onshore wind farms and O&G platforms. 8.4.8 Expected Demand To demonstrate the level of demand for components in the three different growth scenarios, an assumption-based estimate was carried out to quantify indicative values for turbines, blades, monopiles, offshore substations, and jackets.ix The results of this estimate are presented in Figure 8.11 and highlight the need for strategic planning and adaptation of the local supply chain to meet the challenges that are anticipated in the forthcoming decades. ix Assumptions: 15 MW turbines, monopile foundations for all turbines. 8 Supply Chain Analysis 140 FIGURE 8.11 UNITS OF TURBINES, BLADES, MONOPILES REQUIRED FOR EACH SCENARIO BY 2050. 20,000 19,200 18,000 16,000 14,000 12,000 Units 10,000 8,000 6,400 6,400 6,400 6,000 4,000 3,200 2,133 2,133 2,000 1,067 1,067 0 #1 Base case (16 GW) #2 Intermediate (32 GW) #3 Ambitious (96 GW) Turbines (15 MW) Blades Monopiles According to GWEC [81], 163 GW of nacelle production capacity was available globally in 2023. Despite this seemingly significant number, global supply chain bottlenecks are expected in the coming years. The latest GWEC report indicates that some regions, such as North America, Europe, and APAC (excluding China), are expected to be potentially impacted in 2025, 2026, and 2027 respectively. Table 8.7 presents an overview of global wind turbine nacelle facilities. The majority of offshore wind installations (over 99 percent) are currently located in Europe and the Asia-Pacific region, which indicates a higher concentration of facilities compared to onshore wind installations. TABLE 8.7 OVERVIEW OF GLOBAL WIND TURBINE NACELLE FACILITIES. Asia Africa China Europe India USA LatAm Total Pacific & ME Total number of nacelle assembly 201 5 0 0 0 4 0 30 facilities (offshore) Number of announced nacelle assembly 47 1 0 3 0 4 0 55 facilities (offshore) Notes: 1–Facilities owned by western turbine OEMs. Source: GWEC Market Intelligence, February 2023 [81]. In addition to analyzing the components supply chain, it is important to highlight the important demand for raw materials, especially steel, which may be heavily demanded by the growth of the offshore wind industry in the country. To complement the analysis, an estimate was made of the volume of material required to implement offshore wind capacity in each of the established scenarios. Values are indicative and based on IRENA publication [82]. 141 Scenarios for Offshore Wind Development in Brazil FIGURE 8.12 RAW MATERIAL REQUIRED FOR EACH SCENARIO BY 2050. 40 36 32 28 Million tons 24 20 16 12 8 4 0 #1 Base case (16GW) #2 Intermediate (32GW) #3 Ambitious (96GW) Low allow and electric steel Copper Lead Steel (gray cast iron) XLPE insulation Polypropylene Fiberglass As presented in Figure 8.12, the primary material used in the construction of offshore wind farms is steel, but the industry also relies on copper and XLPE insulation for cabling and electricity, fiberglass for blades, and other materials. Brazil is the second largest producer and holds the second largest reserve of iron ore in the world, which is the main raw material for steel production. Brazil is also the ninth largest steel producer in the world and the largest in Latin America [83]. The Southeast region (Minas Gerais, São Paulo, Rio de Janeiro, and Espírito Santo) concentrates 77 percent of the steel industries, and 90 percent of the production is concentrated in six companies: ArcelorMittal, Gerdau, Ternium, CSN, Usiminas, and CSP. In 2021, installed capacity exceeded 50 million tons, and production reached 36 million tons of which 10 million were for export [84]. Therefore, it is noted that there is idle capacity in this industry, so the increase in demand for steel for the offshore wind industry to meet scenario #1 Base Case would apparently not represent major challenges. However, for scenarios #2 Intermediate and #3 Ambitious, it is likely that if Brazil wants to become a pillar for its own offshore wind industry, an expansion of production capacity will be necessary. A key factor is that Brazil’s metallurgical industry makes up the majority of the country’s industrial GHG emissions, at 36 percent, and also accounts for 26 percent of energy consumption [85]. In a scenario of expanding this industry, offshore wind generation could provide renewable energy to the industry, creating a virtuous cycle for low-emission steel production. Regarding copper, the porphyry type deposit is the primary source of copper, accounting for 75 percent of the world’s supply. In contrast to the global context, Brazil’s main copper deposits are of the iron oxide-copper-gold (IOCG) type and are concentrated (87 percent) in the Carajás Mineral Province (PA) and account for 11.14 Mt of mineable copper, which represents ~1.6 percent of the world’s reserves [86]. In 2021, Brazil’s copper production reached 156.3 kilotons [87]. 8 Supply Chain Analysis 142 In total, Brazil has 595 kilotons of lead reserves, which is equivalent to 0.7 percent of the world’s reserves. Brazil’s lead concentrate production in 2016 was 8 kilotons and solely for export, which is equivalent to 0.2 percent of the world’s production [88]. In this context, especially scenarios #2 Intermediate and #3 Ambitious represent great challenges for raw materials such as copper and lead considering the reserves and production locally in Brazil. 8.4.9 Recommendations Brazil has a robust supply chain for the offshore O&G and onshore wind industry, which despite recently facing some challenges, as discussed in section 8.4.1, still has great relevance in the country. In this context, it is necessary to highlight that there are important gaps that need to be addressed for Brazil to meet the challenge of growth of the offshore wind industry, and for this, actions aimed at the medium and long term are necessary, as mentioned below: ■ Establish an action plan and long-term public policies that include the local industry and its ability to meet the government’s vision and volumes. This plan must identify Brazil’s industrial skills and capabilities and include instruments for promoting local industry that, at the same time, can favor the country’s growth without slowing down the expansion potential of offshore wind projects (e.g., due to strict local content policies that can significantly impact the time and cost of implementing offshore wind projects). [Brazilian government] ■ Establish regular and appropriate dialog with the industry and respective associations (e.g., ABEEólica and IBP) to absorb lessons learned from the development of the offshore O&G and onshore wind industry in shaping policies for the offshore wind industry. It is also important to consider bilateral cooperation with countries at a more advanced stage of offshore wind development to share good practices and lessons learned. [Brazilian government] [Industry associations] ■ Establish an industrial development plan that considers offshore wind generation as part of growth plans for new industries (e.g., low-emission steel production, GH2 electricity supply, low- emission industrialization). [Brazilian government] 143 Scenarios for Offshore Wind Development in Brazil 9 ECONOMIC IMPACT ANALYSIS 9.1 PURPOSE This section aims to determine the economic impact of offshore wind in Brazil by examining the potential for job creation and direct investment in the country under the scenarios established in the Executive Summary for two different local content scenarios, with high and low percentage of services and labor provided by Brazilian suppliers. In this way, the analysis includes a total of six different possibilities, considering offshore wind growth scenarios and high and low local content scenarios. The analysis considers opportunities at different stages of the industry, including development, project planning, wind turbine and foundation supply and installation, electrical infrastructure, and operation. Only in-country projects are considered. 9.2 METHOD Initially, the growth scenarios in the Executive Summary were used as a basis, and high and low local content possibilities were defined as shown in Figure 9.1 and Table 9.1. The #1 Base Case, #2 Intermediate, and #3 Ambitious scenarios assume capacity installed will be 16 GW, 32 GW, and 96 GW respectively. The definition of the limits for the low and high scenarios for local content were based on the ABEEólica study for offshore wind [80]. FIGURE 9.1 OFFSHORE WIND GROWTH AND LOCAL CONTENT SCENARIOS. Hi h Loc l Ambitious Cont nt Intermediate Base Case Low 9 Economic Impact Analysis 144 As offshore wind is an emerging industry in Brazil, industry classification codes, input-output tables, production, and employment ratios may not yet be available for traditional modeling methods as developing these national statistics requires long-term data. In addition, these methods use generalized data that may not be robust source of modeling employment. Instead, the method detailed in the World Bank Road Map for Azerbaijan and for the Philippines and developed by BVG Associates and Steve Westbrook of the University of the Highlands and Islands, UK, [75], [76], was used to estimate FTE employment years and GVA[209], [210]. The following sections describe the methodology and assumptions made during the analysis. For this analysis, the direct impacts of the offshore wind scenarios developed in the Executive Summary from 2028x to 2050 were considered. Direct impacts include any transactions between developers and main contractors of their projects. FTE employment years and GVA were modeled by year as indicators of economic output. FTE is a standardized measure of the number of jobs worked over the course of a year by number of hours worked. For example, an employee that works 40 hours a week for 50 weeks a year has an FTE equal to 1; however, a part-time employee who works 20 hours a week for 50 weeks a year has an FTE equal to 0.5. The inputs to the model included capital expenditures by category, operating expenditures, operating margins, and the cost of employment. The following equation was used to calculate FTE years: FTEannual = ( GVA – M (Y +W) •N ) FTE years Where: FTE = number of full-time employees GVA = gross value added M = total operating margin Y = average annual wage W = nonwage annual cost of employment N = percent of local content The first input into the equation is GVA, which is assumed to include gross investment into the project, calculated using the capital expenses at the time of construction, the value per MWh and installed capacity from each scenario. The capital expenditures were estimated in Section 13 using site specific data from eleven “representative projects” along with technical and commercial development projections within DNV’s in-house suite of tools, DNV Renewables.Architect. Similarly, the operating margin was calculated using the operating expenses at the time of operation and installed capacity from each scenario. Operating expenditures were also calculated using DNV Renewables.Architect. The revenue generated from the previously installed capacity was also considered in the calculations as an addition to gross value added in the numerator of the above equation. Revenue was calculated using an assumption of 50 EUR/MWh and a capacity factor of 25 percent. x Development related FTE are divided between the current and four following years to account for reasonable time horizon of development related tasks. 145 Scenarios for Offshore Wind Development in Brazil The average annual wage (Y) was adjusted over time by the average inflation rate in Brazil in 2019 [89]. DNV chose 2019 as an indicator of pre-covid conditions. The non-wage cost of employment was assumed to be 30 percent of the salary of an employee based on data from the United States Bureau of Labor Statistics [90] and it was assumed that this percentage is constant over time. The FTE years were adjusted to account for the percentage of materials and labor that are being sourced from Brazil. As the country installs more offshore wind capacity, it’s expected that the materials and labor available in Brazil will increase over time [80]. Operations labor and materials is assumed to be sourced only from Brazil for the entire time period. Similarly, GVA was adjusted to account for the percentage of materials and labor sourced nationally. The base case scenario was adjusted with a low local content percentage and the intermediate and ambitious scenarios were adjusted with a high local content percentage. This analysis reports national GVA rather than direct GVA to align with the national FTE that is reported. The estimate of the number of jobs was separated by capital expenditure category. The percentage of capital expenditures from each category was assumed to be constant among all scenarios and through time. The following Table 9.1 displays the percent of the capital expenditures by category and percent of local services provided by Brazil starting in 2028 and ending in 2050. TABLE 9.1 CAPITAL EXPENDITURE AND LOCAL CONTENT PERCENTAGES BY PROJECT COMPONENT. Low Local Content High Local Content Phase % of CapEx Lower Limit Upper Limit Lower Limit Upper Limit Development 5% 25% 50% 50% 100% Project Planning and 9% 20% 40% 40% 100% Contingency WTG Supply and 47% 25% 50% 50% 100% Installation WTG Foundation Supply 20% 35% 70% 70% 100% and Installation Offshore Electrical 13% 15% 30% 30% 50% Infrastructure Onshore Electrical 6% 25% 50% 50% 100% Infrastructure For the economic impact analysis, it was assumed that all work for added installed capacity was completed within two years for construction and installation related activities and four years for development and planning related activities. 9.3 RESULTS As the previously installed capacity increases throughout time, the revenue generated from the project increases which in turn increases the gross value added and FTE years. In addition, the local content increases through time, generating higher FTE years. The #1 Base Case scenario and low local content scenario reports over US$15 billion in national GVA and 614,377 FTE years from 2028 to 2050. 9 Economic Impact Analysis 146 The #3 Ambitious scenario and high local content scenario reports over US$168 billion in national GVA and 6 million FTE years from 2028 to 2050. As can be seen in the Table 9.2 below, the national gross value added (GVA) for the three different capacity scenarios ranges from US$15 billion to 168 billion in 2050. TABLE 9.2 NATIONAL GROSS VALUE ADDED IN MILLION USD IN 2050 FOR EACH CAPACITY SCENARIO. Capacity Scenario 2050 #1 Base Case (low local content) 14,549 #2 Intermediate (high local content) 55,306 #3 Ambitious (high local content) 168,344 In terms of annual values, the annual GVA for the three different capacity scenarios and for the two local content scenarios, ranges from US$2.3 billion to 9.4 billion in 2035 and from US$2.1 billion to 8.6 billion in 2050. And in the case of annual FTE years, this ranges from 25,732 to 183,496 FTE years in 2035 and from 57.172 to 515,948 FTE years in 2050. The values in the year 2050 are lower because the growth scenarios were assumed until 2050, that is, without continuity of installation in subsequent years, which generates a decreasing effect in the development and construction when the final years of the scenarios are reached. TABLE 9.3 FTE RESULTS DURING KEY YEARS FOR EACH CAPACITY AND LOCAL CONTENT SCENARIO. Capacity Scenario and Local Content 2035 2040 2050 #1 Base Case, Low Local Content 25,733 25,238 57,172 #1 Base Case, High Local Content 45,874 41,903 91,857 #2 Intermediate, Low Local Content 51,466 50,476 109,627 #2 Intermediate, High Local Content 91,748 83,807 174,916 #3 Ambitious, Low Local Content 102,932 175,813 324,164 #3 Ambitious, High Local Content 183,496 293,829 515,948 The figures in sections below display the FTE years generated from each capacity scenario and local content scenario from 2028 to 2050. 147 Scenarios for Offshore Wind Development in Brazil 9.3.1 Base Case With an assumption of low local content, at the installation of 2 GW of capacity in 2032, just under 205,000 FTE years are generated. As local content for each component and revenue generated increases, the FTE years increase as well. By 2050, 57,172 FTE years are needed for installation and operations. Operations FTE years are dependent on the previously installed capacity, creating a larger percent increase per year than other project components. The project planning and contingency category has the largest increase in FTE years from 2028 to 2050. With an assumption of high local content, 36,121 FTE years are expected to be generated from a 2 GW offshore wind installation in 2032. In 2050, 16 GW results in 91,857 FTE years. FIGURE 9.2 FTE YEARS 2030-2050 IN #1 BASE CASE SCENARIO AND LOW LOCAL CONTENT. 60,000 50,000 Development Offshore Electrical Infrastructure 40,000 (IAC, OSS, Export cable) Onshore Electrical Infrastructure (TL, substation) 30,000 Operations 20,000 Project Planning and Contingency WTG Foundation Supply and Installation 10,000 WTG Supply and Installation 0 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 FIGURE 9.3 FTE YEARS 2030-2050 IN #1 BASE CASE SCENARIO AND HIGH LOCAL CONTENT. 100,000 90,000 80,000 Development 70,000 Offshore Electrical Infrastructure (IAC, OSS, Export cable) 60,000 Onshore Electrical Infrastructure (TL, substation) 50,000 Operations 40,000 Project Planning and Contingency 30,000 20,000 WTG Foundation Supply and Installation 10,000 WTG Supply and Installation 0 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 9 Economic Impact Analysis 148 9.3.2 Intermediate In the low local content scenario 38,570 FTE years are needed in 2032 for an initial installation of 2 GW. In the #2 Intermediate scenario, there is a consistent added capacity of 1.6 GW resulting in a steady increase in the FTE years from 2028 to 2047. During a high local content scenario, it is expected that 72,242 FTE years are generated during the first year of installation. In the last year of installation, FTE years are 174,915. FIGURE 9.4 FTE YEARS 2030-2050 IN #2 INTERMEDIATE SCENARIO AND LOW LOCAL CONTENT. 120,000 100,000 Development Offshore Electrical Infrastructure 80,000 (IAC, OSS, Export cable) Onshore Electrical Infrastructure (TL, substation) 60,000 Operations 40,000 Project Planning and Contingency WTG Foundation Supply and Installation 20,000 WTG Supply and Installation 0 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 FIGURE 9.5 FTE YEARS 2030-2050 IN #2 INTERMEDIATE SCENARIO AND HIGH LOCAL CONTENT. 180,000 160,000 Development 140,000 Offshore Electrical Infrastructure 120,000 (IAC, OSS, Export cable) Onshore Electrical Infrastructure 100,000 (TL, substation) 80,000 Operations 60,000 Project Planning and Contingency 40,000 WTG Foundation Supply and Installation 20,000 WTG Supply and Installation 0 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 149 Scenarios for Offshore Wind Development in Brazil 9.3.3 Ambitious In 2032, 77,140 FTE years are expected for a 8 GW installation in that year under a low local content assumption. In 2050, the expected FTE years grow to 324,164 with operations being the largest contributor. During the first year of installation, 144,484 FTE years are created under a high local content assumption. By 2050, 515,947 FTE years are expected. FIGURE 9.6 FTE YEARS 2030-2050 IN #3 AMBITIOUS SCENARIO AND LOW LOCAL CONTENT. 350,000 300,000 Development 250,000 Offshore Electrical Infrastructure (IAC, OSS, Export cable) 200,000 Onshore Electrical Infrastructure (TL, substation) 150,000 Operations Project Planning and Contingency 100,000 WTG Foundation Supply and Installation 50,000 WTG Supply and Installation 0 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 FIGURE 9.7 FTE YEARS 2030-2050 IN #3 AMBITIOUS SCENARIO AND HIGH LOCAL CONTENT. 600,000 500,000 Development 400,000 Offshore Electrical Infrastructure (IAC, OSS, Export cable) Onshore Electrical Infrastructure 300,000 (TL, substation) Operations 200,000 Project Planning and Contingency WTG Foundation Supply and Installation 100,000 WTG Supply and Installation 0 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 9 Economic Impact Analysis 150 9.4 DISCUSSION It can be seen from the results that local content is a major input into the number of jobs produced from an offshore wind installation. Investments into the supply chain and labor force for offshore wind is key to maximizing the economic benefits of these projects for Brazil. As Section 10.4.9 indicates, the local supply chain could be strengthened with long-term policies, open dialog with industry participants, and a government designated offshore wind working group. The FTE years growth seen in these graphs is dampened by decreases in the LCoE. This has a direct impact on the capital costs per kW. This input is similarly important in determining the economic output of these offshore wind scenarios. The details of how LCoE is modeled for this report are described in Section 13. Indirect and induced economic impacts were not considered in this study. Indirect economic impacts encompass transactions between main contractors and subcontractors for the project. Induced impacts are those that result from employees of the project spending earned money within the economy. Without offshore wind employment multipliers for the Brazilian economy, these effects are difficult to model, and estimations would produce unreliable results. While the methods used to estimate economic impacts in this report may be more robust than traditional methods such as input-output tables for Brazil, they assume a linear relationship between the size of the project and the economic output resulting from the project which may not account for added efficiencies in the labor force. 151 Scenarios for Offshore Wind Development in Brazil 10 CAPACITY BUILDING 10.1 PURPOSE The main purpose of the capacity building assessment is to analyze the demand for qualified personnel that will be required for the installation, operation, and maintenance of the offshore wind farms expected in each of the proposed scenarios. Both the public and private sectors are considered in this analysis: efforts to develop the supply chain are examined for the private sector, and impact on government and institution capacity, and needs to manage the regulatory and permitting aspects of offshore wind development are considered from the public sector perspective. 10.2 METHOD To achieve the objective defined above, the following steps have been followed (see Figure 10.1): ■ Desktop review of existing publications and reports on the offshore wind sector capacity from well recognized institutions (e.g., government departments, energy companies, etc.) both on a national and international level. ■ Employment projection and gap analysis based on the three selected scenarios and input data from the EIA (refer to Section 9 for further details). ■ Finally, discussion and recommendations summarizing the findings are included in the report. FIGURE 10.1 SCHEMATIC REPRESENTATION OF THE METHODOLOGY. Desktop Review Employment Projection Reporting 10.3 RESULTS 10.3.1 Context Brazil has the potential to lead and become a significant player among the emerging low-carbon economies in the world [80]. The country wants to become an important supplier in the global supply chain, helping other countries to achieve their climate neutrality goals affordably, while fostering a sustained economic growth. During COP28, Brazil joined the Global offshore wind Alliance (GOWA), reinforcing its commitment to the development of the offshore wind industry in the country [91]. Nevertheless, this strategic move will require high investments in capital and development of workforce. To accomplish this, some actions can be undertaken to increase Brazil’s capacity to 10 Capacity Building 152 capitalize on its potential and finally benefit from the development of the established onshore and emerging offshore wind supply chains. The rapid growth of the offshore wind sector requires a balance between the demand and the supply of the skills and competences in the country, to avoid shortages and ensure the availability of human resources. This can only be achieved through close coordination among industry, the government, and education and training institutions to attract broader and more diverse candidates for the future workforce. In this regard, understanding what talents would be required, or at what rate will they be developed, is critical for all stakeholders to enable an effective progress of the industry. The workforce required for the offshore wind industry should not be evaluated in isolation; the expansion of the offshore wind farms worldwide and other industries locally, like O&G, may have strong influence in the need of professionals with similar skills and competencies. This means that the offshore wind industry will likely compete with other industries locally and overseas for the same skills and expertise. It is therefore uncertain whether offshore wind players will have access to sufficient competent labor in the next years [93]. In this regard, Brazil will need to implement distinct policies to foster an adequate level of workforce expertise and attract enough professionals to support the offshore wind industry growth. 10.3.2 Occupational Classifications for Offshore Wind Energy According to IRENA [93], the human resource requirements for workers in offshore wind can be classified as follows: ■ Lower certification: Workforce that requires minimal formal training. It is worth noting that when referring to “lower” skills or certification, in a formal sense, does not mean that many jobs in factories or in construction, for example, do not entail valuable practical skills, including manual dexterity and practical problem-solving abilities that cannot be conferred through academic course work. There is a tacit knowledge that shall also be developed and that is extremely valuable for the offshore wind sector. ■ STEM professionals: Individuals with degrees in fields such as Science, Technology, Engineering, and Mathematics (STEM). ■ Non-STEM professionals: Highly qualified professionals such as lawyers, logistic experts, marketing professionals, or experts in regulation and standardization. ■ Administrative personnel: Workforce to support administration and management. The distribution of workforce per type of personnel/professional is presented in Figure 10.2. 153 Scenarios for Offshore Wind Development in Brazil FIGURE 10.2 PERCENTAGE OF EMPLOYMENT IN OFFSHORE WIND. Administrative Non-STEM Professionals 8% 19% Lower Certification Emplo m nt in Offshor Wind STEM 21% Professionals 52% Source: IRENA [93]. Another way of classifying the jobs created during the construction and operation phases of offshore wind development can be to split them into the following three categories: ■ Direct jobs, which are related to installation, manufacturing, and supply chain jobs needed to directly construct or operate the wind turbines, such as on-site construction crews, equipment manufacturers, consultative services and design firms, security crews, and maintenance personnel. ■ Indirect jobs, such as legal services, natural resource suppliers, construction equipment suppliers, accounting services, and wholesalers. ■ Induced impact jobs, which are the additional jobs created in the economy by the spending of the people with manufacturing and supply chain jobs. These include jobs from retailers, restaurants, health care providers, food providers, and housing. Within these three categories, eight general areas can be defined: i) project planning and development; ii) procurement; iii) manufacturing of components and systems; iv) transport; v) installation; vi) grid connection and commissioning; vii) O&M; and viii) decommissioning. Figure 10.3 presents a distribution of expected job creation for a standard 500 MW offshore wind project with a 25-year lifetime. 10 Capacity Building 154 FIGURE 10.3 BREAKDOWN OF JOB CREATION ACROSS A STANDARD 500 MW OFFSHORE WIND PROJECT WITH 25-YEAR LIFETIME. Decommissioning 4.3% Development 1.1% Procurement 0.3% Operation and Maintenance (O&M) 27.9% Job Grid Connection Cr tion and Commissioning 0.03% Component Installation 10.5% Manufacturing 55.7% Transport 0.1% Source: GWEC [94]. Training and educational institutions, governments, labor organizations, private industry, and others, shall work together to understand the workforce requirements of the industry and develop programs to meet industry needs and provide opportunities for all. Gender inequality continues to be an issue in renewable energy workplaces. IRENA has performed studies since 2013, and the gender gap remains open. According to [93], the average women’s share in wind energy was only 21 percent, from which, administrative staff had the highest share (35 percent), while the lowest was identified for the STEM professionals (only 14 percent). Non-STEM women workers represented just 20 percent. Despite these value being higher than in the O&G industry, there is still much work to be done to achieve gender equality. Furthermore, the development of this new offshore wind industry could be a great opportunity for Brazil to implement specific measures to incentivize diversity, to promote women taking technical career paths, and to foster fair treatment in their career developments and compensation. 10.3.3 Synergies Between O&G and Offshore Wind Existing Brazilian’s offshore O&G industry presents a potential opportunity regarding reskilling and upskilling of workers to take on jobs linked to the offshore wind energy value chain. According to DNV’s Energy Transition Outlook 2023 [213], geopolitical events over the last 18 months have brought energy security into sharp focus with the disruption of energy supplies and price shocks for energy importers. The oil demand is expected to increase between 3 and 4 percent over the next three years before levelling off and then starting to decline before 2030. Natural gas peaks in 2036 and slowly tapers off to end about 10 percent below today’s levels. Based on this, the number of jobs related to the O&G industry might see an increase in the coming years, and then gradually decline. This reduction of jobs may be compensated by reskilling and upskilling of workers to reduce the risk of unemployment, poverty, and inequality [95].xi xi Special attention shall be given to the growth in the demand of skilled workforce, which may bring a gap regarding the supply. Consequently, it would not be enough to count only on the reskilling and upskilling of workers from O&G to fulfilll the requirements of the offshore wind industry, with which it will compete to some extent. 155 Scenarios for Offshore Wind Development in Brazil Understanding the synergies between offshore wind and O&G, a number of O&G companies are venturing into offshore wind, which is the case of TotalEnergies, Equinor, or Petrobras, which are present in the Brazilian market. According to a survey performed in the UK, about 53 percent of the O&G workers indicated a preference to shift to offshore wind, especially if they receive retraining assistance [96]. In a recent study focused on the UK [97], it was found that about 70 percent of the O&G workforce has “medium skills transferability” to other energy industries, especially offshore wind, and about 20 percent of the workers have “high skills transferability.” For retraining workers from other industries, such as O&G, it is recommended a clear identification of the transferable skills, a higher standardization of skill certifications, and a minimum subsistence allowance while the transitioning workers/people undergo retraining [98]. It is key to manage proactively reskilling and recertification processes, and to create strategic supporting programs to improve professional skills with a focus on offshore wind energy. A high-level overview of skill areas with synergies between O&G and offshore wind industries are shown in Figure 10.4 with some examples of activities/expertise considered to have strong synergies among both industries. FIGURE 10.4 HIGH-LEVEL OVERVIEW OF SKILL AREAS WITH SYNERGIES BETWEEN O&G AND OFFSHORE WIND. Grid Project Project Construction Manufacturing Connection and O&M Management Development and Installation Commissioning • Planning and • Geophysical, • Steelworks • Construction • Commissioning • O&M services: scheduling geotechnical, and ancillary inspections, • Health and • Electric and components verification, • Contracts and safety connections procurement environmental fabrication repair works, surveys • Lifting predictive / • Large • Controlling • Assembly preventive • Naval, components • Auditing mechanical, fabrication maintenance • Logistics • Resource electrical, cost • Offshore management engineering operations • Interface • Asset Management management Source: DNV. A more detailed skills overlap assessment showed a classification of different skills overlap grades (“Little or no skills overlap,” “Partial skills overlap,” “Some skills overlap,” and “Good skills overlap”) between the O&G and offshore wind industries for the UK [5], [98], [99]. Figure 10.5 presents the skills overlap according to this classification, showing that about 64 percent of the O&G skills have “some” to “good” overlap with those required in offshore wind. This represents an opportunity to Brazil and its intention to establish a strong and sustainable offshore wind sector. Furthermore, Brazil may become a well-positioned worldwide player in services and goods export. 10 Capacity Building 156 FIGURE 10.5 SKILLS OVERLAP FROM OFFSHORE O&G INDUSTRY TO OFFSHORE WIND ENERGY AND OTHER OFFSHORE RENEWABLES. Source: GWEC [5]. 10.3.4 Experience from Other Countries The bottleneck in the workforce within the offshore wind matured countries is well recognized, and it is demanding strategic and systemic planning to solve these challenges from the ground up: ■ In the UK at the end of 2021, the Offshore Wind Industry Council reported a total offshore wind force in the UK of about 2,760 jobs per GW installed, 63 percent of them being direct jobs and the remaining 37 percent indirect jobs for a total offshore installed capacity of 11.26 GW [101]. By 2030, UK offshore wind employment forecasts about 1,133 jobs per GW installed with the same percentage of direct and indirect jobs for a pipeline of more than 86 GW [102]. The workforce in the UK is growing quickly, but arguably, not at the pace needed to achieve installed capacity targets set by the government to meet the sustainable development goals. 157 Scenarios for Offshore Wind Development in Brazil ■ In the Netherlands, about 1,026 jobs have been estimated per GW installed by 2030 with a capacity of 11.5 GW in a base case scenario [103]. Regarding indirect jobs, about 365 jobs have been estimated by 2030. Qualified personnel are currently limited in The Netherlands, and it is unsure if the employment rate can keep up with the expected economic growth in the offshore wind sector. ■ France accounted for about 5,200 jobs in 2020 (including 1,300 in manufacturing) for three windfarms (Saint-Nazaire, Fécamp, and Saint-Brieuc, totaling a capacity of around 1.5 GW). This number is estimated to grow to about 1,110 total jobs (direct and indirect) by 2035 with 18 GW of offshore wind capacity in service [104]. ■ Norway, which is known by its well-established O&G industry, is also facing a gap in the required workforce to cope with the growth of offshore wind energy. The country’s strategy has the objective of becoming an exporter to support the offshore wind global supply chain, a strategy that Brazil may want to also target due to its competitive advantages. In a recent study [92], the needs of competencies to support the Norwegian strategy of having 30 GW of offshore wind installed capacity by 2040 were estimated. In a country of about 5.4 million inhabitants, the needs to support the strategic goals will be about 16,000 employees in the emerging industry by 2030, and about 25,000 employees by 2035, showing an increased need that is reflected at all educational levels. The distribution of the workforce according to the various educational levels are: i) PhD (4 percent); ii) Master (19 percent); iii) Bachelor (17 percent); and iv) higher vocational level (60 percent). Thes values are in line with those reported by IRENA [105]. ■ To meet the target of 30 GW of US installed offshore wind capacity by 2030, average annual US employment levels are estimated at between 15,000 with a low level of domestic supply chain and 58,000 with a robust domestic supply chain [106]. This estimate only includes the direct and indirect offshore wind jobs associated with offshore wind projects, excluding induced impact jobs. ■ In Ireland, about five dedicated new public workers per GW of project pipeline were estimated, besides an unspecified number of external technical advisors and consultants, to cope with the needs in consenting and permitting for a target of 5 GW of project development capacity by 2030 [107]. However, the Brazilian context is different (e.g., size, governance, regulatory framework), and these numbers are not straightforwardly applicable, requiring a national/local assessment. 10.3.4.1 Reference Initiatives in Training and Education There are a series of successful initiatives that Brazil may adapt and incorporate in its strategic plan to develop the workforce required to sustain and make the offshore wind industry grow. Some of these initiatives are listed in Table 10.1, not as an exhaustive list, but examples deemed adequate in the Brazilian context. 10 Capacity Building 158 TABLE 10.1 REFERENCE INITIATIVES IN TRAINING AND EDUCATION. Initiative Region (type) Description EIT InnoEnergy Europe European wide program that seeks to develop people and co- (All levels of create knowledge and innovations to accelerate the energy education and transition. It brings people and resources together (innovators and training—University industry, entrepreneurs and investors, graduates, and employers), degrees, VET, building connections worldwide to drive a sustainable economy. entrepreneurship Two important lines of action are the Master Programs (five networks) programs supported by top technical universities and business schools), and the InnoEnergy Skills Institute, which is one of Europe’s leading training skills providers for the sustainable energy workforce in various domains. Other lines include financial support for companies, start-ups, scale-ups, and innovators, as well as tailor-made support to boost and de-risk business cases and speed up time to market [108]. EIT InnoEnergy is an example of a wide and transversal program that fosters ecosystems of innovation, which is people and knowledge centric. The program covers most of the initiatives recommended by European Wind Energy Technology Platform (2013) in collaboration with DNV, DTU, and EWEA [109]. These initiatives are educational initiatives, apprenticeships, and technical courses, dedicated training centers, tailored university courses, knowledge sharing networks, industry-led vocational education and training (VET). BZEE Skills Global network Organization conceived to provide high-quality industry-relevant passport (Certified training courses allowing certifications with high-level practical training—VET) contents for the wind energy sector. With the support of an advisory board, industry players have a word in the contents design and in the high-quality standards of the courses, ensuring training complies with these high standards. This fits in VET initiatives, essential to develop the workforce’s skills for the offshore wind industry. Global Wind Global network Created by global leading manufacturers and wind turbine owners Organization (Certified and with the mission to create injury free work environments for (GWO) training training—VET) technicians through standardizing training actions globally. This is another VET example, in which Brazil has benefited with almost 14,000 technicians trained since 2017 [110]. Initiative that shall be strengthened to accelerate skills development. Intergovernmental exchanges might also be of benefit to Brazil’s public sector. The visits from Brazilian specialists to other countries as observers or training in the job initiatives to develop or co-create knowledge and expertise in matters related to processes, organization of work, administration, innovation, and policies from the public sector perspectives with developed countries, in matters associated to offshore wind would be of benefit for Brazil. The Brazilian Cooperation Agency counts already with bilateral, trilateral, and multilateral cooperation treaties that might be set to the benefit of the offshore wind strategy of the country. Countries or regions like UK, US, Norway, and the European Union may be suitable locations to undertake such secondments. 159 Scenarios for Offshore Wind Development in Brazil 10.3.5 Impact of Offshore Wind Development in the Private Sector Employment The Brazilian private sector is the executing arm of the growth strategy to develop the offshore wind industry. This sector acts in all phases of the value chain and will face several challenges, among them: ■ The need of a complete and clear regulatory framework (which has shown important advancements in the last two years in the country) that is appropriate for investors, safeguarding the natural resources and the environment, while oriented to de-risking the required large capital investments; and ■ The definition of a clear strategy and of the position Brazil will take in the global supply chain, which should consider the measures to close the gap in skills that the sector already faces worldwide and to which Brazil needs to compete with. The impact of offshore wind value chain development in Brazil is expected to be a driver of economic growth and social well-being, while enabling the expansion of renewable energy sources towards a more sustainable future. Jobs creation, primarily in the private sector, is one of the consequences of the emerging industry development, and one of the bets Brazil is seeking to set in place. For example, in onshore wind, Brazil has an estimated workforce of about 3,000 jobs per GW installed [98]. Offshore wind farms involve longer project timelines than onshore wind energy projects and more complex construction, assembly, and installation activities, which translate in a need of a larger workforce per GW installed. A typical 500 MW offshore wind farm would have a job requirement of 17.29 person- years per MW over the 25-year lifetime [98]. The construction phase of this typical offshore wind farm would support about 2,720 jobs per year per GW under construction, considering an average construction period of three years. In Brazil, it has been estimated a range between 11 to 34 jobs per MW installed, depending on different scenarios considering technological evolution, learning rates, level of work done nationally, and other national base factors [80]. Table 10.2 shows the estimated employment associated with the offshore wind energy sector in Brazil for the development and construction phase, which are the more demanding in terms of workforce due to both the period of execution and the number of workers. The figures presented are based on the results of Section 9, and refer to average full-time equivalent jobs per year (FTEavg jobs-year) per GW installed according to the scenarios defined in this report, considering also low and high local content cases. The FTEavg jobs-year values were obtained from the average number of jobs between the periods 2032 to 2035 and 2035 to 2050, described in the table as 2035 and 2050, respectively. The values were afterwards translated in terms of GW installed by the end of 2035 and 2050 for the lowest and highest scenario. This indicator is a measure of the expected direct jobs during construction that will be sustained by the offshore wind industry and reflects the needs of required skilled workers. This can be used to plan training and educational actions to cope with the shortage of workforce. 10 Capacity Building 160 TABLE 10.2 ESTIMATED DIRECT EMPLOYMENT ASSOCIATED WITH CONSTRUCTION FOR OFFSHORE WIND BRAZILIAN SCENARIOS (FTEAVG JOBS-YEAR PER GW INSTALLED)— PRIVATE SECTOR. 2035 2050 Scenarios Low Local Content High Local Content Low Local Content High Local Content #1 Base Case 2,650 4,850 3,000 4,910 #3 Ambitious 3,370 6,190 2,710 4,440 Source: DNV. Under a scenario in which the installed capacity of offshore wind is about 4 GW by 2035 (#1 Base Case), there are expected to be between 2,650 and 4,850 FTEavg jobs-year/GW, depending on the local content achieved by the industry in Brazil. For the early projects, it is expected to start with a low local content, giving time to the local industry to make the necessary investments. In this sense, it is expected, by 2050, to have a much higher local content for the 16 GW estimated, being the expected number of FTEavg jobs-years/GW between 3,000 and 4,910. For the #3 Ambitious scenario that considers about 16 GW by 2035 and 96 GW by 2050, the situation is more dramatic at the beginning due to the time needed to develop the industry and upskill workers. The need to upskill the workforce that will contribute to the objective of having a strong share of offshore wind energy in the Brazilian energy mix requires considerable efforts from public and private stakeholders. Both sectors have influence in the training and education market, and actions shall be strengthened as soon as possible, especially in extended educational programs, such as those provided by universities. Other VET initiatives take less time to get people certified in certain areas of interest for offshore wind, but still the number of workers to be trained is considerably large. If about 60 percent of all the personnel required are of the lower certification type, industrial players will need to fill between 1,590 and 2,910 FTEavg jobs-year/GW by 2035, which can be translated to between 11,144 to about 20,370 skilled workers trained under a #1 Base Case scenario. A situation that would be more dramatic for the #2 Intermediate and #3 Ambitious scenarios. 10.3.6 Impact of Offshore Wind Development in the Public Sector The public sector will need to adapt to the rapid growth expected with the expansion of the wind energy industry to offshore deployments. This involves the development of specialists with the necessary skills to assess critically and objectively the requirements at different levels and for a diversity of aspects regarding the offshore wind value chain. In addition, it is important to evaluate the current capacity for handling multiple projects simultaneously. This evaluation will determine how government ministries and organizations involved can promptly respond to various demands. Moreover, interinstitutional discussions and collaborative appraisals are required and add more complexity to the process, representing a burden for the stakeholders involved if not well handled and organized. Most of the personnel required in the public sector to support offshore wind decisions are expected to be highly qualified, either STEM and non-STEM professionals, which can take longer to acquire because of their lengthy training and education. 161 Scenarios for Offshore Wind Development in Brazil There is a lack of statistics available to perform a detailed study of the current public capacities and the efficiency of the human factors in terms of regulatory processes, concerning consenting and permitting. It is recommended to start establishing high-quality labor statistical data and analysis [95] oriented for the offshore wind sector to aid in decision-making, planning, execution, monitoring, and control of offshore wind related activities. It is advised that a Strategic Workforce Planning for the public sector in Brazil is performed, and that it is transversal across institutions involved directly and indirectly within the offshore wind sector from the public service, control, and monitoring perspective. For example, the planning and its execution should consider the skills required to be strengthened and developed; appropriate recruitment processes (considering internal and external sourcing); adequate requalification/training for diverse roles; and retention of workers (considering the scarcity of skilled people for the offshore wind industry, there will be to have more migration of workers between public and private sectors). The appropriate sizing of the structures in the different institutions at local and national public institutions is key to provide an agile service to developers and to the society. An adequate sizing of the institutions and specific departments should rely on actual data of roles, degree of centralization/decentralization, volume of work (number of processes), and performance metrics. The public available information is scarce to make a complete assessment of the capacity building requirements for public institutions involved. Currently, offshore wind regulatory aspects are handled by IBAMA, specifically by the Coordenação de Licenciamento Ambiental de Energia Nuclear, Térmica, Eólica e de Outras Fontes Alternativas (Cenef) team. Given the magnitude of offshore wind in Brazil, it is recommended to create a new team within IBAMA to manage regulatory and permitting aspects related to offshore wind. The base initial team might comprise between 24 to 30 people specialized in different disciplines (regulatory and licensing, environment, biology, heritage, protected areas/species, sociology, anthropology, geology, etc.) dedicated to deal with the permitting process, especially the environmental impact assessment of offshore wind projects. In addition, as further detailed in the report, ANEEL will be responsible for managing the offshore areas, the PUG-Offshore (Portal Unico para Gestão do Uso de Áreas Offshore para Geração de Energia), and the offshore/onshore electric infrastructure authorization. ANEEL is the competent authority for organizing offshore wind power bidding rounds and to execute the Usage Assignment. There is also significant participation of EPE, responsible for obtaining the Declaração de Interferência Prévia (Declaration of Prior Interference (DIP)), applicable to the Planned Assignment procedure, as detailed in Section 11. EPE will also be involved in the appraisal of technical studies performed by project developers. The workload will depend on the frequency of public auctions and non-planned assignment applications. These two entities, which form part of the Ministry of Mines and Energy (MME), are recommended to have dedicated teams for offshore wind. These teams could work in synergy with the teams or specialists in onshore activities. In the initial phase of offshore wind in Brazil, it is advisable to work in triad teams (teams of three people who are accountable for the decision-making process) in both organizations to support the offshore wind projects. ANEEL counts on approximately 280 workers specialized in regulation of public energy services, according to the Transparency Portal statistics [111] (in year 2021, about 246 electric generation, distribution and transmission projects were approved [112]). On the other hand, EPE counts on about 40 specialists in the superintendence of electricity generation [113]. It might be useful to consider the assignment or incorporation of at least one team 10 Capacity Building 162 of three to five people per institution (i.e., between six to ten people) dedicated exclusively to offshore wind projects appraisal. It is important to note that the number of auctions, project proposals, and projects approved or awarded will dictate the capacity to be built in the public sector. Nevertheless, dedicated initial teams are recommended which can comprise in total between 30 to 40 FTEs for the main entities described above. These teams might support the appraisal of five to ten projects concurrently. Assuming the later constraint, and an increase in productivity in time that can allow the teams to achieve the assessment of about ten projects simultaneously, needs in terms of workforce for the referred public institutions might be estimated, as a very preliminary figure. Further analysis and a deeper study are required to have a plan for the capacity building in the public sector for the support of the offshore wind industry. Regarding the scenarios under consideration, the #1 Base Case scenario will have the least burden on the public workforce. Nevertheless, if the #2 Intermediate and #3 Ambitious scenarios are realized, the public sector will need an increased number of public servants to cope with a significantly increased number of offshore wind farms. 10.4 DISCUSSION When assessing offshore wind capacity building for Brazil, the following aspects are key for the discussion: ■ Brazil might consider undertaking a range of policy measures in a short period to create competitive advantages in the offshore wind sector. A holistic policy framework should encompass industrial policies, labor market policies, social protection measures, diversity and inclusion programs, educational policies, and skills training and retraining strategies [114]. Training the future workforce requires time and investments aligned with a clear strategy, being therefore one of the most immediate steps in developing the offshore wind energy value chain and pursuing the energy transition. ■ There is currently a global lack of professionals for the expected offshore wind deployment, which require specific and qualified training for both private and public sectors. The shortage of professionals is a worldwide recognized challenge for the sector. ■ The development of offshore wind energy in Brazil will contribute to expand and strengthen the supply chain and will also create qualified employment in the country. ■ Brazil is in a competitive position in the region due to its industrial capabilities and resources, but would need to be reinforced to support the offshore wind industry requirements, generating skilled employment. Offshore wind will contribute to the diversification of the renewable sector leading to the stabilization of the workloads. ■ Brazilian O&G sector has the human resources, industrial facilities, and technological experience to deal with the complexity of offshore energy projects. It represents an important opportunity that also has a driving force on industry and local employment in the regions where the projects are developed. The country can take advantage of the Brazilian industry’s leadership in O&G to extend it to offshore wind energy. This will lead to the consolidation and 163 Scenarios for Offshore Wind Development in Brazil generation of employment in the offshore wind value chain. Nevertheless, some industrial actors have expressed that there is a need to develop specific skills and knowledge for offshore wind [92]. In this regard, Brazil has competitive advantages over other countries [80], but a thorough strategic plan will be required. ■ Initial workforce requirements are expected to be in the order of 3,070 and 3,970 FTEavg jobs-year/GW, depending on the scenario considered, during the construction phase (the more labor intensive). Higher local content conditions will require a significant increase of the workforce overcoming 6000 FTEavg jobs-year/GW. The local content is expected to increase overtime, but also productivity would increase towards 2050. ■ The public sector and the need for public servants will depend strongly on the scenario due to the number of projects and associated public services (permitting, environmental authorizations, environmental and labor related supervision and control, economic activities supervision, higher/ technical education, VAT public programs, among others). The number of projects can vary significantly according to the scenarios. The public sector might be challenged in its resiliency and capacity. The more specialized and high-skilled workers will be key to support the system. The regulatory and permitting capacity needs in terms of workforce might be between 30 to 40 FTE. The Organization for Economic Cooperation and Development (OECD) has promoted the core idea that “helping people to develop and use skills effectively is crucial for people and countries to thrive in an increasingly interconnected and rapidly changing world”[115]. Developing the offshore wind industry is not an exception. The skill strategies proposed by the OECD cover: i) the development of relevant skills, which need to be clearly identified; ii) the strengthening of the governance skill system, which requires the standardization, quality assurance, and a clear organization; and iii) the effective use of skills. These structured strategic lines of action represent guidance to develop the workforce needed by Brazil in its path to build an offshore wind sector. 10.4.1 Recommendations Measures are necessary to guarantee the required qualified employment in the country so that the Brazilian industrial offshore ecosystem can be strengthened to support the development of offshore wind projects. Although the best way to improve the technical skills required in the labor market of the offshore wind sector is to be further defined in cooperation with the different relevant administrations and social stakeholders, the following actions to bring new talent through from schools to industry and smooths the path for workers from declining industries into offshore wind are proposed as a first approach. ■ Reinforce, review, and create educational programs at different levels (Vocational Educational and Training and University programs). [Brazilian government] [Educational Institutions] [Developers] [Suppliers] ■ Identify transferable skills from other industries, foster higher standardization of skill certifications, and create strategic supporting programs to improve professional skills with a focus on offshore wind energy, promoting proactive reskilling and recertification processes. [Brazilian government] [Educational Institutions] [Developers] [Suppliers] 10 Capacity Building 164 ■ Create communication campaigns to raise public awareness regarding offshore wind energy, sensitizing the population on the use of offshore wind resources. [Brazilian government] [Educational Institutions] [Developers] ■ Foster an ecosystem of innovation oriented to offshore wind energy by promoting entrepreneurship training and support in network creation involving multiple actors from industry, education and training institutions, and research and development centers. [Brazilian government] [Educational Institutions] [Developers] ■ Enable equality and social inclusion through specific measures and ensure gender balance in the criteria regarding training and vocational training for the occupation of the professional profiles demanded by the sector. [Brazilian government] [Educational Institutions] [Developers] [Suppliers] ■ Create dedicated teams based on a detailed assessment of the public workforce needs associated with all public organizations involved in planning, regulation and permitting, projects’ approval, control and supervision, and electricity market regulation related to offshore wind projects. [Agencies involved in regulatory and permitting process]. 165 Scenarios for Offshore Wind Development in Brazil 11 PERMITTING AND REGULATORY FRAMEWORK 11.1 PURPOSE The purpose of this section is to provide an assessment of the permitting and regulatory framework for offshore wind, in addition to, outlining the existing processes and identify specific gaps where work is needed to provide an appropriate framework for offshore wind project development. 11.2 METHOD The method for the assessment is: ■ Analysis of the Brazilian offshore wind power regulatory framework in force (Decree 10.946/2022, further regulated by the Ordinance MME 52/2002 and Interministerial Ordinance MME/MMA 03/2022); ■ Analysis of the Bills of Law under discussion in Congress, that may replace the Decree 10.946/2022 and the Ordinances; and ■ Information contained in the report “Key Factors for Successful Development of offshore wind in Emerging Markets” [9], evaluating Brazil's measures in relation to the identified key factors. For this study, the Decree 10.946/2022, Ordinance MME 52/2022, and Interministerial Ordinance MME/MMA 03/2022 shall be referred as “Offshore Wind Power Regulation.” To better structure the information provided in this report, the following 4-block structure was adopted: FIGURE 11.1 SCHEMATIC REPRESENTATION OF THE METHODOLOGY. Offshore Wind Discussion & Bills of Law Gap Analysis Power Regulation Recommendation 11 Permitting and Regulatory Framework 166 11.3 RESULTS 11.3.1 Offshore Wind Power Regulation—Key Legislation The regulatory framework in effect was enacted on this chronological order: ■ January 25, 2022: The Executive Branch of the Brazilian federal government published the Decree 10.946/2022 (“Decree”), that establishes the rules for exploration of physical spaces and natural resources driven to offshore power production at the country’s inland waters, territorial sea, EEZ, and continental shelf. ■ October 19, 2022: MME published Ordinance MME 52/2022 to establish complementary guidelines and procedures concerning the onerous usage assignment for offshore power exploration, and issuance of Declaration of Prior Interference (DIP). This Ordinance delegated to ANEEL the legitimacy to organize the bidding procedures and further acts for the offshore wind usage assignment agreements. ■ October 19, 2022: MME and MMA published Interministerial Ordinance MME/MMA 03/2022 establishing the guidelines for the development and use of the Exclusive/Special Portal for the Management of Offshore areas (Portal Unico para Gestão do Uso de Áreas Offshore para Geração de Energia—“PUG-Offshore”), a digital tool planned for monitoring of the offshore wind projects in Brazil. According to the regulatory framework, MME, ANEEL, and EPE will be the stakeholders responsible for the signing of the Contratos de Cessão de Uso (Usage Assignment Contracts), and grants for power production. The main points of Offshore Wind Power Regulation are summarized in the following subsections: (i) the usage assignment procedure; (ii) the obligation to obtain prior to the assignment a statement of prior interference from different institutions; (iii) the bidding procedure; (iv) the obligation of studies of the energy potential; and (v) the establishment of a ‘one-stop-shop’ procedure for licensing, called PUG-Offshore. 11.3.1.1 Usage Assignment Procedures Cessão de uso (usage assignment) is the administrative grant in which the federal government, through an administrative contract, transfer the right to use a certain asset of its property to a private entity. The compensation for such transfer is the charging of a fee for the assignment. Note that this regulation deals exclusively with the assignment of physical spaces and utilization of natural resources in inland waters, territorial sea, EEZ, and continental shelf [116]. Additional licensing is required for power generation as further described herein. Prior to being offered for usage assignment contracts, offshore areas, commonly referred to as prismas (prisms), must be confirmed by the Secretaria de Patrimônio da União (Secretariat for the Coordination and Governance of Federal Property /117– SPU), which will analyze the viability of the area, mainly to ensure that the prism is not yet destined to other activities. The statement by the SPU is a condition for requesting the DIP which is a condition for the bid procedure [118]. 167 Scenarios for Offshore Wind Development in Brazil For the establishment of the maximum area limit to be transferred, the MME will consider: (i) previous performance of the interested company in same activities area ; (ii) the use of the area in national and international standards; and (iii) security issues based on proximity to other projects[119]. The grant of a usage assignment must be preceded by a bidding procedure [120], through two different procedures: Cessão Planejada (Planned Assignment) or Cessão Independente (Independent Assignment). Cessão Planejada (Planned Assignment) Prisms are identified by the EPE upon request by the MME and according to a set of criteria. Thereafter, EPE shall verify with ANEEL the availability of the prisms within the PUG-Offshore system [122]. This confirmation of availability shall be performed through an official statement by ANEEL. The Offshore Wind Power Regulation provides the possibility of a public call to identify parties interested in the performance of studies. In this case, the executive and technical coordination, and the document analysis and approval will be performed by EPE [126]. According to the Offshore Wind Power Regulation, EPE analysis shall consider the following [123]. FIGURE 11.2 PRISM ANALYSIS PARAMETERS. Competitiveness of the future generation Proximity to other in relation to other Evaluation of natural Connection availability projects and energy sources, and resources to power and load flow to the assignments of economic contribution generation transmission system use issued for the National Interconnected System—SIN Distance from the Technical requirements coast, in accordance Maintenance of human for offshore with visual, social, Appropriate port activities in the sea generation, based on and environmental infrastructure environment and the available commercial impacts and the nature preservation technologies construction cost Availability of the area/prism: After ANEEL confirms the availability of the prism, EPE will request the DIPs issuance. Summary: The Planned Assignment proceeding relies on the fact that EPE will oversee the prism’s availability by itself, alongside relevant stakeholders such as ANEEL and MME. Also, EPE has the sole responsibility for obtaining the necessary DIPs for each prism, and for verifying if the prisms elected are in accordance with the MSP detailed in Section 6.3.3. After such steps, the prism will be submitted to a bidding procedure for granting of the usage assignment. 11 Permitting and Regulatory Framework 168 FIGURE 11.3 PLANNED ASSIGNMENT PROCEEDING. If the statement After obtaining EPE by its own ANEEL issues EPE verifies is positive, EPE the DIPs, the initiative or a statement with ANEEL proceeds to prisms will be upon request about the the availability gather the DIPs submitted to a of the MME, availability of of such areas with the relevant bidding identify areas the areas authorities procedure Cessão Independente (Independent Assignment) Indication of prisms: The Independent Assignment procedure requires a proactive role of the interested party which shall initiate the process. The interested party must present its documents for ANEEL's analysis regarding the availability of the prism. ANEEL may accept or reject the request based on the supporting documentation provided by the interested party, which must contain the following information. All requests for independent assignment shall be submitted within PUG-Offshore as shown in Figure 11.4. FIGURE 11.4 SUPPORTING INFORMATION BY INTERESTED PARTY. Purpose of the Usage Assignment: Geographical data related to the generation of offshore wind Studies that determined prism, based on the SIRGAS 2000 power or research and the choice of the areaxii or WG-84, in shapefile format technological development Technical, economic, and Connection availability and load financial credentials to prove the Preliminary power generation, flow to the transmission system in capacity by the interested party to indicated in MWh/year, the expansion studies issued and develop the project, which may that will be verified approved by MME, with a Technical be proven by the parent company Opinion issued by EPE or ONS of the interested party Availability of the area/prism: After analysis of the documents is provided by the interested party, ANEEL issues its statement concerning the availability of the prism. In the case of approval, the Independent Assignment procedure will start and the interested party must obtain the necessary and complementary DIPs from the competent authorities, at its own responsibility [127]. If ANEEL verifies an area of overlap, the prism can be adjusted considering the limits initially informed. In this case, ANEEL notifies the interested party, in a 90 day window, it may change its application to remedy the overlapping [128]. If the overlapping remains, the grant of such prism will be subject to a bidding procedure. If ANEEL confirms there is no overlapping between the new prism and prisms previously granted or which grant is ongoing, the interested party may proceed with the requests for DIPs. The Offshore Wind Power Regulation is unclear about how the DIPs should be pursued when there are multiple parties interested in the same prism, for instance, if a single party will be responsible for requesting the DIPs. It is also not clearly regulated if the request for DIPs will have any cost, what increases the relevance of defining whether a single party will bear such costs and how will they be reimbursed if the prism is awarded to a different entity. xii Such studies shall contain: a) the minimum technical requirements for offshore power generation; b) the distance from the coast and the limitations of visual, social, and environmental impact with the cost of implementation; c) the existence or planning of the port structure and the adequate vessels to meet the needs; d) the maintenance of human activities in the maritime environment and the preservation of nature; e) the estimation of greenhouse gas emissions throughout the life cycle of the project; and f) the existence of conservation units in the direct and indirect area of influence, the priority areas for conservation, under the terms of Decree 5.092/2004, the occurrence of marine endangered species, and the occurrence of artisanal fishing activity [130]. 169 Scenarios for Offshore Wind Development in Brazil Summary: The proceeding relies on the fact that the interested party will request the prism’s availability and is solely responsible for obtaining the necessary DIPs for each prism. If there is only one interested party in a specific area, the Usage Assignment can be granted once this party obtains the required DIPs, provided they meet the qualification requirements. If there is more than one interested party, the prism will be submitted to a bidding procedure for granting of the usage assignment. There is no provision for the reimbursement of the expenses incurred during the procedure, such as those associated with the DIPs request. FIGURE 11.5 INDEPENDENT ASSIGNMENT PROCEEDING. The interest If there isn't After obtaining party submit the If there is area area overlaps, the DIPs, the request within ANEEL verifies overlaps, ANEEL the interest prisms will be the PUG-Offshore the availability notifyies the party shall submitted to a with a set of of the areas interest party request the bidding documents and to adjust DIPs procedure info 11.3.1.2 Declaration of Prior Interference (DIP) According to Offshore Wind Power Regulation, the Usage Assignment, regardless of whether through Planned or Independent Assignment, requires the presentation of several DIPs from authorities to identify the prism’s interference with other facilities or activities. The analysis will consider the multiple uses of the area and the possibility of coexistence of the activities [131]. In the Planned Assignment, EPE is responsible for requesting the DIPs, while in the Independent Assignment, the interested party shall pursue the DIPs to the relevant authorities. Ordinance MME/ MMA 03/2022 established that such requests will be performed via PUG-Offshore, within a “one-stop- shop” procedure (“balcão único”). Each of the authorities below is responsible for a particular DIP. TABLE 11.1 AUTHORITIES INVOLVED IN THE ISSUE OF DIPS. Authorities Analysis Navy Command Compliance with the standards of the maritime authority on the safeguarding of human life, the safety of navigation and the prevention of water pollution; and absence of injury to water traffic planning and national defense. Air Force Command Possible interference with the aerodrome approach cone; and the absence of injury to the safety or regularity of air operations. Brazilian Institute of the Existence of other environmental licensing processes underway for the Environment and Renewable Natural exploration of the area of interest. Resources (IBAMA) Chico Mendes Institute for Information about the area being in a conservation unit; if there is a Biodiversity Conservation (ICMBio) conservation unit nearby; and the possible future uses of the area. National Agency for Oil, Natural Gas, Possible interference of the project on areas of Define E&P (exploration and Biofuels (ANP) and production) operations; and possible future uses of the area. 11 Permitting and Regulatory Framework 170 Authorities Analysis Ministry of Infrastructure (MInfra) Compatibility with the port sector planning and waterway transport; and possible interference with planned investments and contracts in force. Ministry of Agriculture and Livestock Possible interference in areas ceded to the practice of aquaculture or (MAPA) on fishing routes in the prism region; and the possible future uses of the area. Possible conflicts with tourist areas or the landscape impact with Ministry of Tourism (MTur) contemplative tourist region that demands greater distance from the coast; and the possible future uses of the area. National Telecommunications Potential conflicts with areas of networks and communications systems. Agency (ANATEL) These authorities will have a fixed timeframexiii to issue a final decision upon DIP requests [133]. The issuance of a DIP does not exempt the interested party from complying with other relevant regulations to construct and operate the power generation facilities in the granted area [134]. The identified prisms may undergo adjustments depending on the result of the DIPs. If a DIP indicates an impediment, the issuing authority shall justify its decision and allow for the prism adjustment by the interested party, if the interest remains [135]. The DIP request must include the following information: (i) purpose for the usage assignment; (ii) technical and geographical data of the prism; (iii) description of the project; (iv) information of the foreseen structures for navigation safety; and (v) confirmation of prism availability issued by ANEEL [88]. DIPs may be issued with the following conclusions [138]. FIGURE 11.6 DIP DECISION. DIP Decision with non-impairing interference with impeditive stating lack of conditioned to interference, if they are interference complementary studies duly substantiated xiii The offshore wind Regulation established a minimum term of 30 days to a maximum of 45 days. 171 Scenarios for Offshore Wind Development in Brazil The prisms verified to be overlapping with the following areas are not suitable for being granted: ■ Areas under E&P contracts; or areas granted in bids for E&P contracts that are yet to be executed; or ■ The areas defined as “Pre-Salt areas” and strategic areas, as such areas are defined according to Law 12.351/2010xiv. [139]. If both ANP and ANEEL determine that the E&P contract area and the usage assignment for Offshore Wind Power generation can coexist, they may issue joint regulations for such cases.xv 11.3.1.3 Bidding Procedure In accordance with Offshore Wind Power Regulation, the granting of any usage assignment contract must be subject to specific bidding procedures held by MME. Whether is an independent or planned assignment, the bidding is mandatory, and only prisms that have obtained DIPs may be included in bidding rounds [140]. Specifically, regarding the Independent Assignment, the selected prisms by MME shall be included in a periodic bidding procedure yet to be established in specific Ordinances [141]. ANEEL has yet to define the technical, operational, economic-financial, and legal credentials required for the participation in the bidding process. These credentials are relevant for the preparation of the energy potential studies, as well as for the implementation, operation, and decommissioning of the power plant. The credentials shall consider the characteristics of the prisms that will be put up for bidding and may include proof of relevant experience in offshore power generation projects and the economic capacity to develop and operate the future project, which can be proven by the parent company [143]. The Offshore Wind Power Regulation established that the judgment criteria to determine the bid winner shall be the maior retorno econômico (greatest economic return), which is yet to be defined [143]. Previous discussions on the theme indicated that such methodology would consider: (i) weighting/ reducing/discounting the amount due to the federal government for the area to be used; and (ii) the time required for the studies, implementation, and decommissioning [144] of the project. ANEEL is the competent authority for organizing offshore wind power bidding rounds and to execute the usage assignment contracts [145]. The usage assignment can have two different purposes: (i) the research and technological development for power services, which is free of charge; or (ii) the power production for independent power/IPP or self-consumption, for which pricing criteria is yet-to-be regulated [146]. Note that the usage assignment contracts do not ensure the right to exploit the power generation, which will depend on authorization issued by ANEEL, under the terms of Law 9.074/1995 [147]. xiv The Pre-Salt and strategic areas are defined by Law 12.351/2010 as:“Pre-salt area: a subsurface region formed by a vertical prism of undetermined depth, with a polygonal surface defined by the geographic coordinates of its vertices established in the Annex to this Law, as well as other regions that may be delimited by an act of the Executive Branch, in accordance with the evolution of geological knowledge. Strategic area: a region of interest for national development, delimited by an act of the Executive Branch, characterized by low exploratory risk and high potential to produce oil, natural gas, and other fluid hydrocarbons.” xv Article 21, paragraph 6º It is worth mentioning that there is a provision for the issuance of a joint regulation by the regulatory agencies to address the implementation of hybrid projects, including in the case of ANP and ANEEL, the assessment of the possibility of granting prisms in coinciding areas. 11 Permitting and Regulatory Framework 172 The usage assignment contracts impose the obligation to perform offshore energy potential studies, noting that in the case of planned assignment, these studies can be done by EPE or by a third party. The performance of energy potential studies, which can only occur after a party is granted a usage assignment contract, is a requirement to obtain the ANEEL authorization to exploit power generation [148]. According to Offshore Wind Power Regulation, the usage assignment contract shall provide for the following clauses [149].  Purpos (pow r n r tion or r s rch nd t chnolo ic l d v lopm nt)  Tr nsmission f ciliti s (th tr nsmission f ciliti s for th xclusiv us of th pl nts to b t nd r d must b consid r d s p rt of th n r tion proj cts, nd th ir costs c nnot b cov r d b th tr nsmission t riff)  Fin nci l u r nt s for th commissionin nd d commissionin (th x ct mount will b subj ct to ANEEL’s pprov l)  T rms nd conditions of th Us Assi nm nt  Obli tion to pr p r offshor n r pot nti l studi s  P m nt of ov rnm nt l t k (in c s of on rous ssi nm nt)  C lcul tion nd P m nt m thodolo nd th p n lti s for d f ult or d l in p m nt  Obli tion to provid r ports, d t , nd inform tion r l t d to ll ctiviti s to ANEEL  Ri ht of th Assi n to s ttl or b s th r l v nt structur s on th s b d if th m t th rul s of th m ritim uthorit nd th nvironm nt l lic ns  Sp cific d t ils of th r to b us d for construction of c bl s, nd pip lin s up to its d stin tion, provid d th t th do not j op rdi oth r ctiviti s in pl c  R quir m nts nd proc dur s for xt ndin th t rm of th Us Assi nm nt  T rmin tion Cl us  Provisions on d commissionin , xt ndin th us ful lif or r pow rin th offshor pow r n r tion proj ct, which sh ll b sp cifi d b th Assi n in ccord nc with th forthcomin r ul tion  Th obli tion for th Assi n to imm di t l notif ANP or th N tion l Minin A nc - ANM in c s of n r l t d discov r  Civil li bilit of th Assi n - dut to ind mnif th d m c us d b its ctiviti s  Oth r u r nt s nd obli tions to b furth r st blish d b ANEEL After executing the usage assignment contract the interested party gains the right to use the area. Only after this point the party is permitted to request the necessary licenses and authorizations from federal, state, and municipal public authorities [101]. The term of the Usage Assignment contract is a  Av il bl n tur l r sourc s maximum of ten  Av il During years. bl nd this comm rci ll the period, pow r n party vi blinterested r tion tmust chnolo conduct i s energy potential studies.  Cons rv tion units nd limit tions on th us nd xploit Upon completing these studies, submitting them to ANEEL, and obtaining the necessary tion of n tur l r sourc s authorization b s d on nvironm nt l sp cts for power generation, the tibilit  Comp contractual , nd int term of r tion thenUsage with vi tion,Assignment automatically fishin nd tourism us s in th extends r to match the validity set in the grant. There is currently no definition of this deadline for offshore projects.  Conn ction nd c p cit v il bilit of th futur pl nn d rid  Exist Onshore wind projects pl nnin regulations, nc orANEEL follow of th port structur which, for this matter, provide for 35 years [151].  M int n nc of m ritim nd vi tion s f t in th r  Us of r li bl m sur m nt d t of th n tur l r sourc s, ccordin to EPE crit ri 173 Scenarios for Offshore Wind Development in Brazil  Fin nci l u r nt s for th commissionin nd d commissionin (th x ct mount will b subj ct to ANEEL’s pprov l)  T rms nd conditions of th Us Assi nm nt  Obli tion to pr p r offshor n r pot nti l studi s  P m nt of ov rnm nt l t k (in c s of on rous ssi nm nt)  C lcul tion nd P m nt m thodolo nd th p n lti s for d f ult or d l in p m nt 11.3.1.4 Offshore Energy  Obli tion Potential Studies to provid r ports, d t , nd inform tion r l t d to ll ctiviti s to ANEEL  Ri ht of th Assi n to s ttl or b s th r l v nt structur s on th s b d if th m t thPotential The Offshore Energy m ritimare rul s of thStudies the preliminary uthorit technical, nd th nvironm economic, nt l lic ns and socio-  Sp cific d t ils of th r to b us d for construction of c bl s, nd environmental analyzes that define the available energy in a given prism. These studies pip lin s up to its must observe d stin tion, provid d th t th do not j op rdi oth r ctiviti s in pl c the technical instructions yet to be published by EPE [152].  R quir m nts nd proc dur s for xt ndin th t rm of th Us Assi nm nt beTsubmitted The studies shall  rmin tion Clbyusthe party under a Usage Assignment to EPE’s analysis, via PUG- Offshore, which will then issue  Provisions on an opinion on its d commissionin ndin th that, viability, , xt in us ful turn, lif powbe or r will rinforwarded th offshor to ANEEL for pow r n r tion proj ct, which sh ll b sp cifi d b th Assi n in ccord nc with th approval [153]. forthcomin r ul tion  Th obli tion for th Assi n to imm di t l notif ANP or th N tion l Minin A nc - ANMin All information provided c s study in the of n r l t d be must certified discov r by an independent party. If the agent does not  Civil li bilit of th Assi n - dut to ind mnif th d m c us d b its ctiviti s comply with the instructions of EPE or does not overcome the doubts or questions raised by EPE, this  Oth r u r nt s nd obli tions to b furth r st blish d b ANEEL entity will disapprove the studies and the process will be filed [154]. Offshore energy potential studies should cover the following aspects of the prism of interest [155].  Av il bl n tur l r sourc s  Av il bl nd comm rci ll vi bl pow r n r tion t chnolo i s  Cons rv tion units nd limit tions on th us nd xploit tion of n tur l r sourc s b s d on nvironm nt l sp cts  Comp tibilit , nd int r tion with n vi tion, fishin nd tourism us s in th r  Conn ction nd c p cit v il bilit of th futur pl nn d rid  Exist nc or pl nnin of th port structur  M int n nc of m ritim nd vi tion s f t in th r  Us of r li bl m sur m nt d t of th n tur l r sourc s, ccordin to EPE crit ri For the Planned Assignment proceeding, the study must be performed according to the following sectoral planning criteria [156]: (i) Before the bidding process: under the responsibility of EPE or by other means indicated by MME in a specific regulation, as provided for offshore wind Decree; or (ii) After the bidding procedure: under the responsibility and risk of the winning bidder, in compliance with the offshore wind decree. It is possible to use previous data existing on the prism. Currently, it is understood that such studies do not exist, but will be available as prisms are developed, similar to the geological and maritime information provided by oil and gas upstream operators to ANP. For the Independent Assignment proceeding, the study must be carried out after the bidding procedure under the responsibility and risk of the winning bidder, notwithstanding the possibility of prior studies being presented [157]. 11 Permitting and Regulatory Framework 174 11.3.1.5 PUG-Offshore The Interministerial Ordinance MME/MMA 03/2022 establishes the guidelines for the development of the PUG-Offshore, an online system that shall provide for the following information: (i) Usage assignment request; (ii) Assignment request status; (iii) Web-GIS to visualize requested or contracted areas; (iv) DIPs request; and (v) Other services, such as the provision of official publications and relevant information, e-mail and notification service (PUSH), and possible developments of PUG-offshore [159]. The PUG-Offshore portal will observe the following premises: (i) Unified management of the demands; (ii) Adequate monitoring of the fulfillment of requests; (iii) Transparent access to information, with the confidentiality of the secrecy provided for by law; (iv) Optimization and safety of the procedure, through computerization resources and automation of routines. The creation of the PUG-Offshore is an important step towards the implementation of the offshore wind projects in Brazil, as it allows several services, similar to a one-stop-shopxvi system, which reduces costs and provides transparency. Although the Interministerial Ordinance has not defined the entity that will bear the costs for implementing the virtual system, it has specified that ANEEL will be responsible for its management. However, the expected functionality of the system depends on the conclusion of the regulation provided for in the Offshore Wind Regulation [161]. Note also that the Offshore Wind Power Regulation provides that new assignment requests shall wait PUG-Offshore implementation, meaning that, until further regulation is enacted, new assignment requests cannot be performed [163]. 11.3.2 Bills of Law: Comparison with Offshore Wind Power Regulation Multiple Bills of Lawxvii related to offshore wind were under discussion in the Brazilian Congress. In 2023, all other bills under discussion, including Bill of Law 576/2021, were attached and consolidated into Bill 11.247/2018. On 28 November 2023, the Chamber of Deputies approved a substitute (Substitutivo da Câmara dos Deputados) for Bill 11.247/2018, replacing the original text and submitting it to the Senate. xvi One-stop-shop approach simplifies permitting by consolidating various approvals into a single authority, ensuring efficient evaluation while maintaining effective communication with stakeholders. Some countries that already apply one-stop-shop or similar approach: the UK, Germany, Denmark. xvii A brief introduction about how the Brazilian legislative system, consisting of two federal houses—the Senate and the Chamber of Deputies—works. 1. Chamber of Deputies (Câmara dos Deputados): • The Chamber of Deputies is the lower house of Brazil’s National Congress. • It is composed of 513 deputies (deputados), each representing a specific constituency within Brazil. • Deputies are elected by a proportional representation system every four years. • The primary function of the Chamber of Deputies is to represent the people and pass federal laws. • It initiates and debates bills and resolutions, and it plays a crucial role in budget approval and taxation. 2. Senate (Senado Federal): • The Senate is the upper house of the National Congress of Brazil. • It consists of 81 senators (senadores), who represent the 26 states and the Federal District. • Senators serve eight-year terms, with elections held every four years, alternating between one-third and two-thirds of the seats. • The Senate’s primary role is to represent the states and review legislation passed by the Chamber of Deputies. • It has the power to approve or reject bills and resolutions, as well as confirm appointments to key government positions, including federal judges and ministers. Legislative Process: • To be converted into law, a bill must be approved by both the Chamber of Deputies and the Senate. • It typically starts in the Chamber of Deputies, where it goes through several stages of discussion, committee review, and voting. • Once approved in the Chamber of Deputies, it is sent to the Senate for further review and voting. • If the Senate makes any amendments, the bill returns to the Chamber of Deputies for approval of those changes. • Once both houses agree on the final version of the bill, it is sent to the President for signature. If the President signs it, the bill is converted into law. 175 Scenarios for Offshore Wind Development in Brazil As of the time of this report, it remains uncertain whether Bill 11.247/2018 will receive approval from the Senate. The final text included several matters unrelated to offshore wind framework, leading to criticism and the potential need for revision. If further revisions are made when Bill 11.247/2018 is approved in the Senate, the process will once again return to the Chamber of Deputies for approval, until both houses of the Congress reach consensus on the same text. Below is a summary of the comparison between the offshore wind Regulatory Framework in force and the substitute to Bill of Law 11.247/2018: ■ There are provisions regarding decommissioning obligation in both acts—Decree 10.946/2022 and Bill of Law 11.247/2018. ■ Unlike the Offshore Wind Decree, Authorizations (“Autorizações”) and Concession (“Concessão”) are the grant regimes that give the agent the right to use the area under the Bill of Law, whereas the Decree establishes only Usage Assignment Contracts.xviii ■ Both the Bill of Law and the Decree require the agent to obtain that the Authorization Grant for power generation shall be further requested to ANEEL. ■ Under the Bill of Law 11.247/2018, the offered prisms allow installing wind farms in Brazilian inland waters, such as lakes and rivers, differing from the Offshore Wind Decree that focuses on sea waters. ■ Both the Decree and the Bill of Law have provisions setting rules for the future bidder’s technical, economic-financial qualification requirements, as well as possible legal qualifications. ■ Both the Decree and the Bill of Law explicitly prohibit the installation of prisms in areas that overlap with blocks allocated under the production sharing, concession, and transfer of rights frameworks for oil and natural gas exploration and production (E&P) activities. However, Bill 11.247/2018 introduces an exception when there is compatibility between offshore wind power generation and oil and gas activities. In such cases, it grants owners of oil and gas E&P licenses the right of preference. ■ Governmental takes are explicitly defined in both the mentioned Bill of Law and the Decree. • The Decree mentions “Greatest Economic Return” as the goal, it does not provide a detailed definition of what constitutes such a return, leaving it open-ended (e.g., signing bonus, revenue share from power, etc.). It also addresses payment for the occupation of the area, with further details to be provided in supervenient regulation, offering guidelines such as the area’s size and the duration of potential studies, project implementation, and decommissioning of the enterprise. • In contrast, the Bill specifies the components of governmental takes, which include: i) Bônus de assinatura (signing bonus), payable upon obtaining the grant; ii) Taxa de ocupação de área (area retention fee), calculated in Brazilian Real (R$) per square kilometer; and iii) Participação proporcional (proportional participation), calculated based on the value of the produced power. The exact calculation, payment procedures, and potential sanctions related to governmental takes will be determined by the bidding documents. xviii Both concession and authorization are forms of granting permission for the exploitation of a specific activity. Concession is typically formalized through a contract, while authorization is an act of authority. In the case of Bill 11.247/2018, concession is used for the exploitation of areas made available by the government, while authorization is used for the exploitation of areas identified by private individuals. In the case of Decree 10.946/2023, the authorization for the power generation activity is granted by ANEEL, autonomously and after the use of the area is granted (either by concession or authorization). The lease of the area is made available through a specific contract, name Usage Assignment Contract. 11 Permitting and Regulatory Framework 176 Please find below the main differences between the Offshore Wind Power Decree and the Bills of Laws under discussion. TABLE 11.2 DIFFERENCES BETWEEN OFFSHORE WIND POWER DECREES AND BILL OF LAWS UNDER DISCUSSION. Topic Decree 10.946/2022 Bill of Law 11.247/2018 1st)Concession or Authorization (area) Instrument/Act 1st) Contract (area) 2nd) Authorization from ANEEL (power for Offshore Areas 2nd) Authorization (power generation) generation) Mechanisms Bid Bid Planned Assignment or Independent Procedures Planned Offer or Permanent Offer Assignment Declaration of Individually issued by several competent Issued by a non-specified centralized Prior Interferences authorities government entity (DIP) Bid Criteria Greatest economic return for the prism Highest government take Yet to be detailed, but the Ordinance 52 i. Signing bonus; ii. Area retention fee; and Government Take establishes annual payment for the usage iii. Proportional participation in the value of the area xix of generated power 11.3.3 Gap Analysis Please refer to Appendix E for the Gap Analysis. 11.4 DISCUSSION 11.4.1 Uncertainty of the Legal and Regulatory Framework The development of offshore generation projects in Brazil requires the consolidation of a legal and regulatory framework. The regulation in force was approved by Decree and Ministerial Ordinances issued by Executive Branch, but crucial points remain without definition, such as bid criteria and government take. On the other hand, the Legislative Branch has been discussing a new framework which shall be approved by a new federal law. This situation—framework in force not approved by Law versus the expectation of a new Law—raises a discussion about legal and regulatory uncertainty. The current regulatory framework—Decree 10.946/2022, Ordinance 52/2022, and Ordinance 3/2022—regulates the transfer of offshore areas for the installation of plants for power generation. Although the framework was not approved by a federal law, the provisions contained in such regulations are based on provisions found in ordinary laws that addresses the maritime space and the power sector. In this regard, the preamble of Decree 10.946/2022 points out the following laws: xix The Decree mentions the economic value for the assignment of the prism, and Ordinance 52 indicates that it refers to annual payment to the Union for the use of the asset. 177 Scenarios for Offshore Wind Development in Brazil TABLE 11.3 LEGAL FRAMEWORK REFERRED IN DECREE 10,946/2022. Legal basis Content Reference in the decree Decree-Law The law regulates federal government-owned assets, Art. 2nd, IX 9.760/1946 providing that the use of federal assets is managed by Art. 4th, 2nd paragraph Secretariat of Federal Heritage/SPU. Law 8.617/1993 The law regulates the exploration of the maritime space Art. 2, Sole Paragraph (territorial sea, contiguous zone, exclusive economic zone, and Art. 4, caput continental shelf). Law 9.074/1995 The law regulates the power industry organization and Art. 5, paragraph 3 provides that the facilities that connect the enterprise to the power system may be considered part of the concession. Law 9.427/1996 The law regulates the Regulatory Agency/ANEEL and states Art. 5, paragraph 3 that the Granting Authority is competent to enter concession contracts and issue authorization acts, Such competence was delegated to ANEEL. Law 10.848/2004 The law regulates the power commercialization in the free Art. 6th market and regulated market, as well as transmission Art. 19, II facilities for exclusive use by power plants that sell energy in the regulated market, providing that they are considered part of the project. Law 9.636/2004 The law regulates the use of real estate assets owned by the Art. 1st, second paragraph federal government, and it states that a bidding process must Art. 4th be carried out in case of competition. Law 9478/1998 The law establishes the CNPE (National Council for Energy Art. 25 Policy) and ANP (National Petroleum Agency) and regulates the oil and gas industry. Therefore, despite the Decree 10.946/2022, Ordinance 52/2022, and Ordinance 3/2022 not having the legal hierarchy of a Federal Law approved by the Congress, the points addressed in Decree 10.946/2022 have legal ground. Thus, the existing framework provides legal security, with the caveat that there are still pending acts/ norms and unimplemented systems (economic value, prism limit, offshore gas utilization plan). In any event, we understand that it is unlikely that an auction will be held based on the regulations in force while the discussion is ongoing at the National Congress. Coordination between the Legislative (National Congress) and Executive Powers (MME) is highly recommended to consolidate offshore generation framework. 11.4.2 Granting Regime and Procedure The Decree 10.946/2022 establishes two steps: (i) first there is a bid to sign the Usage Assignment Agreement; and (ii) then the assignee must subsequently request the Authorization to ANEEL to produce energy. In other words, the assignment of the area does not automatically guarantee the right to develop the power plant. Bill 11.247/2018 also establishes the dual procedure: (i) first the investor must obtain the right to explore the area; and (ii) then requires for the license to produce energy. Yet, the type of the act is different. For the usage of the area it requires an Authorization or Concession, instead of the Usage Assignment Agreement. The difference of acts is related to the initiative. If the initiative is public, that is, the Brazilian government includes the area in the bidding round by its own initiative, it results in a 11 Permitting and Regulatory Framework 178 planned offer, leading to a concession. If the inclusion of area is not due to a governmental initiative but rather expression of interest by private entities, it results in a bidding round of the permanent offer, leading to an authorization. The name permanent offer alludes to the permanent possibility of a biding round being performed, upon expression of interest by private entities. Both regimes have their advantages. Traditionally, Brazilian Law viewed “authorizations” as a provisional grant. However, there is a growing recognition that authorizations are now considered a stable administrative grant, revocable only in specific situations outlined by applicable laws. The existence of a prior bidding process reinforces this notion, reducing the legal uncertainty associated with regulatory models based on authorizations. Consequently, there is currently little differentiation in terms of the legal security of these grant regimes, with both concessions and authorizations perceived as equally reliable. Regardless of the chosen regime, it is essential to maintain transparency and competitiveness in the procedure. The Brazilian legal framework mandates a competitive process before granting private usage rights for offshore wind exploration. This ensures fairness and competitiveness while also reducing the risk of legal challenges from third parties. In addition, since offshore areas involve transferring the use of a public asset, the bidding procedure must be adopted to ensure transparency and competitiveness. When multiple parties are interested in obtaining the right to use such asset, the bidding procedure is required in accordance with Law 9.636/1998, Art. 18, paragraph 5. In addition, there is a risk in the two-step procedure (i.e. authorization for the use of the space, followed by authorization for power production, since the latter is only requested at a later stage, with the governmental body not being forced or bound to provide the second authorization just because the use of the area has been granted). To mitigate this risk, it is recommended that the criteria required for power production authorization are defined in advance, thus improving predictability. 11.4.3 Bidding Criteria One of the main discussions concerning the regulatory framework is what shall be the bidding criteria for the offshore wind power sector, whether to adopt a quantitative only criteria (highest value bidder), qualitatively based (“beauty contest”), or a hybrid approach. Brazil has several regulated sectors, and the Brazilian Constitution serves as the primary source for administrative law and establishes the general principles and framework for the regulation of different sectors. Based on that, sector-specific laws are enacted to address industries like telecommunications, energy, transportation, financial services, oil, and gas. These sector-specific laws typically set out the main principles, objectives, and rules that apply to the relevant sector, including the creation of regulatory agencies. Independent research on several public tenders was conducted to verify the average bidding criteria choice in other regulated sectors and the applicable legal framework. 179 Scenarios for Offshore Wind Development in Brazil TABLE 11.4 BIDDING CRITERIA IN DIFFERENT BRAZILIAN REGULATED SECTORS. # Modality Bidding criteria Legal framework Reference 1 Railway Highest value for the Article 34-A and International Bidding Procedure Sector grant (established by the subitems of Federal Law (ANTT bidding notice 01/2020 and bidding notices) 10.233/2001 02/2018) Establishes that the bidding notice will define the bidding criteria 2 Highway Lowest toll charged Article 34-A and Sector to users subitems, article 38 of Concession Public Bidding Federal Law 10.233/2001 Notice 01/2018—Concession of Establishes that the BR-101/290 bidding notice will define the bidding criteria 3 Public Higher value for Article 15 of Federal Law Rio de Janeiro State procedure Sanitation the grant 8987/1995 120207/000707/2020 Allows selection of (International Bidding Notice multiple criteria, no. 01/2020—Water supply according to the scope of and Sanitation services for the the grant municipality of Rio de Janeiro 4 Urban Mobility Highest value for Article 40 of Federal Law International Bidding Notice (Trains and the grant 8.666/1993. 01/2020 of the State of São Subway) Paulo—Lines 8 and 9 of the train networks 5 Power Lowest tariff charged Article 15 of Federal Law Public Notice Sector— to users 8.987/1995; Article 5o, 01/2023—(transmission) Hydro Power Article 17 of Federal Law Plants or 9.074/1995 Public Notice 04/2019 Transmission (generation/hydro) Assets 6 E&P Most advantageous Article 40 and 41 of Bidding document of the 3rd Concessions— proposal, as defined in Federal Law 9.478/1997 Permanent Offer Cycle, as per the Oil and Gas the relevant Bidding revision of 23 March 2023 document The criteria set by the latest Bidding document is highest financial value, obtained by the sum of two criteria: i. Signing bonus, accounting for 80 percent weight ii. Investments performed (Minimum Work Program), accounting for 20 percent weight 11 Permitting and Regulatory Framework 180 The most similar to offshore power generation is the oil and gas sector that has successfully implemented a hybrid approach that consists of the following: ■ Technical and financial qualification: The bidding authorities (ANP and MME) evaluate the area to be offered and establish technical and financial criteria for the bidders. ■ Bid criteria: Signature Bonus (downpayment of a value after execution of the E&P contract) and Production Participation (profit sharing agreements for pre-salt areas provide as bidding criteria a percentage of the profit oil being provided to the federal government). ■ Commitment to invest: In addition to signature bonus, for oil and gas E&P concession contracts, bidders are required to assume commitments to invest in the exploration of the area and obtain more information. Such commitments are known as minimum work program and the investments are guaranteed by a bond that can be enforced if the licensee does not perform the committed investments. A hybrid criterion addresses several concerns of the granting authority while providing rights to economic exploration of a public asset. In any case, the criterion must be objective, measurable, and enforceable. For instance, local content used to be a bidding criterion, with companies winning bids due to their local content commitments, only to later those same companies requesting waivers from their local content commitments due to alleged incapacity of the national industry to supply the intended local content portion. Criteria such as this, that depends on external factors other than the bidding entity’s efforts, should be avoided. Regardless of the elected criteria, it is observed that the rules usually provide the possible criteria in the legal framework, yet leave the decision of the chosen criteria for each bid to be determined in the tender documents. Despite pending further regulation, both the Offshore Wind Power Regulation and Bill of Law 11.247/2018 are being structured in that manner. When defining the winning criteria, it is advisable that the authorities consider the current economic scenario and establish reasonable bidding criteria. High fees pose the risk of increasing costs for end- consumers and adding to the initial cost premium for potential investors entering emerging markets. In the first licensing rounds, given that the offshore wind power sector is expected to face initial challenges, authorities should be able to adjust the financial burden based on the attractiveness of areas. 11.4.4 Coordinated Exploration of Offshore Wind Areas Regulating industries involved in the exploration of natural resources often necessitates specific rules to prevent the occurrence of the “rule of capture.” This rule refers to a situation where one licensee aggressively exploits certain natural resources to the detriment of other projects dependent on those resources. For instance, in the oil and gas sector, such practice negatively impacts the production from a reservoir, possibly damaging it and reducing its productive life. As such, many jurisdictions have mitigated this scenario by mandating joint exploration of oil and gas fields encompassed by multiple licenses, a practice known as unitization. 181 Scenarios for Offshore Wind Development in Brazil In the onshore wind industry, a similar challenge exists, but in offshore wind, its prevention relies on the actions of granting authorities. Here are some recommended best practices and strategies to address this issue: 1. Advanced wind farm layout planning: During the planning and design phase, adopt advanced computational models and software to optimize wind farm layouts. These models should consider factors such as prevailing wind patterns, seabed conditions, and the wake effects of turbines on each other. 2. Site-specific assessments: Before granting licenses, conduct comprehensive site-specific assessments. These assessments should include detailed wind resource evaluations, metocean studies, and wake modeling to assess the potential for wake interference in a specific offshore area. 3. Strategic turbine placement: Ensure that turbines within a wind farm are strategically positioned to minimize wake effects. 4. Coordinated development zones: Establish coordinated development zones where multiple wind farms can be developed in close proximity. Designating specific areas for offshore wind development simplifies the management of wake interference and promotes coordination among different developers. 5. Regular stakeholder consultation: Engage with stakeholders, including wind farm developers, fishing industries, environmental organizations, and local communities, to gather input and address concerns. 6. Robust regulatory framework: Ensure that the regulatory framework incorporates guidelines and standards for wake modeling, wake mitigation strategies, and coordinated development. Regularly update this framework to accommodate industry advancements. 7. Transmission infrastructure planning: Plan efficient offshore transmission infrastructure to collect electricity from multiple wind farms in a coordinated manner. This approach reduces the need for redundant infrastructure and optimizes grid connections. 8. Environmental Impact Assessment (EIA): Make it a requirement for EIAs to evaluate the effects of wake interference on marine ecosystems and recommend appropriate mitigation measures. The legal and regulatory framework that has been discussed so far incorporates some of the points highlighted above. The studies required shall comprise environmental and transmission network analyzes, for example. However, considering the high interest already shown in offshore generation projects in Brazil, it is recommended to discuss site-specific assessments and wind farm layout planning. These aspects prevent conflicts but are not yet clearly addressed. It is recommended to add those premises to move forward to a robust legal and regulatory framework. 11 Permitting and Regulatory Framework 182 11.4.5 Ongoing Process Decree 10.946/2022 currently addresses the treatment of ongoing processes, stipulating that they must align with its provisions. Consequently, ongoing requests, bearing in mind that there have been no previous grants for generation or transfer contracts for this activity, must be processed in accordance with the provisions of the Offshore Wind Power Regulation. We again highlight that this regulation is not yet complete. Furthermore, there has been no regulation issued to address the concept of “greatest economic return” (a bidding parameter) and the area limit for exploration (the prism parameter). Additionally, the system required for project processing, known as PUG-Offshore, has not been established yet. Therefore, if any new legislation is approved before the operationalization of the Offshore Wind Power Regulation, and consequently before obtaining a grant, the provisions of the new law will take precedence. This condition also applies if a new law is enacted during the process of obtaining the grant or authorization for generation. In other words, even if the missing complementary regulations of the Offshore Wind Power Regulation become operational, the introduction of a new law during the grant/authorization acquisition process will subject the interested party to new conditions. A different scenario arises if the entity already holds a grant or authorization for generation. In this case, the new law would generally not revoke or invalidate acts/contracts that were executed and signed under the current regulations. New regulations stemming from an ordinary law will come into effect upon their approval and will apply to new projects. Existing projects may need to adjust due to the new regulations, particularly with the understanding that acquired rights cannot be claimed under the legal regime. However, even in this scenario, there is protection for stability and legal security. 11.4.6 Recommendations The following recommendations are made regarding the permitting and regulatory framework: ■ Bidding criteria: It is advisable to specify the potential criteria in a legal framework, with the selection process adhering to the options outlined within the relevant law’s boundaries. Nevertheless, the ultimate determination of bidding criteria within the tender protocol, using criteria authorized by the law, offers the granting authority more flexibility and the ability to adapt to industry advancements. For instance, in initial projects, some criteria may seem overly rigorous, while applying the same criteria at a more advanced industry stage may appear reasonable to the market. In addition to that, it is advisable to follow qualitatively based (“beauty contest”) criteria against price based competitive processes, especially for a country’s first seabed tender rounds. Among others, in a qualitative approach, the following parameters could be assessed: capability, commitment, project deliverability, sustainability, financial strength, and supply chain plan. [Brazilian government] ■ Incentives: Considering Brazilian taxation in comparison to other markets, for consolidation of the offshore wind power industry, certain tax benefits that are currently applicable to other industries could be replicated for this new industry, such as IPI, PIS and COFINS, ICMS and REIDI. Apart from existing tax incentives, there’s potential to create a new special regime connected to tax treatments covered by the Repetro-Sped regime. [Brazilian government] 183 Scenarios for Offshore Wind Development in Brazil ■ Coordinated exploration of offshore wind areas: Regulating industries involved in the exploration of natural resources often necessitates specific rules to prevent the occurrence of the “rule of capture”. This rule refers to a situation where one licensee aggressively exploits certain natural resources to the detriment of other projects dependent on those resources. For instance, in the oil and gas sector, such practice negatively impacts the production from a reservoir, possibly damaging it and reducing its productive life. As such, many jurisdictions have mitigated this scenario by mandating joint exploration of oil and gas fields encompassed by multiple licenses, a practice known as unitization. In the onshore wind industry, a similar challenge exists, but in offshore wind, its prevention relies on the actions of granting authorities. Some recommended best practices and strategies include advanced wind farm layout planning, site-specific assessments, strategic turbine placement, coordinated development zones, regular stakeholder consultation, robust regulatory framework, and transmission infrastructure planning. [Brazilian governments, developers, Agencies involved in regulatory and permitting process] ■ Government take: All frameworks related to offshore wind power under discussion in Brazil propose a specific type of government take to be adhered to by licensees. Regardless of the government take chosen in the end, it is advisable that the regulatory framework grants discretionary authority to the licensing body to adjust the applicable government take for each tender. Given that the offshore wind power industry is expected to have some competitiveness challenges at the beginning, enabling the licensing body to modify the financial burden based on the circumstances will allow the government to make the areas more appealing for investment in different circumstances. In this regard, the recommendation is to include the concept of government take in the regulatory framework but to defer the final rate or levy decision to the tender protocols instead of rigidly specifying it within the regulatory framework itself. [Brazilian government] 11 Permitting and Regulatory Framework 184 12 HEALTH AND SAFETY ANALYSIS 12.1 PURPOSE The management and regulation of H&S is a vital aspect of developing a sustainable and responsible offshore wind industry. The purpose of this section is to conduct a high-level review of the applicable H&S legislation in Brazil, providing an overview of the regulations and their alignment with offshore wind industry best practices. Additionally, means of ensuring Brazil can develop an offshore wind industry that complies with international H&S needs are also indicated. 12.2 METHOD This assessment is based on existing knowledge of H&S issues in the offshore wind industry, primarily research on H&S frameworks in Brazil. Although there are no specific regulations in Brazil for the offshore wind sector, it is considered that the legal framework for occupational H&S is applicable and must be followed. The review of existing information on this topic has identified the H&S frameworks existing in Brazil considering: ■ Regulations applicable to all industrial sectors, including oil and gas, and an assessment of how these regulations could be applied to offshore wind industry. ■ Regulations in Brazil applicable only to O&G industry, with a discussion on the possibility to extend them to offshore wind; ■ H&S regulations that have been updated to consider requirements for offshore wind; ■ An evaluation of the applicability of relevant H&S legislation and guidance documents from the UK and worldwide, considering Brazilian H&S framework. The topics above are discussed in the following section, which presents a summary of findings and proposes recommendations for the way forward. 185 Scenarios for Offshore Wind Development in Brazil 12.3 RESULTS 12.3.1 Context Brazil has legislations in place covering labor protection and safety and health aspects in the country. H&S is administered by different regulators, including the Ministry of Labor & Employment and Ministry of Health. Additionally, the Ministry of Defense regulates safety on marine, helideck and air space activities, as represented in Figure 12.1. 12.3.2 Safety Regulations The Ministry of Labor & Employment through supporting regulations, codes of practice and guidelines introduces prescriptive elements for H&S at work. The underlying principle is that every employer shall ensure so far as is reasonably practicable the H&S at work for all employees and the environment. Regulatory Normative (NRs) have been established and updated through the years, covering different elements of industrial and commercial activities that may impact employees, currently summing a total of 37 NRs. The first is NR 01—General Requirements and Management of Occupational Risks [167], which presents requirements that any business (commercial, industrial, or service) has to follow to ensure H&S for its employees. This regulation has been established according to requirements of ILO Conventions and ISO 45001 Standard [168]. Other NRs cover several elements, some more specific on certain labor activities and others as a more general employee protection, as presented below: ■ Specific activities: work with electricity [169]; safety on machines and equipment [170]; work with flammable and combustible materials [171]; waterway work [172]; work in confined spaces [173]; work at height [174]; naval construction and repair [175]; offshore work [176]. ■ General employee protection: personnel protection equipment [177]; occupational health control [178]; occupational environmental agents control [179]; ergonomic and exposure limits [180], [181]. FIGURE 12.1 BRAZILIAN REGULATORY OUTLOOK FOR OFFSHORE WIND OPERATIONS. Air Sp c H lth: nd H lid ck Ministr of S f t : H lth Ministr of D f ns H lth & S f t : H&S S f t on M rin Ministr of L bor & in Activiti s: Ministr of Emplo m nt Br il D f ns 12 Health and Safety Analysis 186 12.3.3 Occupational Health Regulations The Agência Nacional de Vigilância Sanitária (Brazilian Health Regulatory Agency (ANVISA)) is an independent administrative entity. The agency promotes the protection of the population’s health by executing sanitary control of the production, marketing and use of products and services subject to health regulation, including related environment, processes, ingredients and technologies applied in the production process. Besides the coordination of the national sanitary vigilance, ANVISA controls ports, airports, and borders—controlling the entry and exit of people and products to prevent the introduction and spread of communicable diseases and vectors in the country. This agency establishes standards and requirements that must be followed and applied by companies that develop their activity within Brazil, such as standards for Industrial Sanitation and Occupational Health, Occupational Safety Requirements for Production Equipment, and Fire Safety. 12.3.4 Navy Regulations The Brazilian Marine Authority (Coast and Harbour Board—DPC and Hydrographic and Navigation Board—DHN, both under the Ministry of Defense) regulates Helideck operation through NORMAM 27 [182] normative, which includes international requirements from CAP 437 [183] and other international references such as ICAO. Regulation of safety aspects for offshore structures (as minimum safety crew, safety appliances, emergency procedures and others) is defined by DPC through normative NORMAM 01 [184]. For manned and unmanned offshore wind structures or support vessels (e.g., flotel) it can be expected the application of requirements from these regulations, given the similarly in work environment. For fixed structures, given that currently SOLAS requirement [185] is not applicable to O&G offshore fixed platforms, it can be expected that it will also not to be applicable for offshore wind fixed structures. Also, it is under DPC and DHN governance of the control of marine traffic in the coast, including ensuring adherence of requirements from NORMAM 11 [186] and 17 [187]), and aspects related to painting and identification of offshore structures (following recommendation from IALA O-139 [188]). Also, under DPC and DHN governance are the requirements related to distances between wind turbines according to guideline from PIANC [189], considering maneuvering space for ships in the vicinity of offshore wind farms and the distance to ensure a minimal risk to navigation. Additional consideration is given to distance between offshore wind farms and shipping routes, with a safety zone of 500 m around WTGs or any other structure from the offshore farm to entrance of any vessel, including fishing vessels. Moreover, NORMAM 11 requires that Risk Assessment and Control Measures report is presented to DPC, including risks associated with construction, operation, and decommissioning of offshore wind farms. 187 Scenarios for Offshore Wind Development in Brazil 12.3.5 Airspace Regulations The Departamento de Controle do Espaço Aéreo (Department of Airspace Control—DECEA) is the agency responsible for planning, managing, and controlling activities related to airspace, flight protection, search and rescue service, and telecommunications with Comando da Aeronáutica (Air Command). As the central control system for Brazilian airspace, DECEA is also responsible for providing the means necessary for the management and control of airspace and air navigation services, safely and efficiently, as established in national standards and international agreements and treaties to which Brazil is signatory [190]. One of concerns regarding offshore wind farms is the potential impact to air space, for both helicopter routes going to offshore O&G platforms, relevant specially in the area of Rio de Janeiro state, airport routes, and any search and rescue operations. Regulations have been updated [68] with requirements for distances from obstacles that can impact airports, covering onshore wind farms, but it does not mention specifically offshore installations. Potentially this regulation shall be revised to incorporate requirements for offshore wind farms, considering they can affect radar operations, causing impact on airport and aircraft safety. Also, consideration shall be given in the regulation to define safe limits around Offshore O&G platforms to not affect helicopter operations. 12.3.6 ABNT Standards The Brazilian Association of Technical Standards (ABNT) is the body responsible for technical standardization in Brazil, providing inputs to Brazilian technological development, as, for instance, publishing international standards from associations as ISO and IEC. Among standards applicable for offshore wind industry there is ABNT NBR IEC 61400 [191], related to Wind Turbine Generator Systems. 12.3.7 Comparison with Relevant H&S Legislation and Guidance Documents To determine any gaps in the current framework and make it fit for the offshore wind industry, it is important to understand the various H&S documents that are applied to offshore wind activities globally. Table 12.1 lists the various H&S legislation documents that are commonly used around the world, along with some that are UK-specific. UK-specific guidelines are included in the table to show how other markets also have unique H&S requirements. Comments are provided in relation to applicability of regulations and guidelines in Brazil, considering existing local H&S framework. The list below is not exhaustive and there are many international standards including EN, ISO, and IEC standards that cover specific areas such as engineering design and processes. The list, however, captures the main guidance applied to existing offshore wind projects. Section 3.8 of the World Bank Group’s Key Factors report [9] also provides additional relevant information. 12 Health and Safety Analysis 188 TABLE 12.1 RELEVANT H&S LEGISLATION AND GUIDANCE DOCUMENTS (UK/WORLDWIDE). Project phase / Applicable to Document Summary area Brazilian projects Construction Construction Design and Regulations to cover the No (UK specific) Management (CDM) management of health, Brazil has H&S requirements Regulations [192] safety, and welfare when for construction defined as carrying out construction part of NRs from Ministry of projects in the UK Labor & Employment Design Safety DNV-ST-0145, Offshore General safety principles, Yes (international / Emergency Substations (OSSs) for Wind requirements, and standard applied globally), Response farms [193] guidance for platform as voluntary standard Inspection / installations associated Emergency with offshore renewable Response energy projects (substations) Design DNV-ST-0119, Floating Wind Principles, technical Yes (international Inspection Turbine Structures [194] requirements, and guidance standard applied globally), for design, construction, and as voluntary standard inspection of floating wind turbine structures Design DNV-ST-0126, General principles and Yes (international Construction Support Structures for guidelines for the standard applied globally), Wind Turbines [195] structural design of wind as voluntary standard turbine supports Design DNV-ST-0437, Loads and Principles, technical Yes (international Construction Site Conditions for Wind requirements, and guidance standard applied globally), Turbines [196] for loads and site conditions as voluntary standard of wind turbines Design IEC 61400, Wind Turbine Minimum design Yes (international Generator Systems [197] requirements for wind standard applied globally); turbines additionally, ABNT NBR IEC 61400 reflects locally the content of this standard Design Operation EN 50308: Wind Turbines— Defines requirements Yes (international Maintenance Protective Measures— for protective measures standard applied globally), Requirements for relating to H&S of personnel as voluntary standard Design, Operation and (commissioning, operation, Maintenance [198] and maintenance) Various G+ Good Practice Good practice guidance Most of requirements Guidelines and Safe intended to improve the presented in these guidelines by Design Workshop global H&S standards have similar present in local Reports [199] within offshore wind farms regulations in Brazil; can and workshop reports that be applied voluntary for explore current industry requirements that are not design and investigate present in local regulations improvements or that supersede it Health & Safety RenewableUK Health & Various H&S guidelines UK specific Safety Publications [200] for offshore wind farms Brazil has local requirements including Emergency for H&S covered by Ministry Response guidelines of Labor & Employment and ANVISA; additionally, Emergency Response guidelines in case of oil spill to see are defined by IBAMA 189 Scenarios for Offshore Wind Development in Brazil Project phase / Applicable to Document Summary area Brazilian projects Safety / Safety of Life at Sea Sets minimum safety Yes (international standard Emergency Regulations (SOLAS) [185] standards for life applied globally) and also Response saving appliances and for Brazil, as signatory from Arrangements arrangements SOLAS; currently oil and gas offshore fixed platform doesn’t have requirement to follow SOLAS, but for offshore wind structures DPC has not yet established local requirements Helideck Design ICAO Heliport Manual [201] Criteria required in assessing Partially applied the standards for offshore Even though ICAO is an helicopter landing areas international standard and can be applied globally, Brazil has a local regulation from Navy—NORMAM 27, with requirements f for Helideck design and Operation; this regulation considers requirements from ICAO and CAP 437, as well as specific local requirements In the UK, the CDM regulations apply to most construction projects, while DNV-ST guidelines are the main global standards for OSSs and wind turbines. In comparison, UK specific regulations will not be applicable to Brazil, but may be used as reference if specific regulations are established for offshore wind industry. DNV-ST, as guidelines, are not mandatory in Brazil, but can be applied voluntarily by the industry, as other existing DNV guidelines (for pipelines and offshore containers, for instance). For other international standards, as EN and IEC, their application may be enforced through local Brazilian Standards published by ABNT. The G+ is the global offshore wind H&S body that brings developers and supply chain companies together to work on areas such as incident data reporting, good practice guidelines, safety workshops, and learning from incidents. Their guidance is intended to be used by all to improve global H&S standards within offshore wind farms. Various G+ and RenewableUK guidelines have been developed specifically for the wind industry (offshore and onshore) and are used in conjunction with the DNV guidelines. As indicated above, these can also be applied in Brazil in case of absence of local requirements or if these are superseded. In February 2024, G+ and ABEEólica signed a cooperation agreement, which will facilitate collaboration in developing a health and safety framework for the region, through shared access to global knowledge, industry guidance and lessons learned. World Bank ESF has among its E&S standards, ESS2 Labor and Work Conditions [203] and ESS4 Community Health and Safety [204], which have been considered as reference for the current assessment. With regards to ESS2, this standard focuses on providing safe and healthy working conditions for employees, including requirements for Occupational Health and Safety. These requirements cover the seven main topics in Table 12.2, each with a high level indication on how they are addressed by Brazilian H&S legislation. 12 Health and Safety Analysis 190 TABLE 12.2 RELEVANT WORLD BANK ESS2 GUIDANCE TOPICS AND RELATED BRAZILIAN REGULATIONS. # ESS2 requirement Brazilian regulations 1 Measures relating to occupational health and safety NRs from Ministry of Labor & Employment, as will be applied to the project. described in Section 12.3.2, provide mandatory (Refer to item 25 from ESS2) requirements to be implemented by any employer established in the country. As mentioned, ILO Conventions that Brazil is signatory have its requirements included in the NRs. 2 Measures to be designed and implemented NRs comply with the several measures described in to address: the item 26 from ESS2, as indicated: (a) Identification of potential hazards to project (a) Hazards shall be identified and treated as workers, particularly those that may be described in several of NRs, with NR9 defining life-threatening; that occupational exposures to physical, (b) Provision of preventive and protective chemical and biological agents shall be identified measures, including modification, substitution, by employer; or elimination of hazardous conditions or (b) Preventive measures shall be defined by substances; training of project workers and employer, based on potential occupational maintenance of training records; exposure to different hazards, as peIR9; (d) Documentation and reporting of occupational (c) Training on use of equipment and some special accidents, diseases and incidents; activities are pre-established in the NRs, as (e) Emergency prevention and preparedness confined space in NR35, work at height in NR 33, and response arrangements to emergency maintenance in electricity in NR10, and others. As situations; and per each NR, maintenance records shall be kept (f) Remedies for adverse impacts such as by employer. General training requirements are occupational injuries, deaths, disability, defined by NR1; and disease. (d) Occupational accidents, diseases and incidents (Refer to item 26 from ESS2) shall be documented and assessed as per NR1; (e) Emergency procedures adequate to identified workplace risks shall be defined by employer and communicated to workforce, as defined by NR1; and (f) measures for mitigating impacts on worker occupational health and safety are covered by the several requirements define by NR1, which is based on implementation of Risk Management Program. 3 All parties who employ or engage project workers Different risks that the employee may be exposed will develop and implement procedures to establish in the workplace shall be identified and treated as and maintain a safe working environment, defined by NR9, that defines as mandatory the including that workplaces, machinery, equipment, assessment of occupational exposures to physical, and processes under their control are safe chemical, and biological agents. and without risk to health, including by use of appropriate measures relating to chemical, physical, and biological substances and agents. (Refer to item 27 from ESS2) 4 Workplace processes will be put in place for project NR1 establishes that organizations shall define workers to report work situations that they believe procedures for receiving and following up complains are not safe or healthy, and to remove themselves from employees. It also establishes that the worker from a work situation which they have reasonable may interrupt their activities when it is noticed a justification to believe presents an imminent and situation of work where, in their opinion, involves serious danger to their life or health. a serious and imminent risk to life and health, (Refer to item 28 from ESS2) informing immediately to hierarchical superior. 191 Scenarios for Offshore Wind Development in Brazil # ESS2 requirement Brazilian regulations 5 Project workers will be provided with facilities These requirements are covered by NR24 for general appropriate to the circumstances of their work, workplace, being this regulation related to Sanitary including access to canteens, hygiene facilities, and and Comfort Conditions in the Workplace. appropriate areas for rest. (Refer to item 28 from ESS2) 6 Where project workers are employed or engaged Brazilian regulations have no distinction between by more than one party and are working requirements for direct employees and third together in one location, the parties who employ party, with each employer being responsible for or engage the workers will collaborate in applying implementation of measures for each on employees. the OSH requirements, without prejudice to the responsibility of each party for the health and safety of its own workers. (Refer to item 29 from ESS2) 7 A system for regular review of occupational NR1 establishes that each company/employer shall safety and health performance and the working adopt measures to improve its H&S performance. environment will be put in place and include NR9 requires periodic assessment of working identification of safety and health hazards and risks, environment conditions. implementation of effective methods for responding to identified hazards and risks, setting priorities for taking action, and evaluation of results. (Refer to item 30 from ESS2) For ESS4 Community Health and Safety, as part of the Environmental Impact Assessment that has to be developed for the licensing process for offshore wind farms, social impacts, including the ones related to H&S direct and indirect impacts to communities, have to be identified and specific programs must be implemented. This approach aligns with European Union Directive 2014 [205], [206]. 12.4 DISCUSSION Based on the existing framework on regulations for H&S, it is a logical conclusion that existing regulations will be applicable for offshore wind, especially the ones that are not industry specific. For more complex installations, where, for instance, permanent manning or helideck is required, O&G industry and marine regulations (as the ones from Ministry of Labor & Employment and Navy) may be taken as a starting point for defining specific regulations for the offshore wind sector in Brazil. Even though it is known that O&G activities have different H&S risks associated with them due to the presence of pressurized hydrocarbons, these regulations have been used as a starting point for offshore wind H&S standards in other worldwide markets. Some regulation initiatives however, have already been launched, such as, the update on Navy regulation NORMAM 11 and 17, to include specific requirements for offshore wind. It is important to note that Brazil’s current national legislation is quite complete and continuously updated, covering aspects from the different life cycle phases for an installation, from construction to operation. Additionally, international standards and directives that Brazil is signatory of, are reviewed to ensure best practices and incorporated to local regulations. Summary of authorities capacity and roles is presented in Table 12.3. 12 Health and Safety Analysis 192 TABLE 12.3 SUMMARY OF BRAZILIAN AUTHORITIES CAPACITY AND ROLES RELATED TO HEALTH AND SAFETY. Authority Related Ministry Capacity Role Department of Ministry of Labor & Labor Occupational To improve workplaces, processes Occupational Safety Employment Safety and Health and work environments to and Health reduce workrelated accidents and illnesses [207]. Health Regulatory Ministry of Health Health Issues To promote the protection Agency—ANVISA of the population’s health by executing sanitary control of the production, marketing and use of products and services subject to health regulation, including related environments, processes, ingredients, and technologies, as well as the control in ports, airports, and borders [208]. Brazilian Institute Ministry of Environment Environmental To carry out actions related of Environment and aspects and to environmental licensing, Renewable Natural operational license environmental quality control, Resources—IBAMA authorization for the use of natural resources, and environmental inspection, monitoring and control, in compliance with the guidelines issued by the Ministry of the Environment [209]. Air Space Control Ministry of Defense Air Space and To plan, manage, and control Department—DECEA Helideck Safety activities related to airspace control, flight protection, search and rescue services, and telecommunications of the Air Force Command [210]. Diretoria de Portos e Ministry of Defense Safety on To plan, coordinate, and control Costas—DPC Marine Activities the technical and administrative activities related to the Merchant Navy, regarding pilot, safety of vessels and port facilities, as well as training, qualification, and qualification of maritime personnel and the civil shipbuilding industry [211]. National Agency Ministry of Operational To establish the regulations for Petroleum, Energy and Mining Safety for Oil and (resolutions and normative Natural Gas and Gas operations instructions) for the operation Biofuels—ANP and trading of the oil, natural gas, and biofuels industries [212]. 193 Scenarios for Offshore Wind Development in Brazil In other offshore wind markets, it has been identified that project developers have implemented a combination of international regulations, standards, and guidelines (for example DNV, ISO and G+) in conjunction with any national frameworks in place instead of drawing up a complete set of H&S rules. For example, UK offshore wind farms will follow CDM guidelines and will also use DNV-ST-0145/0119/0126, along with other ISO standards and guidelines. It can be expected that in Brazil the approach of other offshore wind markets will also be applied, as has occurred with other industries where no specific technical guidelines and standards are locally defined, such as the case for offshore pipelines. For this type of installation, construction and operation combine the applicable regulations from Ministry of Labor & Employment, Ministry of Defense, and other international references. Depending on the regulations defined for offshore wind by Regulatory Framework, another specific regulation for Operational Safety Management System may be established, as is required by ANP. According to ANP Regulation 43 [202] it is required the implementation of a management system covering operational safety aspects for all O&G onshore and offshore operations, refineries, pipelines, and other installation under their governance. ANP is the authority with larger experience on operational safety and such experience can be transferred to new regulatory framework defined for offshore wind. More specifically to the Brazilian H&S regulation for offshore wind, it is expected that the existing framework will remain applicable and that it will be adapted, where appropriate, to incorporate international industry codes, as the ones referred to in this section. The regulations applicable to O&G industry, such as NR 37, NORMAM 01, and ANP Regulation 43, are identified as potential references in case new regulations are established, although there is no knowledge on development of specific documents covering H&S subjects for the offshore wind industry. 12.4.1 Recommendations In summary, in terms of H&S, a number of actions are recommended: ■ Develop instructions to define to operators the minimum requirements, from existing regulatory framework that are appropriate for offshore wind. As a starting point, there is indication that specific regulations for offshore wind are needed, specifically with regards to personnel health and safety. [Brazilian government] [Brazilian wind energy associations] ■ For aspects related to Operational Safety, in case requirements similar to ANP Regulation 43— SGSO are applied for offshore wind, authorities with larger experience in this issue, such as ANP, may share to the authority responsible for offshore wind what are best practices applicable. [ANP and other experienced authorities] ■ There are specific concerns about safety on airspace, due to impact of offshore wind structures on both airports and helicopter operations (mainly to offshore O&G installations). Even though current regulation for controlling airspace obstacles includes requirements for onshore wind farms, it should be revised to consider the impact from offshore wind farms. [Brazilian government] 12 Health and Safety Analysis 194 13 COST OF ENERGY ANALYSIS 13.1 PURPOSE This section presents an overview of the expected cost of energy in Brazil from 2030 to 2050 for both bottom fixed and floating offshore wind projects. The analysis relies on modeling and optimizing LCoE using technical characteristics of the representative sites and using a modular framework for cost and project concept design. The pace and extent of development of offshore wind in Brazil over the coming decades is dependent, among other factors, on its economic viability relative to other energy sources; both fossil fuel and low carbon. Projections of LCoE are therefore critical in allowing the development of effective strategies and policy frameworks to decarbonise the Brazilian economy and realize the offshore wind potential of Brazil. The section presents LCoE estimates for offshore wind in Brazil as well as a summary of the methodology adopted, and key assumptions made. 13.2 METHOD Future projections of LCoE have been derived by estimating CapEx, OpEx, and Net Annual Energy Production (AEP) of 11 “representative projects” located across the three macro-areas derived from the analysis carried out in Section 5. The relevant site-specific data was collated for each of these projects to best capture the individual characteristic of that project (e.g., wind data, wave data, distance to construction port, etc.). This data was then combined with the expectation of technical and commercial developments in the offshore industry and added as input into the Renewables.Architect tool (DNV’s in-house suite of tools) to design and assess the cost these projects for assumed commercial operation dates (COD) of 2030, 2040, and 2050. FIGURE 13.1 OVERVIEW OF DNV’S LCOE MODELING METHODOLOGY. D fin r pr s nt tiv loc tions within ch r ion (NE, SE, nd S) consid rin 1 wind r sourc , dist nc to port, w t r d pth, tc. Ch r ct ri loc tions b coll ctin sit -sp cific nd r ion l inputs 2 ( . . Wind r sourc , oc n conditions, port dist nc s, tc.) D fin futur sc n rios for ch loc tion for 2030, 2040 nd 2050 COD d t s, 3 t kin into ccount t chnic l dv nc m nts nd comm ric l d v lopm nt. Bottom-up mod llin of C pEx, OpEx nd n t nnu l n r production of 4 futur sc nrios for ch loc tion usin R n w bl s.Archit ct. S nsitivit n l is of r sults on k driv rs nd unc rt inti s. 5 195 Scenarios for Offshore Wind Development in Brazil DNV's Renewables.Architect is an engineering and cost modeling tool for wind energy that runs on a MDAO (Multi-disciplinary analysis and optimization) framework. For this analysis, a selection of Renewables.Architect engineering and cost modeling tools were used to: ■ Size and scale turbine concepts based on estimated loads. ■ Estimate gross annual energy production and losses. ■ Perform turbine and wind farm cost analysis. Depending on the type of analysis (turbine or farm level), Renewables.Architect requires many different types of input parameters related to site conditions, turbine design, wind farm configuration, component cost rates, etc. which can be varied to understand the sensitivity of the overall cost of energy to that parameter. The strength of Renewables.Architect is that it combines speed of analysis with accurate results which makes it possible to develop high level insights to parameter sensitivities and selecting optimum designs and configurations from a set of generated data points. It is a flexible tool with analysis and results that can be customized to the needs of each individual study. The main pillars of the Renewables.Architect platform are: ■ DNV wind turbine loads database; ■ Extensive turbine engineering models based on DNV turbine engineering knowledge and skills; and ■ Cost data. The Renewables.Architect platform is flexible in terms of the data it uses for analysis and evaluation. For the high-level nature of this assessment, global input parameters have been varied to capture the individual characteristics of each case, and using DNV’s loads database values and engineering models to design the turbine and substructures. FIGURE 13.2 HIGH-LEVEL OVERVIEW OF RENEWABLES. ARCHITECT ANALYSIS. ENGINEERING INPUT MODELS FINANCIAL OUTPUT ECONOMIC OUTPUT Turbin Turbin mod l Turbin CAPEX F rm CAPEX Economic mod l BoP CAPEX Sit & f rm Windf rm Gross AEP CoE N tt A P M rk t O&M mod Av il bilit IRR F rm OPEX NPV Discount r t T x s, subsidi s 13 Cost of Energy Analysis 196 13.2.1 Identification and Characterization of Representative Projects For the purpose of the analysis, several suitable locations were identified for both bottom-fixed and floating projects, from within each of the three macro-areas. The locations of these projects were chosen to be as representative as possible of likely wind developments within that macro-area. Where possible, this was done by placing these locations in known areas of interest for development while still maintaining meaningful coverage of the region so that LCoE variation within the region could be captured. Prior GIS analysis and engineering judgement were used to select representative project locations considering parameters such as water depth, wind resource, proximity to potential construction ports, etc. These 11 locations are shown in Figure 13.3, with further details of each site available in Appendix F. Each location was then characterized using the parameters in Table 13.3. Out of the 11 locations, four were identified as suitable for floating projects, with a semisubmersible platform considered the most likely topology. The remaining seven bottom-fixed projects were then modeled considering both monopile and jacket foundations. FIGURE 13.3 LOCATION OF THE 11 REPRESENTATIVE PROJECTS ACROSS THE THREE REGIONS. 197 Scenarios for Offshore Wind Development in Brazil TABLE 13.1 KEY PROJECT SPECIFIC ASSUMPTIONS. Parameter Level Description Wind Resource Project-specific Hourly long-term time series (1997-2021) extracted from ERA-5 global reanalysis dataset,1 adjusted from 100 m elevation to WTG hub height assumed wind-shear alpha of 0.05. Water Depth Project- specific Determined using bathymetry GIS mapping. Offshore & Onshore Project- specific Representative offshore and onshore export cable routes from Export center of site to nearest appropriate grid connection point using Cable Distance GIS mapping. Significant Wave Project-specific / Long-term time series using Copernicus Global Ocean Waves Height clustered* reanalysis dataset,2 validated/adjusted by using SeaStates.3 Construction and Project- specific Location of nearest appropriate port identified using GIS mapping. O&M Port Distance Component Project- specific Route mapping based of assumed West European fabrication Transport Distance facility in 2030. National and regional supply chains assumed in 2040 and 2050 respectively. Other Metocean Project-specific / Long-term time series for extreme waves,2 storm surge,4 tidal Conditions clustered* level,5 and tidal current.6 Soil Profile Regional Brazil CPRM Lithology maps,7 supported by DNV’s geotechnical experts. Upper and lower bounds of soil profiles were then created (see Appendix F for details). Notes: 1–https://www.ecmwf.int/en/forecasts/datasecmwf-reanalysis-v5. 2–https://data.marine.copernicus.eu/product/GLOBAL_MULTIYEAR_WAV_001. 3–https://www.seastates.net/. 4–https://www.hycom.org. 5–Admiralty TotalTide. Admiralty TotalTide, version 16.0.0.45. 2020. 6–DHI. MIKE 21 Toolbox—Global Tide Model—Tidal Prediction, DHI Headquarters; 2017. 7–CPRM, https://www.sgb.gov.br/en/About-63. *To reduce the complexity of the metocean analysis, projects in the same region with similar water depths were clustered together. 13.2.2 Representative Project Wind Resource The offshore wind climate of Brazil shows significant regional variation, both in average annual wind speeds and in seasonality profile. Figure 13.4, Figure 13.5, and Figure 13.6 provide a view of the monthly wind speeds in the Northeast, South, and Southeast regions respectively, including both fixed and floating projects. Brazil has strong wind resource, with several of the representative sites modeled possessing wind resource comparable to projects in more established markets in the North Sea and Baltic Sea. 13 Cost of Energy Analysis 198 FIGURE 13.4 MONTHLY AVERAGE WIND SPEED—NORTHEAST REGION (1997-2021). Mean wind speed at 100m (m/s) 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec NE1 NE2 NE3 NE4 NE Avg FIGURE 13.5 MONTHLY AVERAGE WIND SPEED—SOUTH REGION (1997-2021). 12.0 Mean wind speed at 100m (m/s) 10.0 8.0 6.0 4.0 2.0 0.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec S1 S2 S3 S4 S Avg 199 Scenarios for Offshore Wind Development in Brazil FIGURE 13.6 MONTHLY AVERAGE WIND SPEEDS—SOUTHEAST REGION (1997-2021). 10.0 Mean wind speed at 100m (m/s) 8.0 6.0 4.0 2.0 0.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec SE1 SE2 SE3 SE Avg 13.2.3 Future Development Scenarios To create future CapEx, OpEx, and LCoE projections, each of the site locations were modeled under an assumed COD of 2030, 2040, and 2050. Given the uncertainty in these future projects, three scenarios have been considered as described in the Executive Summary. For the avoidance of doubt, these estimates are intended to capture the global technical and commercial development of the offshore wind industry over the coming decades and are subject to uncertainty. The #1 Base Case scenario considered two types of parameters: ■ Technical design parameters are inputs into the Renewables.Architect suite of tools describing the anticipated high-level changes made to turbine design over the coming decades. ■ Techno-economic learning factors aim to capture the cumulative effect of marginal technical improvements in materials, control systems, aerodynamics, etc. as well as the cost reduction potential of expanding supply chains, specialist vessel availability, increased competition, etc. These factors were applied during the post-processing stage of the Renewables. Architect analysis. Full descriptions of these parameters can be found in Appendix F. 13 Cost of Energy Analysis 200 TABLE 13.2 TECHNICAL DESIGN PARAMETERS FOR FUTURE COD YEARS. Assumed COD Year Parameter 2030 2040 2050 Turbine Rating 15 MW 20 MW 25 MW Hub Height 138 m 155 m 170 m Rotor Diameter 235 m 270 m 300 m Lifetime 30 years 30 years 35 years Max tip speed (m/s) 100 m/s 105 m/s 100 m/s Inter-array cable voltage (kV) 66 kV 132 kV 132 kV TABLE 13.3 TECHNO-ECONOMIC LEARNING FACTORS. Assumed COD Year Parameter 2030 2040 2050 Fatigue Load Reduction Factor 0.85 0.83 0.78 Extreme Load Reduction Factor 0.95 0.90 0.87 Rotor Nacelle Assembly Markup 0.95 0.83 0.73 Installation Markup 0.95 0.9 0.85 The learning factors detailed above were informed by consideration of long-term industrial trends as well as current inflationary pressures and supply chain constraints. As mentioned, the assumptions above reflect a broadly conservative growth scenario in which marginal iterative improvements take place to 2050. To reflect the uncertainty in these projections, based on the results from #1 Base Case, two additional scenarios (#2 Intermediate and #3 Ambitious) have also been considered in which industry development is more rapid and widespread, with increased installed capacities, supply chain investment, technology development, and project experience, such that learning rates are increased and cost reduction is greater. 13.2.4 Fixed Input Parameters The following input parameters were assumed for the Renewables Architect modeling: ■ Installed capacity of 1,000 MW per project (1,005 MW in the 2030 COD case) ■ Square-shaped project area of 200 km2 ■ Discount rate of 7 percent ■ Direct-drive topology ■ Carbon spar cap material for blades ■ Export system of 230 kV AC (upon review of export system distances) 201 Scenarios for Offshore Wind Development in Brazil 13.2.5 OpEx Assessment OpEx values have been estimated through detailed computer modeling using the industry proven model “Optimization of Operations and Maintenance” (O2M). This model simulates in a virtual time domain the operations of an offshore wind project over a long term (~100 years), in hourly resolution for different site conditions around the world based on 31-year long term time series of concurrent significant wave height and wind speed sourced from the National Oceanic and Atmospheric Administration (NOAA) hindcast model database [214]. This has been verified against satellite measurements from the GlobWave project [215]. Site conditions modeled include a variety of sites with different metocean conditions with a range between 1 m to 2 m long-term mean significant wave height to allow interpolation/extrapolation between these site conditions and therefore be able to estimate costs and availability for sites with similar site conditions around the world without the use of specific site data. However, it should be noted that operations were not modeled with site specific data and therefore, results are to be seen as indicative of performance of a site with similar site conditions but subject to uncertainty due to the fact that different regions in the world have a different wave and wind distribution and therefore, variations on results are expected. For the purposes of this analysis, these values are considered to be reasonable, and indicative of potential performance and costs required for a project in Brazilian waters. For each individual location, an assumed O&M port was identified and selected, noting that with the exception of SOV access strategies, relatively limited port-side facilities are needed to carry out O&M activities and that investment into installing those capabilities within an existing port would likely be performed prior to or in conjunction with the development of a gigawatt-scale offshore wind farm such as those considered in this analysis. For this reason, smaller ports were considered within the O&M assessment in addition to larger commercial ports; however, the cost of expanding any ports has not been considered within this cost of energy assessment. An optimal O&M strategy, turbine availability and OpEx was defined for each of the 11 representative projects and for each of the 2030, 2040, and 2050 COD dates. These strategies were used for all scenarios when calculating LCoE. Table 13.4 describes the learning factors assumed. TABLE 13.4 O&M LEARNING FACTORS ASSUMED. Assumed COD Year Parameter 2030 2040 2050 O&M Markup1 1 0.96 0.92 Notes: 1-O&M unit costs assumptions are for an assumed 2030 COD as such O&M learning rates have been normalized to that date. 13 Cost of Energy Analysis 202 13.3 RESULTS The results presented in this section are considered indicative and dependent on the assumptions and methodology detailed above. Therefore, more detailed characterization and assessment of an individual site may lead to CapEx, OpEx, and AEP estimates that differ from those presented herein. All costs presented are given in 2023 USD. Table 13.5 below provides a high-level summary of the over 100 individual permutations of site, foundation type, COD year, etc. The CapEx ranges provided are the average range of the #1 Base Case and #3 Ambitious scenarios. As a single scenario has been modeled within OpEx assessment, the ranges provided refer to upper and lower estimates of the individual scenarios modeled. The AEP values are average of all projects considered. As the scenarios only consider changes in CapEx and OpEx, the AEP results are applicable to all scenarios. TABLE 13.5 CAPEX, OPEX, AND NET AEP ESTIMATE RANGES FOR THE SCENARIOS MODELED. Fixed Floating 15 MW 20 MW 25 MW 15 MW 20 MW 25 MW LCoE Category 2030 COD 2040 COD 2050 COD 2030 COD 2040 COD 2050 COD CapEx 2,500 1,900–2,300 1,700–2,200 4,500 3,000–4,100 2,400–3,800 (2023 kUSD/MW) OpEx 445 36–43 31–36 83 55–67 44–58 (2023 kUSD/MW/yr) Avg. Net AEP 3,800 3,850 3,900 3,550 3,600 3,650 (MWh/MW/yr) The LCoE projections, shown in Figure 13.7 and Figure 13.8, present the #1 Base Case, #2 Intermediate, and #3 Ambitious scenarios. It is stressed that at the time of publication there was significant uncertainty over the next several years in the cost of energy and cost of commodities critical to wind farm component fabrication, installation, and operation and maintenance. Therefore, while indicative upper and lower bounds have been provided, it is acknowledged the additional uncertainty in these projections. The bottom-fixed projection in Figure 13.7 gives an initial LCoE of US$64/MWh in 2030, falling to US$49 to 59/MWh in 2040, and a final range of US$41 to 52/MWh in 2050. With reference to Table 13.5, this can be seen to be driven by a combination of reductions in both CapEx and OpEx, as well as moderate increases in AEP. Further reductions in LCoE in the 2050 COD case are also due to the increase in operational lifetime from 30 to 35 years. CapEx reductions are driven by a combination of the assumed technological improvements, such as improved control systems and lower loads, and economic factors such as larger more robust supply chains and greater competition between component suppliers. Many OpEx cost components such as the number of repair technicians, number of vessels, onshore facilities, etc, increase with the number of turbines and remain relatively fixed with turbine size. For this reason, having a smaller number of larger turbines leads to significant reductions in OpEx, as shown in Table 13.5. 203 Scenarios for Offshore Wind Development in Brazil It is important to highlight that the LCoE calculation did not fully recognize some of the financial and legal CapEX costs, such as financial hedges, transmission and generation fees, financial services, bonds, insurance, and legal, cooperate services and overhead, transaction fees, and Brazilian taxes. It was also not considered land and seabed lease fees, both for offshore and onshore construction. This is due to the complexity of estimating these variables, as they are dependent on the risk appetite of the investor, local rules, and seabed auction scheme that are not yet defined and local financial conditions. Another relevant assumption is the weighted average cost of capital (WACC), which can significantly impact the LCoE. In this study, the results presented consider a WACC of 7 percent, however when assuming, for example, a WACC of 10 percent, the LCoE values for bottom-fixed in 2030 could go from US$64/MWh to US$80/MWh. FIGURE 13.7 LCOE ESTIMATES OF BOTTOM-FIXED PROJECTS FROM 2030 TO 2050. 80 70 60 LCOE (2023 USD/MWh) 50 40 30 20 10 0 2030 2040 2050 Commercial Operations Date (COD) Fixed #1 Base case Fixed #2 Intermediate Fixed #3 Ambitious The LCoE projection for floating wind shows a larger spread between the #1 Base Case and #3 Ambitious scenarios reflecting the higher degree of uncertainty in the technology. The initial 2030 projection gives an initial LCoE of US$124/MWh, falling to US$81 to 109/MWh in 2040 and US$62 to 94/MWh in 2050. Higher CapEx estimates for floating wind are largely driven by the high cost of the semi-submersible floater relative to bottom-fixed foundations such a monopiles and jackets, with additional CapEx increases coming from more expense dynamic array cables, floating offshore substations, etc. A moderate convergence in LCoE between floating and bottom-fixed wind projects can be expected over the years as floating wind technology matures. However, if the offshore wind industry is able to leverage existing expertise in ship building and offshore structure fabrication and commodity prices (particularly steel) return to more favorable levels, the difference in CapEx between floating and bottom-fixed projects has the potential to narrow substantially over the coming decades. 13 Cost of Energy Analysis 204 Similar reductions in OpEx are observed for floating projects as for bottom-fixed projects from 2030 to 2050, driven by the same increase in turbine rating reducing the number of turbines for a site of the same installed capacity. However, overall OpEx values are higher for floating wind, due to higher costs for main component replacements, higher balance of plant inspection and maintenance costs and increased insurance costs. All other things being equal, Net AEP values are slightly lower for floating projects as the wind farm availability is lower due to an assumed main component replacement strategy in which turbines are towed to port, resulting increased downtime compared to bottom-fixed projects. Taken as a whole, this results in the LCoE values of floating wind being higher than bottom- fixed, but with the difference between them narrowing from 2030 to 2050. FIGURE 13.8 LCOE ESTIMATES OF FLOATING PROJECTS FROM 2030 TO 2050. 160 140 LCOE (2023 USD/MWh) 120 100 80 60 40 20 0 2030 2040 2050 Commercial Operations Date (COD) Floating #1 Base case Floating #2 Intermediate Floating #3 Ambitious The increase in Net AEP in both the bottom-fixed and floating projects up to 2050 is largely driven by the lower wake losses resulting from the increased distances between turbines as the projects modeled contain fewer, larger turbines. This can be seen in the comparison of turbine spacings in the representative array cable layouts in Figure 13.9, where the turbines (light gray points) are significantly more tightly packed in the 2030 scenario (left) than the 2050 scenario (right). Higher electrical efficiency from the increased inter-array cable voltage and the increased wind speeds from the higher hub heights also contributed to the increased net AEP in the 2040 and 2050 scenarios but their contributions were not as significant. 205 Scenarios for Offshore Wind Development in Brazil FIGURE 13.9 REPRESENTATIVE ARRAY CABLE LAYOUTS IN SELECTED 2030 (LEFT) AND 2050 (RIGHT) SCENARIOS. Loc l E stin (m) Loc l E stin (m) 15000 41 01 02 13 12 31 26 50 06 22 13000 05 40 19 01 12 33 30 00 49 11 05 25 21 00 11 39 58 11000 04 18 29 48 32 04 20 10 38 Loc l Northin (m) 24 57 10 28 47 9000 03 17 03 19 31 37 56 09 09 27 23 7000 OSS 46 37 63 02 OSS 18 36 16 55 30 08 26 08 45 62 22 17 5000 36 35 54 07 15 25 29 44 61 07 16 34 21 53 3000 35 66 24 43 14 60 28 15 33 39 52 06 65 20 23 34 14 42 59 1000 13 32 51 27 64 38 -1000 -1000 1000 3000 5000 7000 9000 11000 13000 15000 -1000 1000 3000 5000 7000 9000 11000 13000 15000 Cable cross section (mm2) Cable cross section (mm2) 95 300 800 95 300 800 As shown in Figure 13.10, the Northeast region has a lower average LCoE in 2040 at US$53/MWh compared to US$69/MWh in the other two regions for bottom-fixed projects. This is due to the higher wind speeds, shallow water depths and shorter distance to grid connection points, leading to higher capacity factors and lower CapEx estimates. The bottom-fixed project locations in the Southeast and South regions are roughly equal when comparing the main drivers of LCoE such as wind speed, water depth, soil conditions, etc. Comparing floating projects, LCoE values are slightly lower in the South region compared to the Southeast region, this is due to stronger wind speeds at the sites selected offsetting the higher CapEx of those projects due to the longer transmission distances. However, the Southeast region can be potentially attractive for floating projects in the short and medium term, especially focused on the electrification of offshore O&G operations as discussed in Section 5. No floating projects were modeled in the Northeast region as in this region the continental shelf is broad, providing ample shallow waters and space for bottom-fixed wind projects. Consideration of floating projects within the region, which would likely be less economical, would therefore not represent a realistic development. 13 Cost of Energy Analysis 206 FIGURE 13.10 LCOE COMPARISON OF BOTTOM-FIXED AND FLOATING PROJECT BY REGION (2040 COD, #1 BASE CASE). 120 114 100 108 LCOE (2023 USD/MWh) 80 60 69 69 53 40 20 0 NE Region SE Region S Region Fixed Projects Floating Projects 13.3.1 Sensitivity Assessment Figure 13.11 provides an overview of the sensitivity of bottom fixed LCoE to its key inputs. While the data used to generate the figure is from the 2030 bottom-fixed #1 Base Case scenario, as the proportional changes are considered, the overall trends are applicable to both fixed and floating projects, all scenarios, COD years and sites considered within this analysis. LCoE varies linearly with CapEx and OpEx, with CapEx being the more impactful input parameter as it dominates the overall lifecycle cost of the project, and as it is incurred at the start of the project it is not discounted. Operational lifetime also has a bearing on LCoE; however, as the additional energy generation occurs at the end of the life, it is heavily discounted. By contrast, changes in Net AEP impact energy generation across the whole lifetime of the project and are therefore much more impactful on LCoE. The results detailed in Section 13.3 assumed a fixed discount rate of 7 percent, however Figure 13.11 highlights that LCoE is sensitive to discount rate changes, emphasising that the results of this assessment are dependent on the input assumptions used. This LCoE sensitivity to discount rate is typical of CapEx-dominated energy projects such as wind and highlights the importance of financing strategy and WACC in the financial viability of offshore wind developments as further discussed in Section 15. 207 Scenarios for Offshore Wind Development in Brazil FIGURE 13.11 VARIATION OF BOTTOM-FIXED LCOE TO KEY PROJECT PARAMETERS (2030 AVERAGES USED AS A DEFAULT CASE). 30% 25% 20% 15% Change in LCOE (%) 10% 5% 0% -20% -15% -10% -5% 0% 5% 10% 15% 20% -5% -10% -15% -20% Change in Input (%) Capex Opex AEP Operational Lifetime Discount Rate 13.4 DISCUSSION A total of 11 “representative project” locations were selected across the three macro-areas and site-specific data was collected for each location. This data was combined with assumptions of technological developments in 2030, 2040, and 2050 and were run using the Renewables.Architect tool (DNV’s in-house suite) for wind design and cost-modeling. Bottom-fixed offshore wind LCoE projections show a significant reduction over the period 2030 to 2050, with LCoE project declining between 19 to 36 percent from US$64/MWh in 2030 to US$41 to 52/MWh in 2050. Floating offshore wind experiences a 24 to 50 percent reduction in LCoE across the period, going from US$124/MWh in 2030 to US$62 to 94/MWh in 2050. In 2030, the LCoE for bottom-fixed offshore wind is projected to be approximately US$64/MWh. As an indicative reference and to provide a sense of magnitude of where onshore wind LCoE stays in relation to energy prices in the Brazilian market, onshore wind and solar achieved average prices of approximately US$35/MWh, while hydropower reached an average of around US$56/MWh in the last auction (A-5, 2022) [216]. For biomass thermoelectric plants, the average price was US$63/MWh in the A-4 auction, 2022 [217]. In 2021, an auction to cover the period between 2022 and 2025 using gas thermoelectric plants resulted in an average price of US$320/MWh, totaling the contracting of 14 projects, which together reached 1.2 GW [218]. 13 Cost of Energy Analysis 208 14 OFFSHORE WIND AND HYDROGEN 14.1 PURPOSE The main purpose of the offshore wind and hydrogen assessment is to examine the potential for GH2 generation from offshore wind. This includes a review of the synergies and advantages of coupling GH2 and offshore wind, evaluation of ongoing projects that aim to produce GH2 from offshore wind in Brazil, particularly in the Northeast region of the country, and an analysis of the LCoH based on different sources including DNV Energy Transition Outlook [213]. 14.2 METHOD To assess the potential integration between hydrogen production and offshore wind energy in Brazil, the following steps have been applied: FIGURE 14.1 SCHEMATIC REPRESENTATION OF THE STEPS OF THE ANALYSIS. Analysis of the Collection of Compilation of offshore wind and information about preliminary LCoH GH2 context, and of H2 projects in Brazil, figures, and analysis the H2 production H2 production, on long-term potential in Brazil energy demand, etc. implications In the first stage, a review of the landscape and background in Brazil regarding the production of GH2 was carried out. This included a description of the current scenario, main initiatives, projects, and studies that evaluate the potential for hydrogen production in the country. Subsequently, a collection of public information was carried out on both ongoing and announced GH2 projects in Brazil. This was based on media reports, news, company publications and scientific/market databases. The analysis resulted in a greater concentration of initiatives led by the Northeast region. Based on this information, a preliminary estimate of the energy demand of these projects was made, and the potential challenges in meeting these energy needs were discussed. 209 Scenarios for Offshore Wind Development in Brazil Finally, a preliminary assessment of the LCoH from offshore wind for Brazil was obtained based on DNV’s Energy Transition Outlook (ETO) knowledge and data. These figures were compared with key literature references related to this work. A discussion of long-term predictions for the reduction of LCoH was also performed, along with a feasibility study on the possibilities of cost reduction of LCoH from offshore wind. It is particularly important to highlight that this section is intended to serve as an introduction for the discussion on how the two industries interact, rather than a detailed analysis that cover every facet of technology and its potential use in the Brazilian market. 14.3 RESULTS 14.3.1 Offshore Wind and GH2 Hydrogen is being considered as the primary energy vector for decarbonizing energy production and consumption systems. Hydrogen can be used directly as a low or zero-carbon energy source in sectors that are difficult to decarbonize. It can also be used as a vector for energy storage, enabling greater entry of variable renewables such as wind and solar. Due to its versatility of use and energy storage capacity, hydrogen is considered a resource with the ability to promote coupling between fuel, electric, industrial, and other markets. In this sense, hydrogen could not only contribute to the deep decarbonization of the global economy but also promote a broader and decentralized competitive dynamic by coupling different market segments. Brazil has shown interest in hydrogen development and has launched several programs to promote it. The “Roadmap for Structuring the Hydrogen Economy in Brazil” [217] established a 20-year schedule to achieve goals related to each proposed theme and provided for the launch of a Governmental Program for Production and Use of Hydrogen in Brazil after 2007, and the PNH2 (“Programa Nacional do Hydrogênio”, or “National Hydrogen Program”) proposes strategic guidance for actions aimed at the development of the hydrogen economy in Brazil, which would allow harmony with the other sources of our energy matrix. Brazil is currently developing the regulatory framework for the offshore wind farms under development [217]. The PNH2 estimates that Brazil has the technical potential to produce around 350 million tonnes per year of H2 from offshore wind-generated electricity. It is worth highlighting the design of hydrogen production hubs in port complexes, where industrial plants are also located. Several countries have adopted this strategy as the main mechanism for promoting investment in the infrastructure needed to make low-carbon hydrogen viable for export in the medium term. At the other end, countries in Europe and Asia would be main importers of this hydrogen. Following this trend, several private Brazilian ports have mobilized efforts to have hydrogen production plants in their retro areas, such as the Port of Pecém (CE), the Port of Suape (PE), the Port of Açu (RJ), and the Port of Rio Grande (RS). 14 Offshore Wind and Hydrogen 210 FIGURE 14.2 PECÉM COMPLEX (EXAMPLE). SOURCE: CIPP, 2021.xx There are synergies in coupling offshore wind and GH2 technologies, even though some are not inherently exclusive to both technologies. One of these synergies is flexibility. A wind farm can include a fuel cell and an electrolyser, and store electricity in the form of hydrogen, which can later be used to generate electricity for sale in the market. Alternatively, the hydrogen can be sold as a product, either for internal use or export [219]. Offshore wind turbines typically yield higher energy production per turbine installed due to better wind speeds and consistency, in contrast to onshore turbines. However, offshore wind turbines also face higher costs and technical challenges due to rough sea conditions [220]. Transporting electricity back to shore is a challenge due to the higher losses in traditional AC power cables and high cost of HVDC systems. Producing hydrogen offshore using pipelines to transport it to shore can be a viable alternative when electricity transmission is too expensive. While the cost per unit length of an offshore pipeline exceeds that of an offshore cable, the pipeline’s energy transmission capacity is greater. This results in lower normalized pipeline capital costs compared to an equivalent offshore electrical cable to transmit the same amount of energy. By normalizing the transmission capacity to carry 1,000 MW renewable energy, the cables unit cost exceeds the pipelines cost for the offshore transmission (US$2.02 million/GW/km for offshore cable, against US$0.96 million/GW/km for offshore pipeline) [221]. xx https://www.complexodopecem.com.br/wp-content/uploads/2022/12/Relato%CC%81rio-de-Sustentabilidade-2021-Complexo-do-Pece%CC%81m.pdf 211 Scenarios for Offshore Wind Development in Brazil Two system configurations are possible for hydrogen production as presented in Table 14.1 and Figure 14.3. TABLE 14.1 SOLUTIONS FOR HYDROGEN PRODUCTION FROM OFFSHORE WIND. Solution Approach Offshore Wind Farm with Electricity generated by wind turbines travels a short distance to the Offshore Electrolyser electrolyser platform. Hydrogen is produced, compressed, and transported to shore via a pipeline. This approach has several advantages over using a submarine electrical cable, including reduced costs and lower transmission losses of H2 in a pipeline (0.1 percent) compared to conventional electricity export from wind farms (up to 5 percent). Offshore Wind Farm with Electricity generated offshore is transmitted to shore via a traditional cable. Onshore Electrolyser Once onshore, a decision can be made: either sell the electricity directly to the grid or use it to produce hydrogen. During periods of extremely low electricity prices, the operator can potentially buy electricity from the grid to produce hydrogen. This approach provides increased flexibility to the operator, with the option of selling electricity or producing hydrogen, depending on the most economically viable choice. FIGURE 14.3 HYDROGEN INTEGRATION WITH OFFSHORE WIND FARMS. El ctrol sis Pow r H2 H Offshor wind f rm with onshor l ctrol r El ctrol sis Pow r To shor H H2 Offshor wind f rm with c ntr li d offshor l ctrol r Source: Arthur D. Little [223]. Further information regarding the role of hydrogen in the decarbonization strategy, the feasibility, uses, and management of hydrogen can be found in Appendix G. 14.3.1.1 H2 Production Potential for Brazil Thinking ahead to 2031, it is also necessary to understand the possible paths for Brazil in hydrogen production and what challenges and opportunities may arise on this horizon. A study promoted by the World Bank and Government of Spain in collaboration with the Ministry of Development, Industry, Commerce and Services in Brazil (MDIC), which aims to accelerate the development of low-carbon hydrogen in Brazil, has identified a potential production of around 3.5 Mt of low carbon hydrogen, in Brazil, by 2035 considering the list of announced projects [222]. 14 Offshore Wind and Hydrogen 212 Another study, the Net Zero by 2050 report from the IEA estimates that the total world production of low-carbon hydrogen will be of approximately 212 Mt by 2030, and of approximately 528 Mt by 2050 [225]. Under the PDE 2031 [226], EPE estimated the total technical potential for hydrogen production in Brazil, which corresponds to the upper limit of resource availability, which would be obtained if all the available resource were recovered from the most efficient technologies available, from proven and probable energy resources, thus admitting a greater level of uncertainty in their availability. This estimate does not consider hydrogen from natural or geological sources, economic aspects, or any other impediment to technological penetration, financial or behavioral aspects, nor any existing barriers to the use of this energy resource. This technical potential can be considered the upper limit for the use of these resources. It should be noted that significant changes in technology and the resource base can alter the technical potential over time. In this case, Brazil would have a technical potential hydrogen production of 1,800 Mt by 2050 [10]. Nonetheless, the Brazilian Center for International Relations (CEBRI) estimates that Brazil should reach between 21 and 32 Mt of hydrogen production by 2050, of which approximately 4 Mt H2/year for export [13]. This value is similar to the 1 percent of global demand projected by IEA. A BNDES study was carried out presenting scenarios and the possibles roles and contributions of Brazil [12]. The chosen scenarios were 1 percent, 3 percent, and 5 percent of global demand being met by Brazil, in a required hydrogen production up to 16 Mt H2/year as presented in Table 14.2. The study also considered electrolysers of 75 percent efficiency and the LCoH to be between US$1.50 and 2.00/kg. TABLE 14.2 ESTIMATE OF HYDROGEN PRODUCTION AND OFFSHORE WIND INSTALLED CAPACITY IN BRAZIL IN 2030 AND 2050. Figures for the planned scenarios Hydrogen in Mt/year OW Installed capacity (GW) 2030 2050 2030 2050 1% contribution to global demand 0.8 3.2 8 32 3% contribution to global demand 2.0 10.0 20 100 5% contribution to global demand 4.0 16.0 40 160 Source: BNDES [12]. These figures were used to support the definition of the scenarios used as reference in this report, as described in Section 2. Namely scenario #2 Intermediate, where the offshore wind capacity would be equivalent to the capacity needed to serve 1 percent of contribution to the global low-carbon hydrogen demand, and #3 Ambitious, where the offshore wind capacity would be equivalent to the capacity needed to serve a 3 percent contribution. 213 Scenarios for Offshore Wind Development in Brazil 14.3.2 Announced Projects and Future Renewable Energy Installed Capacity There are several announced projects that aim to produce hydrogen in Brazil. Unigel is currently building a 100 kt/year of hydrogen and 600 kt/year of ammonia in the Polo Petroquímico de Camaçari, Bahia. Qair is investing US$3.9 billion in a 388 kt/year of GH2 and 198 kt/year blue hydrogen (hydrogen produced by the reform of natural gas) plants in Complexo Industrial e Portuário de Suape, Pernambuco. Qair is also investing US$3 billion in an offshore wind plant to produce 488 kt/year of hydrogen in Complexo Portuário Industrial do Pecém (CIPP), Ceará. Other projects are currently being deployed in Ceará, Pernambuco, Minas Gerais, and São Paulo. As described in Section 14.2, information regarding GH2 ongoing or announced projects in Brazil was collected from publicly available information such as media reports, news, company publications and scientific/market databases. The compiled information is presented in Table 14.3 below. TABLE 14.3 LIST OF GH2 PROJECTS IN BRAZIL (2023). Production Project Value million Start up Project name Locality Operator Project type hydrogen status (USD) year tonnes/ year Base One Ceara Enegix Green Future 5,400 2025 600,000 GH2 Project State–CE Camaçari GH2 Bahia Unigel Green Active 120 2023 10,000 Plant (Phase 1) State–BA Camaçari GH2 Bahia Unigel Green Active 420 2025 30,000 Plant (Phase 2) State–BA Camaçari GH2 Bahia Unigel Green Future 960 2027 60,000 Plant (Phase 3) State–BA H2 Suape GH2 Pernambuco Qair Green Active 1,000 2026 74,000 Project (Phase 1) State–PE H2 Suape GH2 Pernambuco Qair Green Future 710 2027 74,000 Project (Phase 2) State–PE H2 Suape GH2 Pernambuco Qair Green Future 680 2029 74,000 Project (Phase 3) State–PE H2 Suape GH2 Pernambuco Qair Green Future 660 2031 74,000 Project (Phase 4) State–PE Pecém H2V GH2 Ceara EDP Brasil Green Archived 8 2023 193 Plant (EDP) State–CE Pecém Port GH2 Ceara Cactus Plant (Cactus Green Active 5,700 2025 200,000 State–CE Energia Energia) Pecém Port GH2 Ceara Casa dos Plant (Casa dos Green Active 4,000 2026 365,000 State–CE Ventos Ventos-THA) Fortescue Pecém Port GH2 Ceara Metals Green Future 6,000 2027 305,505 Plant (Fortescue) State–CE Group Notes: Active project–This can be defined as one where activity has extended beyond the operator and supply chain business is potentially available. This may only be a feasibility, pre-FEED, or environmental assessment but nevertheless represents a real business opportunity. Planning is almost always consent applied. Future project–This is one where all activity still remains within the operator/ developer and there is no present opportunity for the wider supply chain. The project is essentially still at a planning phase and has not been formally submitted. It is possible, however, that various feasibility/consultancy-based contracts might be in place. 14 Offshore Wind and Hydrogen 214 Cancelled project–This has progressed to a certain point and has then been abandoned. The reasons are nearly always due to financing problems, a lack of final consenting approval or political intervention. Archived project–This is one which has run its build course and has continued into commercial operation. Although archived these projects are on-going in a commercial sense and often have very significant operational and maintenance budgets associ- ated with them and thus the supply chain is still very interested in them. The initial analysis of these projects indicates that, combined, they represent an investment of approximately US$25 billion, with an accumulated capacity of around 1.8 million tons of hydrogen per year, which represents almost 2.5 percent of global hydrogen demand in 2030 to reach net zero according to the IEA. Based on the information collected in Figure 14.3, a preliminary forecast of the accumulated annual renewable power installed capacity for the desired production of hydrogen and the accumulated hydrogen production by these projects has been obtained. The results are presented in Figure 14.4 below. It is expected a renewable power installed capacity of 7.3 GW in 2025, which will practically double by 2030, reaching around 14 GW. This level of renewable power installed capacity is considerable and will provide important challenges in energy planning for the short and medium term, especially in the listed states. As of 2024, the states of Ceará, Pernambuco and Bahia together have 11 GW of onshore installed capacity that were built over the last few decades. FIGURE 14.4 H2 PRODUCTION VERSUS RENEWABLE ENERGY INSTALLED CAPACITY IN BRAZIL. 16.0 2000 1867 1793 1793 14.0 1719 1719 1800 14.4 13.3 13.3 13.9 13.9 1600 12.0 Electric power [GW] 1400 1279 10.3 10.0 1200 KTON 8.0 1000 7.3 840 6.0 800 600 4.0 400 2.0 10 10 200 0.1 0.1 0 0 23 24 5 6 27 28 29 30 31 2 2 20 20 20 20 20 20 20 20 20 Renewable energy installed capacity (GW) H2 (KTON) Levelized Cost of Hydrogen An estimate for producing hydrogen with fixed and floating offshore wind energy (LCoH) was undertaken following DNV ETO (Energy Transition Outlook) methodology and Brazil-specific data. The applied methodology can be outlined as follows: 1. LCoE assumptions for offshore wind energy: The same assumptions as the LCoE calculation (outlined in the Section 13) were employed. This includes factors such as capital costs, operational and maintenance costs, capacity factors, and project lifetime. 215 Scenarios for Offshore Wind Development in Brazil 2. Internal benchmark for Brazil: Assumptions and parameters were tailored based on DNV benchmark specific to Brazil. Factors such as local market conditions, cost of the major components, resource availability, and other relevant variables that may influence the LCoH were considered. 3. ETO calculation and forecast until 2050: The ETO’s calculation and forecast for hydrogen production was incorporated, considering technological advancements, efficiency improvements, and cost reductions over time. ETO projections were used up to the year 2050 to capture long-term trends. 4. Growth scenarios: As for the LCoE calculation (outlined in the Section 13), the three scenarios were considered for the LCoH calculation, varying key input parameters within a range to assess LCoH sensitivity to different assumptions. 5. Parameters used: Parameters for dedicated power and hydrogen production were used, including costs (CAPEX, OPEX, discount rate), specific electricity intensity, expected operating hours, lifetime, stack replacement interval, storage, and transport to where hydrogen is fed into the pipeline or to the port. Using the methodology described above and the three scenarios mentioned in the LCoE calculation, the calculated LCoH for fixed offshore wind, as shown in Figure 14.5, resulted in: ■ Scenario 1: US$5.6/KgH2 in 2030, US$3.7/KgH2 in 2040, and US$3.3/KgH2 in 2050 ■ Scenario 2: US$5.6/KgH2 in 2030, US$3.6/KgH2 in 2040, and US$3.2/KgH2 in 2050 ■ Scenario 3: US$5.6/KgH2 in 2030, US$3.3/KgH2 in 2040, and US$2.9/KgH2 in 2050 FIGURE 14.5 LEVELIZED COST OF HYDROGEN FORECAST FOR FIXED OFFSHORE WIND IN BRAZIL. 7 6 5 LCOH (2023 USD/kg) 4 3 2 1 0 2030 2040 2050 Commercial Operations Date (COD) Fixed #1 Base case Fixed #2 Intermediate Fixed #3 Ambitious Source: DNV. 14 Offshore Wind and Hydrogen 216 For floating offshore wind, the calculated LCoH, as shown in Figure 14.5, resulted in: ■ Scenario 1: US$8.5/KgH2 in 2030, US$5.3/KgH2 in 2040, and US$4.6/KgH2 in 2050 ■ Scenario 2: US$8.5/KgH2 in 2030, US$4.9/KgH2 in 2040, and US$4.1/KgH2 in 2050 ■ Scenario 3: US$8.5/KgH2 in 2030, US$4.3/KgH2 in 2040, and US$3.5/KgH2 in 2050 FIGURE 14.6 LEVELIZED COST OF HYDROGEN FORECAST FOR FLOATING OFFSHORE WIND IN BRAZIL. 10 9 8 LCOH (2023 USD/kg) 7 6 5 4 3 2 1 0 2030 2040 2050 Commercial Operations Date (COD) Floating #1 Base case Floating #2 Intermediate Floating #3 Ambitious Source: DNV. The results for fixed offshore wind in 2050 (US$2.9 to 3.3/KgH2) are in a comparable range with the results of a recent study for onshore wind and solar (US$2.2 to 3.2/KgH2) from Energy Assets, GESEL/ UFRJ, and PUC-Rio [227], however, it is important to highlight that costs for onshore wind and solar are also expected to decline by 2050. On the other hand, for 2030, the results for fixed offshore and floating are around US$5.6 and 8.5/ KgH2, respectively, these values are within the same range from a recent study from CNI, which estimates that the LCoH for Brazil varies between US$5 and 15/KgH2 depending on regional conditions, being US$5/KgH2for NE region [224]. In addition, the study promoted by the World Bank and Government of Spain in collaboration with the MDIC, forecasts a LCoH for Brazil in 2030 and 2050, which is represented in Figure 14.7. This study also identifies potential hydrogen hubs in Brazil. The potential hubs that consider GH2 production from offshore wind are Pecém (CE), Port of Açu (RJ), and Port of Rio Grande (RS) [222]. 217 Scenarios for Offshore Wind Development in Brazil FIGURE 14.7 LEVELIZED COST OF HYDROGEN FOR THREE H2 HUBS IN BRAZIL, 2030 AND 2050. 2030 10.0 9.0 9.1 8.0 8.2 LCOH (USD/kg H2) 7.0 7.2 6.8 6.5 6.0 6.2 6.2 5.5 5.5 5.0 5.1 4.4 4.6 4.0 3.0 2.0 Fixed OW Floating OW Fixed OW Floating OW Fixed OW Floating OW Port of Pécem Port of Rio Grande do Sul Port of Açu 2050 10 9 8 LCOH (USD/kg H2) 7 6.4 6 5.8 5 5 4.8 4.4 4.4 4.5 4 3.9 3.9 3.5 3 3.1 3.2 2 Fixed OW Floating OW Fixed OW Floating OW Fixed OW Floating OW Port of Pécem Port of Rio Grande do Sul Port of Açu Source: World Bank [222]. In 2030, for fixed Offshore Wind, LCoH values vary between US$4.4 and 6.5/KgH2, while for floating foundations the values are higher, starting at US$6.2/KgH2. For fixed foundations, the Pecém hub has the lowest values, and for floating foundations, the Rio Grande do Sul hub presents the lowest values together with Pecém, but with a smaller variation between the minimum and maximum. Analyzing the projection for 2050, it is possible to notice a significant reduction in the LCoH, reaching values of approximately US$3.0/KgH2 for fixed Offshore Wind and between US$4.0 and 5.0/KgH2 for floating. In this way, it is possible to note that offshore wind energy can reach competitive values in the long term, but in the short term, challenges need to be overcome so that offshore wind energy can compete with other renewable sources, especially solar and onshore wind. 14 Offshore Wind and Hydrogen 218 Table 14.4 presents a comparison between the results for LCoH obtained in this report and those from the study promoted by the World Bank [222]. TABLE 14.4 COMPARISON BETWEEN LCOH OF DIFFERENT SOURCES (REFERENCES), USD/KGH2. Source Fixed offshore wind Floating offshore wind 2030 DNV 5.6 8.5 World Bank (Pecém) 4.4–5.5 6.2–8.2 World Bank (Rio Grande do Sul) 4.6–5.5 6.2–6.8 World Bank (Açu) 5.1–6.5 7.2–9.1 2050 DNV 2.9–3.3 3.5–4.6 World Bank (Pecém) 3.1–3.9 4.4–5.8 World Bank (Rio Grande do Sul) 3.2–3.9 4.4–4.8 World Bank (Açu) 3.5–4.5 5.0–6.4 14.4 DISCUSSION Hydrogen production, particularly GH2 produced using renewable energy, has been presented as a key strategy to achieve global net-zero emissions by 2050. In this context, there is a growing demand for energy to produce GH2, which represents an opportunity for renewable energy sources, such as offshore wind. At the same time, offshore wind energy could become attractive in the medium and long term considering the vast Brazilian offshore wind potential, depending on the volume and market conditions for development in Brazil. Offshore wind and GH2 present several synergies that can support their adoption, such as a potential cost saving in transmission infrastructure when generating hydrogen offshore, and providing flexibility to the system, when generating hydrogen for direct use or electricity generation, depending on market conditions and marginal energy production. Specifically in the context of Brazil, the projects announced until 2031 already pose a considerable energy demand challenge for hydrogen generation, reaching 14 GW of renewables installed capacity. Considering the supply from the grid, this demand can represent an even greater challenge, especially in the Northeast region where the points of interconnection have very limited or no spare capacity by 2027. Regarding the LCoH, it is estimated that it could come close to the onshore wind and solar PV LCoH in 2050 based on optimistic assumptions. 219 Scenarios for Offshore Wind Development in Brazil In this scenario, Brazil’s investment in GH2 produced by offshore wind would aid in compliance with the Delegated Act 27 from the European Union. This act mandates that renewables account for at least 90 percent of the energy produced in each country, supporting Brazil’s strategy to export hydrogen to Europe. Nonetheless, the coupling of the two technologies is also beneficial to boost both industries in Brazil and supporting the diversification of energy sources, and at the very least, supporting to manage the energy mix having in mind the availability of hydropower. 14.4.1 Recommendations To further develop the potential between GH2 and offshore wind, it would be highly beneficial to have: ■ Investment in studies and preparation of strategic plans for both offshore wind and hydrogen, including energy supply, availability, and infrastructure close to the production centers, among others. [Brazilian government] [Wind and H2 energy associations] ■ Planning of electric transmission and interconnection infrastructure—in regions closer to potential hydrogen hubs. [Brazilian government] [ONS] 14 Offshore Wind and Hydrogen 220 15 ROLE FOR PUBLIC FINANCIAL SUPPORT 15.1 PURPOSE The objective of this section is to provide an overview of the financial infrastructure and role of public financial support in the successful development of offshore wind projects in Brazil. This analysis presents examples where public financial support has been used to enable other types of large infrastructure investments in Brazil and also considers the availability of local and international bank finance. 15.2 METHOD The assessment of the role of public finance support has been carried out through a desktop review of literature, public reports, and offshore wind project data, as well as with expert matter discussions and interviews. In this section, the results of this review are followed by a discussion and recommendations about what could be applicable in Brazil to achieve different growth scenarios for the offshore wind industry. FIGURE 15.1 SCHEMATIC REPRESENTATION OF THE METHODOLOGY. Desktop review of Public finance Discussion & role of public options Recommendation finance support 15.3 RESULTS 15.3.1 Brazilian Case When it comes to investment in renewable energy, Brazil is positioned in the top rankings worldwide. This is supported by the following facts: ■ In 2019, Brazil ranked as the third most attractive in the world for clean energy investments according to Bloomberg [229]. ■ It is expected that Brazil will attract US$300 billion in infrastructure investments in the energy sector, up to 2040. Of this, 90 percent will come from renewable sources, according to Bloomberg’s New Energy Finance. 221 Scenarios for Offshore Wind Development in Brazil ■ Brazil is globally in renewable installed capacity as per IRENA analysis, occupying the seventh place for wind power [230], as of 2022. ■ It is likely that Brazil and Colombia will become the first countries in Latin America to invest in offshore wind energy, owing to the rising interest from foreign and local energy companies, and announced greenfield projects in the last years. To achieve these rankings, public finance in Brazil has played and will continue to play a major role. The following sections present a summary of the main financial support alternatives, in particular the role that public financing and incentives may play in supporting the development of the offshore wind market in Brazil. 15.3.2 Local and International Bank Lending BNDES is the largest financier of renewable energy projects in Brazil, providing capital directly to project developers and indirectly through a partnership with public financial institutions such as Banco do Brasil and CAIXA, regional banks such as Banco do Nordeste (BNB) and Banco de Desenvolvimento de Minas Gerais, and private financial institutions, such as Santander, BTG, Bradesco, and Itaú. Historically, BNDES has played a key role in the development of renewable energy projects in Brazil and has financed around 60 percent of all onshore wind projects in the country [232]. In the case of offshore, projects will likely pursue a combination of local and international lending [234]. Among international banks with experience and who are active in offshore wind finance, the following can be mentioned: BTMU, BNP Paribas, Société Générale, Rabobank, KfW-IPEX, Natixis, Deutsche Bank, SMBC, SocGen, Goldman Sachs, Santander, Commerzbank, SEB, ABN-Amro, Crédit Agricole, and Helaba. Local Content Rules BNDES implemented Local Content Rules (LCR) in the early 2000s through the FINAME program, which was a condition to receive favorable financing from the bank. This resulted initially in the increase of local production of towers and blades, until 2012, when a new set of local content rules were set. The new LCR established a progressive increase of local content targets, including more components of the wind turbine (towers, blades, hub, and nacelle), which helped establish a strong onshore wind industry and supply chain [231]. It can be said that the increase in wind power procurement, combined with Brazil’s untapped potential, and BNDES’s local content requirements, served as an incentive for foreign manufacturers to establish factories in Brazil [233]. However, it is important to highlight that, as discussed in Section 8, offshore wind has a particularly complex supply chain, with large and complex components, great raw material demand, and significant requirements for manufacturing facilities (i.e., blade manufacturing, foundation rolling, and bending capacity with serial production capabilities). The investment required is significant and it is important to have market certainty and long-term visibility of the sector to establish a local supply- chain. As a result, the industry has established an international supply network, with companies spread across different regions of the world. 15 Role for Public Financial Support 222 Experience in markets such as France and Taiwan have shown that high LCRs tend to reduce competition, increasing cost and risk, and slowing market development. As an alternative approach, the UK refrained from setting a local content requirement in the early years of its offshore wind sector to avoid the risk of stifling the industry. Now that its market has matured, a government-industry target of 60 percent local content by 2030 has been agreed upon, allowing industry and government to determine the most beneficial approach to incorporate local content [9]. Role of domestic financial institutions The success of financing renewable projects in Brazil is not solely due to BNDES’s patient capital, but also to its active role in establishing partnerships. These collaborations help mitigate risks for investors and promote knowledge-sharing within the financial sector. For instance, BNDES collaborates with domestic financial institutions to create financing mechanisms that encourage investment in green projects. Regional banks often serve as intermediaries between BNDES and project developers, thereby enhancing the capacity of local financial institutions to invest in innovative technologies. Additionally, BNDES and domestic financial institutions pool resources from specialized public funding programs, including the Constitutional Funds administered by the Ministry of National Integration [231]. Financing options Most common financing options from BNDES correspond to Corporate Finance, mainly during the project development phase, and project finance, during construction of the projects. BNDES has played a crucial role in financing energy generation projects in Brazil. From 2000 to 2023, approximately 70 percent of the new installed capacity of energy generation projects in Brazil, around 79 GW, were supported by BNDES. Notably, 86 percent of this capacity comes from renewable sources [232]. The model used was project finance associated with a PPA from the regulated power market (Ambiente de Contratação Regulada—ACR), which were used to obtain long-term financing from BNDES, as further described in Section 16. However, it is noted that the development banks’ loans have declined slightly since 2018 when BNDES changed from TJLP (Long-Term Interest Rate) to TLP (Long Term Rate),xxi which made BNDES interest rates closer to those provided by the market [235]. The establishment of a regulatory framework, which enhanced the appeal of issuing debentures through the provision of tax incentivesxxii, played a crucial role in securing a larger portion of funds from the financial market for the financing of generation projects. For context, from 2012 to 2020, the energy sector successfully raised around 13 billion USD through incentivized debentures [236]. As presented in Figure 15.2, an upward trend in BNDES financing was evident from 2005 onward for all sources, and from 2010 for wind energy. The highest funding level for wind energy occurred in 2017, reaching around US$2 billion. In contrast, the peak for all sources (fossil and non-fossils) combined took place in 2012, totaling US$6 billion, primarily driven by the construction of the 11 GW Belo Monte hydroelectric plant in the State of Pará. xxi TLP (Long Term Rate) is composed by the IPCA (Extended National Consumer Price Index) and the real interest of a five-year NTN-B bond. xxii The incentives were mainly the exemption of income tax and Imposto sobre transações financeiras (tax on financial transactions—IOF)—Law 12,431/2011 and Decree 8,874/2016. 223 Scenarios for Offshore Wind Development in Brazil FIGURE 15.2 BNDES INVESTMENT IN ENERGY GENERATION PROJECT (2005-2023), WIND VS. ALL OTHER SOURCES. 7 6 5 Billions USD 4 3 2 1 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Wind All sources Offshore wind In the case of offshore wind, the capital required is of considerable magnitude. This becomes clear when we analyze Figure 15.3, which indicates the BNDES investment in energy generation projects (2005-2023), and the required investment to meet the offshore wind growth scenarios by 2050. Specifically for wind, the financed volume from 2005 to 2023 totalled US$11 billion, and for all energy sources, it reached US$36 billion during the same period, adding around 63.5 GW and supporting a total investment of US$64 billion. When compared with the offshore wind growth scenarios, a preliminary estimate indicates that investment to achieve scenario #1 Base Case would be around US$40 billion by 2050, whereas for scenarios #2 Intermediate and #3 Ambitious, the required investment volume would be US$80 and 240 billion, respectively. Therefore, particularly for #2 Intermediate and #3 Ambitious scenarios, due to the substantial investment required, it will be fundamental to align the scope of financing from national development banks, bilateral entities, and international funds. FIGURE 15.3 BNDES INVESTMENT IN ENERGY GENERATION PROJECT (2005-2023), WIND, ALL OTHER SOURCES VS OFFSHORE WIND GROWTH SCENARIOS REQUIRED INVESTMENT BY 2050. 250 200 Billions USD 150 100 50 0 Wind All sources #1 Base case #2 Intermediate #3 Ambitious (2005-2023) (2005-2023) (by 2050) (by 2050) (by 2050) Due to this large investment required for offshore wind, it is likely that the BNDES will have to mobilize available capital worldwide and access to international investment funds. 15 Role for Public Financial Support 224 European experience The risk premium charged by European lenders has been consistently falling as the offshore wind market matures, the technology’s positive track record continues, and lenders become more comfortable with the risks. A total of 67 lenders actively participated in financing in 2020, including multilateral financial institutions, export credit agencies, and commercial banks [241]. The European Investment Bank (EIB) plays a significant role in financing offshore wind projects. The EIB has committed €5 billion to support Europe’s wind manufacturers and has approved over €20 billion in financing for new projects. In addition, EIB provides counter-guarantees to commercial banks to support investment by companies across the wind sector. This is expected to support up to €80 billion of new wind energy investment [242]. Another initiative from EIB relates to acting as an “anchor lender,” facilitating the creation of lending groups for offshore wind projects [243], and also providing de-risking tools and guarantees, thereby improving access to finance for the wind energy sector [244]. 15.3.3 Multilateral Lending Pioneering projects in emerging markets commonly face higher costs due to factors such as policy uncertainty, increased risk exposure, and underdeveloped local supply chains. Consequently, narrowing the price disparity between established and developing markets becomes imperative to incentivize governments to accelerate the adoption of offshore wind energy. The capacity of private sector developers to obtain financing from Multilateral Development Banks (MDBs) such as the IFC, Inter-American Development Bank (IDB), and EIB can yield various advantages in terms of overall financial accessibility and cost implications. Multilateral lenders can provide project financing for large infrastructure projects such as offshore wind, provided they meet certain thresholds of bankability, development impact, and adherence to environmental and social standards. Some MDBs are able to provide local currency financing; in cases where they cannot, they rely on long-term currency swaps for large-scale investments. When local financial entities like BNDES collaborate in the financing of projects alongside a multilateral bank, the local financial bank participates with local currency loans, whereas the multilateral bank usually participates under USD credit lines. For agreements and finance structure, each party involved has its own lender agreement, and shares a Common Terms Agreement which applies to both parties. Multilateral development banks may also be involved in the early stages of projects to catalyze the market through investments in ancillary infrastructure, like transmission and logistics infrastructure, ports, and preparatory works. 225 Scenarios for Offshore Wind Development in Brazil 15.3.4 Concessional Finance Put simply, concessional finance is below-market-rate finance provided by major financial institutions, such as development banks and multilateral funds, to accelerate their development objectives. Concessional climate finance generally falls into two categories: ■ Concessional lending to governments and public agencies for public investment projects, which combines climate finance with traditional funding sources. ■ Concessional project finance for private sector developers, often referred to as blended concessional finance, where concessional funding is offered alongside commercial debt. Climate funds like the Climate Investment Funds (CIF), Global Environment Facility (GEF), Emerging Market Climate Action Fund (EMCAF), or Green Climate Fund (GCF), have played a pivotal role in concessional climate finance to support climate actions worldwide. The concessional financing in emerging markets will be key to help reducing overall financing costs, reduce tariffs, and create market precedents. Concessional financing is seen as essential for the viability of first-of-a-kind projects, creating a demonstration effect, establishing market precedents, and reducing lenders’ risk premiums over time [238]. Other climate funds have also been launched in Brazil. Table 15.1 presents some examples of climate funds in Brazil. TABLE 15.1 EXAMPLES OF CLIMATE FUNDS IN BRAZIL. Climate Fund Description National Climate Fund Established in 2010 and managed by BNDES. Its subprogram on renewable energy (Fundo Clima) supports investments in the generation and local distribution of renewable energy. Vinci Climate Launched in 2023, it helps financing infrastructure projects in Brazil that Change Fund promote environmental sustainability, with a focus on renewable energy and sanitation projects. It is expected that climate finance will need to play a significant role in financing capital-intensive offshore wind projects. As described in the 2023 ESMAP report on "The Role of Concessional Finance in Accelerating the Deployment of Offshore Wind in Emerging Markets," this may come in the form of concessional debt for both the public and private sector, as well as grants to reduce overall project CapEx. Although the amounts may be relatively small compared to overall project cost, concessional finance can play a critical role in catalyzing investment and reducing the costs of the first projects. 15 Role for Public Financial Support 226 15.3.5 Green Debts Instruments Green bonds serve as fixed income securities designed to generate funds for the financing or refinancing of projects or assets exhibiting positive environmental or climate-related qualities. Distinguished by their focus on funding long-term projects or assets, Green Bonds have emerged as a significant alternative to promote and streamline initiatives and technologies that contribute positively to the environment across various organizational realms. Furthermore, they play a pivotal role in attracting institutional investors, including pension funds, social security trust funds, insurance companies, and asset managers [239]. In 2015, BNDES was the first Brazilian bank to issue a green bond in the international market (Luxembourg Green Exchange listing). Since then, the Green Bond market in Brazil has grown, reaching a total of US$15.2 billion in 2023. A recent example was the bond allocated to RDVE Subholding SA (91.5m USD) for a wind farm. FIGURE 15.4 OVERVIEW OF GREEN BONDS MARKET IN BRAZIL. Gr n bonds m rk t in Br il – k f cts Br il w s th third l r st sust in bl d bt m rk t in L tin Am ric nd th C ribb n, ddin 7.2 billion USD in 2022. Gr n bonds r l d b non-fin nci l corpor tions (79%), follow d b fin nci l corpor tions (11%), nd d v lopm nt b nks (8%). Most r n d ls h v m turiti s of 5-10 rs (48%), whil short r d ls constitut 26%, nd d ls lon r th n 20 rs m k up 15%. R n w bl En r (56%) is th m in UoP (Us of Proc ds), follow d b L nd Us (20%) nd Tr nsport (10%). Source: [239]. In the case of offshore wind projects, it would be expected that BNDES and/or developers will take advantage of Green Bonds to mobilize funds. 15.3.6 Green Equity Instruments Green equity instruments refer to equity issuances by a company where the raised capital is specifically allocated to projects that have a positive environmental impact. The Comissão de Valores Mobiliários (Brazilian Securities and Exchange Commission—CVM) is the institution responsible for setting the rules for the funds. Currently, there are two main equity instruments being used in Brazil that are relevant to the financing of energy projects, including potentially offshore wind: Fundo de Investimento em Participações—Infraestrutura (Infrastructure Investment Funds—FIP-IE), and Fundos de Investimentos em Direitos Creditórios (Receivables Investment Funds—FIDC) [258]. Infrastructure Investment Funds (FIP-IEs) work through investments in securities of public or privately held corporations, focused on projects that help with the country’s development, such as energy, transport and sanitation. There are currently 19 FIPs listed on the Brazilian stock exchange (B3). 227 Scenarios for Offshore Wind Development in Brazil 15.3.7 Tax and Policy Incentives Considering Brazil's relatively high taxation in comparison to other markets, for growth of the offshore wind power industry, certain tax benefits currently applicable to other industries could be replicated for this new industry. All tax incentives in Brazil are grounded in federal or state laws and are initiated by the members of the Congress (deputies or senators). However, advocacy from industry associations is crucial for politicians understanding the need for such incentives. The color matrix below considers the applicability of tax and policy incentives in the energy market in Brazil to the offshore wind industry. TABLE 15.2 COLOR MATRIX FOR TAX AND POLICY INCENTIVES. Description Applicable to offshore wind projects Potentially applicable to offshore wind projects Not applicable to offshore wind projects Table 15.3 present the main tax and policy incentives potentially applicable to offshore wind projects. TABLE 15.3 TAX AND POLICY INCENTIVES POTENTIALLY APPLICABLE TO OFFSHORE WIND PROJECTS. Cat. Name Description IPI Decree No. 11.158/2022: reduces the IPI rate to zero for operations with wind turbines (Excise Tax) classified under code 8502.31.00 of the Table of Excise Tax Incidence (TIPI). The rules have changed in December 2023, and it was established that during 2024, wind turbines with power below 7.5 MW will have import taxes of 11.2 percent while II wind turbines with power above 7.5 MW are subject to an import tax rate of 0 percent. (Import taxes) From 2025 onwards, all imported wind turbines will incur 11.2 percent import tax— and any exemptions, for any power, will only be granted upon proof that there is no equivalent national production. Law No. 13.097/2015: reduces the PIS and COFINS rates to zero for the import of PIS and goods classified under TIPI code 8503.00.90 (parts used mainly in wind turbines COFINS classified under TIPI code 8502.31.00). PIS and COFINS function similarly to a VAT, as they are both levied on the gross revenue of companies. ICMS Convention No. 101/97: authorizes states and the federal district to grant ICMS exemption for operations with equipment and components used in solar and wind energy generation, providing specific treatment for wind turbines classified under ICMS TIPI code 8502.31.00, as well as their parts. ICMS is a tax in Brazil that stands for “Imposto Sobre Operações Relativas à Circulação de Mercadorias e Serviços de Transporte Interestadual de Intermunicipal e de Comunicações”. It applies to various transactions, including sales of goods, services and general supply of goods. Regime Especial de Incentivos para o Desenvolvimento da Infraestrutura (REIDI)xxiii is a special regime introduced by the federal government that benefits companies involved in infrastructure projects, suspending the levy of PIS and COFINS on local acquisitions REIDI and import operations of goods for infrastructure works, as well as in the acquisitions and imports of services applied in infrastructure constructions. Once the regime’s requirements are met, the suspensions of PIS and COFINS convert to a zero rate. xxiii Special incentives regime for the development of infrastructure (free translation). 15 Role for Public Financial Support 228 Cat. Name Description REPETRO-SPED (IN 1781) is a special customs regime applicable to the O&G industry. The regime has three main modalities: (1) Import of goods for permanent stay in the REPETRO-SPED country with exemption from federal tax payments; (2) Temporary admission with exemption from federal tax payments; and (3) Temporary admission with payment of federal taxes. 15.4 DISCUSSION It is characteristic of Brazil to have a very strong national development bank, BNDES, which is involved in the development and construction of almost all large infrastructure projects in the country. In the case of the offshore wind industry, it is expected that BNDES will play a similar role. However, the offshore wind industry is a capital-intensive sector, and developers will likely require finance structures with involvement of many actors besides the BNDES from public and private financing to equity investments, green bonds, or to tax and policy incentives. In developed countries, experience in offshore wind financing has led to a decrease in risk premiums as lenders become more familiar with the technology. However, in Brazil the initial cost of financing may be higher due to the risks associated with first-of-a-kind risks projects. Therefore, the involvement of BNDES and other sources of concessional financing for emerging markets will be key to help reduce overall financing costs, reduce tariffs, and create market precedents. Brazilian public financing is seen as essential for the viability of first-of-a-kind projects, creating a demonstration effect, establishing market precedents, and reducing lenders’ risk premiums over time [238]. Effective risk management, guided by vigilant financiers, is expected to facilitate the attraction of low-cost capital, a key feature for a viable, cost-competitive offshore wind sector. The involvement of national development banks is commonly linked to local content requirements. In Brazil, this was the case for initial onshore wind projects, and it encouraged/facilitated a significant development and growth of local expertise and supply chain. In the case of offshore wind projects, a large involvement of BNDES is also expected, however offshore wind has a particularly complex supply chain, with large and complex components, diverse requirements manufacturing and a large variety of services. As a result, the industry relies on an international supply network, with companies spread across different regions of the world, and the implementation of local content requirements in Brazil should be assessed considering these aspects. The financial and investment sectors will also want to see the involvement and encouragement of the Brazilian national government to give greater certainty to financing and debt risk assessments, by providing certainty in regulatory framework, including potential incentives, and clear visibility in long term policies. Undoubtedly, the creation of relevant incentives and mechanisms, as well as better financing conditions for development banks or second-tier banks, would also increase participation and attraction to projects of this nature. Additionally, seeking advice from experienced foreign governmental entities in understanding financing structures for offshore wind projects would bring additional comfort for investors. In conclusion, a diverse range of funding sources, including public and private debt, concessional finance, green bonds and even climate funds, will be needed to reinforce the development pathways of the offshore wind industry. 229 Scenarios for Offshore Wind Development in Brazil For a successful offshore wind market in Brazil, it is expected that developers and investors will collaborate with local entities like development banks or climate funds to define the scope and design of the projects and instruments to be deployed [238]. Figure 15.4 shows the capital amount required according to each scenario. It highlights the capital- intensiveness needed to meet the installed capacity under each growth scenario, particularly for scenarios #2 Intermediate and #3 Ambitious, where the capital volumes can reach US$80 and 240 billion by 2050, respectively. It is important to highlight that in addition to the capital required for construction of the projects, there is an additional need for capital to develop the necessary infrastructure and supply chain, such as transmission, manufacturing facilities and ports. As discussed in Section 7, the necessary investment can reach up to US$120 million per port. To develop local manufacturing capabilities, the investment required is also significant as seen in mature markets, for example, a XXL monopile foundation manufacturing facility in Teesside from SeAH Wind (~US$500 million) and Siemens Gamesa Renewable Energy investment (~US$235 million) to expand their blade manufacturing facility in Hull [240]. From this perspective, national and multilateral development banks can play a key role in financing the necessary infrastructure. FIGURE 15.5 CAPITAL REQUIRED FOR EACH OFFSHORE WIND GROWTH SCENARIO BY 2050. 40 Capital required 80 (bi US$) 240 #1 Base case #2 Intermediate #3 Ambitious B s c s #1 Base Case Int rm di t Ambitious The investment flow in the country would be conservative with low-risk approach towards flow in and few Th inv stm nt projects This su involved players sts r t rmarket. in the This n rio r that scsuggests This fl cts r t rand authorities th countr would b mount of bil t r l op nn ss to div national banks do not prioritise long-term policies or instruments to stimulate rs sourc s ofinvestment cons rv tiv with low-risk tr ns ctions nd in offshore wind projects, resulting in a low flow of investments in the green th fin ncin , ccomp ni d b energy sector. ppro ch tow rds inv stm nt promotion fulfilm nt of clim t obj ctiv s #2 Intermediate This suggests a greater amount of bilateral transactions and investment promotion proj cts nd f w pl rs b tw n diff r nt nd nd s prioritis d to th r between different stakeholders; however, the conservative investment profile and less involv d in th m rk t. st k hold rs; how v r, with subsidis d fin ncin , plus appealing subsidy mechanisms may still be prevalent. Collaborative transactions between This su sts th t national th cons rv and international tiv entities, stron subsidies, and int rnincentives economic tion l int r help st into build a will uthoriti s nd n tion l inv stm track record of investment. nt profil nd nt rin th Br ili n m rk t. This b nks do not prioritis l ss pp lin subsid sc n rio is six tim s th b s #3 Ambitious This scenario reflects a greater openness to diverse sources of financing, accompanied by lon -t rm polici s or m ch nisms m still b sc n rio. It is fund m nt l to li n the fulfillment of climate objectives and agendas prioritized with subsidized financing, plus instrum nts to stimul t pr v l nt. Coll bor tiv th scop of fin ncin sourc s nd a strong international interest in entering the Brazilian market. This scenario is six times inv stm nt in offshor tr ns ctions b tw n ction ch nn ls of n tion l the level of investment seen under the base scenario. It is fundamental to align the scope wind proj cts, r ofsultin in n tion l nd int rn tion financing sources and action channels of national l d v lopm nt b nks, development t r l entities, bil bilateral banks, low flow of invand stm nts ntiti s, subsidi s nd international funds in the first years of the horizon, to reach this range lof ntiti s, nd int rn tion funds in for the capital in th r n n r s ctor. financing of thisconomic technology.inc ntiv s will th first rs of th hori on, to h lp to build tr ck r ch this r n of c pit l for th r cord of inv stm nt. fin ncin of this t chnolo . 15 Role for Public Financial Support 230 Recommendations It is expected that Brazilian public financing through BNDES and other local development banks, and with a clear definition of policies and regulations by the government entities, will play a pivotal role in the development of the offshore wind industry. Based on experiences in international offshore wind markets and in the existing onshore wind sector in Brazil, the following recommendations are made to boost the financing of offshore wind projects in the country: ■ Create credibility by establishing mechanisms in the electricity market that encourage financial interest in offshore wind projects, such as including offshore wind in long-term energy planning and having dedicated auctions or mechanisms with economic incentives in the market such as dispatch priority. [Brazilian government] ■ Mobilize available capital worldwide and have access to international investment funds with interests in the energy transition agenda. For this, it is required that the country establishes clear regulatory and market plans to attract investors, and, at the same time, maintains the focus on the environment and people as part of a sustainable development. [BNDES] ■ National banks should collaborate with private sector developers to ensure shared risk and facilitate the bankability of projects. Also, multilateral development banks may need to be involved in investments in ancillary infrastructure, like transmission and logistics infrastructure, ports, and preparatory works. [National banks, Multilateral development banks] ■ Developers and government should seek the involvement of concessional financing sources and work with government agencies in a timely manner to ensure that the funds are: 1) sufficient to appreciably reduce the LCoE of the first projects, and; 2) directed at the appropriate public and private sector components. [Developers] ■ Continue pushing for the achievement of climate change targets, which will lead to the opening of funds or bonds by public finance entities to finance projects related to the energy transition and the decarbonization of the grid. [Brazilian government, Private finance entities] ■ Instead of mandating restrictive LCRs, it is recommended to progress with policies that: help local supply chains to learn, grow and be more efficient; support collaboration with overseas companies; establish large-scale markets with stability and visibility; develop industrial policies supporting internationally competitive supply chains; and establish transparent, robust, and bankable frameworks consistent with the global market [6]. Such measures would enable both a strong offshore wind market and a strong local supply chain. [Brazilian government] 231 Scenarios for Offshore Wind Development in Brazil 16 PROCUREMENT OF ENERGY 16.1 PURPOSE This section discusses typical options for procurement of energy for generation projects in Brazil. 16.2 METHOD The overall methodology is depicted in Figure 16.1. It considers a desktop review of literature, public reports, and offshore wind project data, as well as expert matter discussion, an analysis of procurement and contracting strategies, followed by recommendations about a potential approach in Brazil. FIGURE 16.1 SCHEMATIC REPRESENTATION OF THE METHODOLOGY. Desktop review of Procurement and Discussion & procurement contracting Recommendation options strategies analysis 16.3 RESULTS 16.3.1 Brazilian Experience The procurement of energy in Brazil has evolved over time and has enabled the country to rapidly increase the amount of renewables in its energy mix. Brazil is in seventh place in global rankings of onshore wind installed capacity [230], as of 2022. To achieve this, the procurement of renewables followed the framework detailed in Table 16.1. 16 Procurement of Energy 232 TABLE 16.1 OPTIONS OF PROCUREMENT OF RENEWABLE ENERGY IN BRAZIL (UP TO 2023). Key element Feed-In-Tariff Renewable Free Market Contracting and PROINFA energy auctions (ACL) Period in force 2002 to 2011 25 auctions from 2009 Renewable projects started to present entering this market in 2017-2018 Capacity installed 119 plants (41 onshore wind, Over 23 GW of installed Over 10GW of wind and 59 small hydro, 19 thermal capacity of onshore wind solar generation projects and biomass) totaling 2.65 generation GW of installed capacity Procurement • Managed by Electrobras • Competitive process; • Bilateral agreements details • Power purchasing • Ceiling price of energy; between generator and contracts for 20 years • Required contracted/ consumer (which can be in (in BRL) warranted energy BRL or USD). • Phase 1 of PROINFA was production; • Used in the free market, based on feed-in-tariffs • PPA term of 20 years by commercial and with floor and ceiling (in BRL); industrial (C&I) companies prices [246]; for Phase 2 with at least 500 kW of • Tax incentives within of PROINFA, a minimum contracted capacity. REIDI (Regime Especial local content index of de Incentivos para o • Typically for terms of less about 60 percent was Desenvolvimento da than 20 years. [247] required to access public Infraestrutura); financing sources • Favorable financing conditions by BNDES; • Exemption of the ICMS in transactions regarding wind energy equipment and components; and • Possibility to adhere to additional tax benefits. Challenges/ Difficulties regarding the Risk perception of investors • Relatively short terms Success lack of financial capacity was reduced [246] of these agreements, of developers, which forced thanks to these auction increased uncertainty M&A transactions and characteristics. for financing entities delayed the projects. The favorable position of and investors. Slow definition of rules the local currency against • Potential price for local content affected the dollar also played in uncertainty due to investments and the Brazil's favor. variability. effectiveness of the program. • Provides more flexibility Despite these challenges to adapt to electricity during PROINFA, there price changes during the was an important learning life of the project. process that helped defining • Most C&I consumers the basis for the development might have small of the renewable energy power needs and may industry through energy not be suitable to auction mechanisms. sustain PPAs from early offshore wind producers. 233 Scenarios for Offshore Wind Development in Brazil 16.2.3 Worldwide Experience There are a number of approaches that developed markets have taken to offshore wind procurement; these may serve as a reference for Brazil. These are described below. Offtake agreement options for revenue support Most common offtake agreement types applied in recent years involve Contracts for Difference (e.g. UK, Netherlands, Germany, Denmark, and United States), or PPAs with Fixed-Rate Instruments or Fixed Premiums (e.g., United States), with consideration for Renewable Energy Certificates (REC). Agreements based on Feed-In Tariff (FIT) have been also an option for smaller scale projects, such as those applied by Germany between 2010 and 2019. Definitions of these schemes for revenue support for offshore wind energy projects can be found in references [9] and [248]. Auction approaches from other countries The following table presents a summary of selected procurement approaches from other countries. Data presented refers to the most recent auctions, unless otherwise specified. TABLE 16.2 APPROACHES TO AUCTIONS IN OTHER COUNTRIES. Type of Revenue Penalties for Country Stages of the procedure Selection criteria process support non-compliance UK Competitive Yes. Contracts Round 5 Auction Celtic Price criteria: The In case of (public for Difference Sea phases: government sets non-delivery, bidder auction) (CfD) 1. Pre-qualification a maximum price will not be able questionnaire (PQQ): for electricity, and to participate in Assessment of technical bidders compete to the following experience, financial match or go below 2 allocation rounds. standing, and legal this price. compliance. Non-price criteria is applied in early stages 2. Invitation to Tender of the process (PQQ + Stage 1 (ITT Stage ITT Stage 1) [249]. 1): Bidders provide evidence of technical and HSE capability [249], and their intentions regarding integration ports and plans to deliver social and environmental value during the term of the Legal Agreements. A maximum level of cash available is also assessed. 3. Invitation to Tender Stage 2 (ITT Stage 2): Assessment mainly on price. 4. Entry into Wind Farm Agreements for Lease. 16 Procurement of Energy 234 Type of Revenue Penalties for Country Stages of the procedure Selection criteria process support non-compliance Netherlands Competitive No. 1. Bidding Process: Price and non-price In case of (public Last auction Companies compete to criteria focused non-delivery: auction) did not secure offered projects. heavily on ecology • €10m for the 1st consider and system and 2nd month, and 2. Evaluation of Bids: The revenue integration and • €20m for each bids are evaluated based support, but restoration; non-price month thereafter on both price and non- some previous criteria are typically with a maximum price criteria. tenders decisive [251][251]. of €200m (bank offered a 3. Announcement of guarantee) Contract for Winners: The winners of Difference— the auction are usually which are announced several still in place months after close of for onshore the bidding. technologies Germany Competitive No. Negative 1. Bidding Process: Price and non-price €100-200 /kW [252] dynamic bidding Companies compete criteria. bidding achieved to secure a permit to • New auction design procedure (developers build and operate a since second half of pay for the wind farm. If multiple 2023 includes four right to build bids with a value of zero non-price criteria: the wind farm) cents per kilowatt-hour • Environmental are submitted for a protection site, a dynamic bidding (including noise procedure is conducted. impact). 2. Dynamic Bidding • Contribution to Procedure: The skilled workforce. purpose of a dynamic • Carbon emissions bidding procedure is to footprint in the differentiate between production of the bidders in a competitive wind turbines. environment when • Existence of PPAs. several zero-cent bids have been made. The successful bidders are the ones willing to pay the highest amount for each site. This is determined online in successive bidding rounds with increasing bid levels. 3. Announcement of Winners: The successful bidders will receive the right to apply for planning approval to construct an offshore wind farm. 235 Scenarios for Offshore Wind Development in Brazil Type of Revenue Penalties for Country Stages of the procedure Selection criteria process support non-compliance France Competitive Yes. 1. Selection of short- Price and non-price Before COD: dialog (public «Complément listed candidates based criteria. 50+2xM or 125 auction)xxiv de on initial application Non-price criteria for mEUR (whichever the Rémunération» based on technical and 30 percent of total lowest), where M is (a CFD financial capabilities. scoring (15 percent the number of months contract) Environmental Impact between T0 (award) 2. Competitive Dialog: The selected developers are + 10 percent local and the date of exit. invited to discuss content and supply After COD: the specifications of chain + 5 percent 1.25*N mEUR, the project with the robustness of the where N is the number state before submitting financial model). of years before their offer. the end of the CfD 3. Tender Submission and contract. [253] Selection of the Winner. 16.3.3 Procurement of Energy for Offshore Wind in Brazil Brazil has shifted from initial FIT schemes to (competitive) auctions for various renewable energy sources onshore.xxv The current framework for offshore wind in Brazil allows two approaches for the assignment of seabed concessions: ■ Unilateral (competitive) approach (or Planned Assignment Procedure), in which the government defines the areas for offshore wind concessions, manages the Declaration of Interference (DIP) process and launches a competitive process for bidders. ■ Bilateral approach (also known as “Ad-hoc” or Independent Assignment Procedure) which allows interested developers to propose areas for development of offshore wind projects. In this case, the DIP requirement process is under the responsibility of the developer. These approaches are further described in Section 11. The competitive procurement of energy based on the unilateral or Planned Assignment Procedure may consider revenue support through offtake agreements and other (tax) incentives. In the early offshore wind projects in Brazil, it is foreseen that revenue support will be required for auctions. Furthermore, the process might consider one-stage or two-stage approaches (also called ‘one-competition’ or ‘two- competition’ approaches). In the one-stage approach, the seabed rights and offtake are awarded in one tender, with the government undertaking all feasibility work at the site. In contrast, in the two- phase approach the seabed lease is awarded in the first phase, and then then offtake agreement is awarded in a second phase, with the developer carrying out all the site feasibility work. In the two- stage approach, the development risk lies primarily on the developers, while in the one-stage approach, the government bears the responsibility of site development, along with some of the risks. xxiv The French Energy Regulatory Commission (CRE) has proposed a switch from a competitive dialog procedure to that of a standardized call for tenders. xxv Competitive auctions with revenues support based on contracts linked to the spot prices of electricity (e.g., Contract for Difference) or with fixed-price schemes, such as PPAs or RECs, have become increasingly adopted worldwide replacing FIT schemes due to the lower price outcome [246], [260],[261]. 16 Procurement of Energy 236 In addition to the one- or two-stage approaches discussed, auctions’ design follow several steps. These might involve pre-qualification of potential bidders, competitive evaluation based on non-price criteria, evaluation based on price criteria, and selection of a winner per area. Detailed design of the auction depends on various factors, such as the availability and reliability of site data, price criteria definition, non-price criteria definition, offshore areas definition, expected installed capacities, etc. Technical and economic qualification criteria Although Brazil has an advanced offshore oil and gas sector, the regulatory framework for allocation of seabed for electricity generation does not yet exist. In developed offshore wind markets, the criteria for technical and economic qualification of interested players tend to be rigorous. Some examples from other countries are presented in Section 16.3.2. It is advisable to follow measurable qualitatively based criteria rather than price-based competitive processes, especially for a country’s first seabed tender rounds. Among others, in a qualitative approach a number of evaluation criteria could be considered for assessment, including: FIGURE 16.2 TYPICAL QUALITATIVE EVALUATION CRITERIA. Project Financial Supply Capability Commitment Sustainability Deliverability Strength Chain Plan Volume and frequency of auctions In terms of volume, past and planned offshore wind auctions in different countries consider offshore wind project capacities ranging typically from 500 MW up to about 2 GW. Larger projects have also been observed, but usually resulted from the aggregation of leasing sites by the same bidder/winner. Volume is important due to economies of scale. However, larger volumes require larger investments (i.e., investors/developers with larger financial capacities). Brazil has been successful and efficient in executing regular auctions, which is beneficial for predictability. Brazil has held typically three to four auctions per year for onshore renewables [246]. The frequency of offshore wind auctions observed in other countries is usually annual or bi-annual, but this depends strongly on the country's offshore wind targets and timelines. Annual or bi-annual frequencies are also advisable for Brazil. Nevertheless, auctions should only be held when the market is able to absorb the auctioned generation and is prepared to facilitate project development [246]. 237 Scenarios for Offshore Wind Development in Brazil 16.4 DISCUSSION The procurement of renewable energy in Brazil evolved from Feed-In-Tariffs through the PROINFA program, to regulated energy auctions (i.e., competitive bidding processes). In this sense, Brazil has significant experience with auctions, which led the country to be one of the leaders in implementation of public programs to promote renewable energy generation. It is therefore recommended to continue this approach for offshore wind, with a preference for a two-stage process as practiced in the UK. Considering the three scenarios identified in this report, the following considerations regarding procurement of energy can be made: ■ In all scenarios, the procurement of energy for offshore wind is expected to be based on exclusive seabed leasing (competitive) auctions with revenue support. It is foreseen that most of the revenue support will be in the form of long-term PPAs with potential use of Offshore Renewable Certificates (OREC). Additionally, mechanisms to protect against exchange rate risks are anticipated to be implemented. For the free market (ACL), price indexation with reference to the dollar is recommended, a practice covered by Law 14,286/21. This approach will provide more confidence to financial institutions and represents a good practice to mitigate currency rate exchange fluctuation risks. ■ Regarding the #1 Base Case scenario, it is expected to yield between five to ten operational offshore wind farms by 2035 and about 16 to 32 offshore wind farms by 2050. To achieve these levels by 2035 (5 GW total), the first auction will need to be held by 2028 (at the latest) with subsequent auctions on an annual or bi-annual basis. Auction design is not expected to change substantially over time due to the limited offshore wind capacity target of this scenario. ■ If the #2 Intermediate and #3 Ambitious scenarios are realized, the public sector will need a significant number of auctions most likely on an annual basis. These scenarios would bring a significantly increased number of offshore wind farms online, between 12 to 32 by 2035 and reaching between 32 to 70 farms by 2050, especially in the #3 Ambitious scenario. The size of wind turbines and wind farms are expected to increase as the offshore wind industry matures in Brazil. Under these scenarios, auction design may evolve over time to depend less on revenue support as LCoE reduces to levels competitive with conventional technologies. 16.4.1 Recommendations Given the current market conditions and previous experience in Brazil with onshore wind, it is recommended that Brazil implement an auction model for the procurement of offshore wind. In doing so, it will be important to consider the following: ■ Set long-term fixed price or premium tariff (with the use or not of RECs) power purchase agreements: Longterm offtake agreements derived from the energy auctions in the regulated market would provide predictability of revenues and increase confidence among stakeholders (developers, investors, borrowers/lenders, etc.) for a faster and stronger development of the offshore wind industry. [Brazilian government] 16 Procurement of Energy 238 ■ Application of price and non-price criteria for the energy auction: Non-price criteria are strongly recommended for the offshore wind auctions. Non-price criteria (NPC) have risen in importance and gaining traction globally as a strategic measure to foster national economic development, market impact mitigation, and environmental protection. Non-Price Criteria may include environmental protection, contribution to the development of skilled workforce, experience in offshore wind, deliverability of projects, innovation actions, low carbon emissions footprint, and local supply chain development. An appropriate scoring ratio between the price and non-price criteria is also advisable for Brazil, roughly 70/30 (as recommended in the EU) is considered consistent with international good practice. [Brazilian government] ■ Application of penalties based on the non-attained milestones in the auctions: The application of penalties against project milestones is perceived as an important element to increase the commitment of developers to follow their agreed schedules and to reduce risks (e.g., delays, non- deliverability of the project, etc.). [Brazilian government] ■ Establishment of similar (tax) incentives as the ones applied for onshore wind (e.g., zero import taxes on wind turbine components, etc.), low or no leasing fees for the offshore areas, and government-led network and interconnection adaptations to absorb the new production, are important elements that should be clarified while designing the auctions. [Brazilian government] 239 Scenarios for Offshore Wind Development in Brazil 17 PROJECT BANKABILITY 17.1 PURPOSE This section provides an assessment of the main project and market elements that may impact the bankability of offshore wind projects in Brazil. 17.2 METHOD This section looks at key elements of bankability, considering the Brazilian context. The overall methodology is depicted in Figure 17.1. It considers a desktop review of literature, public reports, and project data, as well as expert matter discussion, followed by an analysis of the key elements of offshore wind projects’ bankability in Brazil. FIGURE 17.1 SCHEMATIC REPRESENTATION OF THE METHODOLOGY. Project bankability key Discussion & Desktop review elements analysis Recommendation The results of the project bankability analysis are presented in Table 17.2. The risk rating considers possible impacts arising from the specific risks that have been identified for each bankability key element in Brazil. Table 17.1 presents the Color matrix of potential impacts. TABLE 17.1 COLOR MATRIX OF POTENTIAL IMPACTS. Description Unlikely to cause any impact on bankability. Potential moderate impact on bankability. Potential significant impact on bankability. 17 Project Bankability 240 17.3 RESULTS Although Brazil is in the early stage of the offshore wind industry development, it can be considered as a mature market in terms of onshore wind, oil and gas, and maritime sectors, all three of which are key for the development of the offshore wind industry. Developing this new offshore wind industry requires aligning economic, regulatory, technological, financial, and environmental factors. In addition to the development requirements that come with any new technology, there are two main factors that need to be addressed in Brazil to support the bankability of offshore projects: (i) project competitiveness relative to other technologies; and (ii) setting long-term offtake contracts. The latter can be addressed by setting dedicated offshore wind auctions, as previously done in Brazil for solar and onshore wind (refer to Section 16). Project competitiveness, however, is a major point to be addressed by public financing, which will be needed at early stages to fuel the industry and allow it to achieve lower costs of energy (refer to Section 13). Price stabilization mechanisms, and some degree of shelter from FX risk should be enough to make offshore wind appealing to private financial institutions once the projects are through their relatively long development phase. When a new industry is being developed, the bankability of the projects, or willingness of the lenders to finance it, is affected by the uncertainty and lack of knowledge about the nature of the new market—including trading liquidity, offtake counterparty landscape and revenue certainty. The lenders’ risk perception results in an added “premium” on the cost of capital, which can be reflected in increased interest rates, additional reserves, or more demanding guarantees. As discussed in Section 15, the Brazilian government, through BNDES, has proven successful in co-financing renewable energy generation projects, and is expected to continue doing so for offshore wind projects. This could facilitate the access to financing, reduce risks, and accelerate development of the offshore wind industry. A bankable project requires confidence from lenders, and to provide that confidence a project needs to prove that it can be developed, constructed, and operated with limited and mitigable risks from a technical, environmental, regulatory, financial, and legal point of view. Table 17.2 presents some of the key elements for a bankable offshore wind project, with description of associated risks, their assessment and suggested mitigation measures focused on the Brazilian context. 241 Scenarios for Offshore Wind Development in Brazil TABLE 17.2 INSIGHTS ON MAIN BANKABILITY ASPECTS. Description Risk Key element Suggested mitigation/measures of risk assessment Development Insufficient • Support through government-based co-financing for strategy and financial early-stage offshore wind projects could accelerate evaluation support the development of the industry in Brazil. Tools such as concessional finance might boost private investments (see Section 15). The designed public instrument should focus on risk mitigation and strengthening positive perceptions of offshore wind projects in Brazil to attract investments. In later stages of Project maturity, less public funding is expected. Lack of • Creation of partnerships with international companies with experience previous offshore wind experience would mitigate this risk. of project Building lenders’ confidence about the companies involved in developer and the development, construction, and operation of the offshore contractors wind projects should be fostered carefully. Lenders financing first projects in Brazil will focus on previous track records to ensure that projects are successfully completed and operated. Critical aspects to consider are experience in offshore wind, regions of operation, size, track record, financial health, current and past subcontractors, etc. • Establishment of clear project and business case assessment criteria will be of benefit for all stakeholders. Leasing, Permitting • Creation of dedicated teams in key organizations like IBAMA, permitting, process ANEEL, and EPE, would speed up the appraisal of projects. and complexity, • Assurance of good implementation and quick adaptation to environmental limited potential regulatory changes of the “PUG-Offshore” (Portal authorizations capacity and Unico para Gestão do Uso de Áreas Offshore para Geração de experience of Energia) to develop efficient evaluation and monitoring of offshore wind offshore wind projects.xxvi processes • Brazilian regulatory framework should ensure that both the “Planned Assignment Procedure” and the “Independent Assignment Procedure” (see Section 11) have efficient and timely responses to applicants of offshore wind project appraisals.xxvii Design Complex • Brazil’s first offshore wind projects will likely use fixed bottom evaluation offshore wind foundations, which are proven and bankable in other regions. farm design International partnerships are recommended to foster evaluation and share knowledge, skills, and expertise, especially with process companies with vast experience in offshore wind. • Bankability appraisal by lenders usually considers a close look at different assets of the balance of plant and connection to the distribution networks (e.g., turbines, foundations and offshore structures, offshore substation, cables, and grid connections), as part of the design evaluation. Project developers shall provide all available information, certificates, and approaches to mitigate risks regarding suppliers. • Project certificates can be issued by third parties, reviewing the design and attesting that the project meets the minimum requirements of the applicable standards. These certificates are mandatory in some countries (e.g., Denmark and Germany). In other countries (e.g., UK) while not mandatory, similar certificates are being required by financing institutions. xxvi Brazilian government has achieved important advancements in setting a clear, balance, transparent and agile permitting, and environmental authorization’s processes (see Section 0). xxvii The typical procedure for financing an offshore wind project requires that all permitting and environmental authorizations are obtained before the financial close. 17 Project Bankability 242 Description Risk Key element Suggested mitigation/measures of risk assessment Supply chain Manufacturing • Early support for public measures and co-financing and ports origin of instruments to foster national manufacturing of components factors components for offshore wind projects in Brazil would attract investments and accelerate development of a strong national supply chain (see Section 8). Offshore wind projects depend on a global supply chain. While some components are considered standard (e.g., turbine nacelles, electrical equipment) and are manufactured worldwide, other components (e.g., foundations, structures) are suitable for manufacture at or near to local ports. Local manufacturing of the heavier and bigger components (blades, towers, foundation structures) could reduce transport costs and logistical complexity while enhancing local economic and social development. Local content • Local content requirements tend to hinder offshore wind requirements development, particularly in the early years of the market. in early phases In the case of Brazil, local content has been historically an of development important aspect to achieve local financing from national development banks, such as BNDES, for renewable energy projects. Currently offshore wind sector is linked to a global supply chain, and developers will likely need to source components from international markets with few restrictions in terms of local production quotas. A safe transition period should be designed to allow Brazil to build its own capacity. Suitability • Brazil boasts a robust port infrastructure, encompassing of ports and ports, terminals, and shipyards along its entire coastline. logistics However, none of these ports currently have the necessary structure readiness to meet the demand of an offshore wind project. Therefore, detailed studies and analysis of required improvements should be prepared, regarding the timelines and level of investment needed. As discussed in Section 7, some of the main areas for improvement in Brazilian ports are cargo handling and bearing capacity of quayside and storage area. Commercial Adoption of • The establishment of long-term offtake agreements (e.g., and non-standard Contracts for Difference) with standardized conditions is contractual PPAs or beneficial for facilitating the bankability of offshore wind evaluation offtake projects in Brazil. A long-term offtake agreement, for all (including contracts the energy generated by the project and with a fixed tariff offtake (adjusted for inflation) is desirable. However, there may be agreement) scenarios with multiple offtake agreements (refer to Section 16), with shorter terms and different pricing schemes and with variable energy contracted. These cases should be assessed with care, as lenders aim for and offtake structure that ensures a stable revenue stream for the project during the term of the loan. Any country considering revenue support and offtake agreements for offshore wind consider price stabilization as the key consideration for bankability, as well as term lengths to match construction debt terms. Exchange rate • Offshore wind has an international supply chain, and a fluctuation significant part of equipment and components will be risks purchased in international currencies. To mitigate this risk and increase confidence from lenders, dollar-indexed PPAs are recommended for the free market (ACL). Brazil has approved the Law 14,286/21 (in force since 12/2022), which allows agents in the electricity sector to trade energy through PPAs linked to the dollar [256].In renewable energy auctions, it is anticipated that mechanisms will be established to protect against exchange rate risks. 243 Scenarios for Offshore Wind Development in Brazil Description Risk Key element Suggested mitigation/measures of risk assessment Grid Mismatch • Ensure an adequate planning of the distribution and connection and between the transmission infrastructure required to absorb the power management timing required from offshore wind projects, as well as timely availability to develop of the connection points. Clarity on aspects like actual the grid capacity, future expansion of grid system, power limitations, infrastructure curtailments, or availability of the grid will influence positively and the the confidence on the offshore wind projects. Brazil has offshore continuously carried out public auctions for the upgrade or wind project construction of new electric transmission infrastructures schedule [258]. This shows resilience in adapting to the more flexible energy mix and growing demands of electricity in Brazil. Curtailment • Ensure national coordinated planning around renewable of wind power generation capacity and grid absorption capacity to enhance affecting certainty of offtake. Furthermore, curtailment compensation project is expected for offshore wind projects in Brazil. In addition revenues to congestion based curtailments, an effective balancing mechanism is needed, with appropriate signals both in subsidies and balancing costs in order to incentivize behavior consistent with system integration optimization. Operation and Adequate local • Offshore activities and equipment required (e.g., vessels and O&M strategy equipment to material) are relatively well known internationally and in Brazil operate the from the O&G sector. For example, CTVs and SOVs, are typical project in O&G activities offshore, and consequently, not unfamiliar technologies for banks. The risks are not a significant concern here, especially for vessels, which are well known and available in sufficient quantities. Also, Brazil has an important manufacturing capacity for such type of vessels to support offshore O&M activities. • Regarding personnel, it is important to have a strong local O&M team. Requalification of local labor from other activities to serve as O&M workers might be positive for bankability. Demonstrating a well-planned and reliable O&M strategy aimed at a reduction of downtime and increase of operational efficiency is also key. 17.4 DISCUSSION Offshore wind projects may have a great impact in Brazil, supporting the coverage of electricity demand with clean energy, aiding in the decarbonization of the energy mix, I'm not sure this is a direct result of offshore wind; bolstering offshore economic activities; and contributing to the growth of the GH2 industry. However, to realize this potential it is critical that projects reach a certain threshold of bankability sufficient to attract the large volumes of capital required. For this, the offshore wind industry needs to assess the risks associated with its implementation in the country and evaluate the mitigation actions required. All sections in this report provide insights about Brazil current capacity to develop offshore wind projects and recommend strategies and actions to achieve a successful development of the offshore wind industry, and consequently to make offshore wind projects more bankable. A series of key elements for the bankability of offshore wind projects in Brazil are summarized in Figure 17.2. 17 Project Bankability 244 FIGURE 17.2 REQUIREMENTS FOR BANKABILITY. Sponsors with Grid conn ction: cl r stron tr ck r cords nd tim l lloc tion of nd xp ri nc c p cit nd tr nsp r nt r ul tor fr m work B nk bl & insur bl B nk bl contr ctu l t chnolo i s with t rms in EPCI nd hi h TRLs O&M contr cts Av il bilit of R li bl nd ccur t suit bl port stim tions nd infr structur for c sts to support th busin ss c s Exp ri nc d Pr dict bl nd contr ctors with ind x d l ctricit ood tr ck r cords r v nu Source: DNV. When considering the three scenarios described in this report, the following analysis can be made regarding how each scenario can impact bankability: ■ All scenarios may struggle in early stages in terms of financing due to the early stage of the offshore wind industry in the country, which is expected to evolve once the first offshore farm starts generating and delivering electricity. ■ The #1 Base Case scenario might not benefit from the same advantageous conditions in terms of financing services expected in the #2 Intermediate and #3 Ambitious scenarios. The latter being the one that would achieve optimal financing conditions faster (e.g., loan rates, more expedited bankability assessments, potential better insurance conditions, etc.). This is driven by a more accelerated consolidation and maturity of the offshore wind industry, and experience of all stakeholders (project promoters, banks, governmental agencies, contractors, etc.). ■ Furthermore, under the #2 Intermediate and #3 Ambitious scenarios, a higher local content of the supply chain is expected to be achieved in a shorter period. This could bring additional benefits in financing services and economic development, as well as a higher local engagement and more robust local supply chain which would mitigate risks associated with deliveries and interfaces. 17.4.1 Recommendation It is expected that Brazilian public financing, through BNDES and other local development banks, and with a clear definition of policies and regulations by the government entities, will play a pivotal role in the development of the offshore wind industry. Based on experiences in international offshore wind markets and in the existing onshore wind sector in Brazil, the following recommendations are made to boost the bankability of offshore wind projects in the country: 245 Scenarios for Offshore Wind Development in Brazil ■ Developers should perform international standard studies and investigations and use publicly available information to perform feasibility assessment and identify main risks that may impact projects at an early stage and take corresponding mitigation actions. [Developers] ■ BNDES should contact international finance entities to share knowledge and understand what financial instruments have been used for offshore wind projects in other countries. This will help designing financial instruments for supporting the first offshore projects in Brazil. [BNDES] ■ Brazilian government and BNDES should give workshops regarding national plans and expectations for the offshore wind industry and communicate specific requirements for ensuring the bankability of offshore wind farms. Also, BNDES should propose financial instruments and financial conditions that can improve the bankability of offshore wind projects. [Brazilian government] ■ Brazilian government should communicate its long-term strategies for offshore wind development and launch dedicated auctions for offshore wind, bringing comfort to developers setting a pipeline of projects. [Brazilian government] ■ Brazilian government and BNDES should be very cautious in setting local content requirements. Setting strict local content requirements in the beginning might limit the viability of the first projects, by causing significant delays or by increasing the final cost. Local content requirements could be considered with time as the country develops a local-supply chain. 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[258] ATLAS renewable energy secures BNDES’ first us dollar loan for a renewable energy project in Brazil, Atlas Renewable Energy, 2023. [259] Guia para Power Purchase Agreements (PPAs) corporativos de energia renovável no Brasil, WBCSD, 2020. [260] Leilões, ANEEL, 2024. [261] Hydrogen National Program, MME. [262] Polzin, Friedemann, Florian Egli, Bjarne Steffen, and Tobias S. Schmidt. 2019. “How do policies mobilize private finance for renewable energy? A systematic review with an investor perspective.” Applied Energy 236 (February): 1249–68. [263] Comparing offshore wind Energy Procurement and Project Revenue Sources Across U.S. States (nrel.gov). 255 Scenarios for Offshore Wind Development in Brazil APPENDIX Appendix 256 APPENDIX A—GLOSSARY a.s.l. Above the Sea Level AC Alternating Current ACL Ambiente de Contratação Livre (Free Contracting Market) AEP Annual Energy Production AGC Automatic Generation Control APAC Asia Pacific AZE Alliance for Zero Extinction BA Bahia BOO Build, own, and operate BoP Balance of Plant BOOT Build-own-operate-transfer CapEx Capital Expenditure CBAM Carbon Border Adjustment Mechanism CCDR Country Climate and Development Report CCUS Carbon Capture Utilization and Storage CDM Construction, Design, and Management CE Ceará CEMP Construction Environmental Management Plans CfD Contract for Difference CFI Computerized Supplier Accreditation System CFIA Acordo de Cooperação e Facilitação de Investimentos (Cooperation and Facilitation Investment Agreement) CIA Cumulative Impact Assessment CIF Climate Investment Funds CIPP Complexo Industrial do Porto do Pecém (Pecém Port Industrial Complex) CO2 Carbon dioxide COD Commercial Operation Date CP Construction Permit CPT Cone Penetration Testing COP Construction and Operation Plan CPSA Contrato de Prestação de Serviços Ancilares (Contract for Ancilliary Services) CR Critically endangered CRL Commercial Readiness Level CTV Crew Transfer Vessel 257 Scenarios for Offshore Wind Development in Brazil DC Direct Current DevEx Development Expenditure DFIG Double fed induction machines DG Distributed Generation DIP Declaração de Interferência Prévia (Declaration of Prior Interference ) E&S Environmental & Social EBSA Ecologically or Biologically Significant Areas EEZ Exclusive Economic Zone EIA Environmental and Social Impact Assessment EMCAF Emerging Market Climate Action Fund EMT Electromagnetic Transient ENP European Neighbourhood Policy EPCI Engineering Procurement Construction and Installation ES Espírito Santo ESIA Environmental and Social Impact Assessment ESPOO Convention on the Environmental Impact Assessment in the Transboundary Context ESF Environmental and Social Framework ESS Environmental and Social Standards EU European Union EV Electric Vehicle FACTS Flexible Alternating Current Transmission System FDI Foreign Direct Investments FEED Front End Engineering and Design FID Final Investment Decision FINAME Financiamento de máquinas e equipamentos (Financing Fund for the Acquisition of Machinery and Equipment) FIT Feed-In Tariff FOC Fiber-Optic Cable FPSO Floating Production Storage and Offloading FTE Full-time Equivalent FTZ Free-Trade Zone GCF Green Climate Fund GDP Gross domestic product GEBCO General Bathymetric Chart of the Oceans GEF Global Environment Facility GIIP Good International Industry Practice GIS Geographical Information System GH2 Green Hydrogen GHG Greenhouse Gas GVA Gross Value Added Appendix A—Glossary 258 GW and GWh Gigawatt and Gigawatt hour GWA Global Wind Atlas H&S Health and Safety H2 Hydrogen HRA Habitat Regulations Assessment HVAC High Voltage Alternating Current HVDC High Voltage Direct Current IAC Inter-Array Cables IAV Inter Annual Variability IBA Important Bird Areas II Imposto de Importação (Brazilian import tax) ICMS Imposto de Circulação de Mercadorias e Serviços (Brazilian tax on the circulation of merchandise and services) IFA Iterative Flow Analysis IFI International Financial Institution IMMA Important Marine Mammal Areas INDC Intended Declared Contribution INTOG Innovation and Targeted Oil & Gas IOCG Iron Oxide-Copper Gold IPCA Índice Nacional de Preços ao Consumidor Amplo (Brazilian inflation index) IPI Imposto sobre Produtos Industrializados (Brazilian tax on industrialised products) ITCZ Intertropical Convergence Zone JV Joint venture KBA Key Biodiversity Areas LCC Line-Commutated Converters LIDAR Light Detection and Ranging LCoE Levelized Cost of Energy LCoH Levelized Cost of Hydrogen LOLE Loss of Load Expectation LPA Legally Protected Area MA Maranhão MAB Man and the Biosphere Program MDAO Multi-disciplinary Analysis and Optimization MDB Multilateral Development Bank MDI Investment Decision Model MLAs Multilateral Lending Agencies MoU Memorandum of Understanding MSP Marine Spatial Plan MW and MWh Megawatt and Megawatt hour N North 259 Scenarios for Offshore Wind Development in Brazil NE Northeast NGO Non-governmental Organization NOx Nitrogen Oxides O&G Oil and Gas O&M Operation and Maintenance ODA Official Development Assistance OHS Occupational Health & Safety OMS Operations, Maintenance, and Service OpEx Operational Expenditure OSS Offshore Substation PA Pará PCA Partnership and Cooperation Agreement PCDM Incentive Program for Goods Distribution Centers PE Pernambuco PELP Plano de Expansão de Longo Prazo (Long-term Expansion Plan) PET Programa de Expansão da Transmissão (Transmission Expansion Plan) PIER Incentive Program for the Renewable Energy Production Chain PIS/COFINS Programa de Integração Social/Contribuição para Financiamento da Seguridade Social (Program of Social Integration/Contribution for the Financing of Social Security) PMSG Permanent Magnet Syncronous Generator PNE Plano Nacional de Energia (National Energy Plan) PPA Power Purchase Agreement PPC Power Plant Controller PPP Public-Private Partnership Pre-FEED Preliminary Front-End Engineering and Design PROADE Program for Attraction of Strategic Enterprises PROEDI Programa Estadual de Desenvolvimento Industrial (State Industrial Development Program) PROINFA Programa de Incentivo a Fontes Alternativas (Program of Incentives for Alternative Electricity Sources) PROVIN Companies Operation Incentive Program PSAs Production Sharing Agreements PSSAs Particularly Sensitive Sea Areas PUG-Offshore Portal Unico para Gestão do Uso de Áreas Offshore para Geração de Energia (One Portal for Management of Offshore Areas) PV Photovoltaic PWPDP Provincial Wind Power Development Plan RD&D Research, Design, and Development REC Renewable Energy Certificate REIDI Regime Especial de Incentivos para o Desenvolvimento da Infraestrutura (Special Regime for Infrastructure Development) Appendix A—Glossary 260 REL Renewable Energy Law RMS Root-Mean-Square RoCoF Rate of Change of Frequency ROV Remotely Operated Vehicle RS Rio Grande do Sul R&D Research and Development SCADA Supervisory Control and Data Acquisition SE Southeast SESA Strategic Environmental and Social Assessment SNUC Sistema Nacional de Unidades de Conservação da Natureza (Brazilian System of Protected Areas) SOLAS Safety of Life at Sea Regulations SOV Service Operation Vessel SPE Specific Purpose Entity SPMT Self-Propelled Modular Transport SPV Specific Purpose Vehicle SSCI Sub-synchronous controller interaction STEM Science, Technology, Engineering and Mathematics SVC Static Var Compensator TCA Tourism Characteristic Activities TIPI Tabela de Incidência do Imposto sobre Produtos Industrializados (Table of Tax of Industrialized Products) TMUT Terminal for Multiple Use ToR Terms of Reference TP Transition Piece TRL Technology Readiness Level TW and TWh Terawatt and Terawatt hour UNFCCC United Nations Framework Convention on Climate Change US$ United States dollar UXO Unexploded ordnance VAT Value-added tax VET Industry-led vocational education and training VSC Voltage Source Converters WACC Weighted average cost of capital WCD Works completion date XLPE Cross-linked polyethylene 261 Scenarios for Offshore Wind Development in Brazil APPENDIX B—LIST OF ORGANIZATION ABBREVIATIONS ANA Agência Nacional de Águas e Saneamento Urbano (National Water and Sanitation Agency) ANAC Autoridade Nacional da Aviação Civil (National Civil Aviation Authority) ANATEL Agência Nacional de Telecomunicações (Brazilian National Telecommunications Agency) ANEEL Agência Nacional de Energia Eléctrica (Brazilian Electricity Regulatory Agency) ANM Agência Nacional de Mineração (National Mining Agency) ANP Agência Nacional do Petróleo (Brazilian National Agency for Petroleum) ANVISA Agência Nacional de Vigilância Sanitária (Brazilian Health Regulatory Agency—ANVISA) BNDES Banco Nacional de Desenvolvimento Economico e Social (Brazilian Development Bank) CEBRI Centro Brasileiro de Relações Internacionais (Brazilian Center for International Relations) CES Crown Estate Scotland CIRM Comissão Interministerial para os Recursos do Mar (Interministerial Commission for Sea Resources) CONAMA Conselho Nacional do Meio Ambiente (Brazilian National Environment Council) COP Copenhagen Offshore Partners CPRM Companhia de Pesquisa de Recursos Minerais (Mineral Resources Research Company) DECEA Departamento de Controle do Espaço Aéreo (Department of Airspace Control) DTU Danish Technical University EBRD European Bank for Reconstruction and Development EIB European Investment Bank EPE Empresa de Pesquisa Energética (Energy Research Office) ESMAP Energy Sector Management Assistance Program EWEA European Wind Energy Association FFI Fortescue Future Industries Pty Ltd FUNAI Fundação Nacional dos Povos Indigenas (National Indian Foundation) FUNBIO Fundo Brasileiro para a Biodiversidade (Brazil Biodiversity Fund) FUNDOPEM/RS Fund Operation Company of the State of Rio Grande Do Sul GE General Electrics GEBCO The General Bathymetric Chart of the Oceans GEF Global Environment Facility GWO Global Wind Organization GWEC Global Wind Energy Council Appendix B—List of Organization Abbreviations 262 IBAMA Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais (Brazilian Institute of Environment and Renewable Natural Resources) IBGE Instituto Brasileiro de Geografia e Estatística (Brazilian Institute of Geography and Statistics) ICMbio Instituto Chico Mendes da Conservação da Biodiversidade (National Center for Research and Conservation) IDB Inter-American Development Bank IEA International Energy Agency IFC International Finance Corporation INEA Instituto Estadual do Ambiente (State Environmental Institute), Rio de Janeiro IRENA International Renewable Energy Agency IUCN International Union for the Conservation of Nature MAPA Ministério da Agricultura e Pecuária (Ministry of Agriculture, Livestock and Supply) MInfra Ministério da Infraestrutura (Ministry of Infrastructure) MMA Ministério do Meio Ambiente (Ministry of Environment) MME Ministério de Minas e Energia (Ministry of Mines and Energy) MTur Ministério do Turismo (Ministry of Tourism) NOAA National Oceanic and Atmospheric Administration NSTA North Sea Transition Authority NTB Nordeste Torres do Brasil OECD Organization for economic co-operation and development ONS Operador Nacional do Sistema Elétrico (National Electric System Operator ) SGB Serviço Geológico do Brasil (Geological Survey of Brazil—ex-CPRM) SGRE Siemens Gamesa SIHS Secretaria de Infrastrutura Hídrica e Saneamento (Secretariat of Water Infrastructure and Sanitation) SINAU Sistema Nacional das Águas da União (National Water System) SMBC Sumitomo Mitsui Banking Corporation SPU Secretariat for the Coordination and Governance of Federal Property (Secretaria de Patrimônio da União) TEN Torres Eólicas do Nordeste WB World Bank WBG World Bank Group 263 Scenarios for Offshore Wind Development in Brazil APPENDIX C—GEOSPATIAL MAPS Subtype Type of data Entity Reference of data Mesoscale Global Wind https://globalwindatlas.info Technical wind data Atlas potential https://www.gebco.net/data_and_products/ Bathymetry GEBCO gridded_bathymetry_data/ Country https://geoservicos.ibge.gov.br/geoserver/ IBGE Polygon ows?service=wfs&version=1.0.0&request=GetCapabilities Marine Geography EEZ https://www.marineregions.org/downloads.php Regions States/Federal https://maps.sihs.ba.gov.br/server/rest/services/Hosted/ SIHS Units br_unidades_da_federacao/FeatureServer/0 https://geoservicos.ibge.gov.br/geoserver/ Ports IBGE ows?service=wfs&version=1.0.0&request=GetCapabilities Ports DNV - (Suitable OW) https://minfrageo.infraestrutura.gov. Ministry of Roads br/portal/apps/webappviewer/index. Transport html?id=8d988c6a7fc9441486e9c7b4a5b366a3 https://minfrageo.infraestrutura.gov. Ministry of Train network br/portal/apps/webappviewer/index. Transport html?id=8d988c6a7fc9441486e9c7b4a5b366a3 Grid (Lines + Subst) (Existing EPE https://gisepeprd2.epe.gov.br/WebMapEPE/ and Planned) Airports and https://geoservicos.ibge.gov.br/geoserver/ows IBGE, DECEA Infrastructure aerial space https://geoaisweb.decea.mil.br/geoserver/ows?version=2.0.0 Oil & Gas EPE https://gisepeprd2.epe.gov.br/WebMapEPE/ infrastructure https://geoportal.sgb.gov.br/image/rest/services/geomar Oil & Gas https://www.gov.br/anp/pt-br/assuntos/exploracao- exploration CPRM, ANP e-producao-de-oleo-e-gas/dados-tecnicos/ areas shapefile-de-dados https://gisepeprd2.epe.gov.br/WebMapEPE/ https:// Oil & Gas under www.gov.br/anp/pt-br/assuntos/exploracao- EPE, ANP contract areas e-producao-de-oleo-e-gas/dados-tecnicos/ shapefile-de-dados https://geo.anm.gov.br/arcgis/rest/services/SIGMINE/ Mining ANM dados_anm/MapServer/3 Offshore Mapas de projetos em licenciamento—Complexos Eólicos IBAMA projects Offshore (ibama.gov.br) Appendix C—Geospatial Maps 264 Subtype Type of data Entity Reference of data https://gisepeprd2.epe.gov.br/WebMapEPE/ Existing WFs EPE https://mapbiomas.org/dados-de-infraestrutura?cama _set_language=pt-BR Infrastructure Shipping Lloyds navigation - Intelligence routes https://gisepeprd2.epe.gov.br/arcgis/rest/services/ SMA/ENG_Webmap_EPE_Meio_Ambiente/ IBGE, EPE, Protected Areas MapServer https://geoservicos.ibge.gov.br/geoserver/ CPRM, ANP ows?service=wfs&version=1.0.0&request=GetCapabilities https://geoportal.cprm.gov.br/server/rest/services https://visualizador.inde.gov.br/ https:// INDE, geoservicos.inde.gov.br/geoserver/ICMBio/ Conservation ICMBIO, ows?service=wfs&version=1.3.0&request=GetCapabilities Units INEA, MMA https://geoportal.inea.rj.gov.br/server/rest/services https://cnuc.mma.gov.br/ RSIS Ramsar (Ramsar Ramsar sites Sites https://rsis.ramsar.org/?language=en Information Service) Environmental/ Geology https://geoportal.cprm.gov.br/server/rest/services CPRM Social https://geoportal.sgb.gov.br/image/rest/services https://geoportal.cprm.gov.br/server/rest/services/ Coral reefs CPRM geologia_marinha/areas_costeiras/FeatureServer/2 Priority Conservation IBGE https://geoservicos.ibge.gov.br/geoserver/ows?version=1.0.0 Areas (Marine) https://geoservicos.ibge.gov.br/geoserver/ ows?version=1.0.0 https://www.gov.br/funai/pt-br/ Indigenous IBGE, FUNAI, atuacao/terras-indigenas/geoprocessamento-e-mapas areas ANA https://metadados.snirh.gov.br/geonetwork/srv/api/ records/3fa8cc38-79b4-4aa1-8179-bba315baea4b The Biodiversity and Biodiversity See Appendix D ecosystems Consultancy https://www.peixebr.com.br/sinau-atualiza-status-das- Aquaculture SINAU areas-aquicolas-do-brasil/ 265 Scenarios for Offshore Wind Development in Brazil APPENDIX D—BRAZIL’S PRIORITY BIODIVERSITY VALUES 1 INTRODUCTION The World Bank Group (WBG) commissioned The Biodiversity Consultancy to provide environmental support for the WBG Offshore Wind Development Program. This support includes the completion of early-stage identification of priority biodiversity values and available spatial data to inform the offshore wind country roadmap for Brazil. Incorporating considerations of priority biodiversity values in the assessment of ‘practical potential’ for offshore wind development is essential to avoid adverse impacts from inappropriate development and provide a foundation for a pipeline of bankable projects eligible for funding by International Finance Institutions. The World Bank (WB) and International Finance Corporation (IFC) environment and social requirements are integral to the Offshore Wind Development Program, and the production of individual country roadmaps. They enable WB, IFC and client countries to better manage the environmental and social risks of projects, and to improve development outcomes. The WB Environmental and Social Framework, and the IFC Sustainability Framework promote sound environmental and social practices, transparency, and accountability. These Frameworks define client responsibilities for managing risks and ensure that offshore wind sector preparatory work is aligned with good international industry practice (GIIP). Of particular relevance to this study are: ■ WB Environmental and Social Standard 6 (ESS6): Biodiversity Conservation and Sustainable Management of Living Natural Resources (World Bank 2016), together with the associated Guidance Note ESS6 (World Bank 2018); and ■ IFC Environmental and Social Performance Standard 6 (PS6): Biodiversity Conservation and Sustainable Management of Living Natural Resources (IFC 2012a), together with the associated Guidance Note 6 (IFC 2019). The objective of this study is to identify priority biodiversity values and areas that support these values that should either be excluded from offshore wind development (i.e., areas of the highest biodiversity sensitivity), or require additional assessment through subsequent Marine Spatial Planning (MSP), site selection and Environmental and Social Impact Assessment (ESIA) processes. To meet GIIP, wind developments in areas supporting priority biodiversity values would likely be subject to restrictions in the form of greater requirements for baseline studies, as well more intensive mitigation measures to avoid, minimize and restore adverse environmental impacts. According to IFC PS6 and WB ESS6, projects situated within Critical Habitat are required to demonstrate that: ■ No other viable alternatives within the region exist for development of the project on Modified or Natural Habitat that are not critical; Appendix D—Brazil’s Priority Biodiversity Values 266 ■ The project does not lead to measurable adverse impacts on those biodiversity values for which the Critical Habitat was designated, and on the ecological processes supporting those biodiversity values; ■ The project does not lead to a net reduction in the global and/or national/regional population of any Critically Endangered or Endangered species over a reasonable period of time; and ■ A robust, appropriately designed, and long-term biodiversity monitoring and evaluation program is integrated into the client’s management program. In addition, projects need to achieve net gains of those biodiversity values for which the Critical Habitat was identified. This study has focused on the following key groups of priority biodiversity values, which have been identified through a review of the scientific literature and on experiences in well- developed offshore wind markets: ■ Legally Protected Areas (LPAs) and Internationally Recognized Areas (IRAs)—see Section 3 ■ Marine Mammals–see Section 4 ■ Birds–see Section 5 ■ Sea Turtles–see Section 6 ■ Fish–see Section 7 ■ Natural Habitatsxxviii–see Section 8 2 METHODOLOGY For each group of priority biodiversity values, the available global and regional spatial datasets were identified and screened for inclusion in one of two spatial data layers for use in the country roadmap: a. Exclusion Zone (i.e., areas of the highest biodiversity sensitivity to exclude from the technical assessment of offshore wind resource); and b. Restriction Zone (i.e., high risk areas requiring further assessment of risk during MSP, site selection and/or ESIA). Multiple global and regional biodiversity datasets exist (primarily produced by academic, scientific, government, and non-governmental Organizations) and are useful and important resources. Broadly, these datasets provide an indication of the distribution of given biodiversity values. For example, datasets show: ■ Verified point records of species occurrence; ■ Species range maps; xxviii For the purposes of this study marine benthic invertebrates are included as integral components of marine Natural Habitats. 267 Scenarios for Offshore Wind Development in Brazil ■ The extent of a particular habitat or ecosystem type, or location of key habitat features; ■ Modelled indicative habitat suitability; ■ The boundaries of globally important LPAs and IRAs that represent areas of high biodiversity conservation value. Threatened and range-restricted species are the focus of criteria 1 and 2 for the determination of Critical Habitat, as defined by IFC PS6 and therefore represent priority biodiversity values. As a foundational stage, the IUCN Red List was screened to identify all threatened and all range- restrictedxxix marine species with global ranges that overlap with Brazil’s Exclusive Economic Zone (EEZ). A full list of the identified threatened species is provided in Appendix 1. A detailed literature search was completed to identify spatial data and additional contextual information on these species. In addition to identifying digitised spatial data, many supplementary data sources were identified that provide more detailed information on relevant priority biodiversity values. These sources provide a valuable resource for future MSP, site selection and ESIA stages of offshore wind development in Brazil and are listed in Appendix 2, along with a short commentary on each dataset highlighting its suitability for MSP. Early and constructive stakeholder engagement is an essential component of identifying priority biodiversity values, verifying data and ensuring they are considered appropriately and proportionately in planning for offshore wind development. Stakeholder engagement should be an integral and important part of future MSP and ESIA processes, and a list of relevant environmental stakeholders has been identified and is provided in Appendix 3. 3 LEGALLY PROTECTED AREAS AND INTERNATIONALLY RECOGNIZED AREAS Following the IUCN definition, an LPA is any clearly defined geographical space, recognized, dedicated and managed, through legal or other effective means, to achieve the long-term conservation of nature with associated ecosystem services and cultural values (Dudley 2008; IFC 2012). IRAs are exclusively defined in IFC PS6 as UNESCO Natural World Heritage Sites, UNESCO Man and the Biosphere Reserves, Key Biodiversity Areas (KBAs), and wetlands designated under the Convention on Wetlands of International Importance (the Ramsar Convention) (IFC 2012). LPAs and IRAs represent high value areas designated for various biodiversity conservation objectives, and some should be excluded from consideration for offshore wind development because of this. For example, development in KBAs (see Section 3.3) should be avoided because these sites represent the most important places in the world for species and their habitats.xxx Other types of designated areas, such as Ecologically or Biologically Significant Marine Areas (EBSAs) maybe much larger spatial designations and offshore wind development may be feasible if it is carefully managed, and development activities are coordinated to avoid key sensitive periods for biodiversity—although a site-specific assessment would be required to confirm this. xxix Range-restricted marine species are defined by IFC PS6 as having an Extent of occurrence less than 100,000 km2 xxx http://www.keybiodiversityareas.org/ Appendix D—Brazil’s Priority Biodiversity Values 268 IFC standards prohibit development in UNESCO Natural and Mixed World Heritage Sites, and Alliance for Zero Extinction (AZE) sites (IFC 2019). There are 52 AZE sites in Brazilxxxi and seven Natural and one Mixed World Heritage Sites.xxxii From these, five AZEs (see Legally Protected Areas, Section 3.1) and two Natural and one Mixed World Heritage Site (see Section 3.1) overlap marine areas within Brazil’s EEZ. 3.1 Legally Protected Areas Legally Protected Areas (LPAs) are afforded varying levels of legal protection in different national jurisdictions, often underpinned by commitments made under international conventions. Brazil is likely to be the most biodiverse country in the world,xxxiii leading the world in plant and amphibian species richness. It ranks second in mammals and amphibians, third in birds, reptiles and fish. Brazil has ratified the Convention on Biological Diversity (CBD) through the National Decree 2.519 (1998) and two years later consolidated the National System of Protected Areas— SNUC (Sistema Nacional de Unidades de Conservacao).xxxiv LPAs in Brazil comprise 30.3 percent and 26.8 percent of the country’s total land, and of the country’s marine and coastal areas respectively (UNEP-WCMC 2021). In terms of administration, LPAs in Brazil fall into five main categories: ■ Areas managed by the national government ■ Areas managed by the state government ■ Areas managed by local government ■ Indigenous areas ■ Areas managed by private landowners, recognized by either of the three levels of jurisdiction (national, state or local; SNUC, National Law 9.985/2000) In terms of conservation objectives and level of restriction, the complex range of LPA types in Brazil are divided in two groups (Strict Protection and Sustainable Use), that split in 11 categories, which align with the IUCN management categories.xxxv Strict Protection: ■ Ecological Station (Estacao Ecologica—EE ): IUCN management category Ia ■ Biological Reserve (Reserva Biologica—RB): IUCN management category Ia ■ National / State / Municipal Parks (Parque Nacional—PN / Parque Estadual—PE / Parque Natural Municaipal—PNM): IUCN management category II ■ Natural Monument (Monumento Natural—MN): IUCN management category III xxxi https://zeroextinction.org/site-identification/2018-global-aze-map/ xxxii https://whc.unesco.org/en/list/?type=mixed xxxiii https://news.mongabay.com/2016/05/top-10-biodiverse-countries/ xxxiv https://www.gov.br/mma/pt-br/assuntos/areasprotegidasecoturismo/plataforma-cnuc-1 xxxv https://www.iucn.org/theme/protected-areas/about/protected-area-categories 269 Scenarios for Offshore Wind Development in Brazil ■ Wildlife Refuge (Refugio da Vida Silvestre—RVS): IUCN management category III Sustainable Use: ■ Natural Heritage Private Reserve (Reserva Particular do Patrimonio Natural—RPPN): IUCN management category IV (not completely covered by LPA gov. dataset) ■ Area of Relevant Ecological Interest (Area de Relevante Interesse Ecologico—ARIE): IUCN management category IV ■ Environmental Protection Area (Area de Protecao Ambiental—APA): IUCN management category V ■ National / State / Municipal Forests (Floresta Nacional—FN / Floresta Estadual FE / Floresta Municipal—FM): IUCN management category VI (no marine LPA in this category) ■ Sustainable Development Reserve (Reserva de Desenvolvimento Sustentavel—RDS): IUCN management category VI ■ Extractive Reserve (Reserva Extrativista—RESEX): IUCN management category VI Indigenous lands are not included in the SNUC, since they are owned and managed by the Indigenous people with support from the government Indigenous Foundation (Funai).xxxvi According to WDPA data, coastal and marine Indigenous Lands cover less than 100,000 hectares. There are 227 LPAs in Brazil that are marine, or have marine components, and overlap the country’s EEZ, collectively covering almost 115 million hectares of marine area (Table D.1 Area covered by Legally Protected Areas with Marine or Coastal components in Brazil). TABLE D.1 AREA COVERED BY LEGALLY PROTECTED AREAS WITH MARINE OR COASTAL COMPONENTS IN BRAZIL. Designation Level of protection Number of LPAs Total Extent (ha) Biological Reserve–RB Strict Protection 8 452,859 Ecological Station–EE Strict Protection 9 184,131 National / State / Municipal Park–PN / PE / PNM Strict Protection 56 1,746,253 Natural Monument–MN Strict Protection 10 11,492,236 Wildlife Refuge–RVS Strict Protection 9 124,952 Area of Relevant Ecological Interest–ARIE Sustainable Use 10 24,813 Extractive Reserve–RESEX Sustainable Use 27 1,247,080 Sustainable Development Reserve–RDS Sustainable Use 5 15,730 Environmental Protection Area–APA Sustainable Use 82 94,499,743 Indigenous Area–TI Sustainable Use 11 93,674 Two Natural Monuments account for approximately 82 percent of the area of Strict Protection LPAs in Brazil: ■ MN Ilhas de Trindade, Martim Vaz e do Monte Columbia ■ MN do Arquipélago de São Pedro e São Paulo xxxvi https://www.gov.br/funai/pt-br Appendix D—Brazil’s Priority Biodiversity Values 270 The remaining Strict Protection LPAs cover around 2.5 million hectares of coastal and marine Ecosystems. Most of the marine and coastal LPAs in Brazil are Sustainable Use areas. Of these, the least restrictive designation is Environmental Protection Area, where developments and economical activities are regulated over the environmental licensing process, but are not prohibited. To note, there is some spatial overlap between different LPA types in the Sustainable Use category. Offshore wind developments may cause impacts on biodiversity not only in the marine environment but also in the nearby coastal zone where associated infrastructure (e.g., substation and power lines) will be required (Bennun et al. 2021). Consequently, it is unlikely that offshore wind development would be compatible with the conservation objectives proposed for the designated marine and coastal LPAs. Likewise, some of the priority biodiversity values existent in these areas are likely to be sensitive to impacts associated with offshore wind development. For these reasons, except for the Environmental Protection Areas (APA), the list of LPAs with marine or coastal components are included in the Exclusion Zone layer. 3.2 Ramsar Sites Ramsar sites are wetlands of international importance that have been designated under the criteria of the Ramsar Convention on Wetlands for containing representative, rare or unique wetland types, or for their importance in conserving biological diversity. There are 27 Ramsar sites in Brazil (covering 26,794,455 ha), of which 13 are coastal or marine (see Table D.2) and therefore included in the scope of this study. These 13 sites cover an area of 9.4 million hectares. Due to the importance of the biodiversity values in these costal ecosystems, all 13 coastal / marine Ramsar Sites have been included in the Exclusion Zone layer. TABLE D.2 RAMSAR SITES. Name of Ramsar Site Extent (ha) Relevancexxxvii Amazon Estuary and 3,850,253 The site is located at the mouth of the Amazon River, an extremely Its Mangroves biodiverse and internationally important area. On this stretch of coast lies one of the biggest continuous mangrove formations in the world, stretching over 700 km. Around 40 marine, terrestrial, and freshwater species found in the Site are both nationally and globally threatened. Reentrancias 2,680,911 The site is the second-most important area in South America in terms Maranhenses of migratory bird numbers. It hosts 50 percent of all the coastal bird population in Brazil and 7 percent of all those in South America, including the Hudsonian godwit (Limosa haemastica) and the Whimbrel (Numenius phaeopus). In addition, it provides shelter to Critically Endangered species such as the Hawksbill Turtle (E. imbricata) and Vulnerable ones such as the West Indian Manatee (Trichechus manatus), the Leatherback Turtle (Dermochelys coriacea) and the Atlantic Goliath Grouper (Epinephelus itajara). xxxvii https://www.ramsar.org/wetland/brazil 271 Scenarios for Offshore Wind Development in Brazil Name of Ramsar Site Extent (ha) Relevancexxxvii Baixada Maranhense 1,775,306 The site includes rich biodiversity within a complex range of Environmental ecosystems, including rivers, their floodplains and estuaries, riverine Protection Area forests, swamps, and lagoons, and a mangrove area that regulates local fish stocks. The fertile floodplains provide resting, feeding and breeding sites to more than 20 species of resident or migratory waterbirds. The site is also important for the conservation of globally Vulnerable species, such as the West Indian Manatee (Trichechus manatus). Dolphins and several species of fish use the Baixada Maranhense in their migratory routes, while populations of reptiles and native mammals use the wetlands as a refuge. Cabo Orange 657,328 An extensive site characterized by periodically and permanently National Park flooded grasslands, unique in the Amazon region, as well as by its mangroves, which act as “fish nurseries” and are vital for the maintenance of some of Brazil´s most important fisheries. The associated marine and estuarine fisheries production has made the area one of the most intensively fished areas in the region. Environmental 202,307 The site has mangroves, estuaries, rivers, lagoon channels, coastal plains, Protection Area waterfalls, and marine and coastal islands. It also features sandbank Cananeia-Iguape- forests, dunes, and the most extensive and conserved stretch of Peruibe Atlantic Forest in the country. Abrolhos Marine 91,300 The site includes a mosaic of marine and coastal environments such National Park as coral reefs, algae bottoms, mangroves, beaches, and sandbanks. It sustains IUCN-Red List species such as sea turtles and many threatened fish species such as the Groupers and the coral Millepora nitida. The area is considered an archaeological site due to the number of wrecks found on its waters. It provides livelihood for more than 20,000 fishermen and 80,000 tourism-related posts in the Bahia State area. Guaratuba 38,329 The site features well preserved mangroves, periodically flooded forests, and marshes. Par. Est. Mar. Parcel 34,556 Three coral banks off the northern coast of Maranhao, at the northern Manoel Luis incl. distribution limit of several fish species endemic to the Brazilian coast. Baixios do Mestre The area is particularly important for fishery production and it is of Alvaro and Tarol extremely high scientific value. Lagoa do Peixe 34,400 Extensive lowland area of saltmarshes, coastal sand dunes, lagoons, lakes, and associated marshes, providing important staging sites for numerous migrant species. Lagoa do Peixe is a large brackish to saline lagoon, supporting large concentrations of invertebrates. The area is particularly important for a wide variety of waterfowl, and the lagoon is an important wintering and staging area for migrant species. Lagoa do Peixe 34,400 Extensive lowland area of saltmarshes, coastal sand dunes, lagoons, lakes, and associated marshes, providing important staging sites for numerous migrant species. Lagoa do Peixe is a large brackish to saline lagoon, supporting large concentrations of invertebrates. The area is particularly important for a wide variety of waterfowl, and the lagoon is an important wintering and staging area for migrant species. Taim Ecological 10,939 The site preserves wetlands and lagoons, fields, dunes, and forests, Station and shelters a great diversity of plant and animal species in the Atlantic Forest. Its notable birdlife includes species which migrate from the northern hemisphere, migrants from the continent’s Southern Cone, and others that live here all year round. Endangered species such as the Atlantic Yellow-Nosed Albatross (Thalassarche chlororhynchos) is found in the site. Appendix D—Brazil’s Priority Biodiversity Values 272 Name of Ramsar Site Extent (ha) Relevancexxxvii Fernando de Noronha 10,929 The site is a refuge for many endemic species because of its isolated Archipelago location. Of the 28 coral species occurring in Brazil, ten are found in all phases of their lives here. There are also great concentrations of Spinner Dolphins (Stenella longirostris) and pantropical Spotted Dolphins (S. attenuata). Humpback Whales (Megaptera novaeangliae) reproduce and rear their calves in this site. Guaraquecaba 4,370 The site contains the most important habitats for in-situ biodiversity Ecological Station conservation in the region and has a large diversity of endemic and migratory species such as the endangered green turtle (Chelonia mydas) and the vulnerable Franciscana dolphin (Pontoporia blainvillei). It also protects significant terrestrial, freshwater, coastal and marine ecosystems, such as forests and mangroves. These areas are important for different species including fish and invertebrates such as oysters and crabs. Atol das Rocas 3,186 This site is an oceanic island ecosystem, which includes the only atoll Biological Reserve in the South Atlantic formed predominantly by coralline algae rather than corals. It hosts a great variety of endemic and migratory species. Some species are endangered and many of economic interest. It is an important reproductive site for Green Turtle (Chelonia mydas), and also hosts Hawksbill Turtle (Eretmochelys imbricata) and Loggerhead Turtle (Caretta caretta), all categorized as Endangered or Critically Endangered on the IUCN Red List. It also maintains several endemic invertebrates and accommodates the largest concentration of tropical seabirds in the western Atlantic, with an estimate of at least 150,000 birds of 29 species. It is also an important breeding, feeding, and nursing site for Lemon Shark (Negaprion brevirostris) and hosts five endemic species of fish. 3.3 KEY BIODIVERSITY AREAS KBAs have been designated to cover the most important places in the world for species and their habitats. KBAs are identified using a global standard that includes criteria that were developed through a multi-stakeholder process. These criteria include quantitative thresholds that mean KBAs are globally important for the long-term survival of biodiversity. KBA identification is rigorous, transparent and can be applied consistently in different countries and over time. Sites qualify as KBAs if they meet one or more of 11 criteria, clustered into five higher level categories: threatened biodiversity, geographically restricted biodiversity, ecological integrity, biological processes, and irreplaceability (KBA Criteria n.d.). The KBA criteria are broadly aligned with IFC PS6 criteria for Critical Habitat, although KBA criteria are wider, and therefore not all KBAs will qualify as Critical Habitat. All BirdLife International Important Bird Areas (IBA) are also classified as KBAs, although some would not meet the updated global KBA standard, and therefore might be treated as regional or national KBAs. All existing Alliance for Zero Extinction (AZE) sites are also KBAs. Brazil has 275 KBAs, of which 19 have marine or coastal components and overlap with the country’s EEZ (see Table D.3). The majority of these sites were designated based on their international significance for breeding or migrating waterbirds and seabirds, or for some restricted-range highly threatened bird species associated with coastal ecosystems (mainly mangroves) and are therefore both KBAs and IBAs. Most of the KBAs overlap at least partially with the LPAs. 273 Scenarios for Offshore Wind Development in Brazil All KBAs have been included within the Exclusion Zone layer. Priority marine and coastal biodiversity associated with each KBA is summarized in Table D.3. 3.3.1 Marine IBAs The BirdLife Global Seabird Program has designated ten Marine IBAs (a subset of KBAs) in Brazil. Marine IBAs can include seabird breeding colonies, foraging areas around breeding colonies, non- breeding (usually coastal) concentrations, migratory bottlenecks and feeding areas for pelagic species. The methodology for the designation of marine IBAs is described in the marine IBA toolkit (BirdLife International 2010). Brazil’s ten Marine IBAs are.xxxviii ■ Mangue Seco ■ Atol das Rocas ■ Estuario da Laguna dos Patos ■ Ilha dos Currais ■ Ilhas do Litoral Norte do Espírito Santo ■ Parque Nacional da Lagoa do Peixe ■ Arquipelago de Alcatrazes ■ Arquipelago de Fernando de Noronha ■ Trindade e Martim Vaz ■ Ilhas Comprida e Cananeia ■ Guaraquecaba, Jacupiranga and Cananeia TABLE D.3 KBAS/IBAS IN BRAZIL WITH MARINE OR COASTAL COMPONENTS AND ASSOCIATED PRIORITY BIODIVERSITY.xxxix, xl KBA Area (ha) Triggers Baixada 2,058,575 Red Knot Calidris canutus and Semipalmated Sandpiper Calidris pusilla Maranhense Reentrancias 1,142,472 Red Knot, Semipalmated Sandpiper, Scarlet Ibis Eudocimus ruber, Rufous Maranhenses / Crab-hawk Buteogallus aequinoctialis, and Whimbrel Numenius phaeopus Paraenses Goiabal / Piratuba 975,140 Sanderling Calidris alba and Rufous Crab-hawk Guaraquecaba 626,697 99 species of birds, including Vinaceous-breasted Amazon Amazona vinacea / Jacupiranga / and Parana Antwren Formicivora acutirostris Cananeia xxxviii http://datazone.birdlife.org/country/brazil/marine xxxix http://www.keybiodiversityareas.org/sites/search20,342 xl http://www.keybiodiversityareas.org/ Appendix D—Brazil’s Priority Biodiversity Values 274 Delta do Parnaiba 218,591 Scarlet Ibis and Rufous Crab-hawk Banhado do Taim 111,575 Coscoroba Swan Coscoroba coscoroba, Sulphur-throated Spinetail Cranioleuca sulphurifera, Black-necked Swan Cygnus melancoryphus, Curve-billed Reedhaunter Limnornis curvirostris, Buff-breasted Sandpiper, Tryngites subruficollis, Black-and-White Monjita Xolmis dominicanus Estuario da 104,061 Six species of birds, including Buff-breasted Sandpiper Calidris subruficollis, and Laguna dos Patos Olrog’s Gull Larus atlanticus Parque Nacional 36,387 Ten species of birds, including Olrog’s Gull, Red Knot, and Dot-winget Crake da Lagoa do Peixe Porzana spiloptera Atol das Rocas 35,421 Black Noddy Anous minutus, Brown Noddy Anous stolidus, Sooty Tern Onychoprion fuscata, Masked booby Sula dactylatra. Also an important breeding site for sea turtles (Chelonia midas and Eretmochelis imbricatus) and lemon shark (Negaprion breviceps) Ilhas Comprida e 22,893 16 species of birds, including the Sandwich Tern Thalasseus sandvicensis Cananeia Restinga da 20,342 Cactus Cabeca de velho Pilosocerus ulei, and six species of birds, including Black- Macambaba e Ilha backed Tanager Tangara peruviana de Cabo Frio Mangue Seco 2,651 Roseate Tern Sterna dougallii and Common Tern Sterna hirundo Arquipelago 1,839 Black Noddy Anous minutus, Noronha Elaenia Elaenia ridleyana; Fernando de Common White Tern Gygis alba; Red-Footed Booby Sula sula; Noronha Vireo Noronha Vireo gracilirostris Trindade e 1,672 Common White Tern Gygis alba and Trindade Petrel Pterodroma arminjoniana Martim Vaz Ilhas do Litoral Sul 647 Sandwich Tern do Espírito Santo Arquipelago de 244 Endemic amphibians Cycloramphus faustoi and the Alcatraz Snouted Alcatrazes Treefrog Ololygon alcatraz, and the seabirds Magnificent Frigatebird Fregata magnificens and the Brown Booby Sula leucogaster Ilha de Porcos 74 The treefrog Ololygon faivovichi (IUCN CR) Pequena Ilha dos Currais 13 Magnificent Frigatebird Fregata magnificens (KBA Criteria D1a) Ilha Grande N/A Eight species of birds including Red-browned Amazon Amazona rhodocorytha 3.4 ECOLOGICALLY OR BIOLOGICALLY SIGNIFICANT AREAS EBSAs are special areas in the ocean that support the healthy functioning of oceans and the many services that it provides. The Conference of the Parties (COP 9) to the Convention on Biological Diversity adopted the following seven scientific criteria for identifying EBSAs: Uniqueness or Rarity; Special importance for life history stages of species; Importance for threatened, endangered or declining species and/or habitats; Vulnerability, Fragility, Sensitivity, or Slow recovery; Biological Productivity; Biological Diversity; and Naturalness. The identification of EBSAs and the selection of conservation and management measures is a matter for States and competent intergovernmental organizations, in accordance with international law (including the UN Convention on the Law of the Sea). The criteria do not include quantitative thresholds, but in principle they have a lot in common with WBG/IFC Natural Habitats definition and Critical Habitat criteria and could therefore constitute and important high-level planning consideration for offshore wind development. 275 Scenarios for Offshore Wind Development in Brazil There are six EBSAs that overlap with Brazil’s EEZ: ■ Amazonian-Orinoco Influence Zone; ■ Parcel do Manuel Luiz e Banco do Alvaro; ■ Banks Chain of Northern Brazil and Fernando de Noronha; ■ North-Eastern Brazil Shelf-Edge Zone; ■ Abrolhos Bank and Vitoria-Trindade Chain; and ■ Southern Brazilian Sea. The significancexli of each of these EBSA designations is summarized in Table D.6. All EBSAs are included in the Restriction Zone layer, due to the large spatial extent and lack of detailed spatial information on the distribution of their biodiversity values, except where they overlap with other LPA or IRA designations. The list of LPAs and IRAs overlapping EBSAs is presented in Table D.5. Where there is no overlap, additional survey data is required to better assess whether offshore wind development is appropriate within the EBSA. TABLE D.4 SIGNIFICANCE OF EBSAS IN BRAZIL.xlii EBSA Significance Amazonian- Area of extremely high productivity, associated with transport of dissolved and particulate Orinoco material from terrestrial areas to the coasts and open ocean by Orinoco and Amazon rivers. Influence High levels of biodiversity inclusive of endangered, threatened and endemic species of turtles, Zone mammals, invertebrates, fishes and birds. Parcel do Northern-most coral community known in Brazil. 50 percent of the Brazilian hard corals’ Manuel Luiz e species are reported to occur in the area, six of which were not previously reported in. Banco do The north-eastern adjacent coast. The Endangered fire coral Millepora laboreli is endemic to the Alvaro area. Caribbean reef organisms are abundant in the area. The region represents an important area of feeding and reproduction of sharks and rays. Despite its proximity to the Amazon River mouth, the west-flowing Equatorial Current provides the region with clear and saline water. PE Parcel Manoel Luis, covering 354 km2 and including at least three different formations, has protected this area since 1999 and is a Ramsar site. Banks Chain The Rocas Atoll has the largest colony of seabirds in Brazil (143,000 birds) with five species of Northern nesting on the spot. The same species occur in Fernando de Noronha: Sula dactylatra, Sula Brazil and leucogaster, Anous stolidus; Anous minuta and Sterna fuscata. Two species that breed in the Fernando de southern hemisphere, Great Shearwater (Puffinus gravis), and Sooty Shearwater (Puffinus Noronha griseus), pass through the site during migration to and from non-breeding areas in the northern hemisphere. Four species that breed in the northern hemisphere Fea’s Petrel (Pterodroma feae), Zino’s Petrel (Pterodroma madeira), Manx Shearwater (Puffinus puffinus), and Cory’s Shearwater (Puffinus diomedea) also pass through the site during migration to and from non-breeding areas in the southern hemisphere. As in Fernando de Noronha, the atoll is also used for nesting site for the turtle Chelonia mydas and feeding area to juveniles of Chelonia mydas and Eretmochelys imbricata. The Olive Turtle (Lepidochelys olivacea) uses this area for feeding and as a migration route. The benthic macrofauna, dominated by Crustacea and Polychaeta groups, is more abundant at seamounts when compared to the continental shelf, showing a strong association between areas of Fernando de Noronha Chain and Northern Brazilian Chain. xli Secretariat of the Convention on Biological Diversity n.d. xlii https://www.cbd.int/ebsa/ebsas Appendix D—Brazil’s Priority Biodiversity Values 276 North-Eastern The shelf-edge reefs harbour critical habitats for the life cycle of many sea turtles and Brazil Shelf- reef fish species, including fish spawning aggregation sites. Many of those species recruit Edge Zone in shallow, costal habitats, such as mangroves, sea grasses and coral reefs, so the area is connected to those habitats. Two seabird species that breed in the southern hemisphere, Great Shearwater (Puffinus gravis) and Sooty Shearwater (Puffinus griseus), pass through the site during migration to and from non-breeding areas in the northern hemisphere. Three seabird species that breed in the northern hemisphere, Fea’s petrel (Pterodroma feae), Manx shearwater (Puffinus puffinus) and Cory’s shearwater (Puffinus diomedea), also pass through the site during migration to and from non-breeding areas in the southern hemisphere. This is an essential area for inter-nesting, foraging and migration for three species of sea turtles: Lepidochelys olivacea, Caretta caretta and Eretmochelys imbricata. Abrolhos Bank The Abrolhos Region (56,000 km²) is a mosaic of marine and coastal ecosystems that and Vitoria- encompasses the largest reef area and the highest marine biodiversity in the southern Trindade Atlantic, harbouring a wealth of endemic and IUCN Red List marine species. Multiple species Chain use the Abrolhos Bank as feeding or breeding, such as Humpback and Southern Right Whales; three species of small cetaceans (Guiana Dolphin, Rough-Toothed Dolphin, and Bottlenose Dolphin), marine birds, including the Red-Billed Tropic Bird (Phaethon aethereus), the Boobies Sula dactylatra and Sula leucogaster, the Magnificient Frigatebird (Fregata magnificens) and the migratory Brown Noddy (Anous stolidus), as well as three IUCN Red List marine turtle species: the Endangered Green (Chelonia mydas) and Loggerhead (Caretta caretta) turtles, and the Critically Endangered hawksbill turtle (Eretmochelys imbricata). The Trindade and Martin Vaz Archipelago is a breeding site for seven species of seabirds, including the endemic Trindade Petrel (Pterodroma arminjoniana), and the endemic frigatebirds Fregata ariel trinitiatis and the Fregata minor nicolli. The green turtle (Chelonia mydas) rookery on Trindade Island, is the seventh-largest nesting colony of green turtles in the Atlantic. Southern This site has high biological productivity and makes this region an important reproduction, Brazilian Sea nursery and feeding ground for pelagic and demersal fish stocks and a crucial feeding ground for threatened cetacean, seabird, and marine turtle species. The area is also the main breeding ground for the endangered Southern Right Whale (Eubalaena australis) in Brazil. TABLE D.5 LIST OF LPAS AND IRAS OVERLAPPING EBSAS IN BRAZILIAN EEZ WITH TOTAL OVERLAP AREAS IN HECTARES. Abrolhos Atlantic Northern Northeastern Amazonin a Brazil and Brazilian Parcel do Southern and Vitoria- Equatorial -Orinoco Manuel Luiz Brazilian Sea Trindade Fracture Noronha Shelf APA Baia das Tartarugas APA Costa das Algas APA Costa dos Corais APA da Baleia Franca APA da Lagoa Grande APA da Lagoa Verde APA De Fernando De Noronha APA de Praia Mole APA de Setiba APA do Arquipelago de Sao Pedro e Sao Paulo APA do Arquipelago de Trindade e Martim Vaz APA do Arquipelago do Marajo APA Marinha Recifes Serrambi 277 Scenarios for Offshore Wind Development in Brazil Abrolhos Atlantic Northern Northeastern Amazonin a Brazil and Brazilian Parcel do Southern and Vitoria- Equatorial -Orinoco Manuel Luiz Brazilian Sea Trindade Fracture Noronha Shelf APA Municipal Tartarugas APA Plataforma Continental do Litoral Norte APA Ponta da Baleia / Abrolhos APA de Costa Dourada ARIE do Degredo APA Caraiva/ Trancoso EE do Taim MN das Ilhas de Trindade, Martim Vaz e do Monte Columbia MN do Arquipelago de Sao Pedro e Sao Paulo PE Marinho Banco do Alvaro PE Paulo Cesar Vinha PN Municipal De Bicanga PN da Lagoa Do Peixe PN do Cabo Orange PN do Monte Pascoal PN Municipal de Jacarenema PNM de Fernando Noronha PNMM do Recife de Fora PNMM do Recife de Fora PNM dos Abrolhos RB Atol Das Rocas RB de Comboios RDS Vel Concha Doostra Reserva Extrativista Corumbau RESEX de Canavieiras RESEX de Cassuruba RPPN Carroula RVS de Santa Cruz RVS do Molhe Leste RVS Ilha dos Lobos KBA Ilhas Litoral Sul do Espírito Santo KBA PN Monte Pascoal KBA Trindade e Martim Vaz Appendix D—Brazil’s Priority Biodiversity Values 278 Abrolhos Atlantic Northern Northeastern Amazonin a Brazil and Brazilian Parcel do Southern and Vitoria- Equatorial -Orinoco Manuel Luiz Brazilian Sea Trindade Fracture Noronha Shelf KBA PN Cabo Orange KBA Arquipelago de Fernando de Noronha KBA Atol das Rocas KBA Banhado do Macarico e Cordoes Litoraneos KBA Banhado do Taim KBA Estuario da Laguna dos Patos KBA PN Lagoa do Peixe LPA Overlap With 559 EBSA (Km2) KBA Overlap with 23 2 93 EBSA (except LPA) EBSA Total Area (Km2) 364,873 1,156,020 1,905,042 142,501 71,979 1,939 595,363 3.5 LPA / IRA SUMMARY Overall, there are 252 LPAs with marine or coastal components in Brazil, of various designations, many overlapping each other (see Sections 3.1 to 3.4). These are summarized in Table D.6, with their corresponding national and international designations. TABLE D.6 SUMMARY OF LPA AND IRA IN BRAZIL WITH MARINE OR COASTAL COMPONENTS. TO AVOID DOUBLE-COUNTING, OVERLAPPING SITES ARE COMBINED IN A SINGLE ROW. Legally Protected Areas (LPA) Internationally Recognized Areas (IRA) Focal Area Site Strict Strict Sustainable Sustainable EBSA Action Plans Protection Protection Indigenous Ramsar Use in IUCN Use in IUCN KBA IBA AZE Site in IUCN Cat in IUCN Cat Lands Site Cat V Cat VI Ia, Ib and II III and IV APA Anhatomirim APA Baía das Tartarugas APA Baía de Camamu APA Baía de Todos os Santos APA Barra do Rio Mamanguape APA Bonfim/ Guaraíra APA Caraíva/ Trancoso APA Conceição da Barra APA Coroa Vermelha APA Costa Das Algas 279 Scenarios for Offshore Wind Development in Brazil Legally Protected Areas (LPA) Internationally Recognized Areas (IRA) Focal Area Site Strict Strict Sustainable Sustainable EBSA Action Plans Protection Protection Indigenous Ramsar Use in IUCN Use in IUCN KBA IBA AZE Site in IUCN Cat in IUCN Cat Lands Site Cat V Cat VI Ia, Ib and II III and IV APA Costa de Itacaré/ Serra Grande APA Costa dos Corais APA da Bacia do Rio Macacu APA da Baía de Paraty APA da Baixada Maranhense APA da Baleia Franca APA da Foz do Rio Das Preguiças —Pequenos Lençóis— Região Lagunar Adjacente APA da Ilha do Combu APA da Lagoa do Uruaú APA da Lagoa Grande APA da Lagoa Guanandy APA da Orla Marítima da Baía de Sepetiba APA da Praia de Ponta Grossa APA das Dunas da Lagoinha APA das Dunas do Litoral Oeste APA das Pontas de Copacabana E Arpoador E Seus Entornos APA das Reentrâncias Maranhenses / KBA Reentrancias Maranhanses e Paraenses APA de Algodoal- Maiandeua / KBA Reentrancias Maranhanses e Paraenses Appendix D—Brazil’s Priority Biodiversity Values 280 Legally Protected Areas (LPA) Internationally Recognized Areas (IRA) Focal Area Site Strict Strict Sustainable Sustainable EBSA Action Plans Protection Protection Indigenous Ramsar Use in IUCN Use in IUCN KBA IBA AZE Site in IUCN Cat in IUCN Cat Lands Site Cat V Cat VI Ia, Ib and II III and IV APA de Cairuçu APA de Cananéia- Iguapé- Peruíbe APA de Costa Dourada APA de Fernando de Noronha APA de Grumari APA de Guadalupe APA de Guapi-Mirim APA de Guaraqueçaba APA de Itaoca APA de Jenipabu APA de Mangaratiba APA de Maricá APA de Piaçabuçu APA de Praia Mole APA de Santa Cruz APA de Setiba APA de Tamoios APA de Upaon-Açu / Miritiba / Alto Preguiças APA Delta do Parnaiba APA do Arquipelago de Santana APA do Arquipélago de São Pedro e São Paulo APA do Arquipélago de Trindade e Martim Vaz APA do Arquipélago do Marajó APA do Catolé e Fernão Velho 281 Scenarios for Offshore Wind Development in Brazil Legally Protected Areas (LPA) Internationally Recognized Areas (IRA) Focal Area Site Strict Strict Sustainable Sustainable EBSA Action Plans Protection Protection Indigenous Ramsar Use in IUCN Use in IUCN KBA IBA AZE Site in IUCN Cat in IUCN Cat Lands Site Cat V Cat VI Ia, Ib and II III and IV APA do Entorno Costeiro APA do Estuário do Rio Ceará - Rio Maranguapinho APA do Lagamar do Cauipe APA do Manguezal da Barra Grande APA do Morro do Leme APA do Pau Brasil APA do Rio Pacoti APA do Saco de Coroa Grande APA Dos Recifes de Corais APA Dunas do Rosado APA Estadual de Guaratuba APA Guaibim APA Ilha Comprida APA Lagoa Encantada APA Lagoas de Guarajuba APA Litoral Norte / KBA Mangue Seco APA Mangue Seco APA Marinha do Litoral Centro APA Marinha do Litoral Norte / KBA Ilha de Porcos APA Marinha do Litoral Sul APA Marinha Recifes Serrambi APA Municipal da Serra do Guararu APA Municipal Tartarugas Appendix D—Brazil’s Priority Biodiversity Values 282 Legally Protected Areas (LPA) Internationally Recognized Areas (IRA) Focal Area Site Strict Strict Sustainable Sustainable EBSA Action Plans Protection Protection Indigenous Ramsar Use in IUCN Use in IUCN KBA IBA AZE Site in IUCN Cat in IUCN Cat Lands Site Cat V Cat VI Ia, Ib and II III and IV APA Paisagem Carioca APA Plataforma Continental do Litoral Norte APA Ponta da Baleia / Abrolhos APA Pratigi APA Rio Capivara APA Santo Antônio ARIE Manguezais da Foz do Rio Mamanguape ARIE da Barra do Rio Camaratuba ARIE de Itapebussus ARIE de São Sebastião ARIE do Degredo ARIE do Guará ARIE Ilhas Queimada Grande e Queimada Pequena ARIE Ipojuca- Merepe ARIE Orla Marítima ARIE Zona de Vida Silvestre da APA da Ilha Comprida EBSA Amazonian- Orinoco Influence Zone EBSA Parcel do Manuel Luiz e Banco do Alvaro EBSA Banks Chain of Northern Brazil and Fernando de Noronha 283 Scenarios for Offshore Wind Development in Brazil Legally Protected Areas (LPA) Internationally Recognized Areas (IRA) Focal Area Site Strict Strict Sustainable Sustainable EBSA Action Plans Protection Protection Indigenous Ramsar Use in IUCN Use in IUCN KBA IBA AZE Site in IUCN Cat in IUCN Cat Lands Site Cat V Cat VI Ia, Ib and II III and IV EBSA North- Eastern Brazil Shelf-Edge Zone EBSA Abrolhos Bank and Vitoria- Trindade Chain EBSA Southern Brazilian Sea EE da Guanabara EE de Carijós EE de Guaraqueçaba EE de Maracá Jipioca / KBA Goiabal / Piratuba EE de Tamoios EE do Taim EE Dos Tupiniquins EE Juréia-Itatins EE Tupinambás KBA Estuario da Laguna dos Patos KBA Ilhas do Litoral Sul do Espírito Santo MN Atalaia / KBA Reentrancias Maranhanses e Paraenses MN das Falésias de Beberibe MN das Ilhas Cagarras MN das Ilhas de Trindade, Martim Vaz e do Monte Columbia MN do Arquipélago de São Pedro e São Paulo MN dos Morros do Pão de Açúcar e Urca Appendix D—Brazil’s Priority Biodiversity Values 284 Legally Protected Areas (LPA) Internationally Recognized Areas (IRA) Focal Area Site Strict Strict Sustainable Sustainable EBSA Action Plans Protection Protection Indigenous Ramsar Use in IUCN Use in IUCN KBA IBA AZE Site in IUCN Cat in IUCN Cat Lands Site Cat V Cat VI Ia, Ib and II III and IV MN Municipal da Galheta MN Municipal da Lagoa do Peri MN Municipal Falésias de Marataízes MN Península da Siribinha PE Acarai PE da Costa do Sol / Restinga da Macambaba e Ilha de Cabo Frio PE da Ilha Anchieta PE da Ilha do Cardoso / KBA Guaraquecaba —Jacupiranga —Cananeia PE da Ilha do Mel PE da Ilha Grande PE da Lagoa do Açu PE da Serra da Tiririca PE da Serra do Mar PE da Serra do Tabuleiro PE das Trilhas PE de Ilhabela PE de Itapeva PE de Itaúnas PE do Cocó PE do Delta do Jacuí PE do Itinguçu PE do Prelado PE do Rio Vermelho PE Marinho Banco do Álvaro PE Marinho Banco do Tarol PE Marinho da Laje de Santos 285 Scenarios for Offshore Wind Development in Brazil Legally Protected Areas (LPA) Internationally Recognized Areas (IRA) Focal Area Site Strict Strict Sustainable Sustainable EBSA Action Plans Protection Protection Indigenous Ramsar Use in IUCN Use in IUCN KBA IBA AZE Site in IUCN Cat in IUCN Cat Lands Site Cat V Cat VI Ia, Ib and II III and IV PE Marinho da Pedra da Risca do Meio PE Marinho do Parcel de Manuel Luís PE Paulo César Vinha PE Xixová-Japuí PN da Lagoa do Peixe PN da Serra da Bocaina PN de Jericoacoara PN do Cabo Orange PN do Monte Pascoal PN do Superagui / KBA Guaraquecaba —Jacupiranga —Cananeia PN dos Lençois Maranhenses PN Marinho de Fernando de Noronha PN Marinho das Ilhas dos Currais PN Marinho dos Abrolhos PN Restinga de Jurubatiba PNM Barão de Mauá PNM da Caieira PNM da Lagoa do Perequê PNM da Lagoinha do Leste PNM da Prainha PNM Darke de Mattos PNM das Dunas da Lagoa da Conceição PNM das Dunas da Sabiaguaba Appendix D—Brazil’s Priority Biodiversity Values 286 Legally Protected Areas (LPA) Internationally Recognized Areas (IRA) Focal Area Site Strict Strict Sustainable Sustainable EBSA Action Plans Protection Protection Indigenous Ramsar Use in IUCN Use in IUCN KBA IBA AZE Site in IUCN Cat in IUCN Cat Lands Site Cat V Cat VI Ia, Ib and II III and IV PNM de Grumari PNM de Jacarenema PNM de Niterói PNM do Forte de Tamandare PNM Dom Luiz Gonzaga Fernandes PNM Dos Corais de Armação Dos Búzios PNM Lagoa do Jacaré das Dunas do Santinho PNM Marinho do Recife de Fora PNM Paisagem Carioca PNM Von Schilgen RVS Das Ilhas do Abrigo E Guararitama RVS de Santa Cruz RVS de Una RVS do Arquipélago de Alcatrazes RVS do Molhe Leste RVS do Rio dos Frades RVS Ilha dos Lobos RVS Municipal das Serras de Maricá RVS Municipal Meiembipe RB Atol das Rocas RB de Comboios RB de Santa Isabel RB do Lago Piratuba RB do Parazinho 287 Scenarios for Offshore Wind Development in Brazil Legally Protected Areas (LPA) Internationally Recognized Areas (IRA) Focal Area Site Strict Strict Sustainable Sustainable EBSA Action Plans Protection Protection Indigenous Ramsar Use in IUCN Use in IUCN KBA IBA AZE Site in IUCN Cat in IUCN Cat Lands Site Cat V Cat VI Ia, Ib and II III and IV RB Estadual da Praia do Sul RB Estadual de Guaratiba RB Marinha do Arvoredo RDS da Barra do Una RDS da Ilha do Morro do Amaral RDS do Aventureiro RDS Estadual Ponta do Tubarão RDS Estadual D´Ostra RESEX Acaú-Goiana RESEX Arapiranga- Tromaí / KBA Reentrancias Maranhanses e Paraenses RESEX Corumbau RESEX da Baía do Tubarão RESEX de Canavieiras RESEX de Cassurubá RESEX de Cururupu / KBA Reentrancias Maranhanses e Paraenses RESEX do Batoque RESEX Ilha do Tumba RESEX Itapetininga / KBA Reentrancias Maranhanses e Paraenses RESEX Mae Grande de Curuça / KBA Reentrancias Maranhanses e Paraenses Appendix D—Brazil’s Priority Biodiversity Values 288 Legally Protected Areas (LPA) Internationally Recognized Areas (IRA) Focal Area Site Strict Strict Sustainable Sustainable EBSA Action Plans Protection Protection Indigenous Ramsar Use in IUCN Use in IUCN KBA IBA AZE Site in IUCN Cat in IUCN Cat Lands Site Cat V Cat VI Ia, Ib and II III and IV RESEX Maracanã / KBA Reentrancias Maranhanses e Paraenses RESEX Marinha Arai- Peroba / KBA Reentrancias Maranhanses e Paraenses RESEX Marinha Arraial do Cabo RESEX Marinha Caetétaperaçu / KBA Reentrancias Maranhanses e Paraenses RESEX Marinha Cuinarana / KBA Reentrancias Maranhanses e Paraenses RESEX Marinha da Lagoa do Jequiá RESEX Marinha de Gurupi- Piriá / KBA Reentrancias Maranhanses e Paraenses RESEX Marinha de Itaipu RESEX Marinha de Soure RESEX Marinha do Delta do Parnaiba RESEX Marinha Mestre Lucindo / KBA Reentrancias Maranhanses e Paraenses 289 Scenarios for Offshore Wind Development in Brazil Legally Protected Areas (LPA) Internationally Recognized Areas (IRA) Focal Area Site Strict Strict Sustainable Sustainable EBSA Action Plans Protection Protection Indigenous Ramsar Use in IUCN Use in IUCN KBA IBA AZE Site in IUCN Cat in IUCN Cat Lands Site Cat V Cat VI Ia, Ib and II III and IV RESEX Marinha Mocapajuba / KBA Reentrancias Maranhanses e Paraenses RESEX Marinha Pirajubaé RESEX Marinha Tracuateua / KBA Reentrancias Maranhanses e Paraenses RESEX Prainha do Canto Verde RESEX Taquari TI Cerco Grande TI Comboios TI Comboios TI Coroa Vermelha TI Ilha do Cardoso TI Morro do Coco TI Morro do Osso TI Parati-Mirim TI Passo Grande TI Tremembé de Almofala TI Tremembé de Sao José e Buriti 4 MARINE MAMMALS The Brazilian EEZ is important for some priority marine mammal species, including one sirenid and thirteen cetaceans. There are no Important Marine Mammal Areas (IMMA) designated in South America (including Brazil), as the Marine Mammals Protected Area Task Force has yet to convene a workshop for the region.xliii xliii https://www.marinemammalhabitat.org/ Appendix D—Brazil’s Priority Biodiversity Values 290 4.1 American Manatee The American Manatee (T. manatus) is a relatively large aquatic mammal of the order Sirenia that inhabits coastal marine, estuarine and freshwater ecosystems, including seagrass, mangrove and coral reefs, in the Caribbean Sea and the northern section of the Atlantic South American coast (U.S. Fish and Wildlife Service 2001; IUCN 2008). Manatees are herbivores and need areas with aquatic vegetation (especially seagrasses), undisturbed areas for resting and breeding, and travel corridors between feeding, drinking, nursery, mating, and resting areas (W. Lefebvre et al. 1999; U.S. Fish and Wildlife Service 2001; IUCN 2008). American Manatees are globally classified as Vulnerable and nationally classified as Endangered. They are threatened by human activities such as fishing, aquatic recreational activities and shipping traffic (IUCN 2008) and are therefore prone to impacts from the construction of offshore wind farms. Manatees are also sensitive to environmental noise and underwater noise can potentially affect their behavior, habitat selection and distribution (Miksis-Olds 2006). The distribution of manatees in the Brazilian coast is limited to northern coastline, extending south to Alagoas state with few disjunctions, comprising the protected areas listed below with the corresponding Brazilian State.xliv It is considered extinct along the coast of Espírito Santo, Bahia and Sergipe States. ■ APA Barra do Rio Mamanguape (PB) ■ APA Costa dos Corais (AL/PE) ■ APA Delta do Parnaiba (PI / MA / CE) ■ ARIE Manguezais da Foz do Rio Mamanguape (PB) ■ EE de Maraca-Jipioca (AP) ■ PN do Cabo Orange (AP) ■ RB Lago Piratuba (AP) ■ RESEX Cururupu (MA) ■ RESEX Mae Grande de Curuca (PA) ■ RESEX Maracana (PA) ■ RESEX Marinha do Soure (PA) A range map was obtained from the Ministry of Environment “Priority Areas for Conservation” database and occurrence points from SALVE / Chico Mendes Institute database. 4.2 Cetaceans Thirteen threatened or near-threatened cetacean species occur in the Brazilian EEZ. Two species listed nationally as threatened are considered least concern on global assessment (Table D.6). xliv https://www.gov.br/icmbio/pt-br/assuntos/biodiversidade/pan/pan-sirenios/1-ciclo/pan-sirenios-sumario.pdf 291 Scenarios for Offshore Wind Development in Brazil TABLE D.7 THREATENED AND NEAR THREATENED SPECIES OF MARINE MAMMALS ACCORDING TO IUCN AND NATIONAL REDLISTS. National Common Name Latin Name IUCN status Redlist status Southern Minke Whale Balaenoptera bonaerensis NT DD Sei Whale Balaenoptera borealis EN EN Blue Whale Balaenoptera musculus EN CR Fin Whale Balaneoptera physalus VU EN Southern Right Whale Eubalaena australis LC EN Humpback Whale Megaptera novaeangliae LC NT Sperm Whale Physeter macrocephalus VU VU False Killer Whale Pseudorca crassidens NT DD Burmeister’s porpoise Phocoena spinipinnis NT Not evaluated La Plata dolphin Pontoporia blainvillei VU CR Guiana Dolphin Sotalia guianensis NT VU Lahille’s bottlenose dolphin Tursiops gephyreus (IUCN evaluated under Not evaluated EN T. truncatus) Atlantic bottlenose dolphin Tursiops truncatus VU EN While the whale species are widespread and occur mostly in deep waters of Brazil’s EEZ, dolphin species have patchy and more restricted distributions along the coast. According to the Action Plan for Conservation of Marine Cetaceans, along the coast there are multiple areas of special interest for conservation of four species of whales and dolphins, namely Humpback Whale, Southern Right Whale, Lahille's bottlenose dolphin, and Guiana Dolphin. The following LPAs, listed with their corresponding State, are cosidered strategic for marine cetacean conservation: ■ APA da Baleia Franca (SC) ■ APA de Anhatomirim (SC) ■ APA De Cananéia-Iguape-Peruíbe (SP) ■ APA de Guaraqueçaba (PR) ■ APA Ponta da Baleia / Abrolhos (BA) ■ APA de Fernando de Noronha (PE) ■ APA da Costa dos Corais (AL/PE) ■ APA dos Arquipélagos de Trindade e Martin Vaz (ES) ■ APA do Arquipelago de São Pedro e São Paulo (PE) ■ PN Marinhos de Abrolhos (BA) ■ MN dos Arquipélagos de Trindade e Martim Vaz (ES) ■ MN do Arquipelago de São Pedro e São Paulo (PE) Appendix D—Brazil’s Priority Biodiversity Values 292 ■ PN Fernando de Noronha (PE) ■ PN Superagui (PR) ■ RB Marinha do Arvoredo (SC) ■ RB Marinha do Atol das Rocas (RN) ■ Resex Marinha de Arraial do Cabo (RJ) ■ Resex Corumbau (BA) ■ RVS do Arquipélago de Alcatrazes (SP) Species occurrence records were obtained from SALVE / ICMBio and range polygons and areas of special interest for sea mammals were obtained from MMA. 5 BIRDS 5.1 Threatened seabirds and shorebirds in Brazil EEZ Combining global and national red lists, twenty-seven species of threatened seabirds and shorebirds (Orders Procellariiformes and Charadriiformes) have part of their distribution in Brazilian EEZ. Only the Tristan Albatross is considered CR by IUCN while national assessment also lists Audubon’s Shearwater, Wandering Albatross, and Trindade Petrel as Critically Endangered. Albatrosses and petrels are among the most oceanic seabirds, rarely approaching land, except for breeding. Multiple species carry out extensive migratory movements that cover thousands of kilometers and can, for example, circle the Antarctic continent.xlv Only two species of petrel nest in Brazilian territory and both face conservation problems. The Trindade Petrel Pterodroma arminjoniana, nests on Trindade Island and nearby islets that are approximately 1,200 km from the mainland, and in the Martin Vaz archipelago, located about 50 km from Trindade. This species is not common close to mainland South America, with a single record near the Argentine coast, Golfo San Matias and a southernmost record to the southeast of the Falkland Islands. Apparently, this bird does not interact with fishing, but faces problems in its breeding area, such as suppression of vegetation cover and introduction of domestic animals that prey on their eggs and nestlings. The Audubon’s Shearwater Puffinus lherminieri is a small bird, with a wingspan of 65 to 70 cm. It nests in Fernando de Noronha (PE) and in the Itatiaia Islands (ES). In the South Atlantic it has also been recorded on the Ascension and Saint Helena Islands. In Brazil, less than ten pairs of this species have already been observed in each of the locations where the species was recorded. Shorebirds are those that depend on wetland habitats and seek food in the intertidal zones and margins of aquatic bodies, especially coastal lagoons, and estuaries, although they may occupy a diversity of habitats. These include a large number of migratory species. The migrations occur in the autumn and spring of each year, when thousands of individuals cross the northern and southern hemispheres to escape the winter in breeding sites, generally in the Northern Hemisphere, and overwinter at sites in Brazil.xlvi xlv https://www.gov.br/icmbio/pt-br/assuntos/biodiversidade/pan/pan-albatrozes-e-petreis/2-ciclo/pan-planacap-sumario.pdf xlvi https://www.gov.br/icmbio/pt-br/assuntos/biodiversidade/pan/pan-aves-limicolas-migratorias/1- ciclo/pan_aves_limicolas_migratorias-sumario.pdf 293 Scenarios for Offshore Wind Development in Brazil Environmental conditions at wintering sites and stopping places, during migration, can influence the populations of shorebirds. The supply and quality of food available at these sites reflects on the preparation and health of the birds that will migrate. Likewise, physical changes in water systems, obstruction of beaches and lagoons, installation of structures and activities that interfere with the feeding, movement and rest of the birds will have negative reflexes for their survival and migration. Studies carried out in several countries, including Brazil, indicate a marked population decline of most migratory species in the recent years, demanding greater attention in the investigation and mitigation of threats. Among the main feeding and wintering sites in Brazil, on the north coast, the following are notable: the coast of Amapá, Pará and Reentrâncias Maranhenses and on the south coast, the PN Lagoa do Peixe. Also important are beaches, lagoons and swamps along the coast, riverbanks and other wetlands in Brazilian territory used by birds in large numbers. The report on migration routes and areas of congregation of migratory birds in Brazil published by CEMAVE/ICMBioxlvii in 2019 aims to establish areas where onshore wind developments must follow a more thorough process of environmental license. Five migration routes are described in this report: ■ Atlantic route–along Brazilian coast from Amapá to Rio Grande do Sul; ■ North-Eastern route–diversion of Atlantic route, from São Marcos Bay (Maranhao) and Parnaíba mouth (Maranhão/Piaui), through inland North-eastern region, to Bahia coast ■ Central Brazil route–another diversion of Atlantic route, from Amazonas River and Marajo archipelago, following Tocantins and Araguaia rivers, through Central Brazil, and south to Parana River valley in Sao Paulo ■ Central Amazon / Pantanal route ■ Eastern Amazon route A significant number of Brazilian shorebirds are part of a global population of species that breeds in the Arctic and migrates to South America every year. About 30 species follow the same pattern and congregate in flooded areas along Brazilian coast, as summarized in Table D.8. xlvii https://www.gov.br/icmbio/pt-br/centrais-de-conteudo/publicacoes/relatorios/relatorio_de_rotas_e_areas_de_concentracao_de_aves_migratorias_ brasil_3edicao_2019.pdf Appendix D—Brazil’s Priority Biodiversity Values 294 TABLE D.8 MAIN CONGREGATIONS IDENTIFIED BY THE REPORT ON MIGRATION ROUTES AND AREAS OF CONGREGATION FOR SHOREBIRDS (DATA EXTRACTED FROM THE REPORT ON MIGRATION ROUTES AND CONGREGATIONS). Congregations Marine Legally Protected Areas Threatened species Piacabucu Environmental Protection APA Piacabucu Calidris pusilla Area (AL) Ilha do Parazinho (AP) RB Parazinho Calidris pusilla Praia do Goiabal (AP) - Calidris pusilla Cacha-Prego (BA) APA Baia de Todos os Santos (part) Congregations Camamu (BA) APA Baia de Camamu (part) Congregations Mangue-Seco (BA) APA Litoral Norte Congregations Ilha Grande (CE) APA Delta do Parnaiba (part) Calidris pusilla APA Manguezal da Barra Grande; Limnodromus griseus, Calidris Icapui coast / Banco dos Cajuais (CE) Western Hemisphere Shorebird canutus, Charadrius wilsonia, Calidris Reserves Network pusilla Islands of Vila Velha, Guarapari, - Puffinus lherminieri Itapemirim and Marataízes (ES) APA das Reentrâncias Maranhenses; Reentrancias Maranhenses Calidris pusilla, Limnodromus griseus RESEX Cururupu Baixada Maranhense APA da Baixada Maranhense Calidris pusilla, Calidris canutus Reentrancias Paraenses Calidris pusilla, Limnodromus griseus Ilha dos Currais National Park, PN Ilha dos Currais Congregations Figueira and Itacolomi islands Coroa do Aviao island (PE) Congregations Quissama (RJ) Congregations Salina Diamante Branco (RN) Calidris pusilla Complexo Litorâneo da Bacia Calidris pusilla, Limnodromus griseus, Potiguar (RN) Região dos Banhados e Cordões Congregations Litorâneos (RS) Estuário da Laguna dos Patos (RS) APA Lagoa Verde, IBA Calidris subruficollis Taim Ecological Station (RS) EE Taim Calidris subruficollis PN Lagoa do Peixe, Western Lagoa do Peixe National Park (RS) Hemisphere Shorebird Reserves Calidris canutus, Calidris subruficollis Network site Litoral Medio (RS) Calidris canutus, Calidris subruficollis Ilhas marinhas costeiras da RB Arvoredo, Parque Estadual do Deserta, Moleques do Sul, Santana Congregations Tabuleiro, APA da Baleia Franca de Dentro e Santana de For a (SC) Arquipélago de Alcatrazes (SP) RVS Arquipelago de Alcatrazes Congregations PE Ilhabela, APA Marinha Litoral Ilhabela (SP) Congregations Norte Laje de Santos (SP) PE Marinho Laje de Santos Congregations Ilhote das Gaivotas (SP) Congregations Laje da Conceicao (SP) APA Marinha Litoral Centro Congregations Castilho (SP) APA Marinha Litoral Sul Congregations Ilha da Figueira (SP) Congregations Sergipe river estuary (SE) Congregations Vaza-barris estuary (SE) Congregations Aracaju beaches (SE) Congregations 295 Scenarios for Offshore Wind Development in Brazil Congregations Marine Legally Protected Areas Threatened species Fernando de Noronha archipelago PN Fernando de Noronha Puffinus lherminieri Abrolhos archipelago PN Marinho dos Abrolhos Congregations MN das Ilhas de Trindade, Martim Pterodroma arminjoniana, Trindade and Martim Vaz islands Vaz e Monte Columbia Limnodromus griseus There are different spatial databases available to support identification of areas relevant for seabirds and shorebirds in Brazil: ■ Occurrence points for all listed species can be downloaded from SALVE/ICMBio database. ■ Polygons of species ranges along the Brazilian ZEE were developed and validated by experts involved in Ministry of Environment’s Áreas Prioritárias para Conservação da Biodiversidade Brasileira (Priority Areas for Conservation of Brazilian Biodiversity, in free translation). ■ Data on relevant areas of congregation, feeding and breeding were gathered by ICMBio, systematized by the Action Plans, and can be downloaded from the Priority Area database. ■ A very comprehensive review by Somenzari et al. (2018) provides additional information on breeding ecology, migration and other ecological traits of migratory birds in Brazil. Appendix 2 provides additional sources of survey and monitoring data in relation to migration routes that could be useful to inform MSP, site selection and ESIA. LPAs and IRAs with marine or coastal components that are significant for threatened waterbirds are highlighted in Section 3 particularly the IBAs listed in Table D.3, which have been included in the Exclusion Zone layer. Appendix 2 provides additional sources of bird survey and sightings data that could be useful to inform MSP, site selection and ESIA. 6 SEA TURTLES Five species of sea turtles occur in the Brazilian EEZ, all of them are considered globally threatened and four of them are considered nationally threatened. Species are widely distributed along the coast with some known congregations at specific regions. Nesting sites (Table D.9) are located mainly in north-eastern Brazil extending south to Rio de Janeiro state. Currently, the main threats to sea turtles are coastal development, incidental catches during fishing operations, human consumption of meat, climate change, pollution, and exposure to pathogens. Coastal development specifically leads to the use of areas that are important for these animals in terms of foraging and reproduction. TABLE D.9 MOST IMPORTANT SEA TURTLE NESTING BEACHES / REGIONS (WERNECK ET AL. 2018). Species Nesting Sites Distribution Hawksbill Turtle, Primary nesting sites in Northern Bahia, Sites with hard substrates, such as Eretmochelys imbricata Sergipe, Southern Rio Grande do Norte coral reefs. The main known feeding (IUCN–CR; National–EN and Pipa. Secondary nesting areas in grounds are the Fernando de Noronha the state of Paraíba and the southern Archipelago, Rocas Atoll, Trindade portion of the state of Bahia. Island, Abrolhos Archipelago (state of Bahia), Sao Pedro e Sao Paulo Archipelagos, Arvoredo Island (state of Santa Catarina), and Cagarras Islands (state of Rio de Janeiro). Appendix D—Brazil’s Priority Biodiversity Values 296 Green Turtle, Oceanic Islands (Trindade, Coastal habits, feeds along the entire Chelonia mydas Fernando de Noronha, Rocas Attol) coast of Brazil, including the estuaries of IUCN–EN; National–LC and Northern Bahia. rivers and lakes. Juveniles migrate from the pelagic oceanic environment to the coastal zone when reaching 30–40 cm. Olive Ridley Turtle, Primary nesting sites in Northern Bahia, Widespread from Maranhao to Rio Lepidochelys olivacea Sergipe, Southern Alagoas. Secondary Grande do Sul. Main feeding sites in IUCN–VU; National–VU nesting sites in Espírito Santo. neritic and oceanic environments. Leatherback Turtle, Regular nesting site in Northern Espírito Forages from the ocean surface Dermochelys coriacea Santo; occasional nesting in Piauí, Rio to considerable depths, preferably IUCN–VU; National–CR Grande do Norte, Bahia, Rio de Janeiro, inhabiting the oceanic region. High Santa Catarina, and Rio Grande do Sul. densities in Rio Grande do Sul continental slope. Loggerhead Turtle, Primary site in Northern Rio de Janeiro, Main feeding sites in neritic and Caretta caretta Northern Espírito Santo, Northern oceanic environments. Migration IUCN–VU; National–VU Bahia, and Sergipe. Secondary sites in corridor from Bahia to feeding/resting the southern portions of the states of sites in Ceara. High concentration of Espírito Santo and Bahia. juveniles in Rio Grande do Sul. According to CONAMA Resolution 10/1996,xlviii The Sea Turtle Conservation Center (Tamar / ICMBio) must be consulted to license developments on beaches where nesting sites are located. The areas subject to this resolution are the following: ■ Rio de Janeiro state from Farol de São Tomé beach (Campos municipality), north to the boundary with Espírito Santo state ■ Espírito Santo state from Portocel (Aracruz municipality) north to the boundary with Bahia state ■ Bahia state, from the boundary with Espírito Santo state north to the mouth of Corumba river (Itamaraju municipality) and from Itapua beach (Salvador municipality) north to the boundary with Sergipe state ■ In Sergipe state from the boundary with Bahia north to Pontal dos Mangues (Pacatuba municipality) and from Santa Isabel beach (Pirambu municipality) north to the boundary with Alagoas state ■ Alagoas state from the boundary with Sergipe state north to the Penedo municipality. ■ Beaches of Fernando de Noronha Archipelago: Boldro, Conceicao, Caieira, Americano, Bode, Cacimba do Padre, Baia de Santo Antonio ■ Rio Grande do Norte state in Pipa beach According to the Action Plan for Sea Turtle Conservationxlix, nesting sites are known from the following protected areas: ■ APA Fernando de Noronha/PE ■ APA Lagoas de Guarajuba/BA xlviii http://www.ibama.gov.br/sophia/cnia/legislacao/MMA/RE0010-241096.PDF xlix https://www.gov.br/icmbio/pt-br/assuntos/biodiversidade/pan/pan-tartarugas-marinhas/2-ciclo/pan-tartarugas-sumario.pdf 297 Scenarios for Offshore Wind Development in Brazil ■ APA Litoral Norte/BA ■ APA Mangue Seco/BA ■ APA Rio Capivara/BA ■ APA Bonfim-Guaraíras/RNAPA Litoral Norte e Litoral Sul/SE ■ PN Marinho de Fernando de Noronha/PE ■ RB Atol das Rocas/RN ■ RB Comboios/ES ■ RB Santa Isabel/SE The locations of sea turtles nesting beaches from the Global Distribution of Marine Turtles Nesting Sites (UNEP-WCMC 1999) have large gaps and should not be used as main reference. The only publicly available spatial dataset locating nesting and feeding sites was obtained from the spatial database of the “Priority Areas for Conservation” Program of the Ministry of Environment.l Nesting and feeding sites were digitized from the Action Plan for Conservation of Sea Turtlesli and from the guide for environmental licencing of coastal and marine developments.lii Additional occurrence points for all species can be downloaded from SALVE.liii The identified nesting beaches, plus a 5 km buffer, have been included in the Exclusion Zone layer. Appendix 2 provides additional sources of research and surveys data that could be useful to inform MSP, site selection and ESIA. 7 FISH According to Fishbase, 1,275 species of marine fish have been reported for Brazil. According to the IUCN and National Red Lists, there are 78 threatened or Near Threatened bony fish, 105 threatened cartilaginous fish, and two hagfish species whose global ranges overlap the Brazilian EEZ (Appendix 1). Of these, 24 cartilaginous fish species are listed as Critically Endangered by IUCN, whereas 29 species of cartilaginous fishes and five species of bony fishes and are listed as Critically Endangered by National Red List. While few LPA and IRA designations (Section 3) include fish as specific features of interest, many include habitats that are likely important to fish, especially as spawning and nursery areas and/or areas if economic importance for fisheries. Four species of fish were never recorded in any category of LPA, comprising three bony fish and one hagfish. Beyond those, four bony fish and two cartilaginous fishes were never recorded in strict protection (Vilar & Joyeux 2021) The Conservation Action Plan for Sharks and Rays (PAN Tubaroes e Raias) lists strategic areas for conservation of sharks and rays along Brazilian EEZ, and briefly describes the importance of each area. The spatial data with strategic area polygons are available in the database of Priority Areas for Conservation website of the Ministry of Environment, in the “targets” geodatabase (ALVOS). The strategic areas are listed in Table 10: l https://www.gov.br/mma/pt-br/assuntos/servicosambientais/ecossistemas-1/conservacao-1/areas-prioritarias/2a-atualizacao-das-areas-prioritarias-para- conservacao-da-biodiversidade-2018 - Banco de Dados das Áreas Prioritárias da Zona Costeira e Marinha (Alvos) li https://www.gov.br/icmbio/pt-br/assuntos/biodiversidade/pan/pan-tartarugas-marinhas/2-ciclo/pan-tartarugas- sumario.pdf lii https://www.gov.br/icmbio/pt-br/centrais-de-conteudo/publicacoes/publicacoes-diversas/guia_licenciamento_tartarugas_marinhas_v8.pdf liii https://www.salve.icmbio.gov.br Appendix D—Brazil’s Priority Biodiversity Values 298 TABLE D.10 CONSERVATION ACTION PLAN FOR SHARKS AND RAYS—STRATEGIC AREAS.liv Site Breeding Nursing Feeding Congregations High richness Santa Marta Cape to Chui (0-25m depth) Subtropical Convergence (from Santa Marta Cape to Chui at 100-1000m depth) South of Rio Grande (Albardao)— platform and slope (0-1000m depth) Mouth of Rio Grande Conceicao, AEP Sul and AEP North Corridor (Rio Grande Cone) Coast and shore of Santa Mata Cape (0–1.000 m depth) Higher slope adjacent to RS and SC coast (200-1000m depth) Babitonga (SC), Paranaguá (PR), Iguape e Cananéia (SP) estuaries External platform and slope of regions SE and S (100-1000m depth) Central-South Sao Paulo coast Campos Bay, Santos Bay, pre-salt, offshore Islands of South RJ and North SP Cabo Frio ressurgence zone Cabo Frio–Arraial do Cabo Corridor, from the coast down to 200m depth Tropical–Subtropical Transition Zone– Noth of Sao Tome Cape Trindade and Martim Vaz Royal Charlotte, Abrolhos, and isolated banks Baixo Sul (BA) Todos os Santos Bay Northern Bahia reefs (down to 25m depth) Sao Francisco river estuaries APA Costa dos Corais Recife coastal area External Platforms in NE–Canions (down to 2000m depth) Caicara do Norte, Galinhos, RN Parrachos de Maracaju (APA dos Recifes de Corais) Fernando de Noronha and Rocas Atoll Sao Pedro Sao Paulo Archipelago liv https://www.gov.br/icmbio/pt-br/assuntos/biodiversidade/pan/pan-tubaroes/1-ciclo/pan-tubaroes-sumario.pdf 299 Scenarios for Offshore Wind Development in Brazil Site Breeding Nursing Feeding Congregations High richness Parcel Manoel Luis Reentrancias Maranhenses north to Amapa (Platform) Additional digitized spatial data can be downloaded from SALVE (occurrence points for all species) and MMA (polygons revised by experts). Appendix 2 provides additional sources of survey and sightings data in relation to marine fish that would be useful to inform MSP, site selection and ESIA. 8 NATURAL HABITATS The coastal and oceanic realms of Brazil can be subdivided into eight marine ecoregions, grouped in three provinces: North Brazilian Shelf, Tropical Southwestern Atlantic, and Warm Temperate Southwestern Atlantic (Spalding et al. 2007). Such a variety of conditions leads to a great diversity of habitats and ecosystems, including estuaries, coral reefs, rocky shores, sandy beaches, rhodolith beds, mangroves, salt marshes, deep-sea habitats, vegetated bottoms, and continental shelf. Even though reefs of the Brazilian Province represent only 5 percent of Atlantic reefs, rates of endemism are high: 34 percent for reef-building corals, 11 percent for macroalgae, and 35 percent for sponges (Castro 2001). Reefs of the Brazilian EEZ have low reef-building coral cover and are dominated by algal turfs and macroalgae, even at biogenic reef systems, and among coastal and oceanic reef localities. The highest diversity in the Brazilian ZEE for multiple taxonomic groups occur at mid-latitudes, around 20°S to 23°S, including algae, invertebrates, and fish (Miloslavich et al. 2011). This mid-latitude region corresponds to a transitional zone between tropical and subtropical reefs influenced by the warm Brazil Current and the cold Brazilian Northern Current, where habitat heterogeneity is high and comprise coralline communities, rocky reefs and rhodolith beds (Leão et al. 2003). 8.1 Coral reef Coral reefs extends through 3,000 km along the Brazilian coastline. They are primarily distributed along the north-eastern and eastern Brazilian coast and are less common on the continental shelf in the northern part of the country, a region influenced by muddy sediments from the Amazon River. Brazilian reefs comprise two groups of reefs: nearshore and offshore reefs. Nearshore reefs occur on the inner continental shelf and are either adjacent to the coast or are a few kilometers from the shoreline. Six of the reef-building Brazilian corals are endemic: Mussismilia braziliensis, M. hispida, and M. hartti, Favia leptophylla, F. gravida, and Siderastrea stellata. The most comprehensive and detailed spatial dataset for corals is the Allen Coral Atlaslv, that presents not only the location, but also the main typologies of coral reefs. 8.2 Mangroves Along the coast of Brazil, the distribution of mangroves is discontinuous, covering an area of 9,600 km2 —the third largest mangrove area worldwide, in a single country. They occur from the state of Amapá (04°20′N) to Santa Catarina State (28°30′S) (Schaeffer-Novelli et al. 2016). lv https://allencoralatlas.org/ Appendix D—Brazil’s Priority Biodiversity Values 300 The mangroves at the coast of Maranhão State are the most extensive and most structurally complex and trees reach the greatest heights (up to 40m). This is in part attributable to the diverse characteristics of the shoreline, to high levels of freshwater input from the extensive rivers and from high amounts of rainfall, and to high tidal ranges. This region has approximately 36 percent of the total Brazilian mangrove area. Mangroves extend along a considerable part of the coastline of the state of Bahia. From Todos os Santos Bay to the southern part of the state, mangroves cover the top of emergent reefs. They are under intense pressure, because some of the larger areas coincide with some of the more densely populated regions. Some LPAs were designated along this region, but several of them have not been implemented or managed, allowing opportunities for continuing degradation. Urban expansion, timber exploitation, and industrial pollution are the major factors that threaten Bahia mangroves (Leão et al. 2019). In the Guanabara Bay, in the state of Rio de Janeiro, the mangrove ecosystem is substantial again, despite being affected by intense degradation. In areas of industrial and agricultural development, heavy metals, oil and its derivatives, pesticides and herbicides all reach high concentrations, possibly causing the death of the mangroves. The area between the states of São Paulo and Paraná represents one of the most important mangrove reserves in the southern part of the country, as for example, the estuarine-lagoon complex of Iguape-Cananéia and Paranagua. Brazil has already lost a great part of its mangrove area, linked to a number of factors, engineering works, dumps, marinas, landfills, and shrimp cultivation, but urban expansion stands out caused by the growth of tourism, the installation of new resorts, hotels, hostels, as well as by general urban development (Leão et al. 2019). The spatial data provided by the Brazilian Mangroves Atlaslvi is the most up to date and was developed based on wide consultation with experts across the country. 8.3 Seagrass Five species of sea grasses occur along the Brazilian coast: Halodule wrightii, Halodule emarginata (Cymodoceaceae), Halophila decipiens, Halophila baillonii (Hydrocharitaceae), and Ruppia maritima (Ruppiaceae) (Oliveira F. et al. 1983). The total extent of seagrass areas along the Brazilian coast is still unknown. A few specific regions are better-studied, including: Patos Lagoon, in Rio Grande do Sul State; Lagoon of Araruama, in Rio de Janeiro; Itamaraca, in Pernambuco and the National Marine Park of Abrolhos, in Bahia. These zones occupy shallow marine and estuarine environments covering exposed beaches or protected bays, the surrounding coral reefs, as well as the estuaries and coastal lagoons, adjacent to mangroves and marshes (Copertino & Seeliger, 2010). Seagrass meadows and submerged aquatic vegetation occur all along the Brazilian coast, but species distribution, abundance and dynamics are affected by physical drivers, particularly the coastal geomorphology, oceanography and regional climate and hydrology (Copertino et al. 2016). The following regions are highlighted: ■ Timonha-Ubatuba Estuarine System (PI)—most diverse seagrass meadow in Brazilian coast lvi https://www.gov.br/icmbio/pt-br/centrais-de-conteudo/publicacoes/atlas-1 301 Scenarios for Offshore Wind Development in Brazil ■ Camocim, Acaraú, Icapuí (CE) ■ Tamandaré, Itamaracá (PE) ■ Todos-os-Santos Bay (BA) ■ Itaparica Island (BA) ■ Morro de São Paulo (BA) ■ Boipeba (BA) ■ Camamu Bay (BA) ■ Abrolhos Bank (BA) ■ Santa Cruz (ES) ■ Patos Lagoon (RS) ■ Tramandaí-Armazém Complex (RS) ■ Lagoa do Peixe (RS) The main source of spatial data for seagrasses are the shapefiles provided by UNEP-WCMC.lvii The polygon file comprises only the two systems in Ceara / Piaui. All other important regions can be located in the point file. 8.4 Threatened Invertebrates A total of 37 threatened marine invertebrates occurs in the Brazilian EEZ, 36 of which were included in National Red List and four in IUCN Red List. Threatened species comprise five species of corals (Anthozooa and Hydrozoa), 10 species of echinoderms (Asteroidea, Echinoidea, and Holothuroidea), seven species of crustaceans (Malacostraca), seven species of molluscs (Gatropoda and Bivalvia), four sponges (Desmospongia), one brachyopod (Rhynchonellata), one hemichordate (Enteropneusta) and one annelid (Polychaeta) (Appendix 1). Five of them are considered Critically Endangered: three crustaceans, one hemichordate, and one holothurian. Appendix 2 provides additional sources of survey and sightings data in relation to marine invertebrates that would be useful to inform MSP, site selection and ESIA. lvii https://data.unep-wcmc.org/datasets/7 Appendix D—Brazil’s Priority Biodiversity Values 302 9 SUMMARY Sections 3 to 8 provide the rationale for the digitized spatial data included within the Exclusion and Restriction Zone layers, to be taken into account within the Brazil offshore wind roadmap. These are summarized in Table D.11 along with the sources of the relevant digitized spatial data. TABLE D.11 SUMMARY TABLE OF DIGITIZED SPATIAL DATA TO BE INCLUDED IN EXCLUSION AND RESTRICTION ZONE. Zone Priority Available digitized Source biodiversity spatial data layer value Exclusion LPAs and WDPA global database www.protectedplanet.net Zone IRAs (all categories except Environmental Protection Areas—Cat V) SNUC database—national http://mapas.mma.gov.br/i3geo/datadownload.htm system of Protected Areas (all categories except Environmental Protection Areas / Area de Protecao Ambiental—APA) FUNAI database https://www.gov.br/funai/pt-br/atuacao/ (indigenous lands) terras-indigenas/geoprocessamento-e-mapas Ramsar Sites https://www.ramsar.org/wetland/brazil KBAs, including IBAs and www.ibat-alliance.org AZE Sites Marine TAMAR database available https://www.gov.br/mma/pt- br/assuntos/ Turtles from “Priority Areas for ecossistemas- 1/conservacao-1/areas- prioritarias/2a- Conservation” database atualizacao-das- areas-prioritarias-para- conservacao-da-biodiversidade- 2018 (scroll down to Zona Costeira e Marinha–ALVOS) Natural Coral reefs Allen Coral Atlas maps, bathymetry and map Habitats statistics are © 2018-2021 Allen Coral Atlas Partnership and Vulcan, Inc. https://allencoralatlas.org/ Exclusion Natural Mangroves https://www.gov.br/icmbio/pt- br/ Zone Habitats centrais-de-conteudo/publicacoes/atlas-1 UNEP-WCMC, Short FT (2021). Seagrass beds Global distribution of seagrasses (version 7.1). Seventh update to the data layer used in Green and Short (2003). Cambridge (UK): UN Environment World Conservation Monitoring Center. Data DOI: https://doi.org/10.348 92/x6r3-d211 303 Scenarios for Offshore Wind Development in Brazil Zone Priority Available digitized Source biodiversity spatial data layer value Restriction LPAs and EBSA http://www.cbd.int/ Zone IRAs WDPA global database www.protectedplanet.net Environmental Protection Areas—Cat V SNUC database—national http://mapas.mma.gov.br/i3geo/datadownload.htm system of Protected Areas—Environmental Protection Areas / Area de Protecao Ambiental—APA) American Priority Areas for Ministry of Environment Manatee Conservation Appendix D—Brazil’s Priority Biodiversity Values 304 10 REFERENCES Bennun, L., van Bochove, J., Ng, C., Fletcher, C., Wilson, D., Phair, N. & Carbone, G. (2021) Mitigating biodiversity impacts associated with solar and wind energy development. 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Appendix D—Brazil’s Priority Biodiversity Values 306 APPENDIX 1—LIST OF THREATENED MARINE SPECIES OCCURRING IN BRAZIL EEZ National Class Common Name Latin Name IUCN status Redlist status Marine Mammals MAMMALIA Southern Minke Whale Balaenoptera bonaerensis NT DD MAMMALIA Sei Whale Balaenoptera borealis EN EN MAMMALIA Blue Whale Balaenoptera musculus EN CR MAMMALIA Fin Whale Balaneoptera physalus VU EN MAMMALIA Southern Right Whale Eubalaena australis LC EN MAMMALIA Humpback Whale Megaptera novaeangliae LC NT MAMMALIA Sperm Whale Physeter macrocephalus VU VU MAMMALIA False Killer Whale Pseudorca crassidens NT DD MAMMALIA Burmeister’s porpoise Phocoena spinipinnis NT Not evaluated MAMMALIA La Plata dolphin Pontoporia blainvillei VU CR MAMMALIA Guiana Dolphin Sotalia guianensis NT VU MAMMALIA Lahille’s bottlenose dolphin Tursiops gephyreus (IUCN Not evaluated EN evaluated under T. truncatus) MAMMALIA Atlantic bottlenose dolphin Tursiops truncatus VU EN Waterbirds AVES Olrog’s gull Larus atlanticus NT Not evaluated AVES Red knot Calidris canutus NT VU AVES Buff-breasted Sandpiper Calidris subruficollis NT VU AVES Semipalmated sandpiper Calidris pusilla NT EN AVES Wilson’s Plover Charadrius wilsonia LC VU AVES Bar Tailed Godwit Limosa lapponica NT Not evaluated AVES Short-billed Dowitcher Limnodromus griseus LC EN AVES Tristan albatross Diomedea dabbenena CR CR AVES Southern Royal Albatross Diomedea epomophora VU VU AVES Wandering albatross Diomedea exulans VU CR AVES Northern Royal Albatross Diomedea sanfordi EN EN AVES Sooty albatross Phoebetria fusca EN Not evaluated AVES Light-mantled albatross Phoebetria palpebrata NT Not evaluated AVES Atlantic yellow-nosed Thalassarche EN albatross chlororhynchos EN AVES Grey-headed Albatross Thalassarche chrysostoma EN Not evaluated AVES Black-browed Albatross Thalassarche melanophrys LC NT AVES Leach’s Storm-petrel Hydrobates leucorhous VU LC AVES Sooty shearwater Ardenna grisea NT LC AVES Cape Verde shearwater Calonectris edwardsii NT NT AVES White-chinned petrel Procellaria aequinoctialis VU VU AVES Grey petrel Procellaria cinerea NT Not evaluated 307 Scenarios for Offshore Wind Development in Brazil National Class Common Name Latin Name IUCN status Redlist status AVES Spectacled petrel Procellaria conspicillata VU VU AVES Trindade petrel Pterodroma arminjoniana VU CR AVES Desertas petrel Pterodroma deserta VU VU AVES Atlantic petrel Pterodroma incerta EN EN AVES Zino’s Petrel Pterodroma madeira EN EN AVES Audubon’s Shearwater Puffinus lheminieri LC CR Sea Turtle REPTILIA Olive Ridley Lepidochelys olivacea VU VU REPTILIA Green Turtle Chelonia mydas EN NT REPTILIA Leatherback Dermochelys coriacea VU CR REPTILIA Loggerhead Turtle Caretta caretta VU VU REPTILIA Hawksbill Turtle Eretmochelys imbricata CR EN Marine Fish ACTINOPTERYGII Sole Achirus mucuri Not evaluated VU ACTINOPTERYGII Unicorn Leatherjacket Aluterus monoceros LC NT Filefish ACTINOPTERYGII Coco Sea Catfish Bagre bagre LC NT ACTINOPTERYGII Filefish Balistes capriscus VU NT ACTINOPTERYGII Old Wife Balistes vetula NT NT ACTINOPTERYGII Cerdale fasciata Not evaluated EN ACTINOPTERYGII Choranthias LC VU salmopunctatus ACTINOPTERYGII Acoupa Weakfish Cynoscion acoupa VU NT ACTINOPTERYGII Gobt Elacatinus figaro Not evaluated VU ACTINOPTERYGII Enneanectes smithi VU VU ACTINOPTERYGII Goliath Grouper Epinephelus itajara VU CR ACTINOPTERYGII Yellowbelly Grouper Epinephelus marginatus VU VU ACTINOPTERYGII Red Grouper Epinephelus morio VU VU ACTINOPTERYGII Genidens barbus Not evaluated EN ACTINOPTERYGII Genidens planifrons Not evaluated CR ACTINOPTERYGII Genypterus brasiliensis Not evaluated NT ACTINOPTERYGII Halichoeres rubrovirens Not evaluated VU ACTINOPTERYGII Horsefish Hippocampus erectus VU VU ACTINOPTERYGII Patagonian Sea-horse Hippocampus patagonicus VU VU ACTINOPTERYGII Slender seahorse Hippocampus reidi NT VU ACTINOPTERYGII Atlantic Silverstripe Hyporhamphus LC NT Halfbeak unifasciatus ACTINOPTERYGII Grouper Hyporthodus VU flavolimbatus DD ACTINOPTERYGII Black Grouper Hyporthodus nigritus NT EN ACTINOPTERYGII Seabass Hyporthodus niveatus VU VU Appendix D—Brazil’s Priority Biodiversity Values 308 National Class Common Name Latin Name IUCN status Redlist status ACTINOPTERYGII Kajikia albida VU VU ACTINOPTERYGII Hogfish Lachnolaimus maximus VU Not evaluated ACTINOPTERYGII Blackfin Goosefish Lophius gastrophysus LC NT ACTINOPTERYGII Tilefish Lopholatilus villarii Not evaluated VU ACTINOPTERYGII Paiva’s Blenny Lupinoblennius paivai EN DD ACTINOPTERYGII Mutton Snapper Lutjanus analis NT NT ACTINOPTERYGII Canteen Snapper Lutjanus cyanopterus VU VU ACTINOPTERYGII Dog Snapper Lutjanus jocu DD NT ACTINOPTERYGII Lutjanus purpureus Not evaluated VU ACTINOPTERYGII Bream Lutjanus synagris NT NT ACTINOPTERYGII Silk Snapper Lutjanus vivanus LC NT ACTINOPTERYGII Blue Marlin Makaira nigricans VU EN ACTINOPTERYGII Malacoctenus brunoi Not evaluated VU ACTINOPTERYGII Tarpon Megalops atlanticus VU VU ACTINOPTERYGII Membras dissimilis Not evaluated NT ACTINOPTERYGII Merluccius hubbsi Not evaluated NT ACTINOPTERYGII Yellowtail Damselfish Microspathodon chrysurus LC VU ACTINOPTERYGII Headfish Mola mola VU LC ACTINOPTERYGII Lebranche Mullet Mugil liza DD NT ACTINOPTERYGII Black Rockfish Mycteroperca bonaci NT VU ACTINOPTERYGII Crossband Rockfish Mycteroperca interstitialis VU VU ACTINOPTERYGII Charcoal Belly Mycteroperca microlepis VU DD ACTINOPTERYGII Yellowfin Grouper Mycteroperca venenosa NT DD ACTINOPTERYGII Yellowtail Snapper Ocyurus chrysurus DD NT ACTINOPTERYGII Peixe-rei Odontesthes ledae NT NT ACTINOPTERYGII Band Cusk-eel Ophidion holbrookii LC CR ACTINOPTERYGII Ghost Cusk-eel Otophidium chickcharney LC CR ACTINOPTERYGII Patagonian Flounder Paralichthys patagonicus VU NT ACTINOPTERYGII Barrigudinho-riscado Phalloptychus iheringii NT NT ACTINOPTERYGII Black Drum Pogonias cromis LC EN ACTINOPTERYGII Southern Black Drum Pogonias courbina VU EN ACTINOPTERYGII Wreckfish Polyprion americanus DD CR ACTINOPTERYGII Ancho Pomatomus saltatrix VU NT ACTINOPTERYGII Oblique Butterflyfish Prognathodes obliquus DD VU ACTINOPTERYGII Bastard Snapper Rhomboplites aurorubens VU NT ACTINOPTERYGII Rainbow Parrotfish Scarus guacamaia NT Not evaluated ACTINOPTERYGII Greenback Parrotfish Scarus trispinosus EN EN ACTINOPTERYGII Zelinda’s Parrotfish Scarus zelindae DD VU ACTINOPTERYGII Geelbuik Sea Catfish Sciades parkeri VU VU ACTINOPTERYGII Insular Scorpionfish Scorpaenodes insularis LC VU ACTINOPTERYGII Reef Parrotfish Sparisoma amplum LC NT 309 Scenarios for Offshore Wind Development in Brazil National Class Common Name Latin Name IUCN status Redlist status ACTINOPTERYGII Gray Parrotfish Sparisoma axillare DD VU ACTINOPTERYGII Agassiz’s Parrotfish Sparisoma frondosum DD VU ACTINOPTERYGII Sparisoma rocha Not evaluated VU ACTINOPTERYGII Stegastes rocasensis Not evaluated VU ACTINOPTERYGII Stegastes sanctipauli LC VU ACTINOPTERYGII Stegastes trindadensis Not evaluated VU ACTINOPTERYGII Black brotula Stygnobrotula latebricola LC NT ACTINOPTERYGII Southern Bluefin Tuna Thunnus maccoyii EN ACTINOPTERYGII Bigeye Tuna Thunnus obesus VU NT ACTINOPTERYGII Thunnus thynnus Not evaluated EN ACTINOPTERYGII Urophycis brasiliensis Not evaluated NT ACTINOPTERYGII Urophycis mystacea Not evaluated NT ACTINOPTERYGII Swordfish Xiphias gladius NT NT ELASMOBRANCHII Bonnetray Aetobatus narinari EN DD ELASMOBRANCHII Bigeye Thresher Shark Alopias superciliosus VU EN ELASMOBRANCHII Atlantic Thresher Alopias vulpinus VU CR ELASMOBRANCHII Spotback Skate Atlantoraja castelnaui CR EN ELASMOBRANCHII Eyespot Skate Atlantoraja cyclophora EN VU ELASMOBRANCHII Raya platana Atlantoraja platana EN DD ELASMOBRANCHII Multispine Skate Bathyraja multispinis NT Not evaluated ELASMOBRANCHII Roughtail Stingray Bathytoshia centroura VU CR ELASMOBRANCHII Brazilian Blind Electric Ray Benthobatis kreffti VU DD ELASMOBRANCHII Cockfish Callorhinchus callorynchus VU LC ELASMOBRANCHII Blacknose Shark Carcharhinus acronotus EN NT ELASMOBRANCHII Knopp’s Shark Carcharhinus altimus NT DD ELASMOBRANCHII Bronze Whaler Carcharhinus brachyurus VU DD ELASMOBRANCHII Longnose Grey Shark Carcharhinus brevipinna VU DD ELASMOBRANCHII Silky Shark Carcharhinus falciformis VU NT ELASMOBRANCHII Galapagos Shark Carcharhinus galapagensis LC CR ELASMOBRANCHII Finetooth Shark Carcharhinus isodon NT DD ELASMOBRANCHII Lake Nicaragua Shark Carcharhinus leucas VU NT ELASMOBRANCHII Blacktip Shark Carcharhinus limbatus VU NT ELASMOBRANCHII Whitetip Oceanic Shark Carcharhinus longimanus CR VU ELASMOBRANCHII Dusky Shark Carcharhinus obscurus EN EN ELASMOBRANCHII Caribbean Reef Shark Carcharhinus perezi EN VU ELASMOBRANCHII Sandbar Shark Carcharhinus plumbeus EN CR ELASMOBRANCHII Smalltail Shark Carcharhinus porosus CR CR ELASMOBRANCHII Night Shark Carcharhinus signatus EN EN ELASMOBRANCHII Grey Nurse Shark Carcharias taurus CR CR ELASMOBRANCHII Great White Shark Carcharodon carcharias VU VU ELASMOBRANCHII Centrophorus uyato EN Not evaluated Appendix D—Brazil’s Priority Biodiversity Values 310 National Class Common Name Latin Name IUCN status Redlist status ELASMOBRANCHII Portuguese Dogfish Centroscymnus coelolepis NT LC ELASMOBRANCHII Owston’s Dogfish Centroscymnus owstonii VU LC ELASMOBRANCHII Basking Shark Cetorhinus maximus EN CR ELASMOBRANCHII Groovebelly Stingray Dasyatis hypostigma EN DD ELASMOBRANCHII Variegated Electric Ray Diplobatis picta VU DD ELASMOBRANCHII Shorttail Yellownose Skate Dipturus brevicaudatus VU Not evaluated ELASMOBRANCHII Thintail Skate Dipturus leptocaudus VU DD ELASMOBRANCHII South Brazilian Skate Dipturus mennii CR Not evaluated ELASMOBRANCHII Bramble Shark Echinorhinus brucus EN LC ELASMOBRANCHII Colares Stingray Fontitrygon colarensis CR VU ELASMOBRANCHII Wingfin Stingray Fontitrygon geijskesi CR DD ELASMOBRANCHII Tiger Shark Galeocerdo cuvier NT NT ELASMOBRANCHII School Shark Galeorhinus galeus CR CR ELASMOBRANCHII Southern Sawtail Catshark Galeus mincaronei VU DD ELASMOBRANCHII Nurse Shark Ginglymostoma cirratum VU VU ELASMOBRANCHII Onefin Skate Gurgesiella dorsalifera VU LC ELASMOBRANCHII Spiny Butterfly Ray Gymnura altavela EN CR ELASMOBRANCHII Smooth Butterfly Ray Gymnura micrura NT DD ELASMOBRANCHII Sharpnose Sevengill Shark Heptranchias perlo NT DD ELASMOBRANCHII Bluntnose Sixgill Shark Hexanchus griseus NT LC ELASMOBRANCHII Striped Rabbitfish Hydrolagus matallanasi VU DD ELASMOBRANCHII Southern Stingray Hypanus americanus NT Not evaluated ELASMOBRANCHII Lutz’s Stingray Hypanus berthalutzae VU VU ELASMOBRANCHII Longnose Stingray Hypanus guttatus NT LC ELASMOBRANCHII Brazilian Large-eyed Stingray Hypanus marianae EN VU ELASMOBRANCHII Bluntnose Stingray Hypanus say NT DD ELASMOBRANCHII Daggernose Shark Isogomphodon oxyrhynchus CR CR ELASMOBRANCHII Shortfin Mako Isurus oxyrinchus EN NT ELASMOBRANCHII Longfin Mako Isurus paucus EN DD ELASMOBRANCHII Porbeagle Lamna nasus VU DD ELASMOBRANCHII Chevron Manta Ray Mobula birostris EN VU ELASMOBRANCHII Atlantic Devil Ray Mobula hypostoma EN DD ELASMOBRANCHII Giant Devil Ray Mobula mobular EN VU ELASMOBRANCHII Box Ray Mobula tarapacana EN VU ELASMOBRANCHII Lesser Devil Ray Mobula thurstoni EN VU ELASMOBRANCHII Dusky Smoothhound Mustelus canis NT EN ELASMOBRANCHII Striped Dogfish Mustelus fasciatus CR CR ELASMOBRANCHII Smalleye Smoothhound Mustelus higmani EN CR ELASMOBRANCHII Narrowfin Smoothhound Mustelus norrisi NT DD ELASMOBRANCHII Narrownose Smoothhound Mustelus schmitti CR CR ELASMOBRANCHII Bullnose Ray Myliobatis freminvillei VU EN 311 Scenarios for Offshore Wind Development in Brazil National Class Common Name Latin Name IUCN status Redlist status ELASMOBRANCHII Southern Eagle Ray Myliobatis goodei VU CR ELASMOBRANCHII Shortnose Eagle Ray Myliobatis ridens CR CR ELASMOBRANCHII Lesser Numbfish Narcine brasiliensis NT VU ELASMOBRANCHII Lemon Shark Negaprion brevirostris VU EN ELASMOBRANCHII Broadnose Sevengill Shark Notorynchus cepedianus VU CR ELASMOBRANCHII Herbst’s Nurse Shark Odontaspis ferox VU LC ELASMOBRANCHII Angela’s Catshark Parmaturus angelae VU ELASMOBRANCHII Blue Shark Prionace glauca NT NT ELASMOBRANCHII Wide Sawfish Pristis pectinata CR CR ELASMOBRANCHII Freshwater Sawfish Pristis pristis CR CR ELASMOBRANCHII Brazilian Guitarfish Pseudobatos horkelii CR CR ELASMOBRANCHII Atlantic Guitarfish Pseudobatos lentiginosus VU Not evaluated ELASMOBRANCHII Southern Guitarfish Pseudobatos percellens EN VU ELASMOBRANCHII Whale Shark Rhincodon typus EN VU ELASMOBRANCHII American Cownose Ray Rhinoptera bonasus VU DD ELASMOBRANCHII Ticon Cownose Ray Rhinoptera brasiliensis VU CR ELASMOBRANCHII Brazilian Sharpnose Shark Rhizoprionodon lalandii VU DD ELASMOBRANCHII Caribbean Sharpnose Shark Rhizoprionodon porosus VU DD ELASMOBRANCHII Rio Skate Rioraja agassizii VU VU ELASMOBRANCHII Lizard Catshark Schroederichthys VU LC saurisqualus ELASMOBRANCHII Scalloped Hammerhead Sphyrna lewini CR CR ELASMOBRANCHII Scoophead Shark Sphyrna media CR CR ELASMOBRANCHII Great Hammerhead Sphyrna mokarran CR CR ELASMOBRANCHII Bonnethead Shark Sphyrna tiburo EN CR ELASMOBRANCHII Golden Hammerhead Sphyrna tudes CR CR ELASMOBRANCHII Smooth Hammerhead Sphyrna zygaena VU CR ELASMOBRANCHII Picked Dogfish Squalus acanthias VU DD ELASMOBRANCHII Longfin Angelshark Squatina argentina CR CR ELASMOBRANCHII Hidden Angelshark Squatina guggenheim EN CR ELASMOBRANCHII Smoothback Angel Shark Squatina occulta CR CR ELASMOBRANCHII Chupare Stingray Styracura schmardae EN DD ELASMOBRANCHII Bignose Fanskate Sympterygia acuta CR EN ELASMOBRANCHII Smallnose Fanskate Sympterygia bonapartii NT EN ELASMOBRANCHII Argentine Torpedo Tetronarce puelcha CR DD ELASMOBRANCHII Smalleye Round Ray Urotrygon CR VU microphthalmum ELASMOBRANCHII Shortnose Guitarfish Zapteryx brevirostris EN VU Hagfishes MYXINI Hagfish Nemamyxine kreffti NT LC MYXINI Hagfish Myxine sotoi VU LC Appendix D—Brazil’s Priority Biodiversity Values 312 National Class Common Name Latin Name IUCN status Redlist status Marine Invertebrates ANTHOZOA Condylactis gigantea Not evaluated EN ANTHOZOA Bahia Brain Coral Mussismilia braziliensis DD VU ANTHOZOA Brain Coral Mussismilia harttii DD EN ANTHOZOA Blue Crust Coral Porites branneri NT LC ASTEROIDEA Astropecten articulatus Not evaluated VU ASTEROIDEA Astropecten brasiliensis Not evaluated VU ASTEROIDEA Astropecten marginatus Not evaluated VU ASTEROIDEA Coscinasterias tenuispina Not evaluated VU ASTEROIDEA Linckia guildingi Not evaluated VU ASTEROIDEA Luidia senegalensis Not evaluated VU ASTEROIDEA Oreaster reticulatus Not evaluated VU BIVALVIA Euvola ziczac Not evaluated EN DEMOSPONGIAE Corvomeyenia epilithosa Not evaluated VU DEMOSPONGIAE Halichondria cebimarensis Not evaluated VU DEMOSPONGIAE Halichondria tenebrica Not evaluated VU DEMOSPONGIAE Latrunculia janeirensis Not evaluated VU ECHINOIDEA Cassidulus mitis Not evaluated EN ECHINOIDEA Lytechinus variegatus Not evaluated VU ENTEROPNEUSTA Willeya loya Not evaluated CR GASTROPODA Cassis tuberosa Not evaluated NT GASTROPODA Conus henckesi VU Not evaluated GASTROPODA Eustrombus goliath Not evaluated VU GASTROPODA Macrostrombus costatus Not evaluated VU GASTROPODA Olivancillaria vesica Not evaluated NT GASTROPODA Petaloconchus myrakeenae Not evaluated VU HOLOTHUROIDEA Synaptula secreta Not evaluated CR HYDROZOA Millepora laboreli Not evaluated VU MALACOSTRACA Aegla franca Not evaluated CR MALACOSTRACA Aegla leptodactyla Not evaluated VU MALACOSTRACA Aegla perobae Not evaluated CR MALACOSTRACA Aegla renana Not evaluated CR MALACOSTRACA Cardisoma guanhumi Not evaluated VU MALACOSTRACA Johngarthia lagostoma Not evaluated EN MALACOSTRACA Ucides cordatus Not evaluated NT POLYCHAETA Diopatra cuprea Not evaluated VU POLYCHAETA Eunice sebastiani Not evaluated EN RHYNCHONELLATA Bouchardia rosea Not evaluated EN Aquatic Plants LILIOPSIDA Halophila baillonii VU Not evaluated 313 Scenarios for Offshore Wind Development in Brazil APPENDIX 2—LIST OF DATA SOURCES TO INFORM MARINE SPATIAL PLANNING, SITE SELECTION AND ENVIRONMENTAL AND SOCIAL IMPACT ASSESSMENT National Action Plans and Guidelines: ■ Action Plan for Conservation of Marine Cetaceans (PAN Cetaceos Marinhos): https://www.gov. br/icmbio/pt-br/assuntos/biodiversidade/pan/pan-cetaceos-marinhos/1-ciclo/pan-cetaceos- marinhos-sumario.pdf ■ Action Plan for Conservation of the West Indian Manatee (PAN Sirenios): https://www.gov.br/ icmbio/pt-br/assuntos/biodiversidade/pan/pan-sirenios/1-ciclo/pan-sirenios-sumario.pdf ■ Action Plan for Conservation of Sea Turtles (PAN Tartarugas Marinhas): https://www.gov.br/ icmbio/pt-br/assuntos/biodiversidade/pan/pan-tartarugas-marinhas/2-ciclo/pan-tartarugas- sumario.pdf ■ Action Plan for Conservation of Sharks and Rays (PAN Tubaroes e Raias): https://www.gov.br/ icmbio/pt-br/assuntos/biodiversidade/pan/pan-tubaroes/1-ciclo/pan-tubaroes-sumario.pdf ■ Action Plan for Conservation of Albatrosses and Petrels (PLANACAP): https://www.gov.br/icmbio/ pt-br/assuntos/biodiversidade/pan/pan-albatrozes-e-petreis/2-ciclo/pan-planacap-sumario.pdf ■ Action Plan for Conservation of Migratory Shorebirds (PAN Aves Limicolas Migratorias): https:// www.gov.br/icmbio/pt-br/assuntos/biodiversidade/pan/pan-aves-limicolas-migratorias/1-ciclo/ pan_aves_limicolas_migratorias-sumario.pdf ■ Action Plan for Conservation of Coral Reefs (PAN Corais): https://www.gov.br/icmbio/pt-br/ assuntos/biodiversidade/pan/pan-corais/1-ciclo/pan-corais-sumario.pdf ■ Report on routes and congregations of Brazilian migratory birds (CEMAVE): https://www.gov. br/icmbio/pt-br/centrais-de- conteudo/publicacoes/relatorios/relatorio_de_rotas_e_areas_de_ concentracao_de_aves_migratorias_brasil_3edicao_2019.pdf ■ Environmental Licencing Guidelines (Sea Turtles). Guidelines for Coastal and Marine ■ Developments: https://www.gov.br/icmbio/pt-br/centrais-de-conteudo/publicacoes/ publicacoes-diversas/guia_licenciamento_tartarugas_marinhas_v8.pdf Other governmental biodiversity databases: ■ Priority Areas for Conservation of Biodiversity (spatial database available for download–banco de dados das Areas Prioritarias da Zona Costeira e Marinha–Alvos): https://www.gov.br/mma/pt-br/ assuntos/servicosambientais/ecossistemas- ■ 1/conservacao-1/areas-prioritarias/2a-atualizacao-das-areas-prioritarias-para-conservacao-da- biodiversidade-2018 Appendix D—Brazil’s Priority Biodiversity Values 314 ■ SALVE / ICMBio (download of verified occurrence points for most Brazilian vertebrate species): https://www.salve.icmbio.gov.br ■ Brazilian Mangrove Atlas (publication and spatial data): https://www.gov.br/icmbio/pt-br/ centrais-de-conteudo/publicacoes/atlas-1 ■ Important areas for migratory birds: https://www.icmbio.gov.br/cemave/downloads/ viewdownload/9-publicacoes/32-shapefiles-do-relatorio-de-rotas-e-areas-de-concentracao-de- aves-migratorias-no-brasil-3-edicao-2019.html ■ Windfarm Projects submitted for environmental licensing: ■ https://www.gov.br/icmbio/pt-br/assuntos/biodiversidade/pan/pan-aves-limicolas-migratorias/1- ciclo/pan_aves_limicolas_migratorias-sumario.pdf Designated Areas ■ WDPA Protected Areas: https://www.protectedplanet.net/ ■ National System of Protected Areas (SNUC): https://www.gov.br/mma/pt-br/assuntos/ areasprotegidasecoturismo/plataforma-cnuc-1 ■ Key Biodiversity Areas: https://www.ibat-alliance.org/ ■ Important Bird Areas: http://datazone.birdlife.org/country/brazil/ibas ■ Ecologically or Biologically Significant Marine Areas (EBSAs): https://www.cbd.int/ebsa/ ■ Ramsar Sites: https://www.ramsar.org/wetland/brazil ■ Indigenous areas: https://www.gov.br/funai/pt-br/atuacao/terras-indigenas/ geoprocessamento-e-mapas Biodiversity datasets ■ Wikiaves (collaborative platform for birds data): https://www.wikiaves.com.br ■ Bird Migration Explorer (migration routes): http://www.birdmigrationexplorer.org ■ Allen Coral Atlas: https://allencoralatlas.org/ ■ Global Distribution of Seagrasses (WCMC): https://data.unep-wcmc.org/datasets/7 ■ Ocean Dataviewer (WCMC): https://data.unep-wcmc.org/ 315 Scenarios for Offshore Wind Development in Brazil APPENDIX 3—ENVIRONMENTAL STAKEHOLDERS Early and constructive stakeholder engagement is an essential component of identifying priority biodiversity values, verifying data and ensuring they are considered appropriately and proportionately in planning for offshore wind development. Stakeholder engagement should be an integral and important part of future MSP and ESIA processes, and a list of relevant environmental stakeholders has been identified and is provided in the following table. Stakeholder Type Website National Stakeholders Ministerio do Meio Ambiente Government Agency www.mma.gov.br (Ministry of Environment) ICMBio (Instituto Chico Mendes de Government Agency www.icmbio.gov.br Conservacao da Biodiversidade) —governmental agency for conservation and biodiversity CEMAVE–National Birds Research Government Agency www.icmbio.gov.br/cemave and Conservation Center TAMAR–National Marine Turtle Government Agency www.icmbio.gov.br/tamar Research and Conservation Center CMA–National Aquatic Mammals Government Agency www.icmbio.gov.br/cma Research and Conservation Center CEPSUL, CEPENE, and CEPNOR Government Agency www.icmbio.gov.br/cepsul –National Marine Biodiversity www.icmbio.gov.br/cepene www.icmbio.gov. Research and Conservation Center br/cepnor IBAMA–governmental agency for Government Agency www.ibama.gov.br environmental licensing FUNAI–Indigenous Agency Government Agency www.funai.gov.br Ministry of Aquaculture and Fisheries Government Agency https://www.gov.br/mpa/pt-br SEMA–Secretaria de Meio Ambiente Government Agency https://www.sema.rs.gov.br/inicial –Rio Grande do Sul IMA–Instituto de Meio Ambiente– Government Agency https://www.ima.sc.gov.br/ Santa Catarina SEMA–Secretaria de Meio Ambiente Government Agency https://www.sema.ma.gov.br/ –Maranhao SEMA–Secretaria de Meio Ambiente Government Agency https://www.sema.ce.gov.br/ –Ceara SEMARH–Secretaria do Meio Government Agency http://www.semarh.rn.gov.br Ambiente e dos Recursos Hídricos– Rio Grande do Norte IEMA–Instituto de Meio Ambiete e Government Agency https://iema.es.gov.br/ Recursos Hidricos–Espírito Santo IDEMA–Instituto de Desenvolvimento Government Agency http://www.idema.rn.gov.br/ Sustentavel e Meio Ambiente–Rio Grande do Norte SEAMA–Secretaria do Meio Government Agency https://seama.es.gov.br/ Ambiente e Recursos Hídrico– Espírito Santo INEA–Instituto Estadual do Government Agency http://www.inea.rj.gov.br/ Ambiente–Rio de Janeiro Appendix D—Brazil’s Priority Biodiversity Values 316 Stakeholder Type Website Universidade Estadual do Rio Government www.uerj.br www.maqua.com.br de Janeiro Academic Institute https://lembuerj.wixsite.com/lembuer j Universidade de Sao Paulo Government www.sotalia.com.br www.cebimar.usp.br Academic Institute https://www.io.usp.br/ https://www.io.usp.br/index.php/ocea nos/textos/antartida/40-portugues/ infraestrutura/laboratorios/398- laboratorio-de-manejo-ecologia-e- conservacao-marinha Universidade Federal do Ceara Government https://labomar.ufc.br/?option=com_ Academic Institute content&task=category§ionid=1 3&id=18&Itemid=29 https://www.labbmar.ufc.br/ Universidade Federal Fluminense Government http://www.lecar.uff.br/ http://www.proac. Academic Institute uff.br/eqm/ Universidade Federal de Santa Government https://lbmm.ufsc.br/ Catarina Academic Institute https://www.lafic.ufsc.br/ https://www.lindnerlab.ccb.ufsc.br/ https://proto.ufsc.br/ Universidade Federal do Rio Government https://www.ufrgs.br/ceclimar/ Grande do Sul Academic Institute Universidade Federal do Parana Government http://www.cem.ufpr.br/portal/ Academic Institute Universidade Federal do Government https://labicni.wixsite.com/labicniufrj Rio de Janeiro Academic Institute Universidade Federal Government http://www.doc.ufes.br/ictiolab/ do Espírito Santo Academic Institute https://oceanografia.ufes.br/pt-br/ corpo-docente Universidade Federal de Pernambuco Government https://www.ufpe.br/docean Academic Institute Universidade Federal Rural de Government https://www.ufrpe.br/ Pernambuco Academic Institute Universidade Federal do Rio Government https://longolab.weebly.com/ Grande do Norte Academic Institute Universidade Federal da Bahia Government https://www.ufba.br/ Academic Institute Universidade Estadual do Government https://lecomar.weebly.com/team.ht ml Sul da Bahia Academic Institute Universidade Federal da Paraiba Government https://www.ufpb.br/ Academic Institute Universidade Estadual de Santa Cruz Government http://www.uesc.br/ Academic Institute Universidade Federal do Rio Grande Government https://inct.furg.br/ Academic Institute Museu Oceanografico Univali Private Research Institute https://www.univali.br/institucional/museu- oceanografico-univali/Paginas/ inicial.aspx Rede Sisbiota Mar Research Network https://www.sisbiota.ufsc.br/ Rede Abrolhos Research Network http://abrolhos.org/ 317 Scenarios for Offshore Wind Development in Brazil Stakeholder Type Website Marine Science Network Research Network https://cienciasdomarbrasil.furg. (Ciencia do Mar) br/grupos-de-pesquisa/grupo- de-pesquisa-ciencias-do-mar/ ciencias-do-mar-regiao-nordeste Mar Brasil Non-Government www.marbrasil.org Organization (NGO) TAMAR Long-term project www.tamar.org.br/ Non-Governmental www.terramar.org.br Instituto Terramar Organization (NGO) Non-Governmental http://www.biopesca.org.br/ Instituto Biopesca Organization (NGO) Non-Governmental www.aquasis.org Aquasis Organization (NGO) Non-Governmental https://institutonautilus.weebly.com/ Instituto Nautilus Organization (NGO) Non-Governmental https://maradentro.org.br/ Mar Adentro Organization (NGO) Non-Governmental https://brasil.oceana.org/ Oceana Organization (NGO) Mantas do Brasil Non-Government https://www.mantasdobrasil.org.br/ Organization (NGO) / Long Term Project Projeto Coral Vivo Non-Government www.coralvivo.org.br Organization (NGO) / Long Term Project Projeto Baleias na Serra Non-Government www.projetobaleiasnaserra.org/ Organization (NGO) / Long Term Project Projeto Golfinho Rotador Non-Government www.golfinhorotador.org.br/en/ Organization (NGO) / Long Term Project Projeto Meros do Brasil Non-Government www.merosdobrasil.org/ Organization (NGO) / Long Term Project Projeto Baleia Jubarte Non-Government www.baleiajubarte.org.br/ Organization (NGO) / Long Term Project Projeto Albatroz Non-Government www.projetoalbatroz.org.br/ Organization (NGO) / Long Term Project Projeto Baleia Franca / Instituto Non-Government www.baleiafranca.org.br Australis Organization (NGO) / Long Term Project WWF-Brazil Non-Government www.wwf.org.br Organization (NGO) SAVE Brasil (BirdLife International Non-Government www.savebrasil.org.br partner in Brazil) Organization (NGO) Conservation International do Brasil Non-Government www.conservation.org/brasil Organization/network Appendix D—Brazil’s Priority Biodiversity Values 318 Stakeholder Type Website International Stakeholders Smithsonian Migratory Bird Center Academic Institute https://nationalzoo.si.edu/migratory- birds SWOT - The State of the World’s Sea Non-Government https://www.seaturtlestatus.org/ Turtles Organization (NGO) BirdLife International Non-Government https://www.birdlife.org/ Organization (NGO) Global Ocean Biodiversity Initiative Non-Government https://gobi.org/ Organization (NGO) Tethys Research Institute Non-Government https://www.tethys.org/ Organization (NGO) WCMC Non-Government https://data.unep-wcmc.org/ Organization (NGO) Western Hemisphere Shorebird Conservation Network Reserve Network 319 Scenarios for Offshore Wind Development in Brazil APPENDIX E—REGULATORY FRAMEWORK GAP ANALYSIS Key traits Brazil Marine Spatial Planning a. Responsible use of marine resources: The Brazilian Navy has been consistently developing its national-level MSP, which is currently a. Responsible use of marine adherent to the United Nations’ environmental recommendations, resources: embracing 17 global targets established by the Sustainable Development Goals (SDGs) i. Sustainable use of resources i. Sustainable use of resources, as provisioned on SDG no. 14.c ii. MSP to define the geographical ii. The MSP is entitled to identify exploitation areas’ limits in limits of leasing rounds or lease coordination with the Interministerial Commission of Sea Resources awards for offshore wind iii. MSP providing predictability iii. Sustainable use of resources, as provisioned on SDG no. 14.c of permitting iv. The use of marine space is performed by the Interministerial Commission for Marine Resources (CIRM), a deliberative and advisory governmental body, established on September 12, 1974, and reinstated in 2019 by Decree No. 9.858, dated June 25, 2019. Its purpose is to: coordinate actions related to the National Policy for Marine Resources (PNRM), approved by Decree No. 5.377, dated February 23, 2005; implement the Brazilian Antarctic Program (PROANTAR), in compliance with the provisions of Decree No. 94.401, dated June 3, 1987; and exercise the competences outlined in Law No. 7.661, dated May 16, 1988. This law established the National Coastal Management Plan (PNGC) as an integral part of both the PNRM and the National Environmental Policy (PNMA) and assigned CIRM the responsibility for developing the PNGC and its subsequent updates. The PNRM is comprised of multi- iv. Government defining use of year and annual Plans and Programs, developed by CIRM. These plans marine space within EEZ unfold into specific projects and constitute the fundamental working documents. These projects are subject to approval by CIRM, and the necessary resources are provided by various bodies through agreements with executing institutions, such as universities, research institutes, and governmental organizations focused on marine resources. This process aligns with the different phases of development. The integral plans encompass:—Sectoral Plan for Marine Resources (PSRM);—National Coastal Management Plan (PNGC); and—Continental Shelf Survey Plan (LEPLAC). In addition to these plans stemming from the PNRM, CIRM also implements the Brazilian Antarctic Program (PROANTAR), which is grounded in the National Policy for Antarctic Affairs (POLANTAR). Adding to that, Brazil adhered to United Nations SDG no. 14.2, allowing its government to define the use of marine space within the EEZ. v. The Brazilian MSP is not directly integrated with neighboring v. MSP being discussed in countries’ framework. However, the country’s MSP has been developed collaboration with neighbor countries in alignment with international standards of the United Nations. b. Principles of MSP: b. Principles of MSP: i. Compliance with the guidelines i. The Brazilian Navy’s Directorate of Hydrography and Navigation issued by the Intergovernmental (DHN) has been promoting and coordinating national MSP’s adherence Oceanographic Commission (IOC) to the IOC guidelines. Appendix E—Regulatory Framework Gap Analysis 320 Key traits Brazil ii. Government-led planning of ii. Provisioned by adherence to United Nations’ SDG 14.2 and SDG 14.c potentially suitable areas iii. Sensitivity map highlighting areas iii. Sensitive maps indicating risks related to marine space areas are of lower, higher risk, or highest risk provisioned on SDGs 14.2, 14.a, and 14.c iv. Spatial mapping considering economic viability of sites for iv. Provisioned by adherence to United Nations’ SDG 14.2 and 14.c offshore wind v. MSP considering export system v. Not specifically provisioned on Brazilian MSP. Further regulation or cable routing and onshore elements legislation on this topic may be further provided. of offshore wind projects vi. MSP data available to relevant vi. MSP data is available for potential developers, as provided on the stakeholders and project developers Brazilian Marine website. vii. Relevant State Stakeholders such as the MME, the Brazilian Power vii. Ongoing stakeholder engagement Regulatory Agency (ANEEL), the Brazilian Marine, and the Energy in the MSP process Research Office are indirectly engaged in the MSP process, as the offshore wind areas’ availability relies on the MSP’s approval. viii. Inclusive stakeholder engagement viii. Same answer as defined above (vii.) in the MSP process Leasing a. The rights to issue leases: Under the Brazilian legal framework, the a. The rights to issue leases: rights to survey, develop, and operate a wind farm are awarded through a Usage Assignment Agreement (equivalent to lease agreement) i. Offshore wind economic i. The Brazilian effective wind offshore framework (Decree no. exploitation over country’s 10.946/2022 and Complementary Ordinances) is applicable to undisputed jurisdiction (12 nautical undisputed areas ruled under Brazilian legislation miles—200 nautical EEZ) ii. Local legislation’s adherence to wind offshore projects is still under ii. Ensuring local legislation’s development, considering the Brazilian Federalist system is complex acceptance for offshore wind projects and requires specific alignment between the Union, States, and Municipalities. b. Leasing award formats: The Brazilian Framework currently in force formalizes the offshore wind exploitation activity through planned and b. Leasing award formats: independent assignment modalities, aiming at performing a usage assignment agreement. i. Usage assignment agreements awarded through competitive bidding i. Multiple lease awarding formats procedures, either on the planned or independent assignment modality. ii. The specific contractual term shall be defined on the contract template, which comes along with the public bidding notice. However, governmental concessions may, by law reference, reach up to 35 ii. Tenure certainty over awarded years in similar regulated sectors. Similarly, the current wind offshore agreements framework establishes that, under the independent energy production or self-production of power regimes, usage assignment agreements shall have a minimum term of 10 years. iii. The Brazilian model has not yet provided sufficient information iii. Optimal leasing framework shifts regarding the best framework model for assigning rights over wind from country to country offshore areas. iv. No specific definition about this topic, no Brazilian framework. iv. Repeated leasing procedures for However, it is provided under art. 19 of Decree no. 10.946/2022 that the continuous streaming projects assignment of rights over wind offshore areas may be extended. v. Encouraging timely project v. Bidding procedures follow a set of transparency requirements development by transparent, robust, provided in Law no. 14.133 which, among other provisions, assure and repeatable leasing processes considerable vested rights for winning bidders over acquired rights. 321 Scenarios for Offshore Wind Development in Brazil Key traits Brazil vi. There is no specific provision about this topic on the developing vi. Leasing procedures wind offshore industry. However, in other regulated sectors, such as following international good the oil E&P, Brazil commonly adheres to Internacional standards of practice standards good practice. vii. Leasing procedures’ scope over vii. The areas’ economic availability will be analyzed by EPE, by ANEEL, economically viable areas and during the issuing of DIP before the agreement’s performance. viii. Independent assignment procedure ensures an active role of viii. Site offered by project developers interested developers, which are entitled to seek the analysis of the prisms’ availability. ix. Established market’s experience ix. Not specifically defined in the effective framework; however, as useful basis for designing national discussions on this sense are being conducted during the bill of law no. leasing framework for offshore wind 576’s legislative procedure. x. During the DIP issuance procedure, which is prior to the agreement’s x. Leasing procedures covering cable performance phase, shall cover all necessary analysis regarding cable routing issues routing issues, as define on Art. 20, II, b and c of MME complementary Ordinance no. 52/GM/2022. c. Administering the leasing c. Administering the leasing process: process: i. Leasing processes administrated by i. ANEEL, a relevant federal government regulatory body, is competent trusted organization for managing leasing processes. ii. Leasing bodies addressing ii. In the Brazilian case, the EPE will carry out offshore potential studies supportive measure for developing for supporting the development of offshore wind projects. offshore wind projects d. Lease terms d. Lease terms i. Effective lease terms for i. The usage assignment-specific terms will be provided when on the encouraging project developers’ publication of the public bidding notice. progress ii. The Decree establishes payment only for the occupation of the area, which will still be further detailed. There are guidelines for this in ii. Realistic leasing fees for reflecting the Decree: weighting/reducing/discounting the amount owed to the governmental public intents Union considering the area and the period of potential studies, project implementation, and decommissioning of the enterprise. iii. The currently effective framework defines (Ordinance MME 52/2022) that “after the issuance of the grant for the project, the validity iii. Leasing periods aligned with the period referred to in the heading (Usage Assignment) will be project’s development timescale automatically extended, respecting the timeframe established in the authorization for the project, including the decommissioning and any eventual extensions.” iv. Leasing agreements as iv. After the relevant power generation grant is provided to a certain opportunity for committing project, the corresponding survey for power potential will be made developers to benefit the available within ANEEL’s website (Decree 10,946/2022 Article 24, wider industry sole paragraph). v. The current framework establishes provisions regarding the decommissioning obligation on its art. 19, III. ANEEL has yet to define the technical, operational, economic-financial, and legal credentials v Lease obligations including required for the preparation of the energy potential study, as well as for decommissioning requirements the effective implementation, operation, and decommissioning of the power plant. These credentials are necessary to qualify an interested party to participate in the bidding process. Appendix E—Regulatory Framework Gap Analysis 322 Key traits Brazil Permitting a. Permitting process a. Permitting process i. Alongside Decree no 10.946/2022 and its Complementary Ordinances (no. 52/GM/MME/2022 and no. MME/MMA no 03/2022), there are i. Governmental commitment in three ongoing bills that address the topic of offshore generation: Bills providing a proper framework for 576/2021, 3655/2021, and 11.247/2018. Two specific ordinances by the wind operations MME are pending to be edited to deal with the value of the use of the area and its limits. ii. Is compliance with international ii. The currently effective framework does not impose such lending requirements a requirement requirements. (GIIP, IFC, World Bank ESS6) b. Administering the permitting b. Administering the permitting process process i. The interministerial Ordinance MME/MMA no.03/2022 has been i. Permitting process carried out by developing the use of a single portal for the Management of Offshore areas trusted organization (“PUG-Offshore”), which is a newly created digital tool for monitoring the offshore wind projects response from relevant stakeholders. ii. Offshore cables and onshore ii. The offshore cables infrastructure will be analyzed by EPE, by ANEEL infrastructure as useful tools for wind and during the issuing of DIP before the agreement’s performance. offshore enterprises c. Permitting frameworks c. Permitting frameworks i. All bidding procedures, as well as sufficient information regarding i. Transparent and robust permitting permitting procedures shall be disclosed for public information. framework for understanding Additionally, public consultations shall be performed considering assessment criteria managing assessment criteria. ii. The currently effective framework does not provide a specific national commitment for promoting offshore wind operations, expressly referring that the grant of prisms will not impose corresponding bids for acquisition of offshore wind power to the grid (Article 4th, ii. National policy commitments are 5th paragraph of Ordinance no. 52/GM/MME/2022). However, the relevant to offshore wind operations National Power Expansion Plan issued by the Brazilian Energy Research Company already includes offshore wind power as a source of power for the following years. Such plan precedes the creation of specific bids for acquisition of power from relevant sources and may be understood as an indication that further policies will be issued about the matter. iii. Requirements’ flexibility in the iii. So far, there are no additional incentives for the early stages of wind early stages of project’s development offshore projects development. iv. Currently, art. 33 of Ordinance no. 52/GM/MME/2022 indicates that further contractual mechanisms shall observe the future specific regulation about the matter, concerning facilities’ decommissioning, iv. Framework should allow a life extension, and repowering. The expansion of the power capacity of simplified approach to offshore certain projects (i.e., installation of additional turbines and increase of wind extensions power generation capacity) is simplified, but faces certain challenges such as power stations capacity of receiving the energy, transmission grid capacity, etc. Such challenges do not depend solely on the regulatory agency’s intention, but rather on the existing infrastructure. v. According to Brazilian current wind offshore framework, there is no v. Permitting frameworks are deadline or timescale for issuing necessary permitting documents to improved by realistic timescale project developers. 323 Scenarios for Offshore Wind Development in Brazil Key traits Brazil d. Environmental and Social Impact d. Environmental and Social Impact Assessment (EIA) Assessment (EIA) i. EIA tool for mapping environmental i. Currently addressed by the environmental analysis of national-level and social consequences of new MSP, IBAMA, and Chico Mendes Institute for Biodiversity Conversation infrastructure projects (ICMBio). e. International lending e. International lending requirements requirements i. The current Brazilian framework does not establish the environmental i. EIA results as a tool for fulfillling and social impact assessment requirements for matching international international lending requirements lending requirements. f. Baseline studies f. Baseline studies i. In the Brazilian case, the EPE will majorly carry out offshore potential i. Baseline surveys provide studies for supporting the development of offshore wind projects. quantifiable data for EIA and residual Potential project developers may contribute with the performance of impact assessment mitigation surveys/studies during public calls. ii. The government shall ensure that ii. The conduction of project-level baseline surveys is part of the developers conduct project-level environmental licencing process and should be performed as part of the baseline surveys environmental impact analysis. g. Stakeholder engagement g. Stakeholder engagement i. Stakeholder engagement and i. The Brazilian framework provides the public consultation for fostering public consultation are necessary for local and multiple debates over addressed concerns. addressing potential concerns ii. EIA coupled with public ii. EIA and public consultation are provided by the current Brazilian consultation can reduce local framework. objections iii. Local stakeholder organizations iii. State and municipality stakeholders are to be addressed by the shall also be well resourced usage assignment agreement. iv. Although not yet possible to measure how are local communities iv. Local communities need to see the being impacted by wind offshore projects, they will be taken into projects’ benefits consideration in light of Brazilian constitutional principles and public consultation objectives. Offtake and revenue a. Emerging market context a. Emerging market context i. Brazilian electricity sector admits two possibilities of commercialization: (i) Regulated Market (ACR): several distributors can buy from the entrepreneur for a tariff defined by the government, execution of an energy sale contract (CCEAR), which will have a term of i. Lack of liberalized electricity markets 15 to 30 years; and (ii) Free Market (ACL): the sale of electricity is freely negotiated between traders, other generators and consumers (free and special), including the terms of the contract (CCVEE). Free consumers are allowed to trade electricity in ACL (minimum 1MW). Bill No. 414/2021 proposes full liberalization of Brazilian electricity market. Appendix E—Regulatory Framework Gap Analysis 324 Key traits Brazil ii. Brazil, as a stimulator of the production of electricity from renewable sources, guarantees some incentives for the sector, such as the Incentive PROINFA, the current ACR purchase auctions, as well as the discount policy on the tariffs for the use of electrical systems. (subject to the provisions of Law No. 14,120/2021). Regarding specific ii. Higher level of revenue support for incentives for the electricity sector, the Special Incentive Regime for covering first projects Infrastructure Development (REIDI) and the Priority Project/Incentivized Debentures stand out. In the context of the discussions of the Bill, the possibility of removing the signing bonus provided for there from the auctions to be held in the first 5 years is discussed, as an incentive to the establishment of the new industry. iii. In Brazil, BNDES was essential for the expansion of renewable generation, which occurred initially with investments in the regulated market (ACR) and, later, with free market participation (ACL). The iii. Revenue support on offtake Bank, with specific financing lines, paved the actions for the expansion agreements shall consider the performance of other financial institutions and for the financing existing mechanisms on other of ACL projects. BNDES is an example of successful financing in regulated markets Brazil, but there is no guarantee that the result would be the same if eventually applied in support of the offshore wind industry. Given the particularities involved in the development of these projects, it is known that existing financing, if reused, will need to be readapted. b. Types of offtake agreements b. Types of offtake agreements i. So far, there is no provision for the application of the feed-in tariff i. Feed-in tariff (FIT) policy for offshore wind in Brazil. ii. The Renewable Energy Certification Program in Brazil uses the REC Standard (I-REC), which ensures that the certificates issued here follow the standards adopted internationally. The certification is made by the Totum Institute, which issues 2 types of certificates: i) I-RECs ii. Renewable energy certificate (REC) standards—for renewable energy generators that meet the criteria of the I-REC; and ii) IRECs with additional REC Brazil seal—for generators that present additional sustainability criteria/actions related to the UN Sustainable Development Goals (SDGs). iii. So far, there is no provision for the establishment of the feed-in tariff policy for offshore wind in Brazil. However, as an example, it is noteworthy that, to insert renewable sources in the Brazilian electricity matrix, in 2002, the Incentive Program for Alternative Sources of Electric Energy—PROINFA (Law No. 10,438/2002) was instituted, which iii. Feed-in premium encourages the acquisition of electricity from renewable sources (wind, small hydroelectric plants and biomass). In addition to this, we also have the discount policy on the rates of use of the system (TUST and TUSD), granted to agents who have grants for the generation of electricity from renewable sources. 325 Scenarios for Offshore Wind Development in Brazil Key traits Brazil iv. In Brazil, a similar mechanism for renewable sources does not exist, but in the past, renewable sources used to be subsided without the relevant entrepreneurs being required to “pay back” the government after the projects became profitable. Concerning the format of fixed price contracts, the closest in Brazil are the contracts entered into by the agents participating in the capacity auctions. Through these, the CCEE—sectorial institution—can contract capacity, remunerating the iv. Contract for Difference (CfD) generators through a fixed annual revenue independent of the energy generated linked to a maximum inflexibility. The goal is energy security instead of environmental sustainability of the source. Energy effectively produced associated with the level of inflexibility of the auction is allocated in this same contract. The unbound energy of such inflexibility is released for commercialization. This model accepts power generated from fossil fuels, differing from the “Contracts for Difference” concept goal of fostering renewable sources only. c. Fiscal support c. Fiscal support v. Currently, there are no effective law provisions for the fostering of offshore wind enterprises. Comparatively, however, one may extract relevant tax information arising from onshore wind projects, which are already operating under the subjection of the Import Tax (“II”—Federal Level), Taxation on Manufactured Products (“IPI”—Federal Level), Social Contributions (“PIS and COFINS”), State Tax (“ICMS”—State Level), and Tax on Services (“ISS”—Municipality Level). As one may infer, Brazil, just like the United States, is a Federalist system country. That directly impacts the Brazilian Tax Matrix which is divided by Federal, State, and Municipal level taxation. Regarding tax incentives, the same division shall be considered to be differently conceived by each governmental structure level, as addressed below (only applicable to onshore wind i. Tax incentives enterprises): a) Federal Executive Branch’s Decree no. 11.158/2022, which zeros out IPI rates for imports on wind turbine operations; b) Law 13.097/2015 (federal law), which zeros out PIS and COFINS rates for the importation of wind turbines; and c) ICMS (state-level) convention no. 101/97, which addresses the exemption of ICMS taxes on generating solar and wind energy; differing from one state to another. Currently provisioned by the States of Bahia, Minas Gerais, Pernambuco, Rio de Janeiro and São Paulo. Additionally, potential project developers shall consider the Federal Government’s Special Regime for Infrastructure Development—also known as REIDI, which is applicable to relevant infrastructure projects in multiple regulated sectors, such as the energy one, aiming at the suspension of PIS/COFINS taxation before the Brazilian IRS. d. Processes for awarding d. Processes for awarding offtake agreements offtake agreements i. Under Brazilian jurisdiction, the revenue support shall be transparent i. Robust and transparent revenue and conducted by public/ administrative proceedings to grant access to awarding processes are necessary developers, stakeholders, and the general public. Transparency is taken as a principle in both public administration and public policy. ii. The search for revenue support is manifested by many agents in ii. Moderate oversupply of bidders Brazil, thus meeting the purpose of boosting competition (in competitive seeking revenue support auction, the winning bidders who receive the support tend to be the ones with the lowest value). Appendix E—Regulatory Framework Gap Analysis 326 Key traits Brazil iii. If the fiscal or financial incentive to foreign (and domestic) investors is provided for in a legislation, the criteria of eligibility, in general, are established in the legislation itself. The approval process iii. Prequalification criteria for receiving incentives is not automatic. It is necessary that the company must plead the incentive before the relevant body, demonstrating the characteristics that make it eligible for the incentive. iv. Transition between revenue iv. The transition of revenue support agreements in Brazil should be support agreements shall be carefully managed with the necessary caution so as to allow for consultation and managed changes in primary legislation. v. In 2021, there were two treaties integrated by Brazil linked to foreign v. Bilateral contracts for developing investments: i) Acordo de Cooperação e Facilitação de Investimentos (CFIA) early projects e ii) Acordos de Dupla Tributação (32). e. Transition to auctions e. Transition to auctions i. ANEEL is suitable for promoting competitive bidding procedures in both Planned and Independent Assignments, in light of the Brazilian i. Competitive auctions impact supply Bidding modalities established under Federal Law no. 14.133/2021. chain and offshore costs However, the current Bidding criteria addressed by Decree no 10.946/2022, namely “Greatest Economic Return”, still lacks a reasonable legal approach to the offshore wind market bidding procedures. ii. Bidding procedures conducted under Brazilian procurement law no. ii. Revenue support competitions 14133/2021 shall be promoted in light of the Administrative Efficiency offer key opportunities for ensuring Principle, as to promote competition for the best price trade-off while wider policy objectives conducting public tenders. iii. Brazil still lacks legal certainty regarding the bidding procedure’s iii. Governments need to be careful criteria (Greatest Economic Return), which may turn to be an about auctions in emerging markets unattractive feature for potential bidders. iv. Industry consultation during iv. Previously to the bidding procedures, the Brazilian current framework auctions procedures lead to provides the possibility of public consultation and discussion with successful outcome project developers or the general public. f. Bankability of offtake agreements f. Bankability of offtake agreements i. Offtake agreements shall i. Currently, there are no specific law provisions for the bankability of have attractive costs offtake agreements on the wind offshore context. for international financing ii. As stated above, there is currently no provision for the bankability of contracts. However, regarding the aforementioned flexibility of the contracts, it is noteworthy that the Brazilian effective wind offshore framework does not provide for a specific payment mechanism for ii. Such agreements shall be the partial entry into commercial operation of the project (anticipated structured under a flexible structure generation revenues). Regarding the eventual anticipation of the schedule, Ordinance 52/2022 only provides for the possibility of reducing the amount due to the Union when this situation is verified and the agent complies with the other contractual obligations applicable to it. g. Future options for power offtake g. Future options for power offtake i. As previously stated, in Brazil, the commercialization of electric energy occurs in a regulated or free manner, and, after the realization of the regulated auctions, whose purchase is made at the lowest i. Established markets guarantee amount offered, the Contracts for the Commercialization of Electric Corporate Power Purchase Energy in the Regulated Environment (CCEARS)—Regulated Market Agreements (CPPAs) PPA are executed. It is important to highlight that in the ACR, the operation of buying and selling electricity occurs between selling agents (generators—new energy auctions; generators or traders—existing energy auctions) and distribution agents. ii. CPPAs are being set in advance for ii. Given that Brazil’s regulatory framework is still in formation, no project construction energy purchase and sale agreement has been entered into to date. 327 Scenarios for Offshore Wind Development in Brazil Key traits Brazil iii. Brazil is still developing its legal framework regarding GH2 and ammonia. However, the country intends to be a leading producer of such type of renewable energy, having at least 42 projects under various iii. Offshore wind will be used in phases of development. (e.g., multiple projects are currently under the GH2 and ammonia industry/ development in the States of Ceará, Rio Grande do Norte and Bahia). transportation According to the latest data, Ceará State, for example, has solely addressed more than 20 Memorandums of Understanding aiming at the development of renewable energy enterprises. iv. As mentioned above, Brazil is currently developing its GH2/ammonia framework (refs: Bill of Law no. 725/22, Bill of Law no. 2308/2023 and the National Hydrogen Program). GH2 Power and Ammonia projects are iv. The use of GH2 power can to be developed in coordination with wind offshore projects. Recently, increase the offshore wind relevant to note that the Bill of Law no. 2308/2023 has been recently generation production requested as “urgent” by the Deputies’ Chamber, aiming at the waiver of formal requirements and regimental formalities, as provided in Art. 152 of the Internal Rules of the Deputies’ Chamber. v. Brazil is a potential developer of GH2 and ammonia energy source structures. According to the latest data energy insight, provided by v. Emerging markets can benefit McKinsey Company (2022), Brazil has a very competitive levelized cost from local supply chains of GH2 of GH2, which creates good industrial opportunities for substantially developing equipment, such as hydrolysers. Export systems and grid connection a. Timely connection a. Timely connection i. The art. 16, V of the MME complementary Ordinance no. 52/GM/ i. Timely and cost-effective 2022 establishes that the studies/requirements for assignment shall offshore export system are to be include the availability of grid connection. In addition, at the DIPs ensured by governments requesting stage, agents must include the entry points for connection of transmission lines of restricted interest on the coast. ii. The alignment of generation and transmission schedules is a challenge to be faced l when it comes to the development of the ii. Exporting policy targets shall be offshore wind industry in Brazil. The Sectorial and Government Planning aligned with industry timing (activity that is the competence of the Granting Authority, represented by the MME and that has subsidies from the EPE) has been working to solve this challenge. iii. The process for access to transmission systems has five well-defined steps: i) Access Query (agent); ii) Access Information (ONS); iii) Access iii. Developers require a clear, Request (agent); iv) Access Opinion (ONS); and v) CUST (agent and bankable framework to apply for ONS). The analysis of the access conditions of the enterprises is an grid connections attribution of the National System Operator (ONS) and is regulated by the Network Procedures, which establishes the procedures, instructions and minimum requirements to be observed by the interested parties. iv. The Brazilian wind offshore framework appoints the right of the assignee to establish structures intended for transmission and generation, compliance with the rules of the maritime authority and the issuance of an environmental license by IBAMA. In addition, it is noteworthy that one of the points of the Term of Reference for iv. Export systems might require a offshore wind complexes prepared by the aforementioned IBAMA separate EIA and permitting process obliges the entrepreneur to delimit the polygonal of the project from the port area of reference for the installation of the enterprise, in addition to identifying if there is overlap with the marine conservation unit. In addition to this, the Environmental Compensation Plan, Decommissioning Plan and Environmental Compensation are points of the Term. Appendix E—Regulatory Framework Gap Analysis 328 Key traits Brazil v. The alignment between generation and transmission schedules is a challenge. Although the Brazilian Energy Planning is already working to solve this challenge, it is still a point of attention when thinking about v. Grid connection dates need to be the development of the sector. Another challenge already identified in aligned with project completion time relation to the expansion of transmission is the location of the projects, since not having the access points to the network defined makes it difficult to identify predictions about the absorption capacity of the National Interconnected System (SIN) for the injection of energy. vi. The Brazilian effective wind offshore framework does not provide vi. Developers deal with huge for any compensation for any period in which the entrepreneur financial impacts while waiting for may be prevented from generating due to delay in the completion of grid connection the transmission system or network upgrade. vii. The generators sign with the ONS the Transmission System Use Agreement (CUST), through which they assume the obligation to pay the Transmission System Use Charge (EUST), which corresponds to vii. Grid connection costs and system the product of the Transmission System Use Tariff (TUST) for the charges shall be provided in a clear Amount of Use of the Transmission System (MUST), being determined framework by the highest value between the contractor and the measured at the connection point. The methodology for calculating tariffs is established by the regulatory agency. b. Connection agreement and b. Connection agreement and grid code grid code i. EPE’s offshore wind Roadmap (2020) pointed out that the interface of offshore wind projects with the transmission network can represent a considerable challenge to enable the connection of the projects. It i. Grid codes may need to be modified was highlighted the need to prepare Prospective Studies of the for attending offshore wind projects Expansion of Transmission to verify the systemic impacts of the integration of large-scale projects and determine, if appropriate, an expansion of minimum overall cost to the system. ii. ANEEL’s Normative Resolution no. 1.030/2022 defines the criteria and rules to be observed when operating restriction events occur for wind power plants, defined by the regulation as those considered in the schedule, which have originated externally to the facilities of the respective plants (Art. 13). These events are classified by the ONS according to their motivation, which can be: i) reason for external unavailability; ii) reason for meeting electrical reliability requirements; and iii) energy ratio (Art. 14). For the events classified as external ii. Network access need unavailability ratio, the ONS calculates the reference of power well-defined rules and curtailment generation resulting from the event from the plant’s productivity compensation mechanisms curve—elaborated by the Operator according to the technical criteria established in the Network Procedures, which relates the output power and wind speed. The payments of the financial amounts are made through the System Service Charge—ESS by CCEE—sectoral institution, according to the criteria established in the regulation (art. 16). It is important to say that the energy amount for the calculation of these charges is calculated from the rule established in article 16, §4º of the aforementioned ANEEL Normative Resolution. c. Approaches to export system c. Approaches to export system design and ownership design and ownership i. According to Brazilian regulation, the power producer can own the i. Integrated offshore hub model ‘restricted use facilities’ that connect the power plant to the grid; reduces the needed amount of however, the transport facilities of the grid itself are subject to bidding— connection assets eventually the power producer can participate in the bid procedure. 329 Scenarios for Offshore Wind Development in Brazil Key traits Brazil ii. In Brazil transmission assets belong to multiple actors. The ii. Export systems’ ownership and transmission facilities belong to the concessionaries and are subject operation can lie over multiple actors to a bid procedure. In Brazil, the ONS coordinates and operates the grid system. iii. Transmission companies are responsible for the design, construction, iii. Building, ownership, and and operation of the assets. Those companies are chosen under a bid operation export models shall procedure in which ANEEL verifies technical and economic experience consider the best manager and credentials. ONS verifies the compliance of the projects with the bidding protocol and the Network Procedures. iv. The expansion of transmission lines will, in fact, be a challenge in the iv. High complex and risky export Brazilian scenario. However, the recognized Brazilian potential for the systems are likely to be unattractive development of the offshore wind industry has already been attracting in emerging markets the interest of agents with experience in the international scenario, which can facilitate the delivery of the system. v. Low-cost public finance is a way v. The methodology for setting tariffs for grid connection considers the out for financing a project’s export ‘locational signal’ and has a uniform methodology for the entire country, system (tariff reduction) any different treatment would have to be authorized by law. Health and safety a. Global best practice a. Global best practice i. The Brazilian current offshore wind framework does not directly mention compliance with EHS Guidelines. However, in the i. The country’s regulations shall environmental, health and safety areas, the country has been meet Environmental, Health, and developing a regulatory framework that is aiming to be aligned with Safety (EHS) Guidelines International Standards. The Decree provides principles that must be observed in the exploration of the potential (income generation, respect for environment, gender policies). ii. The Brazilian Energy Research Company has been using the best international practices to conduct its studies (ref: wind offshore ii. Best practices from global training roadmap by EPE). According to such study, the best international bodies shall be encouraged practices have been encouraged by relevant stakeholders, such as MME, ANEEL, and EPE. iii. Due to the high investments needed for developing offshore wind enterprises, chances are that already established companies, such as iii. Attracting experienced offshore the E&P ones, might be the pioneers on the wind offshore development. wind project developers They are usually companies who have considerable experience and approach with Brazilian administrative and bidding rules. iv. The current Brazilian framework considers the needs of permitting iv. Health and safety frameworks with local (Municipalities) and State authorities next to possible shall be relevant to the local context offshore wind areas. v. Although not yet specified under the effective wind offshore framework, at least on the environmental side, IBAMA has been v. Partnering and leaning improving its knowledge of sustainable energy projects, in light of the from international experiences Brazilian commitment to achieving goals set in the Paris Agreement. is recommended Partnerships have been made with European Union countries for development (e.g., Environmental Impact Assessment in offshore wind). b. Legislation b. Legislation i. Although not specified under offshore wind Decree and Ordinances, the Brazilian regulatory framework typically encourages safety-focused i. Health and safety legislation behaviors through the Brazilian Health Regulatory Agency (ANVISA), encourages safety-focused behaviors which is entitled for inspecting health and safety conditions in similar enterprises (e.g., vessels and travellers through clearance certificates). Appendix E—Regulatory Framework Gap Analysis 330 Key traits Brazil ii. National health and safety ii. ANVISA might be chosen as the national health regulatory body for regulatory framework shall assessing risks related to operating offshore wind enterprises. complement offshore wind gaps Standards and certification a. International standards for wind a. International standards for wind farm and key component design farm and key component design i. Established suppliers use well i. The Brazilian framework follows IEC standards on its commercial proven wind industry standards trades and requirements. ii. This has been developed by the Brazilian authorities, which ii. Harmonization between typically embraces multiple standards for trade, such as the Brazilian international and national Association of Technical Standards (ABNT), which currently references standards is relevant ISO and IEC standards, as well as INMETRO institution, as the main national accreditation body. iii. The Brazilian Industry and Developers are, so far, considering iii. Offshore wind standards are not the onshore and offshore wind as distinct markets with different rules equivalent to those for onshore wind and needs. b. The role of certification b. The role of certification authorities and technical advisers authorities and technical advisers i. Regarding this topic, although not yet mentioned by current offshore i. Wind turbines and other wind framework, the Brazilian framework typically embraces multiple components are type-certified to standards for trade, such as the Brazilian Association of Technical international standards Standards (ABNT), which currently references ISO and IEC standards, as well as INMETRO institution, as the main national accreditation body. ii. Brazil is currently a state member of the International ii. Project finance often requires Electrotechnical Commission (IEC), fully following its standards and third-party project certification guidelines. However, there is no current compulsory provision about against IEC standards third-party/developers’ needs to certify against IEC standards for joining the offshore wind markets. iii. Industry and investors should be entitled to choose type and iii. Not yet established by the current Brazilian offshore wind framework. project certification 331 Scenarios for Offshore Wind Development in Brazil APPENDIX F—COST OF ENERGY METHODOLOGY F.1 FUTURE SCENARIO INPUTS Turbine rating, hub height, and rotor diameter Offshore wind turbines have evolved rapidly in size and rotor diameter over the past decades. Certain developments in the past can be translated to make assumptions how future turbine sizes will evolve. DNV have assumed a 15 MW turbine in 2030, 20 MW in 2040, and 25 MW in 2050. The rotor size of the 15 MW turbine was selected to align with existing SGRE and Vestas platforms. The rotor for the larger determines was calculated using an assumed power density of approximately 370 W/m2. The hub height of the turbines was determined assuming a tip clearance of 20 m. Lifetime increase As the wind industry continues to mature, the operational lifetimes of turbines both onshore and offshore are increasing. There is a clear economic benefit in maintaining turbines beyond the traditional 20-year design lifetime. Lifetime extension requires additional OpEx costs for necessary repairs, inspections, and condition monitoring. However, the energy obtainable yields enough revenue to justify those investments and there are clear signs that turbines are designed and operated for longer and longer. Maximum tip speed increase Increasing the maximum tip speed of turbine blades has a beneficial effect onto the loads experienced by the drive train, making it cheaper and lighter. Even though leading-edge erosion is likely to remain the reason for tip speed limitation, DNV expects the maximum tip speed to slowly increase over the next decades as technology evolves and new solutions are developed. This is a continuation of a trend throughout the last decades of wind turbine development. Inter-array cable voltage In recent years the inter-array cable voltage most used in offshore wind projects has risen from 33 kV to 66 kV. The reason for this is current limitations, reducing the number of turbines that can be connected to a string as turbine rating continue to increase. DNV therefore assumes that 66 kV may soon not be sufficient to connect turbines efficiently to the substation. Appendix F—Cost of Energy Methodology 332 Fatigue load reduction factor and extreme load reduction factor Load reduction factors for turbine loads have been considered in DNV Renewables.Architect an appropriate representation of future developments. Models within the tool derive the design and cost for parts based on experience with current turbines and therefore do not predict how loads experienced by the turbine and loads within the design standards will change. However, as the industry develops more refined analysis methods and tends towards less conservative standards due to a better understanding of the technology and improved control systems, there is an expectation that the extreme and fatigue loads feeding turbines will be designed to decrease in the future. Rotor nacelle assembly cost reduction ■ The offshore wind industry is expected to expand significantly in the future, with many new markets emerging globally in addition to significant growth within existing markets. Current cost reductions in offshore wind are expected to continue through a combination of direct and indirect developments and innovations (e.g., regulatory, financial, commercial, industrial, technical, etc.). These developments include: ■ Economies of scale (i.e., the reduction in the per-unit contribution of fixed costs arising from increased production volumes). ■ Pipeline efficiencies (i.e., opportunities created by a large pipeline of projects in a geographic area, from which suppliers are incentivised to dedicate assets and resources to address the order volume). ■ Technology improvements (which may include manufacturing technology as well as design technology). Increased competition, in which the continued growth of the offshore wind market attracts new suppliers and contractors, increasing competition and driving down costs. For the purposes of this analysis, DNV has taken a “system” approach and has used unit cost and material cost inputs into the modeling of future turbines which are consistent with those which best represent the current market situation, instead capturing the impact of potential future turbine cost reduction through economies of scale, pipeline effects, and technology improvements within the cost reduction factors described above. Installation cost reduction Offshore wind turbine installation is a relatively well-proven process, and significant advances in installation methodology are considered relatively unlikely. As such, the per-turbine duration of installation activities (allowing for factors such as metocean conditions and distance from shore) is not expected to reduce significantly, and therefore installation costs on a per-turbine basis are expected to reduce slightly over time, due to economies of scale and market development. 333 Scenarios for Offshore Wind Development in Brazil However, on a per-megawatt basis, considering expected increases in turbine size, installation cost is forecast to reduce. This will be facilitated by larger vessels which are capable of installing future turbines via a conventional approach. New-build vessels are expected to be larger than the current fleet, and therefore likely to require higher CapEx and higher day rates; however, this is largely expected to be countered by increased vessel utilization and competition within the market. Operation and maintenance cost reduction Similar to the reduction in installation cost, DNV expects the cost of operation and maintenance to decrease incrementally over the next decades. This would be due to learning curves, additional competition and pressure on prices and the changing vessel cost. As for installation, the per-megawatt cost will decrease significantly considering expected increases in turbine size. The decrease of cost also decreases slightly due to economies of scale and market development. F.2 REPRESENTATIVE PROJECT SITE CHARACTERISTICS TABLE F.1 DNV RENEWABLES.ARCHITECT REGIONAL SOIL PROFILES. South Southeast Northeast Soil Profile Upper band “soil_type” “sand” “sand” “sand” “thickness” 100 100 100 “submerged_unit_weight” [9,9] [9,9] [10,10] “internal_angle_of_friction” [35,35] [35,35] [35,35] “epsilon50” [0,0] [0,0] [0,0] “undrained_shear_strength” [0,0] [0,0] [0,0] “skin_friction_limit” [81,81] [81,81] [81,81] “end_bearing_limit” [5000,5000] [5000,5000] [5000,5000] “j_factor” [0,0] [0,0] [0,0] “medium_dense_ “medium_dense_ “sand_iso_table_row” “medium_dense_sand” sand” sand” Soil Profile Lower band “soil_type” “clay” “clay” “sand” “thickness” 100 100 100 “submerged_unit_weight” [8,8] [8,8] [8,8] “internal_angle_of_friction” [0,0] [0,0] [27,27] “epsilon50” [0.006,0.006] [0.006,0.006] [0,0] “undrained_shear_strength” [80,300] [80,300] [0,0] “skin_friction_limit” [20,250] [20,250] [67,67] “end_bearing_limit” [720,2700] [720,2700] [3000,3000] “j_factor” [0.5,0.5] [0.5,0.5] [0,0] “sand_iso_table_row” clay clay “medium_dense_sand_silt” Appendix F—Cost of Energy Methodology 334 TABLE F.2 DNV RENEWABLES.ARCHITECT SITE-SPECIFIC INPUT PARAMETERS. Northeast region Southeast region South region Characteristics NE1 NE2 NE3 NE4 SE1 SE2 SE3 S1 S2 S3 S4 Latitude -2.66 -2.55 -3.34 -4.88 -22.10 -22.30 -23.10 -30.21 -30.37 -32.05 -32.67 Longitude -41.46 -40.00 -38.66 -36.01 -40.61 -40.21 -41.56 -49.90 -49.46 -50.74 -52.11 Water 16 15 30 29 48 117 81 37 105 78 19 depth (m) Foundation fixed fixed fixed fixed fixed floating floating fixed floating floating fixed type Annual mean wind speed at 138m (m/s) 8.59 8.74 8.42 9.34 8.10 8.23 8.07 8.65 8.92 8.77 7.91 (15MW hub height) Construction Rio Rio Pecém Pecém Pecém Pecém Açu Açu Açu Rio Grande Rio Grande Port Grande Grande Distance to Construction 350 180 30 365 50 95 160 320 340 145 75 Port (m/s) Porto Porto Porto Porto Rio Rio O&M Port Luís Fortaleza Tubarão Tubarão Tramandai Tramandai Camocim Guamaré Forno Grande Grande Correia Distance to 33 105 30 45 50 95 45 34 80 145 75 O&M Port (km) Offshore export cable 26 32 29 18 44 93 55 35 88 85 35 length (km) Onshore export cable 61 13 15 12 20 20 75 28 28 80 115 length (km) Significant 1.30 1.50 1.60 1.20 1.80 1.90 1.80 1.96 1.99 1.99 1.89 wave height (m) Transport distance (2030 6,500 6,500 6,500 6,500 8,500 8,500 8,500 10,100 10,100 10,100 10,100 COD) (km) Mean sea level (m relative 2.00 2.00 2.07 2.07 0.92 0.92 0.92 0.42 0.42 0.42 0.42 to LAT) 50-year positive storm 0.22 0.22 0.16 0.16 0.45 0.45 0.45 0.45 0.32 0.32 0.84 surge (m) 50-year maximum wave 5.14 5.14 6.17 6.17 8.76 9.81 9.81 12.66 13.47 13.47 11.54 height (m) 50-year current 0.48 0.48 0.44 0.44 0.50 0.46 0.46 0.58 0.61 0.61 0.58 velocity (m/s) Highest astronomical 3.90 3.90 4.00 4.00 1.70 1.70 1.70 0.90 0.90 0.90 0.90 tide (m rel to LAT) 335 Scenarios for Offshore Wind Development in Brazil APPENDIX G—HYDROGEN CONTEXT ROLE OF HYDROGEN IN THE DECARBONIZATION STRATEGY GH2 is referred to the Hydrogen obtained through a chemical process known as electrolysis—where an electrical current separates the hydrogen from the oxygen in water—utilizing electricity obtained from renewable sources, such as solar and wind. GH2 emerges as an energy vector capable of being stored, generating energy, heating, participating in the industrial chain of several sectors, and owning the potential to deeply reduce carbon emissions by replacing fossil fuels in activities that traditionally produce GHG (Greenhouse Gases). Regarding the total life cycle emissions for different traditional technologies for electricity generation, in terms of CO2 equivalent emissions per kWh from cradle to grave,lviii the five technologies with the least emissions are, in ascending order, hydroelectricity, nuclear, wind, biomass, and solar. TABLE G.1 GHG EMISSIONS OF TECHNOLOGIES INVOLVING GH2. Energy source Equivalent emissions (kg CO2eq / kWh) Lignite 0.800-1.300 Coal 0.660-1.050 Oil 0.530-0.900 Natural Gas 0.380-1.000 Solar PV 0.013-0.190 Biomass 0.0085-0.130 Wind 0.003-0.041 Nuclear 0.003-0.035 Hydro 0.002-0.020 Source: [254]. In 2002, the Ministry of Science and Technology (MCT) launched the Programa Brasileiro de Hidrogênio e Sistemas Células a Combustível (Brazilian Hydrogen and Fuel Cell Systems Program—PROCAC). Later, in 2005, this program was renamed Programa de Ciência, Tecnologia e Inovação para a Economia do Hidrogênio (Science, Technology, and Innovation Program for the Hydrogen Economy) with the acronym PROH2 (EPE, 2021). Also in 2005, the Ministry of Mines and Energy coordinated the “Road Map for Structuring the Hydrogen Economy in Brazil,” a comprehensive study together with the Ministry of Science and Technology—MCT, including experts from Brazil and abroad, national, and foreign companies, research institutes, regulatory agencies, and metrological institutes. Similarly, the Brazilian energy strategy in the Plano Nacional de Energia 2050 (National Energy lviii The “cradle to grave” concept for hydrogen encompasses the entire lifecycle of hydrogen from its production, through transport and storage, to its use, and finally Plan—PNE 2050), to the disposal infrastructure. in approved of related ThisDecember 2020 analysis examines by the impacts the environmental Ministry at eachof Mines stage, and including how Energy is heavily hydrogen is generated focused (e.g., electrolysis or steam methane reforming), its distribution and storage methods, and its applications in various industries. The goal is to identify and minimize the total ecological on the hydrogen. impact of hydrogen throughout its entire lifecycle. Appendix G—Hydrogen Context 336 GH2 is referred in the Plan as a disruptive technology and is mentioned as an element of interest in the strategy of the decarbonization of the energy matrix, in the insertion of distributed energy resources, in the search for the expansion of storage and flexibility management, and in the perspectives for the application of nuclear energy and natural gas. The PNE 2050 offers the perspective of hydrogen mixing in the natural gas pipeline networks with limited pressures for transportation and storage purposes, as a better way to use natural gas pipelines and to use important volumes of hydrogen for energy purposes. Regarding decarbonization process and the prospects for the disruptive insertion of hydrogen, the PNE 2050 highlights the following recommendations for the energy policy: ■ Encourage the possibilities that make use of hydrogen for the decarbonization of sectors such as: transportation, chemical industry, and residential, as well as for the generation of “clean” raw materials for industry, such as the steel industry, among others. ■ Design regulatory improvements related to quality, safety, transport infrastructure, storage, supply, incentive, and use of new technologies. In 2018, the global demand for hydrogen was 115 Mt, of which 73 Mt was pure hydrogen (IEA, Reports, 2019). Ammonia production for fertilizer and petroleum refining accounted for 96 percent of pure hydrogen demand. The demand for hydrogen in mixtures with other gases was 42 Mt, with methanol production accounting for 29 percent, direct reduction in the steel industry accounting for 7 percent, and the rest in other miscellaneous uses (MME, 2022). In September 2023, the MME released the Plano de Trabalho Trienal H2 (Three-Year Work Plan, in Portuguese—PNH2) [259]. This document guides Brazil’s strategy towards fostering Hydrogen from low-carbon emission sources, aiming to accelerate the low-carbon hydrogen economy in the country and take advantage of the opportunities in the global market for low-carbon products and their supply chain in the energy transition. In addition, Brazil aims to make low-carbon hydrogen competitive in the country and provide an alternative for hard-to-abate sectors in Brazil and in the global market. Finally, these actions aim to consolidate low-emission hydrogen hubs in Brazil by 2035. FEASIBILITY AND USES OF HYDROGEN There are three main factors that are critical for the production of hydrogen from renewables: 1) the electrolysers capital expenditure; 2) the cost of the renewable electricity to be used in the process (levelized cost of electricity or LCoE); and 3) the number of operating hours (load factor) on a yearly basis. Other than regulatory incentives, the adoption of this technology by stakeholder and shareholders rely on lowering those costs: on one side, by increasing the efficiency, production scale and life cycle of electrolysers; and, on the other side, by reducing energy costs, although, in part, this has already been occurring thanks to the maturation of the technology of main renewable sources (wind and solar). In Brazil, energy auctions have shown a significant price decrease in wind (US$0.045/kWh) and solar (US$0.048/kWh) energy (IRENA, 2019). Water harvesting and treatment processes, in turn, have mature technology and can be further optimized, knowing that water consumption in the electrolysers is about 9 kg H2O/kg H2 (Gates, 2021). 337 Scenarios for Offshore Wind Development in Brazil On the topic of hydrogen uses, it can be deployed in modified internal combustion engines (ICE), allowing for the use of a mixture of hydrogen and natural gas, diesel, or biofuels, optimizing performance and reducing emissions (although not to zero). It can also be used in fuel cells, a device capable of converting the chemical energy of hydrogen in electrical energy and heat. There are many different fuel cell types, which differ between themselves by operation conditions and use (transportation/vehicles, stationary for power or combined heat and power and battery storage). Finally, Hydrogen has been used in large quantities for well over 100 years as a chemical feedstock, in fertilizer production, in refineries and for e-fuels production. MANAGEMENT OF HYDROGEN Regarding storage, transport, and distribution, hydrogen can be stored compressed, and pipeline transport has the best cost-benefit ratio when there is a high, continuous demand over long periods. In this case, there is the alternative of exclusive pipelines for hydrogen or mixed with natural gas. Small amounts of hydrogen (up to 20 percent in volume) could be added to the natural gas network almost without cost, although there are technical and organizational barriers to be overcome. For example, 15 percent is the highest percentage of hydrogen in the mix with natural gas in North American utilities. Transportation in liquefied form is suitable when there is a high and stable demand but insufficient investment for pipeline transportation. It is the appropriate form for hydrogen export by sea and suitable for long-haul maritime transportation. Liquefaction demands a very high amount of energy, about 12.5-15.5 kWh per kg of hydrogen, equivalent to 38 percent to 47 percent of its lower calorific value (Castro & Sergio Leal Braga, 2023). Hydrogen can also be stored in substances or materials and released at the end-use site. One route is converting Hydrogen in ammonia, which already has a mature production and logistics chain and can be an end-use product, which potentiates its use as a means of transport. Ammonia is easier to transport compared with hydrogen and can be a good alternative, although the cost of converting the ammonia back to hydrogen needs to be considered. For distances shorter than 1,500 km, it is cheaper to transport hydrogen in pipelines as pure gas, while for longer distances, transporting the hydrogen as ammonia or via a LoHC by ship seems to be more cost-effective. Converting ammonia or LoHC back to hydrogen for the end user adds costs of about US$1/kg H2 or US$0.4/kg H2 respectively. Reconversion of ammonia to hydrogen also requires about 7 to 18 percent of the energy content of the hydrogen, while for LoHC it requires about 35 to 40 percent. (DNV Hydrogen Forecast 2022-2050). Seen as one of the main mechanisms for catalysing the development of regional vocations for hydrogen production, the structuring of hubs has the main advantage of integrating the infrastructures needed to make these projects viable, from the production stages to storage, transportation, and consumption. In addition, hydrogen hubs can represent opportunities to link different sectors of the economy, including the possibility of adopting new technologies, such as carbon capture, use and storage (CCUS). Appendix G—Hydrogen Context 338 NOTES FUNDED BY: Energy Sector Management Assistance Program The World Bank 1818 H Street, N.W. Washington, DC 20433 USA esmap.org | esmap@worldbank.org