Despite Pandemic, Solar Energy Grows 70% in Brazil, Attracting Major Companies

RIO DE JANEIRO, BRAZIL – Few sectors can boast of growth in Brazil in 2020, amid a global pandemic and projections of a record downturn in the economy, yet the solar industry has not only broken records but will start 2021 with even higher expectations.

Solar generation facilities in Brazil soared by 70% in the year to 7.5 gigawatts (GW), almost half the capacity of the Itaipú hydroelectric plant. The performance did not go unnoticed among investors and led large global and local electric companies to increase investment in the technology in the largest Latin American country.

Companies such as China’s CGN, Norway’s Statkraft, and VRTM, a joint venture between Canada’s CPPIB and Votorantim Energia, said recently that their next projects in Brazil should involve photovoltaic plants.

Canada’s Brookfield, an infrastructure company, debuted in the country with the acquisition of an assembly plant to be completed by 2023, while France’s Engie and Portugal’s EDP have widened their focus on the technology, which has entered the sights of even oil companies like Shell for 2021.

“Solar energy has gained momentum, it is changing level and scope. This source is now becoming more interesting for this investor profile, which is bigger, and which formerly focused more on other renewable energies, more specifically wind energy,” said Camila Ramos, director of the Clean Energy Latin America (CELA) consulting firm.

Although expansion of solar energy in 2020 was still 1 GW below the initial projections, with impacts of the coronavirus crisis, the final result breeds optimism and shows a V-shaped recovery, said Rodrigo Sauaia, the president of the Brazilian Association of Photovoltaic Solar Energy (ABSOLAR).

He further emphasized that the year marked a turning point, with distributed generation projects – which involve solar panels on rooftops or land to directly meet the demand of people or companies – beating large plants in terms of capacity. But he refrained from making projections for 2021, saying that studies are still being conducted.

The construction of these smaller assets, known by the acronym GD, has attracted thousands of small companies, but also large groups such as the state-owned mining company CEMIG and EDP Brasil, for instance, which recently delivered installations in Taubaté (SP) that will meet the demand of TIM telecom group.

“We noticed the coming of a third wave, of ‘conservative’ companies, the big transatlantic corporations. They are coming strong for solar energy in Brazil. We also see large corporate clients starting to buy solar energy,” said Sauaia, referring to cost reduction with technological gains.

One of the niches that expanded interest, particularly in distributed generation, is the agricultural sector, he added. “Rural producers also share this more conservative profile, because they already cope with the climate risks. We are beginning to see that solar energy is becoming a very strong agribusiness partner.”

GIANTS WATCHING

EDP Brasil, from the Portuguese company EDP, which has energy distributors, hydroelectric plants, and power transmission lines, has recently begun to build photovoltaic plants and DRM installations to meet the demand of companies such as Banco do Brasil and Globo Group. It has already installed 28 MW and has 30.8 MW under development.

“In terms of size, they are not our largest business… but EDP Brasil’s main growth avenue lies in solar generation,” said the company’s Vice President of Strategy and New Business, Carlos Andrade.

At Engie Brasil Energia, of the French Engie, CEO Eduardo Sattamini said in a recent conference with investors that the company intends to expand its operations in the industry. “In the generation aspect, if we think about it, we already have a very robust wind farm, we would like to grow in solar.”

CEMIG has founded a GD branch, CEMIG SIM, while also developing its own solar projects portfolio with 1.75 GW capacity, in order to leverage the great potential of its headquarters in Minas Gerais for photovoltaic generation.

In addition to the investment of companies in new projects, the sector records strong movement in mergers and acquisitions, and several ongoing negotiations that may result in operations to be announced in 2021, according to CELA’s Camila Ramos.

She stressed that regulatory issues also help this increased appetite for solar assets among investors, and even companies with high demand for electricity, after the government announced that as of 2021 spot prices in the electricity market will be calculated on an hourly basis rather than weekly as today.

According to experts, this should favor pricing of solar output, delivered to the system during the day, when demand peaks are recorded.

It also favors broad capital availability for investments, amid great interest from both the private market and development banks like BNDES (National Bank for Economic and Social Development) and BNB for loans for renewable energy projects, which was not disrupted during the pandemic, according to analysts.

The International Energy Agency (IEA) in October projected that solar generation should establish itself as the “electricity queen” in the next decade, with an average global expansion of 12% per year, amid the search by several countries to reduce carbon emissions.

Source: Reuters