Brazil denies developers' request for PV project extensions

Brazilian power regulator Aneel has denied a request by solar developers for a two-year delay until mid-2019 to start operation of 23 PV plants with a combined capacity of 760MW.

“The postponement would pass on to the end-consumer the risk assumed by the independent power producer,” says Aneel director Reive Barros dos Santos, who reviewed the request. His decision won full support from Aneel’s board.

Dos Santos notes that a postponement could have led other developers to “relax in their planning and investments”.

The developers included China's Canadian Solar, Spain's FRV and Cobra, and Brazilian firms Renova Energia, Rio Alto and Inharé Solar, which won contracts at the reserve auction in October 2014.

In the first quarter, they filed for postponement, arguing that since the tender, the investment climate in Brazil has changed due to political and economic instability.

They note that the local currency, the real, has sharply lost value against the US dollar, which makes imported goods more expensive. Sector suppliers continue to postpone investment and this hinders developers’ ability to carry through projects and qualify them for cheap financing from BNDES, the national development bank.

The adverse ruling could potentially lead certain developers to cancel projects.

“The developers and the government agreed that for the solar sector to develop in Brazil it would need to develop a local equipment-supply industry and have differentiated financing,” says André Epstein, who represented developers at the Aneel hearing.

He also contends that because of oversupply, solar power contracted at R$215 ($63) per MWh was significantly higher than the spot price projected for coming years. A two-year delay would have saved consumers R$400m, he claims.

Aneel’s stance is that auction winners had full knowledge of the tender rules, lack of a local supply chain and associated risks.

Dos Santos argues that only force majeure events such as unforeseen government policy changes would have justified Aneel delaying contractural dates.

He contends that energy supply security, even at a higher price, is the paramount public interest in this case.

As the Ministry of Mines and Energy made the decision on the amount of generation capacity to award at the auction, the industry will now need to make its case for a postponement there, he says.

Of 890MW of PV projects contracted at the 2014 tender, only Italy's Enel Green Power has started construction with imported Jinko Solar modules — equivalent to about 210MW — in the state of Bahia.

After subsequent tenders in 2015, Brazil has auctioned around 3GW of PV capacity thus far with a mid-2017 deadline for construction. As prices were over 20% higher than the 2014 auction, the 2015 projects are seen by the industry as more feasible.

Canadian Solar is the only Tier 1 panel manufacturer building a module assembly plant in Brazil. It says the 350MW facility will be ready in September and plans to seek accreditation from BNDES, which is requiring progressively greater local content.

Current BNDES-accredited module assemblers do not have high enough quality to supply utility- scale projects.