How to make Brazil's fledgling distributed generation sector solar

Solar Power in Brazil: Troubled Start, Promising Future By Carolina Lapa - October 10, 2016

Ruberval Baldini President Abeama
Ruberval Baldini, president of Brazil's association of renewable power sources Abeama, spoke to BNamericas about expectations regarding Brazil's first national program for distributed power generation, ProGD. We also asked him for his views on a recent decision by Brazil's national development bank to raise the funding cap for solar projects to 80% from 70%, and more.

BNamericas: In December last year, the Brazilian government created a development program for distributed power generation, called ProGD. Its first proposals may be unveiled in a matter of weeks. What is Abeama expecting?

Baldini: There are two main matters. First, there are local content rules. In our view, when the Brazilian photovoltaic industry matures, it will be possible to demand better conditions. Today, the number of companies that offer installation services is small. In addition, this service does not have associated quality standards yet. Customers notice that installation processes and final results vary greatly. One of the things the solar sector needs is a set of national practice standards for the workforce. I believe manufacturing and installation companies will notice a big difference when customers finally feel that the learning curve has been followed by the market. One other matter is financing conditions. Consumers who want to install microgeneration systems, like solar panels, to meet their own power demand should be allowed to use a percentage of their income tax as an investment fund. It could be, for example, 5% of the amount paid as income tax. This percentage could be used to make distributed generation cheaper and more attractive. At least for an initial period, this would be an important move to develop Brazil's local industry. This has been done in other countries and it has worked. We need to emulate those nations in this regard.

BNamericas: Do you believe there is restrained demand for distributed solar power in Brazil?

Baldini: Yes, I think there is. Today, the industry is producing less, stemming from the country's economic recession. However, we cannot forget that the price of electric power is very high. In other words, Brazilian industry will continue to suffer even when sales return to their normal levels, because expenses will not drop. That is why, for many companies, investing in their own power generation system makes perfect sense. Trade and services are still the most affected. Hospitals and hotels, for example, are great power consumers, and they could benefit much from distributed generation.

BNamericas: BNDES [Brazil's national development bank] has just raised the credit limit for solar projects to 80% from 70% of the total price tag. Could this measure help Brazil's solar industry obtain better results in the next federal auction?

Baldini: The new financing conditions help, but they are not enough to drive more investment in solar power in Brazil. Regarding the next power auction, I believe the biggest challenge is still the exchange rate. In 2014, constant exchange rate fluctuations made many contracted projects unviable. Enel was pretty much the only company that did not have any problems in terms of starting construction, also because it can count on partial funding from its holding. The maximum bid price has risen over the years, which is also really important for this industry. The Brazilian government should set simpler rules until 2017 in order to help the development of solar power.

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