Energy minister struggles to restart Brazil's renewables train

Brazil's interim energy minister, Fernando Coelho Filho, is trying hard to overcome his lack of knowledge about the power sector.

Within days of his nomination in mid-May, he had held meetings with lobby groups, tried to signal a more investor-friendly approach, named a team of renowned consultants and sector leaders, and announced the partial, stepwise, privatisation of electricity utility Eletrobras.

But uncertainty nowadays in Brazil is hard to overcome, as the changes come thick and fast, including the postponement of July's solar and small-hydro reserve tender.

With 9GW of PV projects registered — after developers had faced complex, expensive red tape, environmental licensing and technical measurements, and had started talks with equipment suppliers — the decision didn't do down well.

The wind sector faces the same uncertainty over the October reserve tender — the last hope of contracting wind this year.

With several players traditionally registering 20GW-plus in recent tenders, the wind industry's main lobby group, ABEEólica, commissioned a study to convince Coelho Filho that a tender should be held, to avoid a cliff of contracts from 2019 and leave the five turbine makers in the country idle after they had made almost $1bn in investment.

Coelho Filho is a 32-year-old congressman from a political family (his father is a senator for the Northeast state of Pernambuco).

He is trying to reassure observers that renewables will continue to be important if he and his boss, acting president Michel Temer, are confirmed in late August.

With his dream team of experts, Coelho Filho arrived at Brazil Solar Power in Rio de Janeiro last week to give the opening speech on the prospects for utility-scale and rooftop PV. It was first time he had appeared in public to talk specifically about renewables.

Initially, he seemed to convince the audience.

The reduction of greenhouse gas emissions is the fight of his generation, he said, and solar is firmly in the plans. The interim energy ministry will not be as interventionist as the former government, he indicated. The tenders will continue and there will be at least one more auction this year, he promised. Rooftop solar will be boosted by new government financing; all government buildings in the capital, Brasília, will set the example and be powered by the sun.

Being from the Northeast — a traditionally poor, drought-ridden region from which waves of famine-fleeing migrants have filled the cities of Brazil's south with cheap labour over the past century — he said that he knows the harm the sun can do, but “it is just this same sun that will generate jobs, income and prosperity”.

However, after the applause, when asked for details of the tender, he said he needs to solve some urgent problems, especially the financial troubles of distribution companies burdened by excess power contracted as electricity demand has dwindled since 2014.

Will it be a reserve tender, which allows the government to bypass the over-contracted distributors, reporters asked. We are studying that, he answered.

Will it include solar and wind? We are studying that... and these were his final words as he was ushered away by his aides.

The minister returned to Brasília, leaving perhaps half-a-dozen officials rushing in and out of micro-meetings, continuing the hand-to-hand combat to win over hearts and minds in one of the world's most promising solar markets.

That market was forecast by the ousted former government to reach 7GW by 2025 through tenders that would contract 1-2GW annually, combined with cheap financing from the national development bank, BNDES, in exchange for local content.

Similar policies ushered Brazilian wind into the world's top ten for new installation growth and making it among the most attractive countries for renewables investment.

On the second day, the show organisers put the interim government's main planners on stage, a heavyweight team of decision makers: planning and development secretary Eduardo Azevedo; the future president of the federal energy planning authority, Luiz Barroso; the president of the national grid operator, Luiz Eduardo Barata; the director at power regulator Aneel, André Pepitone; and the president of Brazil's power trading chamber, Rui Altieri.

The two-hour debate ranged from explaining how Brazil's auction system works, to a discussion about grid operation. But when the panel was asked about tenders, technicalities apart, there were no details.

Reserve tenders, which were created a few years ago to allow the government to contract stand-by power independent of demand and which have successfully introduced wind, solar and biomass into Brazil's hydro/thermal mix, needed to be revised, they said, because they burden the end consumer.

Asked whether 2GW of solar a year could be contracted (the minimum to guarantee investment by equipment makers in Brazil), Azevedo said he “would like to, but cannot promise”.

That uncertainty again...

Laura Porto, the Brazil head of Força Eólica — Iberdrola's renewables arm in Brazil, with a hefty interest in wind and a nascent interest in solar — requested the microphone on the floor, explaining that investors need predictability and asking when the guidelines for this year's remaining tender would be published.

Perhaps because of the weight of Iberdrola's investment, or because Força Eólica was one of top sponsors of the event, Azevedo finally promised that the guidelines would be published “within a month”, indicating that the tender could be held early in the fourth quarter.

Before the political and financial turbulence of the past two years, renewables had been faring all right.

The green train had already left the station on what looked like a promising journey: wind turbine makers are up to their necks in orders to 2018, and solar investors were sure they could count on the government to guarantee demand and a return on investment. After all, this was a film they had watched before with the creation of a local wind industry.

Now the train is heading back to the platform and it's hard to tell whether it will just be cleaned or totally overhauled. Perhaps we'll know “within a month” if all is going to change.

But in about a month, the Senate is expected to reach a final decision in the impeachment trial of President Dilma Rousseff. What happens if she wins over the five to six votes she needs to stay in office?

Perhaps the interim government should just have ridden the renewables train, and it could have won twice: showing that it was committed to stability; and that it was earnest about attracting investment.