The availability and cost of battery energy storage systems (BESS) meeting Brazil’s domestic-content rules are expected to influence how the government allocates demand between two capacity reserve auctions scheduled for December.
The Dec. 2 auction, known as Product 2028 A, will be restricted to projects meeting minimum domestic-content requirements. A second auction on Dec. 4 will procure battery storage without that requirement.
In a survey conducted in early July, the Brazilian Association of Energy Storage Solutions (Absae) identified expected domestic production capacity of around 12 GWh, equivalent to 3 GW of power. The estimate needs updating as manufacturers and integrators develop partnerships and localization strategies.
At Intersolar 2026, Chinese and Brazilian companies announced several partnerships aimed at meeting the rules. CATL strengthened its partnership with Moura, while Jinko ESS signed a memorandum of understanding with UCB. Trina Storage and JA ESS said they were exploring local partnerships. WEG and Sungrow have also been linked to a potential partnership by project developers, while Hyperstrong announced an agreement with YOU.ON to supply localized BESS.
Most of the companies are still selecting suppliers and deciding how to localize their systems, Absae Executive Director Fábio Lima told pv magazine Brazil.
The Brazilian Development Bank (BNDES) currently accredits BYD, Gotion, Moura, TBEA, Trina, SecPower, WEG and You.On as battery storage system suppliers. Moura and Automa are also listed as energy management system (EMS) suppliers. WEG already has a Finame code for its 1 MW storage system.
“BNDES and EPE are continuously assessing these companies’ actual capacity to deliver battery storage systems within the time required for the auction,” Lima said, referring to Brazil’s Energy Research Office (EPE). He said companies were evaluating four localization routes, with the market expected to consolidate its choices during October.
The government will use that assessment to help divide demand between the two auctions. However, the first auction is not expected to absorb all estimated domestic supply, as doing so could reduce competition among projects.
Localization routes
Brazil’s domestic-content framework allows several approaches, ranging from partial local battery production to localizing other strategic components, such as power conversion systems (PCS) and EMS, while importing complete battery containers.
Under the first phase of the rules, which applies through Dec. 31, 2027, BNDES divides a storage system into eight components, four of which are classified as strategic. To qualify, a system must combine at least three components, including at least one strategic component, and achieve a national-content index of at least 15% of the system’s total financial value.
The first localization route does not necessarily require partial battery-pack manufacturing in Brazil. Suppliers can combine at least three components, often including EMS hardware and software as separate items and a bidirectional PCS inverter. This approach can allow complete battery containers to be imported, potentially reducing costs.
The second route and subsequent options require partial battery-pack manufacturing in Brazil. These routes involve different levels of battery localization, classified as B1, B2, B3 and B4, according to domestic-content shares.
Localizing the EMS and PCS and using Brazilian labor may not be sufficient to meet the 15% threshold in every project, potentially requiring other components to be localized.
Eduardo Tobias, founding partner of renewable energy finance consultancy Watt Capital, said the first route could lower upfront investment and widen the pool of suppliers able to qualify for Finame financing. Importing complete battery containers could also reduce the risk of relying on new factories being completed in time.
“With this route, the supply capacity for systems with a Finame code increases considerably. It is possible to bring in an imported container in six months,” Tobias said.
WEG and Moura are also advancing initiatives to manufacture batteries locally in partnership with Chinese suppliers. These projects could help develop Brazil’s industrial supply chain, but require greater investment and sufficient demand to sustain production after the first auction.
Lima said opportunities for Brazil’s storage market extend beyond the December auctions, including transmission tenders, isolated power systems and commercial and industrial applications. Finame and other incentive mechanisms could further support demand for domestically manufactured equipment.
Absae estimates that Brazil will face a power shortfall of around 4.5 GW in 2028. Meeting that need entirely with four-hour battery systems would require 18 GWh of storage, although actual procurement will depend on government decisions and supplier capacity.
Over the next decade, Absae estimates storage demand could reach around 70 GWh. Lima said the scale of investment in domestic manufacturing would depend on public policy.
Integration with other industries, including automotive manufacturing and telecommunications, could create synergies and expand the market for battery manufacturers and component suppliers.
Financing needs
Initial quotations for localized storage systems were reportedly 40% to 50% more expensive than fully imported alternatives, Tobias said. Prices have since begun to decline, although he cautioned that there are still too few formal domestic-content proposals to compare the different localization routes reliably.
Some reductions may reflect competition and lower commercial margins, while suppliers refine estimates for manufacturing, integration and subcontracting costs.
Tobias expects systems using the first localization route to cost only slightly more than fully imported alternatives. Because PCS and EMS account for a relatively small share of total system investment, a premium for locally manufactured versions could have a limited effect on overall project costs.
For projects with 15-year contracts under the auction, a system qualifying for Finame financing could cost up to around 25% more than an imported alternative and still approach financial parity, Tobias estimates, when more favorable financing through Brazil’s Climate Fund is taken into account. The result varies with grid connection costs, project configuration, leverage and other credit conditions.
Tax treatment, applicable tax codes and the location where invoices are issued can also affect final prices, particularly for systems combining domestic and imported components.
Manufacturers are meanwhile receiving quotation requests from numerous developers. Tobias identified 53 companies in a preliminary, non-exhaustive survey of potential auction competitors. The volume of requests is putting pressure on commercial and technical teams, while some suppliers are still calculating costs for factories that have yet to be completed.
Execution risk
Price is not the only consideration. Storage systems contracted through the auctions must begin supplying capacity in August 2028, requiring manufacturers to complete factory development and organize production in time to meet delivery commitments.
Tobias warned that concentrating demand among a small number of companies still building factories could increase execution risks. The first localization route offers more supply options because it allows developers to use imported battery containers without waiting for new domestic manufacturing facilities to be completed.
Developers also face tight schedules for project negotiations, land and environmental due diligence, equipment quotations and preparation of auction guarantees, all before their companies’ investment committees approve projects.
The selection of suppliers and agreement of commercial terms during October and November will therefore be important for developers making delivery commitments.
Despite uncertainty over pricing, contracted volumes and the continuity of industrial policy, suppliers are advancing localization plans, while Brazil’s need for capacity procurement in 2028 remains.
From pv magazine Brazil
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