Solar Power in Brazil: Troubled Start, Promising Future

Solar Power in Brazil: Troubled Start, Promising Future By Carolina Lapa - Wednesday, July 6, 2016

Ruberval Baldini President Abeama
Brazil's energy ministry canceled the reserve power auction that was scheduled for July, leaving the industry uncertain about new plants in the country. However, the government is showing support for investors with delayed projects, which is a good sign for the future of solar power in Brazil, according to Ruberval Baldini, president of Brazil's association of renewable power sources.

BNamericas: How will the cancelation of the reserve power auction, previously scheduled for July, affect the development of the solar power industry in Brazil?

Baldini: The delay of the auction is not a surprise due to Brazil's frail economic situation. This reserve auction had been scheduled before the political changes regarding the presidency of the republic. From the investor's point of view, postponements bring uncertainty, which is not good at all for the Brazilian market. Not only the investors, but the whole supply chain of solar power is interrupted. The preparation for an auction is a lengthy process, it usually takes one or two years, so all the players involved are adversely affected by such situations. There are a lot of doubts. Will there be new rules for the next auction? When will it be? Why exactly was the last one postponed? This uncertainty is bad for the market and for investors, especially foreign investors that are planning to start business in Brazil.

BNamericas: Unlike other countries, in Brazil solar power is a beginner, with only three federal auctions until now. Do you think distributed generation is a better fit for solar projects in the country?

Baldini: Distributed generation is very important. However, its growth depends largely on the availability of funding. The money for investing has to be in the consumer's hands. For example, why can't people use 20% of the amount paid in income tax to buy and install solar panels in their own homes? The problem is that Brazil's solar industry is lagging behind the world. It should have started in the 1980s. Today, internationally, a solar panel is almost a commodity. People can buy it at much lower prices than they did two years ago, and the prices tend to decrease even more before stabilizing. It's not the technology that hinders growth, but in Brazil this supply chain is not ready yet. We have five industrial plants, but only three are operating. The other two should start operations in 2016. All these plants will have to import part of their components, but we should be using our land, our silicon.

BNamericas: So it's mostly a matter of energy planning?

Baldini: Mostly, yes. I always said that Brazil has to change its model of power development. We still base our growth on huge hydropower projects. But in a place like Brazil, a country that has the second highest rate of solar insolation, is this the best way to develop the energy matrix? What the Brazilian government is showing is that it intends to keep this position. We need to rethink this model.

BNamericas: In 2014, Brazil had its first federal auction for solar power projects. But now about 70% of the 889MW bought by the government is showing signs of delays. Why did solar power have such a troubled beginning?

Baldini: This situation is connected to Brazil's economic crisis. Those projects were all based on well-known rules and in studied scenarios, but suddenly the local currency [the Brazilian real] saw a huge drop against the US dollar. And it happened in a short period of time. Players had to almost rethink their entire projects. Anyhow, when growth returns, Brazil will need new power plants operating. At this time, the demand is not increasing due to the recession, but if the country gets back to the figures originally planned, it would already be in need of these solar power projects.

BNamericas: These players have not had much success negotiating with energy regulator Aneel to avoid paying fines for delays, but the energy ministry showed support for a resolution. What are the expectations about the negotiations with energy ministry [MME]?

Baldini: Brazil's energy minister expressed an optimistic position last week [during the Brasil Solar Power event in Rio de Janeiro]. He said that MME wants things to work out with the greatest possible harmony. If the minister said that, I believe there is a plan to solve this situation, making the necessary and possible adjustments. It was a very positive statement. Now we have to wait and see if these expectations will translate into facts.

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