Brazilian state signs contract for 50 MW of solar PV


On Tuesday, the Brazilian state of Pernambuco signed the second power purchase agreement (PPA) with developers for 50 MW of solar PV from projects approved under a 2013 auction. Developers Kroma Energia and Cone were each granted approvals under the 2013 auction, and the US$57 million project represents a collaboration between the two companies.

GTM Research notes that while the government of Pernambuco facilitated these auctions, that final details of contracts were negotiated between the developers and off-takers. He says this is part of the reason that PPAs for projects awarded in 2013 are being signed a year and a half later.

"Delays can be attributed both to a lack of commercial clients interested in power purchase agreements at the bid prices, and to project development issues – particularly taxes on capex, forex risk, and financing," notes GTM Research Senior Solar Analyst Adam James.

"At this point, the pricing of the solar contracts is more attractive due to increased electricity pricing on the wholesale power markets, so commercial clients are coming around."

James says that utility-scale solar projects in the nation face a number of development risks. "Foreign exchange risk is prominent, notably for the Real against U.S. Dollar," explains James. "With power purchase agreements signed in Real, developers are highly exposed to currency fluctuations."

And while high taxes in Brazil are also an issue, the project will be spared at least one tax. As of last Friday, Pernambuco is giving wind and solar projects an exemption from the Tax on the Circulation of Goods and Services (ICMS).

Kroma Energia and Cone plan to utilize up to 60% local content in the project, with components produced in the state of Pernambuco. The plant will be built in the city of Flores, and the companies expect an output of 80 gigawatt-hours (GWh) annually.

Pernambuco held Brazil's first auction for solar energy systems at the end of 2013. Six projects were approved, and the first PPA from that auction was signed with Enel Green Power, which began construction on its 11 MW project in February.

For the other projects, a PPA is only one step. "Signed PPAs don't mean the projects will get built," clarifies James, noting that these projects – including the Kroma Energia/Cone project – still have financing to secure.

Update: This article was modified at 13:00 EST on August 19 to include commentary by GTM Research.

Popular content

This content is protected by copyright and may not be reused. If you want to cooperate with us and would like to reuse some of our content, please contact:


Related content

Elsewhere on pv magazine...

Leave a Reply

Please be mindful of our community standards.

Your email address will not be published. Required fields are marked *

By submitting this form you agree to pv magazine using your data for the purposes of publishing your comment.

Your personal data will only be disclosed or otherwise transmitted to third parties for the purposes of spam filtering or if this is necessary for technical maintenance of the website. Any other transfer to third parties will not take place unless this is justified on the basis of applicable data protection regulations or if pv magazine is legally obliged to do so.

You may revoke this consent at any time with effect for the future, in which case your personal data will be deleted immediately. Otherwise, your data will be deleted if pv magazine has processed your request or the purpose of data storage is fulfilled.

Further information on data privacy can be found in our Data Protection Policy.