1. Financing the expansion of photovoltaic power generation in Brazil: challenges of using similar mechanisms for different renewable sources
ANDREÃO, G. O., PPGE-UFF,
HALLACK, M. C. M., PPGE-UFF,
VAZQUEZ, M., PPGE-UUF,

2. Brazil
Over 100 degrees in farenheit

3. Brazil

7. Utility-level Solar Photovoltaics (PV)

9. Renewables in Brazil
Major importance of the hydro source, but the thermal capacity is increasing
New renewables are being pushed forward
Objective: a responsible and sustainable expansion of the electric matrix
Utility-level wind and solar PV potentials are expected to be developed in the near future
Wind: 9,71 GW (2015)  24 GW (2024) (Δ= 247%)
Solar: 10 MW (2015)  7 GW (2024) (Δ= %)

11. Renewables in Brazil
Major importance of the hydro source, but the thermal capacity is increasing
New renewables are being pushed forward
Objective: a responsible and sustainable expansion of the electric matrix
Utility-level wind and solar PV potentials are expected to be developed in the near future
Wind: 9,71 GW (2015)  24 GW (2024) (Δ= 247%)
Solar: 10 MW (2015)  7 GW (2024) (Δ= %)

13. Renewables in Brazil
Major importance of the hydro source, but the thermal capacity is increasing
New renewables are being pushed forward
Objective: a responsible and sustainable expansion of the electric matrix
Utility-level wind and solar PV potentials are expected to be developed in the near future
Wind: 9,71 GW (2015)  24 GW (2024) (Δ= 247%)
Solar: 10 MW (2015)  7 GW (2024) (Δ= %)
TO KEEP IT CLEAN

14. Main drivers for renewable deployment
Two essential tools for a larger share of new renewables in Brazil
Auction mechanism (major player: ANEEL)
Public financing mechanism (major player: BNDES)

15. Auctions
Introduces ex-ante competition among the power plants (generation)
Winners have access to long-term PPAs
attenuates risk -> demand guarantee

16. Auctions (cont.) A-3 and A-5 auctions
Standard (all-sources)
Specific (incipient sources)
A-3 and A-5 auctions
A: first year of commercial operation
A-3/5: three or five years prior to that year
Leilão de energia reserva (LER) [more common]
Leilão de fontes alternativas (LFA)
These are meant to push forward still incipient sources (which would not be successful in a standard auction)

17. Auctions (cont.)
Solar PV was a winning source in three auctions (LER 08/2014, LER 08/2015, LER 09/2015)
2652,8 MW of contracted utility-level solar PV.
Four major winners:
Enel (22 plants and 620 MW)
Canadian Solar Inc (11 plants and 330 MW)
Lintran do Brasil (9 plants and 270 MW)
Solairedirect SAS (7 plants and 200 MW)

18. Lintran do Brasil Participações S.A.
Auctions
Plants
Potency
Investment numbers
In Nov R$ (IGP-M)
Companies
Units % MW
R$ 1.000,00
Enel 22
23,40%
619,98
23,64%
R$ ,82
Canadian Solar Inc 11
11,70%
329,97
12,58%
R$ ,51
Lintran do Brasil Participações S.A. 9
9,57%
269,97
10,29%
R$ ,48
Solairedirect SAS 7
7,45%
199,98
7,62%
R$ ,81
Other firms 45
47,88%
1203
45,87%
R$ ,45
TOTAL 94
100%
2623
R$ ,07

19. Main drivers for renewable deployment
Two essential mechanisms for a larger share of new renewables in Brazil
Auction mechanism (major player: ANEEL)
Public financing mechanism (major player: BNDES)

20. Main drivers for renewable deployment
Two essential mechanisms for a larger share of new renewables in Brazil
Auction mechanism (major player: ANEEL)
Public financing mechanism (major player: BNDES)

21. Solar PV investments enterprises evolution in Brazil
Out of the 110 PV power plants analyzed by ANEEL, only 9 were currently under construction (all belonging to ENEL) as of October 2016
Only 6 should enter into operation according to schedule

22. Main drivers for renewable deployment
Two essential mechanisms for a larger share of new renewables in Brazil
Auction mechanism (major player: ANEEL)
Public financing mechanism (major player: BNDES) ???

23. BNDES’ Public Financing
Brazil has one of the world’s highest interest rates!
This makes BNDES with its lower interest rates important to finance infrastructure projects
Financiamento a empreendimentos (Finem)
Objective, methodology and access criteria
To promote the national industry (internalize a value chain)
Progressive local content steps
Measurement:
Weight and parts (wind turbines)
Items and processes (PV panels)

24. BNDES’ Public Financing (cont.)
BNDES is specially important for the expansion of still incipient sources, as the new renewables:
Traditional sources (50%~60%)
Wind power generation (90%)
The current solar PV panels financing methodology was heavily inspired by BNDES’ institutional learning acquired from the successful financing of wind turbines.
However, there are currently no solar farms being financed by the bank

25. Technical-economical differences between PV and wind generation
The solar PV panel industrial chain is more concentrated than the wind turbines value chain
In solar PV, both ends of the chain have a high technological complexity
Solar PV:
More technologically challenging than wind turbines
No clear technological path defined
Therefore, to base the solar PV financing methodology on the prior wind case makes little sense

26. BNDES’ Public Financing (cont.)
The current solar PV panels financing methodology was heavily inspired by BNDES’ institutional learning acquired from the successful financing of wind turbines.
However, there are currently no solar farms being financed by the bank
Alleged cause: Local content requirements (too high)
Exchange rates and taxes hinders importation of panels
Therefore, this essential mechanism is not working properly

27. Main drivers for renewable deployment
Two essential mechanisms for a larger share of new renewables in Brazil
Auction mechanism (major player: ANEEL)
Public financing mechanism (major player: BNDES)???

28. Main drivers for renewable deployment
Two essential mechanisms for a larger share of new renewables in Brazil
Auction mechanism (major player: ANEEL)
Public financing mechanism (major player: BNDES)

29. Mechanisms & Objectives: (in)compatibility?
Solar Power Generation
Internalize Solar PV industrial Chain
Products
Services
Currently, BNDES unites two objectives through one single mechanism  however, none are achieved
Potencial improvements:

30. Mechanisms & Objectives: (in)compatibility? (cont.)
Solar Power Generation
Internalize Solar PV industrial Chain
Products
Services
Currently, BNDES unites two objectives through one single mechanism  however, none are achieved
Potencial improvements:

31. Mechanisms & Objectives: (in)compatibility? (cont.)
Potential improvement (1): to focus on solar PV power generation and to loosen up or ease the local content criteria
Objectives
Solar Power Generation
Internalize Solar PV industrial Chain
Products
Services

32. Mechanisms & Objectives: (in)compatibility? (cont.)
Potential improvement (2): A change of focus of the local content criteria – from products to services
Objectives
Solar Power Generation
Internalize Solar PV industrial Chain
Products
Services

33. Mechanisms & Objectives: (in)compatibility? (cont.)
Potential improvement (3): To create complementary policies focused on catching up and innovation
Objectives
Solar Power Generation
Internalize Solar PV industrial Chain
Products
Services
Innovation-related policies (e.g. R&D)

34. Conclusions
A change of objective would imply a change in the promotion mechanisms (BNDES financing mechanism)
The country has to decide what is its objective
If the status quo is kept the same, the slow construction of power plants will continue and the Brazilian solar expansion may be highly jeopardized.

35. Thank you! gustavo.93.andreao@gmail.com michellehallack@gmail.com