IN DEPTH: Brazil solar set to go

More than 150 solar companies are establishing offices in Brazil, hoping to carve themselves a share of the country’s PV market.

Yet the market is almost non-existent as the technology remains prohibitively expensive. There are no more than 40MW of projects across the entire country (many of which are unprofitable pilot projects), and the government has no plans to support the sector financially.

So what are all those companies doing here? Well, for a start, Brazil is one of the sunniest countries on Earth. The average insolation index in the South, the least sunny part of the country, is 3.4 times higher than in Germany, while in the hot-spot state of Bahia, in the Northeast, the index is 5.2 times higher than in any European country.

Also, a new federal regulatory framework has been created for net metering schemes, which could unlock a huge residential/commercial market — providing that state governments agree to exempt solar from the current 10-30% tax on electricity production.

The price of solar energy is coming down in Brazil, with some companies offering large-scale projects at R$160 ($71) per MWh, but this is still far more than the average price of wind (R$100/MWh) and large hydro (less than R$80).

With 170GW of hydro and 300GW of wind potential still to be tapped, the government says that Brazil does not need solar at the moment.

But many in the Brazilian renewables sector are saying that the government needs to start incentivising solar in order to keep up with developed markets.

“Solar might be more expensive today than the other sources, but if we don’t start it quickly, it might get even more expensive for us to develop it in the future. We need to learn the technology,” says Leônidas Andrade, co-ordinator of the solar group at the electronics industry association, Abinee.

In early 2013, when the country’s top energy officials were dealing with a power supply shortage, a group of ten companies, including prominent wind developers, headed to the capital, Brasília, armed with a study by consultancy PSR that showed how solar costs are going to plummet in the next five years.

They asked the government to include solar in the A-5 federal power tender, which looks to deliver energy over a five-year time frame. They got an immediate response from Altino Ventura, director at the Mining and Energy Ministry — “no”.

“He claimed five years was too long for building solar projects,” says the chief executive of one of the wind developers. “We know that, but we were considering the cost decrease within this time to make the projects viable.

“The truth is that the government has prejudices about solar.”

After the criticism it received for creating Proinfa, a costly subsidised alternative-energy programme, in 2004, the Brazilian government has decided not to give any preferential help to solar energy.

“We don’t need to hurry. Why should we pay R$200/MWh now if the costs will go down in a few years?” asks José Carlos de Miranda, a director at the national energy planning agency, EPE.

While the national government sits on its hands, several state administrations — São Paulo, Bahia, Ceará, Pernambuco and Rio Grande do Norte — are giving some support to the solar industry by offering tax exemptions to manufacturers that set up factories on their soil.

São Paulo energy secretary José Aníbal says his staff have held talks with several PV makers from around the world, especially from Germany and China. His state, which is by far the richest in Brazil, is also providing potential investors with maps highlighting the optimal locations for large-scale solar projects.

But the sector itself believes that market demand is needed to establish local manufacturing — and the easiest way of creating demand is to hold a solar-only tender.

“It’s just impossible to compete with wind. We need a separate tender to start the industry,” says Renato Mangussi, director of Brazil’s only module manufacturer, DYA, which has so far bagged 1MW of orders.

“Wind and biomass had exclusive tenders in their beginnings. Why can’t solar have one?” asks Andrade.

Eduardo Tosta, a renewables analyst for governmental industry development agency ABDI, believes the quickest way to start up the solar industry in Brazil would be to boost the residential market.

“With the right leasing conditions, I’m sure this will be a great opportunity for us to develop the whole supply chain,” he says. “We just need a special financing line to give conditions for residential consumers to accelerate the market.”

Mauro Passos, head of renewable-energy lobby association Instituto Ideal, believes that residential and commercial rooftop installations are more likely to be deployed in the near future than utility-scale arrays — especially as PV panels already offer consumers grid parity in several states with high energy prices.

“I think we will see urban PV projects of medium size coming up soon,” he says. “I think not only residential installations are going to be seen, but also projects in large rooftops, like in industries, parking lots, shopping malls and supermarkets.

“Every day, someone comes to this office to show a new project. We have lots of people looking for ways to make it happen.”

On the utility-scale side, Passos noted a slight change in the government’s attitude when it allowed solar bids in the A-3 national power tender.

“This is something that Maurício Tolmasquim [head of EPE] had never considered. But now we are able to see people bidding. I reckon this tender will give us an idea of the price that the government would use in an exclusive tender,” he says.

Major Brazilian wind players, such as Renova Energia, CPFL Renováveis and Bioenergy, are preparing for such a move by setting up their own solar divisions.

“The demand for solar power is still incipient in Brazil, but should grow stronger in the next two years,” says Wilson Ferreira Jr, president of Brazilian utility CPFL Energia. “We are one of the countries with the highest insolation rates in the world. The potential is huge.”