World Cup highlights Brazil's infrastructure woes

In one month, football fans’ eyes will be on Brazil as the World Cup kicks off.

But people will not just be focusing on the opening match between the hosts and Croatia. Talk will also focus on construction delays: three of 12 tournament stadia aren't ready, and some supporting infrastructure is being scaled back or scrapped.

There is a parallel with what has happened in Brazil’s wind sector. The idea of hosting a sizeable wind industry looks exciting, but infrastructure is letting it down.

Brazil has embraced renewables. Hydroelectricity of 86GW makes up two-thirds of the country’s installed energy capacity, and wind accounts for a comparatively tiny 3.5GW. However, the government wants to grow wind to support other sources.

Capacity has been growing fast. For example, when the country was awarded the right to host this year’s World Cup in 2007 it had 247MW of installed capacity. Since then, capacity has grown 14-fold to 3.5GW.

But life has not been a carnival for investors and developers.

Many of these new wind farms are still not linked to the grid because of connection delays by state-run utility Chesf. Earlier this year, there were 48 wind farms without connections, and developers are sceptical that Chesf will meet its revised deadline of the end of this year.

The public is still paying more than $200m a year in government subsidies for the energy produced by these unconnected wind farms.

Politically, this puts the wind sector in a tough position. We need only look to last summer’s riots about the state of public services and the cost of hosting the World Cup and 2016 Olympics to see how incendiary this issue is.

Thankfully for Chesf, the public has bigger concerns than the cost of paying for energy that is not being fed into the grid issue. Nevetheless, its record should make investors question the realism of Brazil’s wind ambitions.

The government now has a target of 17GW of installed capacity by 2020. Some analysts have even forecast that wind power in Brazil could reach 24GW by 2020.

This would present investment opportunities for developers and manufacturers.

But investors will rightly be cautious if transmission problems aren't fixed. Wind is a maturing asset class, and delays and missed deadlines are not good enough.

If there are hundreds of wind farms waiting to be linked to the grid then this would do major damage to the wind industry in Brazil and South America, not to mention individual investment strategies.

The country is also on the cusp of moving into offshore wind, which presents its own transmission problems. Developer Eolica Brasil said this month that it wants to start work in the near future on the first 1GW of its planned 11.2GW Asa Branca offshore project. It is planning a 12MW pilot in 2016 followed by a 258MW demonstrator project in 2017.

Investors will want to see that Brazil is learning from established offshore wind markets in Germany and England — even if it doesn’t copy their style on the pitch.

In one month, football fans’ eyes will be on Brazil as the World Cup kicks off.

But people will not just be focusing on the opening match between the hosts and Croatia. Talk will also focus on construction delays: three of 12 tournament stadia aren't ready, and some supporting infrastructure is being scaled back or scrapped.

There is a parallel with what has happened in Brazil’s wind sector. The idea of hosting a sizeable wind industry looks exciting, but infrastructure is letting it down.

Brazil has embraced renewables. Hydroelectricity of 86GW makes up two-thirds of the country’s installed energy capacity, and wind accounts for a comparatively tiny 3.5GW. However, the government wants to grow wind to support other sources.

Capacity has been growing fast. For example, when the country was awarded the right to host this year’s World Cup in 2007 it had 247MW of installed capacity. Since then, capacity has grown 14-fold to 3.5GW.

But life has not been a carnival for investors and developers.

Many of these new wind farms are still not linked to the grid because of connection delays by state-run utility Chesf. Earlier this year, there were 48 wind farms without connections, and developers are sceptical that Chesf will meet its revised deadline of the end of this year.

The public is still paying more than $200m a year in government subsidies for the energy produced by these unconnected wind farms.

Politically, this puts the wind sector in a tough position. We need only look to last summer’s riots about the state of public services and the cost of hosting the World Cup and 2016 Olympics to see how incendiary this issue is.

Thankfully for Chesf, the public has bigger concerns than the cost of paying for energy that is not being fed into the grid issue. Nevetheless, its record should make investors question the realism of Brazil’s wind ambitions.

The government now has a target of 17GW of installed capacity by 2020. Some analysts have even forecast that wind power in Brazil could reach 24GW by 2020.

This would present investment opportunities for developers and manufacturers.

But investors will rightly be cautious if transmission problems aren't fixed. Wind is a maturing asset class, and delays and missed deadlines are not good enough.

If there are hundreds of wind farms waiting to be linked to the grid then this would do major damage to the wind industry in Brazil and South America, not to mention individual investment strategies.

The country is also on the cusp of moving into offshore wind, which presents its own transmission problems. Developer Eolica Brasil said this month that it wants to start work in the near future on the first 1GW of its planned 11.2GW Asa Branca offshore project. It is planning a 12MW pilot in 2016 followed by a 258MW demonstrator project in 2017.

Investors will want to see that Brazil is learning from established offshore wind markets in Germany and England — even if it doesn’t copy their style on the pitch.

In one month, football fans’ eyes will be on Brazil as the World Cup kicks off.

But people will not just be focusing on the opening match between the hosts and Croatia. Talk will also focus on construction delays: three of 12 tournament stadia aren't ready, and some supporting infrastructure is being scaled back or scrapped.

There is a parallel with what has happened in Brazil’s wind sector. The idea of hosting a sizeable wind industry looks exciting, but infrastructure is letting it down.

Brazil has embraced renewables. Hydroelectricity of 86GW makes up two-thirds of the country’s installed energy capacity, and wind accounts for a comparatively tiny 3.5GW. However, the government wants to grow wind to support other sources.

Capacity has been growing fast. For example, when the country was awarded the right to host this year’s World Cup in 2007 it had 247MW of installed capacity. Since then, capacity has grown 14-fold to 3.5GW.

But life has not been a carnival for investors and developers.

Many of these new wind farms are still not linked to the grid because of connection delays by state-run utility Chesf. Earlier this year, there were 48 wind farms without connections, and developers are sceptical that Chesf will meet its revised deadline of the end of this year.

The public is still paying more than $200m a year in government subsidies for the energy produced by these unconnected wind farms.

Politically, this puts the wind sector in a tough position. We need only look to last summer’s riots about the state of public services and the cost of hosting the World Cup and 2016 Olympics to see how incendiary this issue is.

Thankfully for Chesf, the public has bigger concerns than the cost of paying for energy that is not being fed into the grid issue. Nevetheless, its record should make investors question the realism of Brazil’s wind ambitions.

The government now has a target of 17GW of installed capacity by 2020. Some analysts have even forecast that wind power in Brazil could reach 24GW by 2020.

This would present investment opportunities for developers and manufacturers.

But investors will rightly be cautious if transmission problems aren't fixed. Wind is a maturing asset class, and delays and missed deadlines are not good enough.

If there are hundreds of wind farms waiting to be linked to the grid then this would do major damage to the wind industry in Brazil and South America, not to mention individual investment strategies.

The country is also on the cusp of moving into offshore wind, which presents its own transmission problems. Developer Eolica Brasil said this month that it wants to start work in the near future on the first 1GW of its planned 11.2GW Asa Branca offshore project. It is planning a 12MW pilot in 2016 followed by a 258MW demonstrator project in 2017.

Investors will want to see that Brazil is learning from established offshore wind markets in Germany and England — even if it doesn’t copy their style on the pitch.