Rumors of massive solar plant auctions in Brazil set for 2013 raced through U.S. renewable energy headlines last week to no avail. Brazil’s federal government quashed the rumor that it might auction off multiple solar plant construction concessions, saying instead, that installed solar kilowatt costs in the country are still too high — by three to four times — to compete with other renewable energy sources. Government officials did express hope, however, that as solar material costs continue to decline, the government could begin solar auctions in a few years’ time.
Meanwhile, a number of Brazilian utilities, now building their first solar power plants, are anticipating the auctioning of electricity from their soon-to-be-built facilities on the unregulated commercial market for electricity, says Andrea Lombardo, a spokesperson for Eletrosul Centrais Eletricas, or Eletrosul, a state utility based in Florianopolis, in southern Santa Catarina state. The utility provides about 17 percent of the country’s electricity.
Eletrosul itself has commissioned a 1-megawatt (MW) solar demonstration plant for its headquarters, which will cover both buildings and parking structures. The project is being financed in part by Germany’s KfW Bankengruppe. Eletrosul also has cooperated with the University of Rio Grande do Sul to produce domestic photovoltaic modules, with the aim helping to boot-strap the domestic photovoltaic industry.
While the on-grid market for photovoltaics in Brazil is just beginning to take shape, the country has a long history of using off-grid PV for residential installations and for community lighting. Kyocera Solar is a pioneer in this market in Brazil, among a few other international manufacturers. Solar lighting use has attracted a number of international development bank loans, including funds from the World Bank. Similarly, Brazil has a well-developed solar thermal industry that is focused on residential and commercial hot water provision, but not on concentrating solar power projects.
Net Metering Starts Solar Reforms
Since the Brazilian government earlier this month authorized residential and commercial entities to install solar generation equipment up to 1 MW capacity and sell electricity to the grid under basic net metering, the market is expected to focus on smaller installations until costs drop enough for large utility-scale projects. When large national licitations come out for solar plants, they will be managed by the Comissão Especial de Licitação, or licitation commission, of the Agência Nacional de Energia Elêtrica (Aneel), based in Brazil. Aneel. which has already held a substantial number of wind concession auctions in Brazil.
One incentive the federal government did promulgate earlier this month to encourage private sector solar plants of up to 30 MW was a tax break of up to 80 percent over the first 10 years of operation. This provision is limited to those projects that begin operating by December 2017. Thereafter, the tax break would drop to 50 percent, and any plants coming online after 2017 also would be eligible for the break, according to a recent announcement by Aneel.
Demonstration Systems Tied to Soccer
Earlier this year, Brazil made solar power headlines with the announcement of plans to build a solar system on top of the soccer stadium in Salvador, in Bahia state, as part of the country’s efforts when it hosts the 2014 World Cup. The Salvador stadium project is being developed by the German-Brazilian joint venture Gehrlicher Ecoluz. A variety of other municipalities with soccer teams plan to build solar systems on their stadiums as well.
Financing for solar power in Brazil is also nascent. The national development bank Banco Nacional de Desenvolvimento e Social, or BNDES, has indicated it is prepared to finance large solar projects in the country. The bank has a special lending fund for Climate and Renewable Energy already established, and a separate Renewable Energy program that involves a broader set of financial tools.
Utility Plans Starting Small
Thus far, the only utility-scale solar power plant in Brazil is the 5 MW unit built by MPX Energia using Kyocera solar modules, in the northeastern city of Taua, in Ceara state, which was funded in part by the InterAmerican Development Bank, based in Washington. In September 2011, General Electric announced that it would add another 1 MW of generating capacity to the unit. MPX has filed for approval to expand the facility to 50 MW.
Another 3 MW solar power unit is being planned by the state utility Companhia Energética de Minas Gerais, or CEMIG, at Sete Lagoas, in Minas Gerais state. The plant is being developed in cooperation with Solaria Brasil, a unit of Madrid-based Solaria Energía y Medio Ambiente. Some financing will come from Germany’s Banco de Fomento da Republica Federal da Alemanha (KfW) Entwicklungsbank.
The national umbrella utility, Eletrobras, in Brasilia, has begun calls for interested domestic companies capable of providing solar generation plants of up to 3 MW.
Brazil does have ambitious plans to triple its renewable energy sourced power by 2020. However with abundant and relatively less expensive hydroelectric and wind resources, solar costs will need to drop for solar generation to take off. A further complication in the development of a solar power industry in Brazil is the country’s long history of erecting protective tariffs against imported goods in strategic industries. Some solar module tariffs are already in place, and as demand rises and domestic production grows, tariffs are likely to rise.