Demand analysis of emerging PV markets: Brazil of Central and Southern America
February 25, 2020 PV InfoLink
Brazil, a country with an estimated population of 200 million, is floundering on the economic front in recent years. From 2015 to 2016, the Brazilian economy was stuck in a slump as a political corruption scandal, the Zika virus, and rising inflation took toll. Consequently, the GDP growth rate slowed to -3.3-3.5% during that period.
Despite years of attempt to revive the sluggish economy, the Brazilian government is hindered by power struggles that follow from erroneous personnel decisions and policymaking. Brazil only posted a GDP growth of 1.118% in 2018, and as the economy did not fare well either in 2019, that figure would be even down to around 0.8% for that year—well below the government’s target of 2%. Brazil’s economic growth is widely predicted to be conservative; it has been assigned a credit rating of Ba2 by Moody’s.
Tropical regions encompass over 80% of Brazil’s land. The north lies in the Amazon rainforest climate with an annual temperature averaging 27 °C–29 °C; the central region has tropical savanna climate with an annual temperature being 18 °C–28 °C. The south’s annual temperature averages 16 °C–19 °C.
Every year, Brazil receives an average solar radiation of 1,700–1,800 kWh/m2.
Renewable energy development in Brazil
Under the Ten-Year Energy Expansion Plan 2027 (PDE 2027), Brazil commits itself to achieving 47% of renewable generation capacity by 2027. Hydropower, wind power, solar power, and biomass are all high on its agenda for renewable energy development.
Renewables power much of Brazil. Hydro is the most well-developed sector, supplying the lion’s share of Brazilian energy demand and representing 61% of the country’s installed capacity. By contrast, PV takes a mere 1% of the installed capacity, although this figure seems likely to grow in the years ahead thanks to increased reductions in PV costs and a gradual shift in the focus of renewable energy policy from hydropower to wind and solar power. So, once more PV installations are built and brought online, Brazil can certainly improve its renewable generation capacity.
Solar policies and outcomes in Brazil
The introduction of the Net Metering regulation 482/2012 in 2012 set the stage for the development of distributed generation in Brazil, allowing small-scale generators with generation up to 1 MW to participate in a net metering scheme. However, the Brazilin PV industry was just starting to take shape back then—and understandably, there was not much demand for PV projects.
Things have turned for the better since the Distributed Generation Development Program for Energy (ProGD) was launched at the end of 2015 to accelerate the adoption of distributed generation systems. Under ProGD, owners of distributed energy systems are offered tax credit, credit lines and project financing. The ubiquity of distributed systems also further increasing with the maximum capacity of a distributed project having been raised to 5 MW and the government actively attracting investment.
The advancement in PV technology these years has driven down the costs of distributed system in Brazil. This reduction, coupled with favorable policies, has boost Brazilian demand for distributed systems.
The Brazilian government also adopted auction mechanism to spur the development of domestic solar projects. The first auction round, issued in 2014, led to a breakthrough in the development of ground-mounted projects. Between 2014 and 2019, Brazil has procured around 4.4 GW of solar through seven auction rounds held. The 580 MW projects awarded in round 4 may come into operation this year.
The Brazilian PV industry thrives not only on public auctions but also private auctions hosted by power utility firms. Some of the remaining unselected projects have been translated into grid-parity projects, which probably amount to over 3 GW in total. Despite being unsubsidized, these projects are given access to the liberal electricity market. This means that grid-parity projects have started to grow and seems likely to flourish in Brazil.
In brief, the Brazilian PV market has been growing exponentially since it took form in 2012. Brazil accumulated 4.4 GW in installed capacity at the end of 2019, with 1.9 GW of which coming from distributed generation systems and 2.5 GW from ground-mounted plants.
Brazil-China trade: Module import and export
China shipped 4.4 GW of modules to Brazil in 2019, well below the actual volume of installed capacity. Most of these modules may have been used in projects from round 4 auction, unsubsidized projects, PPA projects, and distributed generation systems—the last of which are high in demand.
Brazil’s solar energy is expanding rapidly. A significant drop in solar costs and supportive regulatory framework have driven growth of distributed and ground-mounted systems. In addition, the solar tax exemption for distributed PV to be implemented this year is expected to see positive knock-on effects on the country’s distributed PV.
The Brazilian government issues auctions for the construction of ground-mounted projects every year, and these projects have all been completed within specified timeframes. At the same time, private auctions held by utility firms are growing in numbers. Clearly, there is consistently large demand from tendered projects in Brazil. It also deserves noting that grid-parity projects will play a part in the rapid growth of the Brazilian PV market.
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