Intersolar South America examines challenges, promise of Brazil's solar market

In an immense conference hall in a northern suburb of São Paulo the 2014 Intersolar South America trade show began on August 26th. Within this cavernous building, the relatively small trade show shared floor space with at least two other industry events, and it was hard to see the line where Intersolar ended and an electrical equipment trade show began.

Despite its name, Intersolar South America 2014 was very much focused on the nation in which it is hosted. Brazil took center stage, with less attention on Chile and only tangential mentions of Uruguay or other markets. And the Brazilian market has had plenty of good news recently, including the announcement of a solar-only auction as part of the nation’s reserve auction in October and the publication of rules under which national development bank BNDES will provide loans to PV projects.

However, even with these significant developments, the circumstances of the show spoke to the position that solar occupies in Brazil. Solar and other renewable energy development is competing for space with other national priorities, including the ever-present drive for economic development.

Jürgen Beigel of the German Federal Enterprise for International Cooperation (GIZ) estimates that the nation needs to add 60 GW of new electricity capacity by 2020, due to Brazil’s growing population and economy.

Another consideration is water. Brazil is highly dependent upon cheap hydroelectricity, and two years of drought have reduced generation from this sector, causing greater reliance on expensive fossil fuels. Wind and solar can help address this problem as well, however renewable energy is still treated as a means to an end rather than an end in itself.

Conference sessions were cautious, and addressed very real market barriers. Chiefly, the nation’s distributed generation sector is hamstrung by taxes on the output of net metered systems, which have caused this market segment to be stillborn. For utility-scale systems, an extremely difficult financing environment and high taxes on imported PV products coupled with a lack of domestic manufacturing present major challenges.

Despite this, there is reason to be excited. Last week S4 Solar do Brasil announced plans to build a PV module assembly facility in the state of Goiás with an annual production capacity of 100 MW, which will triple the nation’s entire module production capacity. This can be seen as a direct result of BNDES rules, which stipulate that solar projects which it funds through 2016 feature locally-assembled PV modules.

Bloomberg New Energy Finance Latin America Research Analyst Lilian Alves says that access to such financing will be a make-or-break issue for solar projects. When asked by PV Magazine if large utility-scale solar projects can be built under the October auction without BNDES funding, Alves replied: “I think it would be very hard. The math doesn’t add up.”

Perhaps this combination of promise and real challenges was best summed up by Jürgen Beigel of GIZ. "Whoever wants to do business here in Brazil, it might be better to prepare for a marathon rather than a short sprint.”