Brazil’s Energy Transition Is Misaligned — and the Costs Are Already Showing

When public leadership, regulation, and markets fail to move in sync, a strategic agenda turns into systemic risk.

By Laís Victor – Renewable Energy Specialist and Executive Director of Partnerships

Brazil’s Energy Transition Is Misaligned — and the Costs Are Already Showing

The paradox of Brazil’s transition

Throughout my career in the energy sector—following expansion cycles, regulatory reforms, and structural market shifts—it is rare to see a country so well positioned in terms of natural resources and yet so strained by a lack of systemic coordination. Brazil’s largely renewable power mix remains a relevant strategic asset, often highlighted in international forums as a competitive differentiator.

Operationally and institutionally, however, Brazil’s energy transition is advancing in speed and scale without a matching evolution in coordination tools. This mismatch is already reflected in operational, economic, and regulatory signals that can no longer be dismissed as short-term noise. As the transition accelerates, the need to align planning, regulation, and system operation becomes increasingly evident—a recurring theme in technical discussions I hold with market players, investors, and policymakers.

When curtailment stops being an exception and becomes a structural symptom

A consistent reading of recent operational data shows that curtailment has shifted from an isolated event linked to specific contingencies to a phenomenon with structural characteristics. Reports from Brazil’s National System Operator (ONS)—particularly the Monthly Operation Programs (PMO) and System Interconnected Network monitoring bulletins published between 2023 and 2025—have repeatedly recorded transmission and operational constraints in regions with strong wind and solar expansion, especially in the Northeast.

These restrictions are not the result of energy scarcity, but of the system’s difficulty in transmitting, absorbing, or flexibly managing generation when it occurs.

From a market perspective, analyses released by the Electric Energy Trading Chamber (CCEE) throughout 2024 and 2025 indicate that rising curtailment has coincided with increased volatility in the Settlement Price for Differences (PLD) and a greater use of out-of-merit dispatch, even under more favorable hydrological conditions. For those who follow these indicators closely and discuss their impacts with companies and investors, the signals converge: renewable supply is expanding faster than transmission capacity, operational flexibility, and demand-response mechanisms.

This diagnosis is not new to sector planning. In Brazil’s Decennial Energy Expansion Plans (PDE 2032 and PDE 2034), the Energy Research Office (EPE) highlights that a higher share of intermittent sources increases the need for transmission reinforcements, regional integration, and the valuation of attributes such as flexibility, reliability, and capacity. When these elements fail to advance in a coordinated way, curtailment ceases to be merely a physical loss of generation and becomes a source of economic value destruction and heightened investor risk.

From curtailed generation to systemic cost

When renewable energy that is already contracted cannot be delivered due to structural constraints, the impact goes far beyond the lost megawatt-hours. To maintain balance and operational security, the system turns to alternative sources and services—often more expensive and less economically efficient. This is where curtailment directly connects to price formation, sectoral charges, and risk perception.

This dynamic helps explain why, even amid rapid renewable expansion, system costs do not fall proportionally. The problem is not the abundance of clean energy, but the fragmented way the system is being managed.

The invisible cost of poor coordination

When decisions are made in silos accelerated renewable expansion on one side, reactive regulatory adjustments on another, and an increasingly strained system operator in between the cost does not disappear. It is simply redistributed. The system becomes more expensive to operate, more complex to balance, and less predictable for investors and consumers.

Consolidated CCEE data show that expenses related to out-of-merit thermal dispatch, security services, and system charges have gained relevance in recent cycles. In strategic discussions with investors, this issue surfaces repeatedly: perceived risk is not driven by a lack of energy, but by a lack of institutional coordination. An energy transition that should reduce long-term uncertainty instead introduces new layers of complexity when not managed in an integrated manner.

Governance as the next stage of the transition

This context reinforces a conclusion shaped over many years: the main challenge of Brazil’s energy transition is not technological. The country has abundant natural resources, competitive projects, and widely recognized technical expertise. The challenge is institutional. The transition has been conducted as a collection of parallel agendas rather than as a cohesive, system-wide state policy.

EPE’s own planning documents stress that generation expansion must move in lockstep with the evolution of transmission, system operation, and market design. The absence of such integration creates an environment in which technical and regulatory decisions fail to reinforce one another, increasing system complexity at precisely the moment when predictability and clarity should be core assets.

Coordination is not a choice it is a condition

International experience supports this assessment. Recent reports from the International Renewable Energy Agency (IRENA), including Innovation Landscape for Sustainable Development Powered by Renewables (2026), show that countries making the most consistent progress in energy transition are those that treated institutional coordination as a strategic priority. Clear governance, defined roles, coherent economic signals, and regulatory predictability emerge as just as critical as technology or natural resources.

The next phase of Brazil’s energy transition will not be defined solely by the number of new projects or the pace of installed capacity growth. It will be defined by the country’s ability to align public leadership, regulation, and markets within an increasingly complex system. Without coordination among these pillars, the transition stops being a driver of competitiveness and becomes a systemic risk—a cost no country, investor, or consumer can afford to bear.

About the author

Laís Victor is a renewable energy specialist and Executive Director of Partnerships, with more than 15 years of experience in the energy sector. She works in business development, the structuring of strategic alliances, and supporting investment attraction for energy transition projects, with a focus on governance, systemic integration, and continuous monitoring of regulatory, operational, and market developments in Brazil and internationally.

Brazil’s Energy Transition Is Misaligned — and the Costs Are Already Showing