Wednesday, July 18, 2012

Interest increases in Brazilian solar market, but challenges remain

Article published on, July 16, 2012

The Brazilian solar market has yet to get off the ground, and many of the existing photovoltaic installations are off-grid. However, according to ANEEL, there has been a recent "explosion" of interest in the country, with rooftop systems offering cheaper electricity prices than the grid. Nevertheless, based on existing support, the IEA is more skeptical about growth.
Brazil one MW solar photovoltaic Plant Taua
MPX and E.ON have completed construction on a one MW photovoltaic plant in Tauá.
Empresa de Pesquisa Energetica, or EPE, the research arm of the Ministry of Mines and Energy in Brazil, has recently released a 60 page report, in Portuguese, on the solar industry, designed to aid in the creation of a specific solar policy in the country.
According to ANEEL, Brazil’s national electricity regulatory agency, which summarized the report in English, distributed rooftop solar power generation is already competitive with traditional electricity sources in some areas of the country, with these costs less than those sold by 10 of the 63 electricity distributors in Brazil. While centralized power generation is said to still be more expensive than other energy sources, falling photovoltaic costs are expected to help its integration.
"Following the introduction of ANEEL’s net metering legislation in April of this year, a boom is expected in the commercial and industrial rooftop PV market as businesses look to reduce their energy costs," stated the agency.
In order to build a strong solar energy industry, EPE is reported to have said that further incentives are required. One of its suggestions is the introduction of a specific solar auction "that would send a clear message of Brazil’s commitment to solar power."
ANEEL, reporting on EPE’s findings, says that around 20 MW of photovoltaics has already been installed in Brazil. The majority of this is said to be located in remote, off-grid systems. Furthermore, the agency says it has selected 17 projects, worth 23.6 MW to "evaluate the technical and commercial arrangements required to integrate solar projects into the grid". They arescheduled to be online in the next three years.
While ANEEL is confident of solar’s future in Brazil, the International Energy Agency, in its recently released renewable energy, medium-term market report 2012, has said that while renewable energy development is expected to grow in the country, photovoltaics will play a relatively small role.
Overall, it expects to see wind and hydro power resources grow "significantly" in Brazil, with an estimated capacity of eight GW and 21 GW to be added, respectively, by 2017, thus taking cumulative installed renewable energy capacity from 98 GW in 2011, to 128 GW in 2017. Meanwhile, the IEA says photovoltaic development is predicted to "proceed more slowly", due to the higher costs involved. Overall, it forecasts the addition of just 900 MW of photovoltaics by 2017.
It writes, "Outside of rural electrification efforts, solar PV has remained largely absent from renewable energy development, partly due to the government’s skepticism on its economic viability compared with other sources. Indeed, the PDE, thus far, has not factored this technology into its capacity projections."
Despite this, it does recognize that efforts are underway to introduce new solar policies, including the aforementioned auction, tax reductions and transmission incentives for solar energy under the proposed Prosolar program. It adds that ANEEL’s new net metering rules should stimulate photovoltaic development.
In terms of financing, the IEA believes Brazil is invested in renewable energy. "The country’s power sector, in general, has attracted a significant capital influx in recent years with the auction system providing an attractive entry mechanism. Moreover, the state-backed Brazilian Development Bank (BNDES) plays a large role in renewable energy investments by offering low-interest loans to a significant number of projects," it says.
Overall, it adds that the main challenges to implementation are:
  • Cost reductions through auctions, which may increase project vulnerability and head-to-head competition, which may price out some technologies;
  • A lack of streamlined environmental licensing procedures; and
  • Poor economic attractiveness of photovoltaics.

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