Shining bright

Brazil’s solar industry booms with further growth to come.

Brazil is experiencing a broad-based boom in solar power generation and international investors are taking note. “The growth is coming from both residential installations and large photovoltaic plants in the free energy market,” explained a project finance executive at a Chinese solar company in Brazil.

The country reached 17GW in large solar farms and small self-generation projects after multiple significant new investments. Consumer installations are also growing rapidly but this is just scratching the surface of the opportunity: total consumer installations are at 1.4 million units from an estimated market size of 90 million units.

Since February 2022, the country’s installed solar capacity has increased 1GW per month, becoming the third main source of electricity in Brazil, behind hydroelectric and wind power, according to the Brazilian Association of Photovoltaic Solar Energy (“Absolar”).

Demand is driving this increase in solar generation, a Brazilian energy markets consultant confirmed, “Demand is coming from agribusiness, large industrial companies and where other alternatives are limited. It is also becoming popular with individual clients, like families.”

“Demand is coming from agribusiness, large industrial companies and where other alternatives are limited. It is also becoming popular with individual clients, like families.”

Energy markets consultant, Brazil

In relation to the free market, there is a lot of growth potential with the demand from agribusiness and large industrial companies. It also has the potential to expand to individual clients, like family households and facilities where other distribution alternatives are limited.

There are also other business development opportunities surrounding photovoltaic plants, particularly in the maintenance, management of operations and logistics areas. Investors are benefitting from an increase in electricity prices which has led to profits of 15% to 20% on the installation of solar panels.

Despite the positive development of the sector, which attracted BRL 86.2 billion of investment, investors continue to face several challenges. These include a strong US dollar which increases the cost of imported equipment, logistic chain disruptions caused by the pandemic and war in Ukraine; as well as the initial installation costs for clients.

Last January, after two years of congressional debate, the Senate approved a new regulatory framework for self-generation which prolonged existing subsidies for the sector. The new regulation is expected to expand investment which Absolar estimates could result in another 6.2GW with BRL 40.6 billion of investment by the end of 2022.

The project finance executive was encouraged by the new regulatory framework, “One of the main points of the new regulatory framework is the definition of solar power as an infrastructure project of electric generation. This will allow projects to apply for incentive credit project, such as the Investment Fund in Participation in Infrastructure (FIP-IE) and the Special Incentive Regime for Infrastructure Development (REIDI).”

“One of the main points of the new regulatory framework is the definition of solar power as an infrastructure project of electric generation.”

Project finance executive, Brazil

With rising electricity costs and the decreasing cost of photovoltaic equipment, the future for solar in Brazil looks attractive with further upside from the growing shift towards electric mobility solutions. Despite these favourable dynamics, the project finance executive urged some caution, “Brazil’s energy markets are still developing and specialised financing is still hard to find but progress has been made in recent years.”

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