As Latin America’s leader in solar energy deployments, Brazil is about to become one of the five biggest solar energy markets and can envisage a future in which photovoltaics will be the main power source in its electricity mix. This article gives an overview of the discussions between experts and authorities at Intersolar South America about public policy, the framework for distributed generation, green hydrogen, the social role of solar energy and other topics.
Solar energy continues to grow exponentially, and it is expected to reach 2 TW globally by late 2025. Latin America should add more than 30 GW yearly and, as the region’s leader to become one of the top five global markets, Brazil could top 54 GW by then. The country’s photovoltaic generation has already surpassed 18 GW in installed capacity, and it has generated nearly R$94 billion in new investments, more than R$25 billion in taxes and has created more than 540 thousand jobs in the last ten years, as reported by ABSOLAR, the Brazilian Association of Photovoltaic Solar Energy. A study by Greener –a research and consultancy firm specialising in solar energy– says the PV market expanded strongly in the first half of this year. The survey indicates that the large volume of equipment purchased by the sector during that time to meet the needs of distributed generation and large solar power plants will make it possible to attract investments in excess of R$35 billion, a much higher figure than the R$21 billion in the same period last year.
Intersolar South America 2022 was held last August in São Paulo and its success clearly testifies to the optimism felt in the solar market. There were more than 44,000 visitors to 400 exhibitors, with 2,300 conference delegates. The event organised by Solar Promotion International together with Freiburg Management und Marketing International GmbH and Aranda Eventos is the leading business and networking platform for the solar industry, where such topics as market prospects, regulatory aspects, new technologies and financing possibilities are discussed in depth. At the opening ceremony, Florian Wessendorf, Managing Director of Solar Promotion International, produced exciting data on the growth of solar energy, which has doubled globally in capacity in the last three years, with Latin America’s PV installations growing by 44% by adding 9.6 GW. “No other energy technology can be deployed as quickly as solar technology. People, businesses and governments around the world have been acknowledging the immense power of the sun to ensure their sovereignty in energy,” he said.
ABSOLAR’s Chairman Ronaldo Koloszuk vouched that solar energy’s installed capacity will overtake that of hydroelectric power in the next 20 years, by which time it will have become the main source of electricity in Brazil. Today, solar PV is third in the national electricity grid. “In 2021, Brazil’s solar PV energy had the fifth fastest growth in the world and is now the 13th biggest market globally,” he said. Koloszuk also remarked that the costs of centralised solar generation have become more and more competitive, which makes it an ideal source to be included in the government’s energy auctions. “The MWh in Itaipu’s power plant costs around R$363, as opposed to solar’s R$180.”
ABSOLAR’S Chairman also cited the benefits which distributed generation offers to society in general and to the electricity industry in particular. He argued that a conjectural absence of solar DG during the recent water crisis would have entailed a 46.8% increase in end consumer electricity bills. His opinion was based on a study by Volt Robotics commissioned by ABSOLAR, called “Guidelines for Estimating Costs and Benefits from Microgeneration and Distributed Minigeneration”, whose aim is to aid the National Energy Research Council (CNPE) identify the advantages of DG and estimate its costs so that the National Electric Energy Agency (ANEEL) can calculate the tariff model it is to use in the future.
The Mines and Energy Ministry (MME) and the Energy Research Company (EPE) have together authored the Ten-Year Energy Expansion Plan to 2031, which predicts that DG’s installed capacity should grow to more than 37 GW by 2031. According to Volt Robotics, this means that end consumers who do not generate their own electricity will see a reduction of 5.6% in their energy costs over the next decade. The expansion should bring in its wake a systemic benefit worth more than R$86 billion to society. The study factored in components such as tariff bands, cost of grid energy, system losses, overheads, and fuel.
Volt Robotics’ founding partner Donato da Silva Filho explained that the predicted system operation costs between 2022 and 2031 will be R$397 billion with GD and R$431 billion without it –a difference of R$34 billion. “This estimate is based on a conservative expectation of DG growth, so the actual benefits might be even greater,” he said, adding that possible severe droughts would increase DG’s contribution to R$189 billion. “Therefore, distributed generation is also good for people who do not generate their own electricity.” He pointed out that DG should help reduce the need for red tariff bands by 60% during the same period. “The centralized power plants, which are cheaper to deploy, will be completed first. So distributed generation renders it unnecessary for the more expensive power plants, which are paid by those who do not have DG, to stay connected for a longer time. This means that people who do not have DG may be benefited by cheaper costs because there is DG.”
Another gain revealed by the study pertains to reductions in the economic risks posed by fluctuations in fuel prices, to the amount of more than R$24 billion, representing 1.5% less in tariffs. Self-consumption should further contribute to decrease electricity losses in power lines and distribution grids, with savings of more R$8 billion in 10 years, or 0.5% less in electricity bills, according to the study.
The leadership of renewable sources in the energy expansion was another hot topic at the Intersolar Conference. In his presentation, ABSOLAR’s CEO Rodrigo Sauaia called attention to the fact that renewable sources were responsible for 80% of new power additions to the Brazilian energy mix last year. “We are walking in the right direction by amplifying renewable generation. This is not a chance development. Nations are concerned about global warming and its economic impact, and have begun to establish increasingly ambitious goals for energy transition and evolution.” Sauaia reckoned that at least 135 countries have already set their renewable energy generation goals. “Technical experts have proved that it is possible to achieve a 100% renewable energy grid. Also, economists have already shown the economic feasibility of this endeavour.”
Sauaia speculated that federal, state-wide and municipal policies might help Brazil reach the top 10 solar countries. “ABSOLAR’s projections indicate that we may reach nearly 25 GW by the end of this year, if conditions favour a market development,” he said. Among the major challenges to the development of solar energy, he stressed the role of the tax burden and cited actions taken by ABSOLAR to seek solutions that might benefit the market, such as the 2022 Compacts 87 and 94. “We are now pushing these Compacts in every Brazilian state to help them include them into their tax legislation.”
The state of Minas Gerais has been introducing public policy interventions to increase the share of solar PV in the grid. Last year, the state outpaced the solar generation target of 1.75 GW which had been set for 2022. In November 2021, solar PV generation in operation reached the 2.5 GW mark, R$9 billion in investments, and 60,000 jobs. According to Frederico Amaral e Silva, Director for Regional Potential Development at Minas Gerais Economic Development Office, those results demonstrate the policy’s assertiveness and its success in attracting investments. “In addition to being one of the pillars of the economy, the photovoltaic industry also generates employment and income. We have several projects in operation and others in the deployment phase.”
Last year, Minas Gerais’ PV capacity was increased by 1,506 MW with investments totalling R$ 3.77 billion. The state’s 3.5-year payback period on PV generation is the shortest in Brazil.
Sol de Minas is one of the leading programs created by the Minas Gerais government to spur the development of solar energy in the state. It aims to increase solar PV installed capacity and attract investment by simplifying environmental licensing procedures, among other measures. “Preliminary surveys are made simpler, not least because sustainable development and solar energy generation are mutually relevant and synergetic.” The program also contemplates tax incentives for both the acquisition of equipment and the energy generated.
Additionally, in a move to help grow the supply chain, Sol de Minas has teamed up with the Minas Gerais Research Support Fund to create lines of credit for research and development of solar PV innovations and products by small, medium and large companies.
Silva points out that solar energy is a essential ingredient if Minas Gerais is to honour the “Race to Zero” pledge its government signed in 2021. This is a UN-backed global campaign to reduce carbon emissions to zero by 2050. “We were the first Brazilian state to commit to decarbonising the economy, and solar energy is part and parcel in that. Minas Gerais has substantial solar irradiance levels. The north of the state is especially good for solar projects and we have been working to make this energy available to our main consumer markets. The state has been attracting investments that will spread the supply of this energy to the whole country.”
Transmission lines for PV energy supply – Recently, three lots of transmission lines to connect Minas Gerais to São Paulo and Espírito Santo were sold in an energy auction held by ANEEL, garnering investments of around R$12 billion. According to Silva, the companies with the winning bids have been approached by the state government to work together in accelerating the environmental licensing procedures so that the transmission lines are speedily deployed to be able to feed out to those states the renewable energy generated in Minas Gerais.
The need to pour money into transmission lines for renewable energy was also brought up by Paulo Guimarães, who heads the State of Bahia’s Economic Development Office. Speaking of the drought in the South and Southeast which led to an energy crisis, he maintained that other regions generated a considerable volume of energy that might have been exported to the Center South of Brazil, but that could not be fully transferred due to a bottleneck in the energy grid. “If we are to exploit this potential, we need to invest in infrastructure,” he warned.
For Guimarães, a major challenge is the government’s resistance to giving up tax revenues in order to upgrade the stimulus to renewable energies. “We need to join efforts to try and reduce the tax burden on PV products and the consumption of solar energy. The savings obtained from distributed generation can be redirected to other economic activities which can generate more jobs and eventually more tax revenue.”
The São Paulo government, in its turn, plans to build more than 80 PV power plants on state-owned land to partially supply electricity to some of the state’s public buildings. The project is to be developed through public-private partnerships (PPPs) and was announced by Fernando Chucre, the head of São Paulo’s Infrastructure and Environment Office (SIMA), at the opening of The smarter E South America Conference.
Chucre reported that the São Paulo government carried out a study on large disused state-owned areas for their potential to accommodate solar power plants. Parameters such as surface area, availability, solar irradiance levels and production capacity of each land parcel were analyzed. 85 sites were selected, 35 of which in the metropolitan region of the capital, and all are now under further analysis by a committee comprising seven state government agencies, including SIMA, the Economic Development Office and the Agriculture Office. “The committee is analysing each track of land individually and matching it to a planned capacity for approval, and then we will move forward from there,” said the official. All installations will be ground-mounted, and their capacities will vary according to assessments by government experts.
Still on the subject, the São Paulo government also plans to install solar panel roofs on at least 12,000 buildings belonging to the Health and Education departments in a project independently supervised by these bodies. A 2018–2020 study by the Inter-American Development Bank (IADB) identified more than 34,000 state-owned buildings amenable to rooftop solar installations. Chucre reported that the call for interested parties to supply the first 12,000 installations is due soon.
This whole lot of projects, however, cannot supply more than a part of the energy needed by state-owned buildings, whose total monthly electricity bill may run up to as much as R$150 million, said Chucre. That is why a third task for government experts is to design an adequate model for purchasing renewable energy on the Free Market. “The State of São Paulo is the biggest electricity consumer in Brazil. We depend on buying energy from all over the country to keep the state at work and we want to reduce this dependence.”
Countrywide, ABSOLAR argues for a 2026 target of 5 million solar roofs adding up to 25 GW of installed capacity, R$ 124.5 billion in investments, 750,000 jobs, and channelling R$37 billion in revenue to public coffers. The association estimates a potential 12 million roof systems installed in Brazil by 2030, which would mean a capacity of 60 GW in distributed generation alone, R$300 billion in investments, 1.8 million jobs, and R$90 billion in tax revenues.
The Legal Framework for Distributed Generation
Experts generally agree that Law 14,300, which details the new legal framework for distributed generation, has given the market a greater sense of security and provides a window of opportunity, since the current billing rule of full credit compensation is to remain unchanged until December 2045 for consumer-generators who file a request for connection permits until January 6, 2023. Consumer-generators who opt for distributed generation as of January 7, 2023, will be included in a transition rule and will be charged a percentage of the electricity distribution costs –a percentage which will gradually increase until 2028. From 2029 on, the credit compensation will be subject to ANEEL’s tariff rules for consumer systems with microgeneration or minigeneration.
Bárbara Rubim, vice-president of the Managing Board of ABSOLAR, reported that Law 14,300 will increase the economic viability of low voltage projects as it puts an end to double charging for network availability and improves flexibility for community solar. The new legal framework goes even further by opening up new opportunities, as it introduces alternative modes of partnership, not only as consortia and cooperatives, but also as civil condominiums, be they voluntary or binding. “Community solar has grown a lot since the introduction of subscription-based schemes, which is in effect a plant leasing model. The new legal framework makes it easier to deploy this model,” she said. A study carried out by Greener has found that subscription-based schemes are especially attractive to energy consumers in retail and services, who are keen to reduce overheads. Greener speculates that as this business model grows, at least 3.9 GW in new capacity will have to be made operational by 2024.
Rubim pointed to another change introduced by the new law: it is now possible for medium voltage consumers to request low voltage billing. Before, ANEEL’s understanding used to be that no consumer with minigeneration power plants could be billed as belonging to tariff Group B, which comprises consumers of less than 2.3 kV. As of now, consumers can make use of this option if they have a plant next to a load of up to 112.5 kW. “It is the consumer who needs to justify opting for Group B, not the plant. Therefore, it is not possible to have a plant that is a hundred percent remote,” she stressed.
She also highlighted the introduction of a faithful performance surety bond, which aims to protect the market as a whole. Projects of more than 500 kW must place in escrow a percentage of the project’s worth, although consortia and cooperatives are exempt. “These measures have been created to prevent developers who are not actually prepared to build power plants from occupying grid connection points which are needed by those who are in fact prepared to do it. An additional purpose is served as the new law will help curb trading on connection permits, and thus prevent prices from getting inflated.”
Green Hydrogen and Solar Power Plants
Another hot topic at the conference was the evolution of green hydrogen, a technology poised to spawn even more solar power plants. It is estimated that the demand for renewable power generation to supply GH2 projects should reach around 15 GW by 2030. Marília Rabassa, director of Clean Energy Latin America (CELA), reported that “several solar and wind companies have been in talks with potential investors about this new market with far-reaching possibilities for energy projects in the country.”
A report issued by Bloomberg Intelligence shows that Brazil has the potential to produce the cheapest hydrogen in the world through renewable sources, at a cost of US$1.7 to US$3 per kilogram, which is expected to fall to US$1 per kg by 2030. “In short, Brazil can rise to an enviable position in this new market,” said Rabassa.
She also reported that green hydrogen production can potentially reach between 400 and 800 million tons globally by 2050. “These projections mean that green hydrogen may eventually supply 12 to 22% of the world’s energy demand.” Regarding competitiveness, Rabassa said that the International Energy Agency calculates that 1 kg of green hydrogen with an energy content of 33.3 kWh costs between US$3.40 to US$5, while that of gray hydrogen averages to US$1.50. “The expectation is that the difference will have decreased by 2030 due to gains from scaling up production, reducing costs and better logistics, among other factors.”
According to Rabassa, there are already more than 20 MoUs signed between potential hydrogen investors and the state of Ceará, in addition to several other agreements for Rio de Janeiro’s Açu Superport, and in the state of Rio Grande do Norte. “Companies are interested in producing green hydrogen near ports due to facilitated logistics –potentially meeting demand from home and abroad– and easy access to competitive renewable energy.”
Luís Viga, Country Manager at Fortescue Metals Group, argued that hydrogen could offset Europe’s dependence on natural gas, effectively making Brazil an exporter of renewable energy. GH2 also makes it possible for Brazil to reduce imports of fertiliser. Viga states that fertiliser imports, mainly from Ukraine and Russia (which have cheap natural gas), currently account for 85% of all fertiliser used in the country.
In order to stimulate the Brazilian green hydrogen market and industry, the MME issued Resolution 06/2022 in early August, which created the National Hydrogen Program (PNH2). The program’s actions will work on three fundamental vectors for the development of the GH2: public policies, technology and market. In her presentation at the Intersolar Conference, Patrícia Naccache Martins da Costa, advisor to MME’s Executive Office declared that “the rationale behind the program –and also behind the policies already being developed– is to cover the full potential of the green hydrogen market. We’re considering not only what already is there, but also the great potential of this fuel for the decarbonisation of industries such as mining, metallurgy and transport, as well as the development of fuel cells as components of energy storage systems. The challenge is to expand and make the hydrogen economy viable.”
The PNH2 was designed by the MME in cooperation with other government bodies such as the Ministry of Science, Technology and Innovations (MCTI) and the Ministry of Regional Development, and with additional technical support by the EPE. The program’s directives are structured along six lines, namely, the strengthening of the scientific-technological basis; the training of human resources; the planning of the energy system; the legal, regulatory and standards framework; the growth and competitiveness of the market; and international cooperation. Those will be implemented with the help of discussion panels. “The idea is to allow people from a broad spectrum to participate in the panels so that the program is not designed solely by the government behind closed doors, but through talks between the public, private and academic sectors which will hopefully clarify the industry’s development needs,” said Costa.
The MME will supervise the program through a management committee together with other ministries. As explained by Costa, “The MME will supervise the energy planning and regulatory panels. The Ministry of Economy will supervise the market panel, and the MCTI will be in charge of the Science and Technology panel. The human resources panel will be led by the Ministry of Education and Culture.”
A plan spanning three years, to be updated annually, is expected to be presented by the end of this year (2022). Each panel must develop a timeline with actions and deadlines for the next three years. “The prospect is to have proposals approved by the panels in October and offered for public consultation in November.” The action plans are expected to be published in December and started in January 2023.