The emerging solar market of Brazil

Brazil has one of the highest solar insolation levels in the world and is becoming one of the fastest growing solar energy markets with a capacity to supply energy to the neighboring countries. The coordinates of Brazil are 14.2° south and 15.92° west, receives an annual mean solar insolation of around 5.7 KWhr/m²/day which is quite higher than the average solar insolation of most of the European and the American countries.

The North East and the North West region of the country receives a good amount of the solar radiations. Although the Northern region is nearer to the equator but it receives lower solar insolation than the Southern region, because of the fact that it is adjoined to the Amazon region, which is covered with wide and strong clouds which cause heavy rainfall during the summer season, thereby reducing the solar intensity falling on the surface. The variation in the radiation intensity in summer and the winters is not much, please look at the solar radiation values in the 12 months of the year in the following chart:

(Chart & Data source: NREL)

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Month	Solar Radiation (kWh / m2 / day )
January	5.34
February	5.67
March	5.59
April	5.71
May	5.43
June	5.85
July	6
August	6.24
September	6.33
October	5.86
November	5.08
December	4.88
Annual	5.67

The central region of Brazil receives higher solar radiations during the dry seasons of July, August and September marked with low relative humidity with clear days.

North Region	North East Region	Central West Region	South east region	South region
Acre	Maranhao	Mato Grosso	Minas girais	Parana
Amazonas	Ceara	Mato Grosso Du sul	Espirito santo	Santa Catarina
Rondonia	Rio grade do norto	Federal district	Rio de janerio	Rio Grande do sul
Rotaima	Pariba	Goias	Sao Paulo
Para	Pernambuco
Amapa	Sirgepie
Tocantins	Bahia
	Piaui'
	Alagoas

(1) Economic parameters of Brazil (2015 estimated)

Brazil is the largest economy in Latin America, the member of the BRIC countries and the 7th largest economy GDP wise ahead of India, Italy, and Australia.

• Capital: Brasilia
• Official Language: Portuguese
• Currency: Brazilian Real (R$)
• Population: 204 million
• Area: 8.5 million Km2 (5th largest country in the world)
• GDP (PPP): 3.3 trillion USD
• GDP growth rate: -3.8%
• GDP per capita (PPP): 16,096 USD
• Unemployment rate: 6.8%
• Economic growth rate: 6%
• Inflation rate: 5%

(2) Energy sector in Brazil

Brazil is a country having higher proportion of electricity generation using clean energy and it has one of the healthiest clean energy matrices in the world. The main sources of the Brazilian electricity production are the Hydro-electric power, Ethanol, Biomass and wind energy.  The main reasons that made Brazil to think of the alternative energy options are as following:

• The recent droughts in the country affected the hydro-electricity production
• Unable to meet the rising electricity demand of the country
• Fluctuation in the natural gas prices
• Volatility in the electricity prices

All the above factors have contributed for searching the alternative and reliable energy option and therefore, it started making efforts to further diversify its energy portfolio by trying its hand in solar electricity. Still today, the main source of electricity production from renewable energy is the hydro-electric power and the ethanol. The solar energy contributes very less of the total electricity consumption by the country.

(3) Solar energy production

The main motivation, in addition to the good amount of the solar radiations, behind using the solar energy is the need of diversification of the energy resources apart from the traditional resources. There are around 200 solar companies in Brazil and around 80% of them are micro and small enterprises and are mostly concentrated in the south and the southeast region of the country.
Around 1 million systems are installed in Brazil, which are powering commercial and the residential sectors. The country does not manufacture solar cells but it imports them from the other countries. The various customs and duties along with the transportation cost add up the overall cost of the solar power system. The solar PV market is underdeveloped in Brazil. However, the Brazilian government has set a target of 8.7 GW of solar PV installations by 2024 under its 10-year energy plan. It plans to meet 13% of the total demand of electricity through solar power by 2050.

(4) Solar power auction in Brazil

The solar auction follows the Reverse price bidding process.  The government of Brazil sets the ceiling price and the power producing companies bid for the lower prices at which they are willing to sell the solar electricity to the power distribution companies, which are further distributed to the retail customers. The average contract duration is of 20 years with at least 5 MW of production.
The energy auction winning projects are as follows:

(5)  Incentives for the solar for the suppliers and the installers

The net metering facility allows the small scale solar power generators (<=5MW) to offset their grid electricity bills with the units of the solar electricity they provide to the electricity distribution companies. The several small solar generators can combine and avail the benefits as the single customer. Moreover, the solar credits can last up to 60 months.

(6)Feasibility of residential solar PV system in Brazil

The feasibility of the solar PV system depends on the intensity of solar radiations in that location. However, in addition to that, the costing of the system plays a crucial role in deciding the feasibility of the solar power system. Let us calculate feasibility of 1 kw solar PV system in Brazil

• Average Solar insolation: 5.7 KWHr/m²/day
• Average energy produced by 1 KW solar PV system in a month: 150 units or 150 KWhr/month
• Average Grid electricity rate in Brazil: R$ 52 ct/KWhr
• Monthly savings: 150 KWhr x R$ 52 ct/KWhr = R$ 78 per month or $ 22.62 per month
• Yearly savings = R$ 78 x 12 = R$ 936 per year

(R$ = Brazilian Real and $ = US Dollar)

• Average cost of 1 KW residential solar roof in Brazil is R$ 8,000 or $ 2,304.28
• Payback period: R$ 8,000/R$ 936 = 8.55 years (It is the expected time period in which your invested amount will be recovered)

How to build your own solar and wind power?

(7) SWOT analysis

Strength:

• Favorable natural conditions: Brazil being nearer to the equator receives an average of 5.7 KWHr/m²/day of the solar radiations making it one of the favorable destinations for the solar PV installations in the world.
• Strong demand: Brazil is the developing economy with ever increasing demand for the energy to harness its economic growth. The existing Hydroelectric power plants are unable to meet the rising energy demand. Moreover, they have become old and also a costly affair either to renovate them or to construct a new hydroelectric power plant and it requires a good amount of time to construct the new one. All these factors support the growth of the solar energy in the Brazil.

Weakness:

• High cost of transmission: The Hydroelectric power plants are located in the remote locations of the country and from there, the electricity is supplied to the different locations through transmission wires. The long distance between the hydroelectric plant and the destination point is the main reason for high cost of wires & towers and the transmission losses in the wires.
• Low levels of awareness: Most of the people are less aware of the use, feasibility and the benefits of the solar energy. Therefore, they are quite reluctant to adopt it as the alternative or the new source of energy.
• Dependence on the Hydropower: Brazil fulfills most of its electricity demand through Hydroelectricity generation. Or you can say that the country is majorly dependent on one source of power for last so many years. Therefore, shifting to another source of energy has become quite tough for the country as it has become use to the hydroelectricity.

Opportunities:

• Broad development of Renewable energy resources: As Brazil has one of the most healthy renewable energy matrices in the world, it  is easy for it to adopt solar as another renewable source of energy.
• International Partnership:The government of Brazil is working towards international collaboration to promote and invest in the renewable energy, opening doors for the growth of solar energy in the country.
• High cost of transmission is an opportunity in disguise for the solar energy  in Brazil
• Mini/Micro solar generators: There are more than 200 small solar power suppliers in the market, who with the support of the government can facilitate the growth of the solar sector in the country.

Threats:

• Political instability
• Increasing prices of electricity
• High Taxation
• Increasing demand

The Barriers

• Lack of financing policies: At present, the Brazilian Development Bank offers loan facility below market rate for the larger projects. The residential homeowners who want to install a small solar system at their rooftop should have enough bank balance to buy the solar PV system. Government’s initiative in promoting the residential solar power by offering attractive credit lines to them can definitive boost the growth of solar power in the residential sector.
• Custom duty on imports: The solar PV market is in the nascent stage and Brazil imports almost all the solar PV equipment from overseas. The solar panels and inverter is imposed a duty of 12% and 14% respectively. Thus, making solar PV costlier in comparison to the cost in other countries.
• Lack of expertise: As solar power is in the nascent stage, the solar PV industry is quite new in Brazil. Therefore, there is a scarcity of skilled workforce in the country, which can manage the solar system from assembling & installation to the execution of the project. The professional certificate program from the government can enhance the expertise in this field.

Conclusion

Although, the solar energy sector is in the beginning stage in Brazil but it has enough potential to compete with leaders of the solar energy and has the ability reach the top position. There can be a great investing opportunity for the foreign investors, provided they have enough knowledge of its Government policies, legislation, and the Portuguese language. The solar power can be helpful to meet the peak demand of electricity in summers. Moreover, the solar electricity can be installed very much near to the demand site of electricity, thus reducing the transmission losses which otherwise are very much in a case of Hydro-electric transmission. The country is hosting 2016 Olympics in Rio de Janeiro from August 5 to August 21 can be a good opportunity for Brazil to showcase its solar energy potential and can attract foreign investments in this sector.

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