Brazil stands to see unprecedented growth in its installed wind power capacity over the next decade, thanks to rising electricity demand and new policies, a report from research firm New Energy Finance concludes. The country should add 1.4GW of new nameplate capacity by the end of 2010, more than doubling its current base. By 2020, Brazil should have 7.8GW installed, representing 4.6% of the country’s installed capacity. The potential has caught the eye of major international developers, as well as turbine makers who have been adding local manufacturing capacity to meet anticipated demand and comply with the country’s domestic supply requirements.

Brazil will have 1.4GW wind installations plugged into its grid in 2010, New Energy Finance finds. This far exceeds projections in the Brazil government’s Ten Year Energy Plan, which forecasts such a total will only be reached in 2017.

“Despite some outstanding wind resources, particularly along its coasts, Brazil has moved relatively slowly to date in adding new capacity,” said Camila Ramos, New Energy Finance’s Brazil research chief based in Sao Paulo. “Now the country appears ready to make up for lost time.”

The expected long-range growth will be driven by Brazil’s overall demand for electricity, which is expected to expand at a rapid 5.4% per year clip through 2017. Brazil’s energy regulator also plans a series of tenders to sign long-term power purchase agreements with certain projects. The first of these tenders is scheduled for 14 December and could see 1GW of PPAs inked.

Despite the strong potential long-term opportunity, Brazil is not without risks for investors. Local tariffs being offered are high but not spectacular. Deployment costs of turbines in Brazil are roughly 40% above global averages, putting further pressure on projects to achieve peak performance. Brazil’s Real has been subject to wild fluctuations in value against the Euro, the currency most commonly used in wind component transactions. Tempestuous conditions in some north easterly states could put stress on wind equipment and lead to higher maintenance costs. Finally, there is regulatory risk. The country has in the past imposed restrictions on the import of certain types of equipment. While some rules have changed recently, financing from Brazil’s state-run banks is only available to projects that use equipment majority sourced from local manufacturing plants and import rules could again change.

To date, wind development in Brazil has been dominated by a mix of both local and foreign investors, some of which have formed joint-ventures to operate in the market. Well known international players such as Spain’s Iberdrola and Endesa and Portugal’s EDP Renovaveis all have a local presence. Big domestic players Petrobras and CPFL are also angling for PPAs. As for manufacturers, India’s Suzlon and Wobben, a subsidiary of Germany’s Enercon, have to date supplied the large majority of turbines deployed in Brazil. However, competition is heating up with GE Wind recently adding a manufacturing plant in Sao Paulo. Argentina’s IMPSA Wind and Denmark’s Vestas also are pursuing opportunities aggressively in the country.

New Energy Finance examines the upside potential and downside risks in Brazil in the company’s recently published Research Note Wind Tenders in Brazil: Strategies and Opportunities in a New Market, available to the company’s Insight clients. The Note also sizes up the various players competing to dominate this potentially lucrative market.