Solar presents solution to Brazil post-election economic woes

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The results are in – one of the world’s largest democracies has voted the Workers’ Party, led by Dilma Rousseff, into power for a second term. Adam James, analyst at GTM said the continuity of Rousseff’s presidency has “provided some certainty for developers and first buyers trying to get PV off the ground” in Brazil. 

But not 24 hours into Rousseff’s second term leading the world’s seventh largest economy, Brazil’s currency and market tanked after government bonds were downgraded on the back of her re-election.

The economic shocks to the largest South American country come just as Brazil is beginning to realise the potential its sunny skies offer to generate solar energy, prioritising the energy source with solar-only tender auctions and funding from its national development bank (BNDES).

The investment and currency rate dips are “a threat – they are two challenges we need to face”, executive director of Brazil’s solar energy association, ABSOLAR, Rodrigo Lopes Sauaia told PV Tech.

As Brazil has little domestic solar manufacturing, the falling value of the Real against the dollar means an additional challenge for solar projects looking to attract foreign equipment. “Our projects become less competitive with this price tag,” said Sauaia.   

Nevertheless, an ongoing electricity crisis in Brazil means solar needs “to be one of the priorities, especially as electricity prices indirectly influence our overall economy – it influences the competitiveness of the country”, said Sauaia.

Brazil also faces a huge increase in electricity demand as the country’s middle class swells and the population increases.

Sauaia said ABSOLAR predicts a demand for 70GW of new generation by 2023 – or 7GW a year, a significant boost from the 3-5GW currently planned, added Sauaia.

On top of demand, Sauaia said predictions for 2015 show electricity prices will rise by 20-25%. On top of last year’s 20% rise, leading to some cases of “more than a 40% electricity rise in two years, it’s very significant, it’s a lot”, said Sauaia.

The recent drought in Brazil has been the main driver of electricity prices as the country relies heavily on more fossil fuels and less hydro power. “Higher electricity prices tend to be a drag on the economy overall because it just costs more for people,” said James.

“Fossil fuels are way more expensive to operate” compared to Brazil’s previous 70% hydro power, resulting in “significant price pressure” on the citizens of Brazil, agreed Sauaia.

However with fossil fuels plants selling power at up to BR800 (US$325) per megawatt hour, the solar auctions being held next week, with a ceiling price set at BR260, offer the chance of replacing some fossil fuel with renewables at a much more economical value, said Sauaia.

“As [PV] technology can be developed very fast and can help to reduce the consumption of fossil fuels that are so expensive”, solar could fill this transition gap he added.

The less than healthy grid is “also an opportunity for distributed generation”, said Sauaia; in some places it is already cheaper to produce solar electricity locally rather than buying from grid, he claimed.

While not a “silver bullet” for Brazil’s energy crisis, James said solar power was “one of the solutions on the table. “By lowering energy costs overall the hope is that that will increase the economic competitiveness of the country,” he said.

ABSOLAR predicts at the very least 500MW a year, as per Brazil’s previous plan for 3.5GW of solar by 2023, can be expected.

GTM forecast 51MW of solar will be installed in total this year, and 2015 will see installed capacity double to 110MW next year, and again with 240MW forecast for 2016.

By 2018 the solar market will reach 1.6GW, an 85% compound annual growth rate.

James said the boosted forecasts are down to the state and national solar-only auctions and BNDES funding, as finance was “one big barrier before”, as well as the more attractive price of solar when compared to the high costs of fossil fuels.

Solar auctions are being held in Brazil next week.

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