Climate change is at the core of the ongoing adjustments in Brazilian energy planning.
As part of this, the Energy Research Company (EPE), which is linked to the Ministry of Mines and Energy, has been developing methodologies to incorporate climate impacts on generation, transmission and demand, as well as to assess effects on future investments and the sector’s expansion rules.
In an interview with BNamericas during the Energyear Brazil 2026 conference, Thiago Ivanoski Teixeira, EPE’s director of economic, energy and environmental studies, outlines the main challenges related to climate risks and evaluates the drivers that should spur new investments in Brazil’s energy sector.
BNamericas: What are the main challenges and adjustments that EPE has been identifying to integrate climate change into Brazilian energy planning?
Teixeira: What we have been thinking about is how to incorporate climate change into energy planning. We are building a line of reasoning to incorporate this topic in a structured way, and that involves understanding why we need to do this.
When we think, for example, about the power transmission sector, the question arises of how to adapt infrastructure to climate change. Stronger winds require more robust structures. Episodes of heavy rainfall, like those that occurred in Rio Grande do Sul [in 2024], have led us to rethink the location of transmission towers, including the removal of some of them. In other words, we are experiencing these changes in practice.
In thermoelectric generation, rising temperatures can reduce the efficiency of existing machines, something that is already technically known. In hydropower generation, which is Brazil’s main source, we know there is a trend toward reduced water availability in the Northeast and Southeast, while the South tends to have more water.
The first step has been to map these effects. From there, we are creating modeling processes that make it possible to quantify these impacts and then incorporate them into energy planning tools. This includes assessing how much additional capacity or energy will be needed and how this will be distributed geographically.
We are still in an early, principles phase. We have already published two important papers. One of them is a roadmap on climate change that evaluates each source – transmission, hydropower, wind, thermal, and demand.
Regarding demand, it is important to highlight that the Brazilian electricity market is highly sensitive to temperature: the higher the heat, the greater the consumption, mainly due to cooling and the use of air conditioning.
The second study, developed in partnership with other institutions, already brings a slightly more quantitative approach, analyzing how climate change can affect Brazil’s hydropower security. It was released about two months ago, but it is still a conceptual study that will serve as a basis for future planning-oriented research.
BNamericas: When will EPE have a more consolidated document, including to serve as a basis for drafting tenders?
Teixeira: This is a difficult question to answer in terms of timeframe.
What we can say is that we need to be as organized as possible internally so that we can adapt to climate change, both from the point of view of adaptation and of mitigation.
We also need to clearly recognize the role of climate change in the energy sector. We already have a qualitative notion of the impacts; the challenge now is to quantify them. And it is important to remember that climate change is not static, but dynamic, evolving over time.
The great advantage of energy planning is precisely having tools that allow us to react and determine how much will be necessary. The expectation is that, in the next two or three years, we will already have some clearer quantitative elements.
An example is the work we are developing with PUC-Rio [Pontifícia Universidade Católica do Rio de Janeiro] on the impact of rising temperatures on energy demand.
These studies function as building blocks that are gradually assembled until they form a more complete picture. The first quantitative results should begin to appear within this two- to three-year horizon, but the process will continue over time, since Brazilian energy planning is cyclical, dynamic, and adaptive, and is adjusted year by year.
An example of this is distributed generation. Ten years ago, the projections were much lower. With the drop in solar panel prices and the dynamics of the market, it was necessary to completely revise the planning. Today, I would say we are quite comfortable with the estimates. I believe that something similar will happen with the incorporation of climate change.
BNamericas: Could climate change lead Brazil to adopt more flexible bidding rules, allowing more contractual revisions over time?
Teixeira: I understand that the entire world needs to adapt to climate change, whether from a technical and engineering standpoint or from a regulatory, legal, and contractual standpoint. Brazil, moreover, is well served by regulatory agencies that are qualified to discuss these issues.
At this moment, it is still not possible to say exactly how this will be reflected in the calls for bids and contracts in the energy sector. The first step is to have a good mapping of the impacts. From there, this discussion tends to advance over time. It is not something about which we can give a definitive answer now.
BNamericas: In the Ten-Year Energy Expansion Plan, PDE 2035, which is currently under public consultation, what are the main drivers that should boost new investments in the Brazilian energy sector?
Teixeira: We have already published the PDE 2034 and we are in the final stage of the public consultation for the PDE 2035. In terms of approach and results, the two are quite similar.
In PDE 2034, the total estimated investment volume was around 3.2 trillion (tn) reais (US$615 billion) over the ten-year horizon, that is, in the next ten years. PDE 2035 should present numbers very close to that.
The largest share of these investments is in oil, natural gas, and biofuels, accounting for more than 75% of the total. Even so, there are very significant investments in electric power generation, something around 600 billion (bn) reais over ten years, and in transmission, with about 200bn reais.
These are quite significant numbers and reflect the attractiveness of the Brazilian energy sector, which has long-term contracts, respect for contracts, and conditions that facilitate financing at more attractive interest rates. This makes the sector very appealing to private capital.
BNamericas: Is Brazil’s energy sector prepared to meet the demand from data centers?
Teixeira: This is one of the major challenges in planning today. The growth in demand associated with data centers has truly been exponential.
We are working on this topic on several fronts within EPE, assessing how to meet this demand from the standpoint of generation, transmission, infrastructure, and also the commercial aspect.
There is a classic dilemma in which it is necessary to build infrastructure to make projects viable, but the projects also need to exist to justify the infrastructure. What we have seen is a gradual process. The first projects become viable, this encourages new investments and creates a virtuous cycle.
In planning, we have expanded studies on transmission flow capacity and deepened analyses of demand profiles, including questions such as whether this demand is constant and what the effect of temperature on it is.
Of course, meeting something like 20GW of data centers in five years is not feasible anywhere in the world. But it is possible to overcome the system’s inertia and serve the first gigawatts. This is already happening. In the latest load review carried out by EPE together with ONS and CCEE, around 400MW on average were added to the projection, largely due to data centers that are actually materializing.
Therefore, the answer is yes, the sector is getting ready, but the big question is the pace and timing of this expansion.
BNamericas: Until recently, there was discussion about the fact that data center and green hydrogen projects were competing side by side for space in the connection queue. Have data centers overtaken hydrogen? Is there a chance for hydrogen to regain space?
Teixeira: It’s not possible to say that one has surpassed the other. What we see is that data center projects have materialized more quickly than hydrogen projects. Even so, there are hydrogen projects under development, including advanced discussions on contracts with off-takers.
It is a topic that is still evolving and that we need to monitor closely.
BNamericas: What are the main risks to the implementation of the projects planned for Brazil’s power sector in the short and medium term?
Teixeira: That depends a lot on which projects we are analyzing.
On the demand side, in the case of data centers, for example, it will depend on how quickly these projects materialize and on the associated demand contracts, such as artificial intelligence applications, hyperscale, and cloud computing.
In hydrogen, two years ago we had expectations of faster growth, which did not materialize in the short term. The potential is still there, but development may take longer.
In the case of power-intensive industries, such as aluminum and steel, everything will depend on factors such as the competitiveness of green steel in the international market and the premium that this product may obtain. Brazil has a very renewable power mix, which can represent a competitive advantage.
On the supply side, the country has a very broad portfolio of projects, with many gigawatts in wind, solar, and thermal. I do not see any risk that Brazil will be unable to meet the demand. The central issue is the timing of how these projects will materialize over time.
(The original version of this content was written in Portuguese)