The Brazilian electricity sector is experiencing a major contradiction. On one hand, it confirms an accelerated expansion of energy and digital infrastructure, with distributed generation (DG), the free energy market , and the Artificial Intelligence (AI) data center segment driving demand for investments in the short and medium term.
On the other hand, this growth is threatened by infrastructure bottlenecks in the energy grid – such as delays in the construction of transmission lines, whose schedule does not keep pace with the sector's growth rate – and by regulatory unpredictability caused by increased cuts in renewable generation due to oversupply of energy, the so-called curtailment , an effect of the uncontrolled advance of distributed generation, one of the drivers of this sector's expansion.
In general terms, these are some of the conclusions of the unprecedented study by the consulting firm Inventta , "Macromovements and trends in the sector," released on Wednesday, September 10th, which NeoFeed had early access to.
“More than mapping signs of transformation, we seek to translate opportunities and risks that are already beginning to impact companies' strategies – and which will inevitably define who will be best prepared to compete and grow in the coming years,” explains Juliano Cortez, COO of Inventta, a consultancy specializing in market intelligence.
The study starts from the observation that the Brazilian electricity sector is undergoing an unprecedented transformation, with 88.2% of the electricity matrix composed of renewable sources. In April 2025, Brazil surpassed 210 gigawatts (GW) of monitored power, placing the national electricity system among the largest in the world, with installed capacity greater than that of countries such as Italy, France, and the United Kingdom.
Furthermore, the country's electricity sector surpasses the global average in climate transition. One of the highlighted data points was that 60% of the companies evaluated already operate with a 100% renewable energy matrix, and 53% offer energy efficiency solutions.
Asset resilience and increasing regulatory unpredictability are central themes of the study, while curtailment appears as a symptom of insufficient infrastructure and coordination, with worrying projections until 2035. In parallel, AI data centers emerge as a dominant driver of demand and investment, with a preference for locating in the Southeast region, which necessitates the upgrading of networks and transmission lines.
“Despite regulatory pressures, the electricity sector remains, among the country's infrastructure verticals, the most attractive when compared to sanitation and oil & gas,” assures Cortez. “Addressing regulatory unpredictability and modernizing infrastructure are critical factors for sustaining investments, ensuring stability, and meeting the new wave of demand driven by data centers.”
Immediate opportunities
According to the study, distributed generation (DG) and the free energy market offer immediate opportunities for the capital market, while digitalization and energy storage – through batteries, to reduce the intermittency of renewable generation – are strategic trends, with model and regulatory challenges.
Cortez observes that distributed generation (DG) and the free market attract investors for different reasons. According to him, distributed generation – a segment known for housing smaller renewable energy plants, including solar panels installed on rooftops – requires projects without high complexity, whose energy enters the grid operated by distributors.
With rates of return above 40%, distributed generation (DG) allows for unrestricted injection of load into the grid, forcing the National Electric System Operator (ONS) to cut generation from large, centralized power plants to avoid overloading the system.
Therefore, distributed generation (DG) has become the most critical factor in increasing curtailment . In just the first 8 months of 2025, the installed capacity of distributed photovoltaic generation rose 16%, to 45.3 megawatts (MW). This DG load volume is already close to the combined capacity of centralized wind (35 GW) and solar (14 GW) plants.
“The risks of distributed generation, especially the worsening of curtailment , are already priced into the market,” assures Cortez, referring to the generation cuts from centralized renewable plants, which have been hitting successive records, generating an estimated loss of R$ 1 billion per month for the approximately 1,500 centralized projects monitored by the ONS, including giants like Enel, Engie, and Auren.
“Our projections up to 2035 indicate that curtailment will lead to the discarding of 8% of the national average of energy generated by centralized renewable plants, and in the Northeast this rate is expected to reach 11%,” he warns. This market moves around R$ 35 billion.
Regarding the free market, the study attributes the high investor expectations to two essential changes: the opening to the medium/high voltage market in 2024, and the prospect of opening to the low voltage market as early as 2026 – which could attract the average consumer.
Strictly speaking, this change is already underway. In June, the free energy market totaled 77,156 consumer units. This number represents a growth of 124% in two years. The opening of the market to smaller consumers (retailers with demand below 500 kW) alone attracted 26,680 new users.
According to Cortez, the changes in the free market will require a new business approach from energy companies operating in the segment, which previously acted as simple suppliers of a commodity.
“Now, they will have to shift their focus to customer relationships and pursue digitalization and efficiency as monetization drivers,” he says. “In other words, they will need to structure business models that add value beyond the supply of kilowatt-hours (kWh).”
Other data compiled by the study show the great potential of the free energy market, which this year accounted for 43% of the electricity consumed in Brazil. While the average tariff charged by distributors is R$ 345 per megawatt-hour (MWh), the long-term price in the free market is R$ 192/kWh, generating savings of 46% in energy costs.
Data centers and new entrants
The Inventta study also points to the growth of the data center market as a driver not only of the country's energy demand but also of investments in the sector in the medium/long term.
Brazil already leads the data center market in Latin America, accounting for 50% of investments in the region. The country is also expected to register the largest capacity expansion by 2029: there are 450 MW under construction, with inauguration scheduled for that date – more than double the volume of Chile, the second-placed country, with 215 MW.
According to data from Brasscom, an association of technology companies, cited in the study, the sector is expected to expand by an additional US$3.5 billion by 2029, with an average annual growth of 11.05%.
The fact that Inventta's study was completed before the approval of the Special Tax Regime for the Data Center Area (ReData), through Provisional Measure (MP) No. 1,318, in September of this year, left out announcements of billion-dollar investments in data centers.
But other investment opportunities with high returns in the electricity sector were also identified by the study. The 20 largest energy trading companies, for example, account for more than 60,500 average megawatts, representing a significant share — above 50% — of the free energy market.
Cortez says it is not surprising that two financial institutions – BTG Pactual and Santander – lead the ranking of energy trading companies, ahead of companies in the sector. According to the study, companies from other areas – telecommunications, construction, and banking – are also looking at the electricity sector as a safe haven for investments.
“For companies seeking long-term investment in a regulated market, the electricity sector, with all the problems it carries, is still very attractive,” says Cortez, recalling the study's warning about the need for planning and investments in technical and regulatory improvements to increase the sector's value chain.
In essence, the study reiterates that, despite being one of the first in the infrastructure segment to modernize with a secure regulatory framework, the electricity sector is now threatened by its own growth, with significant political pressure in Congress favoring special interest groups.
Among the urgent demands to attract capital market investments, Cortez cites the digitization of the grid, with the introduction of smart meters, storage batteries, automation, and flexible networks to address demand and intermittency challenges.
Adopting the ESG agenda, demanded by large investor groups, and accelerating the construction of transmission lines, which take two to five years to meet demand, are also essential items for raising funds.
According to the study, Aneel, the sector's regulatory agency, predicts progress: between 2025 and 2029, more than R$ 140 billion will be invested in expanding the country's electricity grid, and another R$ 95 billion in renovations and improvements.
Cortez, however, suggests an urgent regulatory response aimed at addressing unpredictability through specific regulations for distributed generation (DG) and incentives for storage and hybrid generation.
“There is concern about legal uncertainty if measures are announced abruptly,” says Cortez. “The fact is that, even though it is dynamic, the electricity sector is still as slow as an ocean liner; that is, changes are progressing, but with significant inertia.”
