Brazil's PV auction lacks key details

Brazilian PV developers and the government are still discussing the final details of the country's exclusive auction for the technology, says Rodrigo Sauaia, president of the newly created Brazilian Solar Power Association (Absolar).

Mauricio Tolmasquim, president of Brazil's energy planning authority EPE, tells Recharge that the solar auction should occur at the end of the third quarter or the beginning of the fourth.

The guidelines should be published by the end of May.

But Sauaia said that several key issues are still not defined, which will be needed in order to secure power purchase agreements.

Among the main issues are how to include contractual clauses to take into account the natural decline in efficiency of solar panels, an issue Brazilian grid operators are unaccustomed to, and how to deal with intermittent solar power production.

Another issue is how to apply appropriate tax incentives and national content rules.

Tolmasquim said that he is talking to BNDES to allow a longer time period for national content to reach the 60% levels normally required by the bank.

Sauaia says discussions about the price cap at the auction have not yet started. “We need to increase dialogue between the government and companies,” he says.

Sauaia believes that the start of the solar PV industry in Brazil will repeat what happened in the wind power industry, which started in the 1990s through the subsidized tariff Proinfa program.

About 1.3GW of wind projects were contracted and build under the Proinfa program, through which federal energy company, Eletrobras, paid R$320/MWh ($144).

From 2009, the government has been holding yearly auctions which includes wind, a signal for power turbine makers to build new plants in the country in order to comply with BNDES' local content rules. As result, wind power prices fell. This should also happen in solar power, said Sauaia.

But the lack of operating PV plants raises uncertainty.

“We don't have a local reference”, he says. "And we cannot mirror the international market”.

Brazil has only 9.3MW of solar PV power in operation.

The government needs to confirm that yearly auctions will occur and that starting price caps at the auctions will be high enough to allow companies to import solar cells, build panels with other imported components and gain know-how in the first few years.

Sauaia uses the R$320/MWh from the Proinfa wind contracts as a reference, but said the price cap at the auction will be lower than that, but above the R$200/MWh that government officials have said to be feasible. (By comparison, wind power prices are now at around R$120/MWh).

“The price cap at the auction will be below R$320/MWh, but well above R$200/Mwh”, sadi Sauaia.

Some PV developers have said that the price cap needs to be above R$250/MWh.

Absolar was created in December 2013 and has about 12 members, among them SunEdison, Canadian Solar and Brazilian solar array developers Meta Solar, Agência Renova and EBES.