Why Brazil’s Wind Power Is Now Cheaper Than Hydroelectric Energy

Brazil is rapidly emerging as a global leader in renewable energy, with wind power generation standing out as one of the cheapest and cleanest sources available. In the heart of the Bahia state, in the northeast of Brazil, several changes, including in the landscape and in the lives of farmers, exemplifies this transformation, boasting dozens of towering wind turbines that mark its status as one of Brazil's top wind energy producers.

The small town of Sento Sé (40,000 inhabitants) in Bahia holds the second-highest installed wind power capacity in Brazil, nearly 1500 MW. At full capacity, this could power approximately 3 million people simultaneously. The landscape, dotted with aerogenerators across numerous wind farms, is a testament to Brazil's ongoing energy transition.

The Ascendance of Wind Energy

Brazil currently hosts over 15 wind farms across 14 states, predominantly in the Northeast. These colossal structures, with tower bases up to 7 meters in diameter, 100-meter-high towers, and 42-meter propeller blades, are not just engineering marvels but also significant economic drivers for local communities. Landowners receive payments based on the energy produced on their land, supplementing their traditional livelihoods. 

Wind energy generation, the inverse of a fan's operation, harnesses wind as an input to produce electricity as an output. This output translates directly into income for communities, with payments often tied to the energy generated. This model has fostered a symbiotic relationship between large-scale energy production and local economic empowerment.

A Decade of Unprecedented Growth and Future Horizons

Since 2009, when Brazil initiated annual auctions for wind energy contracts, the sector has experienced unparalleled growth. By 2017, wind power had become the cheapest energy source in the country, even surpassing the cost-effectiveness of large hydroelectric projects like Belo Monte. This rapid expansion has positioned wind as the second-largest source of large-scale generation in Brazil's electrical matrix, and the fastest-growing over the past 15 years.

The future of Brazilian wind energy extends beyond land-based farms to offshore wind projects. This technology, already mature in countries like Norway and led globally by China, involves floating or seabed-fixed turbines. Last year, the Brazilian Congress approved a legal framework for offshore wind, regulated in April by the federal government, paving the way for new contracting auctions. These new turbines are mandated to be at least 22 km from the coast, signaling a significant leap in Brazil's renewable energy ambitions.

Currently, wind power accounts for approximately 16% of Brazil's installed electrical matrix capacity, and can generate over 20% during peak wind seasons, showcasing the nation's rich natural resources.

Echoes of the Past: Hydroelectric Legacy and the Green Shift

Brazil's energy landscape has a complex history. Decades before wind turbines dominated the horizon, regions like Bahia were shaped by massive hydroelectric projects. In the 1970s, the construction of the Sobradinho lake, one of the country's largest reservoirs, submerged entire communities. This traumatic past, marked by the loss of homes and livelihoods, underscores the social costs of previous energy endeavors.

The energy rationing crisis in the early 2000s spurred further investment in large hydroelectric plants, particularly in the Amazon, leading to controversial projects like Belo Monte. Scientists acknowledge the difficulty in predicting river behavior, especially with rivers like the Xingu, which experience significant flow reductions during dry seasons, raising concerns about the long-term efficiency and viability of such large-scale hydroelectric developments.

Regional Investment and the Challenge of Curtailment

But it's not only in the northeast of Brazil that things are happening in the wind energy sector, the commitment to renewable energy is evident across the country. In Rio Grande do Sul, in the south of the country, the state government recently met with DGE Soluções Renováveis and Casa dos Ventos to discuss the Torquato Severo wind project in Dom Pedrito. This project, with an installed capacity of 700 MW and an initial investment exceeding R$3.9 billion, is set to begin construction in late 2027 and become operational in 2029. It is projected to create 3,000 direct and indirect jobs and prevent 1.2 million tons of CO₂ emissions annually, solidifying Rio Grande do Sul's role as a renewable energy hub.

However, the rapid expansion of renewables has not been without its challenges. A significant issue is curtailment, where the National System Operator (ONS) limits energy generation due to saturated transmission lines. In the Northeast, wind and solar farm expansion has outpaced infrastructure development, leading to situations where generated energy cannot be fully absorbed by the grid. This results in interrupted generation, impacting financial predictability for investors. Between January and April 2026, 660,000 MWh were curtailed from wind and solar plants, a 22% increase from the previous year, with the state of Ceará alone estimated to have lost nearly 3.3 million MWh between October 2021 and September 2025. 

This situation has been described by Elbia Gannoum, president of the Brazilian Wind Energy Association (ABEEólica), as the worst crisis in the Brazilian wind energy industry, categorizing it into a “macro crisis” (economic downturn leading to decreased demand) and a “micro crisis” (curtailment due to infrastructure limitations).

Navigating Challenges and Charting a Sustainable Future

Despite these challenges, the renewable energy sector in Brazil is showing signs of recovery. Elbia Gannoum of ABEEólica anticipates a market recovery from 2027, with energy curtailment expected to decrease from 2028. This optimism is fueled by increasing corporate demand for decarbonization and the influx of energy-intensive data centers. New job opportunities are also emerging, with Chinese companies like Goldwind establishing manufacturing plants in Brazil, particularly in the Northeast.

Further supporting this recovery is Law 15.269/2025, sanctioned in November 2025, which modernizes the regulatory framework for the electricity sector, promotes tariff moderation, and incentivizes battery energy storage systems. A battery auction is also expected this year, which will help balance the national system and mitigate curtailment losses.

While the path to a fully optimized renewable energy system is complex, involving transmission expansion, improved pricing mechanisms, and regulatory adjustments, Brazil is firmly committed to its green energy transition. The energy surplus, once a problem, is now seen as a competitive asset to attract new industrial and technological investments, particularly in segments like data centers and electro-intensive industries, fostering a "green neo-industrialization" across the nation.

The AI Bubble and Its Risks for Brazil: Rising Pressure on Energy and Water Resources

Trillions Invested in Artificial Intelligence Collide With Weak Returns, Environmental Costs, and Structural Challenges in Emerging Economies

The rapid expansion of artificial intelligence (AI) is increasingly exposing a dual global risk: financial instability driven by inflated valuations and mounting environmental pressure caused by the sector’s growing demand for energy and water. While these challenges affect the global economy, their implications are particularly significant for countries like Brazil, where infrastructure expansion, natural resource use, and regulatory transparency are becoming critical issues.

Economists warn that the AI sector is showing classic signs of a speculative bubble. Trillions of dollars have been invested worldwide based on expectations of future profitability that may never materialize. At the same time, the physical infrastructure required to sustain AI, especially large-scale data centers, is generating environmental costs that remain poorly measured and weakly regulated.

Financial Excess Meets Physical Limits

The global AI market has absorbed an extraordinary volume of capital in the last months, yet the sector’s capacity to generate returns consistent with this investment remains highly uncertain. From a basic financial perspective, investments on the scale of $20–30 trillion would require annual profits in the trillions to justify current valuations. Existing revenue models fall far short of that threshold.

Much of the capital circulating in the AI ecosystem moves within a closed loop among a small group of large technology firms, inflating valuations without expanding real economic demand. This concentration heightens systemic risk and increases the likelihood that a future correction will be abrupt rather than gradual.

Data Centers: The Hidden Physical Cost of AI

Behind every AI interaction lies a data center. Those are facilities that process enormous volumes of data and consume vast amounts of electricity. AI-oriented data centers are particularly energy-intensive because they rely on high-performance chips capable of executing complex computations at scale.

In addition to energy use, water has become a critical and often overlooked input. While companies often suggest that a single AI query consumes only a negligible amount of water, independent academic research challenges these claims. Estimates that account for electricity generation and liquid-based cooling systems indicate that dozens of AI interactions can consume hundreds of milliliters of clean water.

Liquid cooling systems, increasingly adopted by AI data centers, rely on potable-quality water to prevent corrosion and bacterial growth. In many cases, up to 80% of this water evaporates during the cooling process, effectively removing it from the local water cycle. This places AI in direct competition with agriculture, human consumption, and sanitation, especially concerning in water-stressed regions.

Lack of Transparency and Environmental Uncertainty

One of the core problems in assessing AI’s environmental impact is the lack of transparency. Technology companies routinely report aggregate water and energy usage in sustainability disclosures but rarely specify how much is attributable to AI training versus daily operation.

As a result, researchers are forced to rely on indirect estimates based on chip production, data center capacity, and assumed efficiency levels. Even conservative models suggest that global AI electricity consumption already rivals that of medium-sized countries and could double within a few years.

Brazil at the Center of Data Center Expansion

Brazil is emerging as a strategic destination for data center investment due to its large market, expanding connectivity, and relative abundance of renewable energy. Today, the country hosts an estimated 160 data centers with a combined installed capacity of roughly 750–800 megawatts.

Official projections indicate that by 2038 this capacity could exceed 17,000 megawatts, more than a twentyfold increase. This level of demand would be comparable to the electricity consumption of a city with over 40 million inhabitants, highlighting the scale of the challenge facing Brazil’s energy system.

Energy, Water, and Local Trade-Offs

Although many Brazilian data centers rely on renewable energy sources such as hydroelectric, wind, and solar power, these solutions are not impact-free. Hydropower depends heavily on water availability, while wind and solar projects have been linked to land-use conflicts, noise pollution, water use for panel cleaning, and social disputes with local communities.

Water use is also a growing concern. While some facilities in Brazil employ closed-loop air cooling systems that consume less water, the expansion of AI-specific infrastructure may increase pressure on local water resources, particularly if liquid cooling becomes more widespread.

Economic Value Versus Environmental Cost

A key unresolved question for Brazil is whether the economic value generated by hosting AI data centers justifies the environmental and infrastructural costs. Unlike countries that concentrate AI model training, Brazil often hosts facilities focused on data storage and service delivery, which may generate fewer high-value jobs relative to resource consumption.

This raises broader policy questions about industrial strategy, energy planning, and environmental governance. Without detailed data, it is difficult for regulators and society to weigh the true costs and benefits of AI-driven infrastructure expansion.

Structural Risks and a Potential Market Reckoning

The environmental pressures created by AI compound existing financial vulnerabilities. As private funding becomes scarcer and profitability remains elusive, the sector increasingly depends on public support. This dynamic creates moral hazard while shifting financial and environmental risks onto society.

History suggests that periods of technological euphoria rarely resolve smoothly. The combination of inflated valuations, weak revenue generation, opaque environmental impacts, and growing dependence on state intervention points to an approaching inflection point for the AI sector.

Brazil’s Strategic Dilemma

For Brazil, the challenge is twofold: managing the immediate environmental and infrastructural impacts of AI expansion while avoiding deeper exposure to a potential global technology-driven financial crisis. Greater transparency, stricter reporting requirements, and integrated energy and water planning will be essential to ensure that the country does not absorb disproportionate risks without corresponding long-term benefits.

As artificial intelligence reshapes the global economy, its sustainability, financial and environmental, will increasingly depend on decisions made not only in technology hubs, but also in emerging economies that host the physical backbone of the digital world.

TikTok to Build Brazil’s Largest Data Center in Ceará With R$ 200 Billion Investment and 100% Clean Energy

TikTok has announced a landmark R$ 200 billion investment to build its first Latin American data center in Brazil. The facility, which will be the largest data center in the country, will be located in the Industrial and Port Complex of Pecém, in the city of Caucaia, in the metropolitan region of Fortaleza, capital of Ceará. The announcement was made on Wednesday (3) by President Luiz Inácio Lula da Silva during an official agenda in the state, highlighting the project as a milestone for Brazil’s digital and industrial development.

According to TikTok, the investment will be carried out over the next several years. Of the total amount, R$ 108 billion will be allocated to high-tech equipment by 2035, with additional investments planned for the following decade. The project is being developed in partnership with Casa dos Ventos and OMNIA.

Clean Energy, Advanced Technology, and Job Creation

The Pecém data center will run on 100% renewable energy, sourced exclusively from new wind farms built specifically for the project. This ensures that the facility will not draw electricity from the local grid and will help expand the supply of clean energy in Brazil.

TikTok also confirmed the use of state-of-the-art closed-loop water-reuse cooling technology, designed to deliver extremely high energy efficiency while keeping water consumption minimal, placing the new center among the most sustainable data facilities in the world.

During the first phase of construction and operations, the government of Ceará estimates the creation of 4,000 direct and indirect jobs, both temporary and permanent. The partner companies are also required to invest R$ 15 million per year in community development initiatives for residents living near the Pecém Complex.

Lula Highlights the Strategic Importance of the Project

President Lula emphasized the significance of the investment for Brazil’s digital and economic future, noting: 

“We are announcing that TikTok will build a data center here, which over time will invest R$ 200 billion in this country.”

Caucaia an the water problem 

The Caucaia data center will consume 30,000 liters of water per day in a region where water scarcity has been a challenge for indigenous and rural communities for years. The project, expected to break ground within six months, marks a significant milestone for the city and for Brazil’s growing digital infrastructure sector.

A data center functions as a large-scale facility for real-time data processing and storage, a demand that has surged with the rapid expansion of artificial intelligence technologies. TikTok’s decision to install the structure in Caucaia reinforces Ceará’s rising prominence in the global digital ecosystem.

Strategic Location and Green Investments

Located near the international submarine cable routes that connect Brazil to Europe and the United States, Caucaia has emerged as a strategic hub for the Brazilian Northeast’s digital economy. The region is set to receive approximately R$ 5 billion in investments for the data center, along with an additional R$ 50 billion for green hydrogen projects. These initiatives are part of a national program aimed at boosting not only the 184 municipalities of Ceará but cities across the entire country.