IN-DEPTH: Brazil solar prices fall

Solar energy expensive in Brazil? Not any more.

Developers have shown the Ministry of Energy a study suggesting that the R$300 ($150) per MWh so-called break-even point for PV projects has plummeted to R$140 in some cases.

The figure is a long way behind wind prices - which hit R$90/MWh in the most recent tender, although that figure is expected to rise this year due to new government measures. But solar prices have reached a mark that raises the question: is it time to promote a special tender for solar and set the foundation stone of a local PV industry?

Apparently, the answer is "no"; government officials believe costs will fall even more sharply in the near future. Overcapacity of PV modules around the world is the main reason for the cut in prices.

With many cheap alternatives, the ministry sees no need to hurry.

“Solar will come some time. We need patience. We don't want to launch it and have to step back,” insists Altino Ventura, a director at the energy ministry.

A study on solar viability, made by the respected energy consultancy PSR, was presented to the government, showing a range of possibilities to make a solar tender a reality in 2013. It estimated the reduction in the cost of PV modules by using a technology learning curve methodology.

A group of ten companies, including big wind developers CPFL Renováveis, Renova and Bioenergy, had ordered the analysis.

Rafael Kelman, PSR's associate director, tells Recharge that depending on investors' internal rate of return (IRR), the bids could vary from R$140 to R$170/ MWh.“The study shows that developers would firmly sign PPAs [power-purchase agreements] by this range of price to deliver power five years ahead," Kelman says.

The PSR scenarios considered IRRs of 8%,10% and 12%. The delivery date for those projects would be January 2018, allowing further PV cost reductions. Ventura does not see the point in having an A-5 tender - for delivery in five years - for solar, as it can come on line within two years of the start of construction.

“We are analysing the study, but A-5 is out of question. It could be an A-3 tender [for delivery in three years]”, says Ventura.

Kelman believes that changing it from A-5 to A-3 would not make solar unviable.

Even though the study astonished ministry officials, it was shelved, and Ventura has given up thoughts of having solar in this year's energy tenders.

Because of this, solar developers that have spent years carving out a business in Brazil are looking at alternatives to kick-start a domestic industry.

Brazilian renewables developer Braxenergy recently received the green light from the local environmental authority for a 60MW concentrating solar power plant in the northeast state of Pernambuco. The company still has not signed a long-term PPA, but there are talks with retailers to sell the output in the unregulated market.

Braxenergy chief executive Helcio Camarinha tells Recharge that the project could be put into full operational in 18 months. Financing for the R$400m cost will be arranged with US and European banks.

The Pernambuco government is considering buying the plant's total production if the equipment can be produced locally. It wants to attract solar players to the state, which has one of the best resources in the country.

Camarinha says that around 85% of the plant can be made with local equipment and materials if required. He sees government help as fundamental to the viability of Brazil's first large-scale solar project.

He will not disclose at what price he would sign a PPA. Camarinha believes that about R$160/MWh is not viable ye, but it may be soon. “We need to take care of a lot of technical aspects before making such bid,” he warns.