The national energy storage market is expanding, driven by the drop in battery cell prices and the opportunities from new capacity auctions. Additionally, the anticipated regulation is expected to stimulate investments and accelerate the implementation of systems.
There are several reasons to believe that the battery energy storage market is about to turn from a mere promise of energy transition to actual consolidation in Brazil. This applies both to behind-the-meter applications and to utility-scale systems connected directly to the electrical grid, i.e., in front of the meter.
The significant drop in battery cell prices in recent years has benefited this technology, regardless of its use - either in the retail market by directly serving end consumers in homes or businesses, or in the wholesale market, in utilities, by helping to stabilize the electrical system during high demand periods.
Similarly, the development of storage sector regulations, which is expected to be completed by May, is another key driver to create the legal security needed for investments and provide incentives for the sector.
The announced deadline for the completion of the regulatory work, if fulfilled, aligns with the capacity reserve auction in the form of power, the LRCAP Storage, which aims to contract only battery systems. The expectation is that the regulation, if ready before the auction, will clarify the rules and encourage more companies to participate.
The regulation will define business models, CUST/D tariffs, and the ways storage agents connect to the transmission and distribution networks. Furthermore, it will establish the rules for grants and the structuring of the so-called revenue stacking, that is, the various types of compensation for the multiple services that batteries can provide.
According to the Brazilian Association of Energy Storage Solutions (Absae), a defined legal environment for the auction could enable the deployment of around 8 GWh of battery storage capacity between 2027 and 2029, equivalent to 2 GW of power in Battery Energy Storage Systems (BESS).
Attractive Market
Regardless of the details of the new regulation, the fact that the government has included batteries in the power reserve planning is already very positive for the sector. This is part of the strategy to address the issue that is expected to worsen in the coming years with the so-called load ramp, between 7:00 PM and 9:00 PM, when solar production, especially from distributed generation, which is not dispatchable by the National System Operator (ONS), stops generating.
Despite uncertainties about the effect of a very high thermal and hydroelectric reserve in the first LRCAP, which could hinder battery participation, the general expectation is that there will be strong participation in the auction. In addition to the direct benefit of contracting large-scale systems, the success of the auction, while attracting new competitors to the market, would also help expand the use of batteries in other growing demands, behind the meter, in various distributed generation sectors.
Revenue Stacking
The viability of storage systems is directly related to the possibility of stacking the maximum number of functions and revenues. The increasing use in industries allows for higher self-consumption of solar plants, reducing the injection into the grid and thus optimizing the energy generated. Another revenue stream is peak shifting, which generates savings on tariffs by using stored energy during the most expensive hours.
The same logic applies to other sectors, such as hotels, larger businesses, supermarkets, hospitals, and agriculture. In some cases, even smaller residential and commercial applications are beginning to show feasibility.
Tax Burden
The tax burden on the battery sector is considered excessive and remains an obstacle to be overcome. With the combination of import duties, PIS/Confins, IPI (tax on industrialized products), and ICMS, calculations by Absae indicate that the tax burden could reach up to 70% of the total value of a BESS.
Despite this tax burden, the market is starting to attract new entrants, which are interested in the generally favorable aspects for future business. A main motivation is the reduction in the return on investment time for battery storage systems for solar installations in homes, businesses, and industries.
Conjunctural drivers include the end of B-wire discounts, which will stimulate the use of generated energy in consumer units through storage, as compensation for energy exported to the grid will be reduced. Additionally, there is a reverse power flow, which has caused distributors to deny access to projects due to the excessive injection of energy into the grid.
The market is expected to develop both in the field of projects emerging from the capacity reserve auction and in isolated systems and distributed generation. The residential sector is also expected to grow, mainly to provide energy security in regions where power interruptions are becoming increasingly frequent.
Summary of an article written by Marcelo Furtado and published in the in the February 2025 issue of Fotovolt magazine, edition number 77. The full article is available here .