Interview: Solar is paving its own road in Brazil, regardless of politics and economy

pv magazine: Mr. Sauaia, is the current political uncertainty, and the upcoming election, affecting the Brazilian solar market?

Rodrigo Sauaia: They are not. The solar sector is moving forward regardless of the political and economical environment in Brazil. We see that the PV sector is paving its own road in Brazil. This does not mean that political support is irrelevant, as it is still actually very important for the growth of the market. But what we see today is that the basic drivers are getting aligned. So, we have a competitive technology that is available to the population, as well as a business sector capable of innovation, and more consumers wanting the technology. As a result, the market keeps growing fast, although it starts now to be a sizeable market. However, once you start to get bigger, it becomes difficult to keep growing.

What are ABSOLAR expectations for this year?

We started 2018 having reached the historical mark of 1 GW of installed PV capacity, and we expect to reach 2 GW by the end of this year. Furthermore, we have already 3.7 GW of solar contracted by the government in auctions, while distributed generation (DG), which is growing fast, is currently surpassing our initial forecasts.

The market is responding well and the interest from people, despite some political uncertainties, is strong and keeps moving forward. On the other hand, it is also important to say that ABSolar has been doing strategic work to engage and motivate political leadership from all parties, to include photovoltaics in their programs.

It appears that all candidates in the current presidential elections are ok with solar.

Yes, more than ok, I would say. Public and popular support for solar is currently very strong in Brazil. Politicians are now understanding this, and including PV in their plans.

Are there still hidden enemies of solar in Brazil?

There is always resistance. We see that some traditional segments of the energy sector sometimes try to resist the advance of solar energy, and perceive it as a threat. But they are seeing that solar is also becoming an opportunity for well-established conventional sources. They can now migrate to solar and create their own PV plant portfolios. It is also an opportunity for distribution companies that start to include new services and business opportunities using solar. It is never a won battle, however, and we should never let our guard down.

Petrobras and AES have made their first investments in solar, while Cemig is now holding its first wind-solar auctions.

We see not only traditional oil and gas companies and hydroelectric power providers moving to solar, but also distribution companies, as I said before. The solar market is open to all players of the energy sector, and there’s room for everyone.

Brazil’s energy regulator, Aneel, has a new head, André Pepitone, who is reportedly against subsidies for solar and renewables.

Solar is still a minor source of energy in Brazil, and its share on the incentives for energy is very limited. There are other incentives for electricity that are much more relevant and that represent a higher share of what consumers have to pay. There are costs related to subsidies, which are related to the subsidies granted to low income populations, rural producers, people using irrigation for agriculture. But there are also subsidies for fossil fuels, and their amount is much higher than that paid by the consumers for renewable energy incentives. There are also specific subsidies for mineral coal.

During the opening of our conference here in Sao Paulo, we recommended that Aneel and the Ministry of Mines and Energy (MME) should clearly show the composition of these subsidies in electricity bills, and to show how much of this is given to each electricity source. In doing so, solar will emerge as one of the less supported sources of power in Brazil.

Is there any good news about the inclusion of solar in future auctions?

We are now in a political transition, so we still don’t have a clear idea yet what will happen with auctions in 2019. We hope that the new government will provide this information as soon as possible after its establishment.

We need long-term signals not only for solar energy but for the entire electricity sector. We are recommending that the government contracts at least 2 GW of solar in auctions per year, and that solar is included in all of the electricity auctions, as it has all the fundamentals to participate to all of them, while bringing competitive, cheap and clean electricity. There is no reason why PV should be excluded from A-6 auctions. It makes no sense to only leave solar out – there is no economical and technical justification for this.

What about the private PPAs segment? In an interview with pv magazine last year, you said they were still unviable. What's your position now?

We see now that things are chaging, and in a positive way. There is big movement now with large-scale projects being evaluated or developed to participate on the PPA market in Brazil. There are currently nine solar initiatives of this kind. We are talking of PPAs with a lifespan of 10 to 20 years.

Could private PPAs represent an alternative to auctions for large-scale solar?

We still cannot evaluate if these PPAs will be an exception or the rule, but it is very interesting this is happening. They can have importance in spurring further growth, although I exclude that PPAs could be as consistent and predictable as auctions. But in the short and mid-term, they may offer a significant contribution to the Brazilian PV market.

As for distributed generation, which is now seeing impressive growth, could it be affected by regulatory changes?

The regulatory framework has shown that the current net metering rules are working well, and this one of the reasons why ABSolar is recommending that the government maintains them. On top of this, all Brazilian states have now decided to exempt distributed generation up to 1 MW from the payment of the ICMS, the Brazilian state sales tax. But this incentive has limitations and needs to be improved.

We are proposing now the structuring of a new scheme for it, in order to enable state governments to improve this exemption, regardless of what other Brazilian states do. New rules on this exemption may also resolve current uncertainties surrounding the incentive, as the rules that are in force now may be misinterpreted.