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Brazil's solar energy scenario has changed significantly in the last decade even in the midst of the pandemic and continues to attract large companies.
With a solid history of renewable energy development, Brazil is currently one of the fastest growing solar energy markets in the world even amid the pandemic, attracting the interest of several foreign investors, multilateral development banks, energy companies and equipment manufacturers. Furthermore, the size of the Brazilian market positions the country not only as a leader in the Latin American region, but also as a potential supply hub for neighboring countries.
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What led Brazil to invest in solar energy amid the pandemic?
After a severe drought in 2001 that reduced the flow of water to the country's hydroelectric dams, caused regular power shortages and led to unprecedented electricity rationing across the country, the government began to aggressively support biomass and wind as alternatives to the country's strong historical dependence on hydroelectric plants, with the creation of a federal incentive program and a robust bidding system for public tenders.
Furthermore, hydropower growth is increasingly blocked by environmental and social issues not just the pandemic, and in recent years developers and investors are being forced to overcome many project development hurdles as well as public and administrative challenges. to allow emission.
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Since the first wind-only auction held in December 2009, Brazil has added approximately 7 GW of installed solar and wind power capacity. Through similar supportive policy and regulatory regimes, the government has demonstrated its intent to replicate the same rapid growth in solar power generation by committing to contract one to two GW of utility scale solar energy per year at auctions. managed by the government.
Promulgation by the Brazilian Federal Energy Regulatory Agency (ANEEL)
Equally important for Brazil's strategy was the recent enactment by the Brazilian Federal Energy Regulatory Agency (ANEEL) of new rules aimed at reducing barriers to the incorporation of distributed solar power generation into the country's grid supply system, and allowing small-scale solar power systems to receive credits for electricity produced on site and sent back to the grid.
Notably, the installation of new solar and wind energy capacity amidst the pandemic is of strategic importance for Brazil, not only to guard against periods of low rainfall, but also for economic purposes, in order to hedge against volatility. in electricity prices and fluctuating natural gas prices (i.e. prolonged droughts like the most recent one in 2014/2015 forced Brazil to significantly increase the amount of natural gas it imports to bring thermoelectric plants in order to support consumption increasing amount of electricity).
Solar energy auctions in the pandemic grew
In Brazil's “reverse” energy auction mechanism, the government sets a price cap per megawatt-hour (MWh) and companies lower the price at which they are willing to sell energy to the market.
Power producers offering the lowest prices sign 20-year power purchase agreements with distribution companies, which are statutorily required to purchase power through auctions.
Three solar energy auctions have been held so far, of which two (in October 2014 and August 2015) were exclusively solar energy auctions and in the most recent auction (in November 2015) wind energy was included in the auction. The auctions secured around R$12 billion ($3 billion) in investments for the next three years and attracted several national and international players to the market, with the following results:
- October 2014 Auction (solar only): awarded over 1 GW – 31 projects that will start supplying energy on October 1, 2017 – at an average price of R$220/MWh ($55/MWh).
- August 2015 auction (solar only): More than 830 MW awarded – 30 projects that will start supplying energy on August 1, 2017 – at an average price of R$301/MWh ($75/MWh).
- November 2015 Auction (solar and wind): award of over 920 GW – 33 solar energy projects with energy supply starting on November 1, 2018 – at an average price of BRL 297 / MWh (BRL 74 / MWh ).
