Brazil
Q&A

Why the solar sector will become a pillar of Brazil's economy

Bnamericas
Why the solar sector will become a pillar of Brazil's economy

Solar power is expected to become Brazil’s main energy source, providing investment and development opportunities, if flanked by adequate policies and incentives.

Rodrigo Sauaia, president of solar association Absolar, talks with BNamericas about what’s needed and where the sector is headed.

BNamericas: What are the sector’s expectations for 2023?

Sauaia: Our projections at Absolar indicate that we will see an expansion of 10.1GW in photovoltaic solar energy, which means that we will reach 34GW of operational installed power at the end of the year.

This advance represents a total investment of 50bn reais (US$9.4bn) and the creation of 300,000 jobs.

BNamericas: What explains this expansion?

Sauaia: Several important factors are happening.

In the last decade, we have observed a technological evolution in the solar energy sector and this has resulted in an increase in efficiency and a reduction in equipment costs. This represented a cost reduction for the final consumer. In the last decade, the price of solar energy has dropped 86%, and it has become a more affordable energy source.

This reality already happens in other countries. In countries that concentrate 60% of the world's population, we can already see that the cost of solar energy is cheaper than thermoelectric, coal and wind energy.

In addition, in recent years the electricity price has increased in Brazil, even above inflation, greatly influenced by the water crisis, which forced the country to activate thermoelectric plants, increasing the prices of the rate flags.

Another advantage of solar energy is that installation time is very short. It is possible to install a solar system on a roof in just one day. A large solar plant takes 18 months to install, which is much less time than it takes to build a thermoelectric or even nuclear power plant, not to mention that it requires a lot less maintenance.

BNamericas: Have the emission reduction goals of companies from various sectors also benefited solar energy projects?

Sauaia: The sustainability factor is important. The attention of society and investors to sustainability issues is increasing. Large companies have sustainability goals and need to generate energy from renewable sources.

BNamericas: How will the expiration of financial incentives for solar consumers on January 6 affect the sector?

Sauaia: For those who want to generate their own solar energy, the technology remains attractive and positive, even after January 6, when the new rules of the legal framework for the generation of renewable energy come into force.

This legal framework creates predictability and continuity for the sector, as it enables a smooth transition in relation to the costing of the electricity sector. We have to remember that this rate issue only affects consumers who share the surplus energy generated with the grid and not own consumption.

If we look at the payback time for the investment, we see that the advantages remain unchanged.

BNamericas: How can the new government contribute to sector expansion?

Sauaia: Certainly, to reach these projected numbers, we need good public policies, good government programs and good incentives to keep moving forward.

Currently, Brazil practices a contradiction, because public policies in the energy sector benefit more fossil fuel than renewable sources.

Given what we are seeing from the speeches of this new government, which said in its first days that it intends to prioritize the energy transition, we want these speeches to be transformed into practice. This is a point the government needs to look at carefully to accelerate the energy transition and turn Brazil into in international leader in this process.

In addition to the federal government, we need precise actions and programs by cities and states that encourage solar energy. Some states and municipalities have already done this, such as the Goiás Solar program, the Palmas Solar program and the Salvador Program, but these actions are still isolated, we need broader development in relation to renewable energies by local governments.

BNamericas: Are other public policies necessary for the sector?

Sauaia: We need to work on access to financing. It is necessary to establish public policies offering financing for the final consumer.

We also have an opportunity regarding the equipment used in solar energy projects. We have the opportunity to strengthen the industry of local suppliers, but we need to develop a national policy and laws aimed at this industrialization.

Now we have around 30 companies in Brazil that manufacture equipment and components for the solar sector, but still, most of the equipment used in the projects is imported.

BNamericas: How have high interest rates affected the sector?

Sauaia: The high interest rate scenario was and remains a challenge in 2023. In view of this, development banks such as BNDES, Banco do Nordeste and Banco da Amazônia will be extremely important and inducers of development.

We need to increase the volume of financing through these banks for projects in the sector, because then we will attract more investments and generate more jobs and income for various regions of the country.

BNDES, specifically, can also be a development inducer for local industrial policy.

BNamericas: Will solar energy surpass hydroelectric energy in the Brazilian electricity matrix?

Sauaia: Market analysts have said that this will happen around 2040. I think it is just a matter of time. It will happen.

Today, 109GW [of electric energy] are generated by hydroelectric plants and our projections for this year point to 34GW of solar energy. We will be at a third of [the volume of] hydroelectric energy, which for decades benefited from an exclusive public investment policy.

BNamericas: Where are the main long-term expansion frontiers?

Sauaia: The good news is that there is a lot of potential for expansion in all segments.

Brazil has 92mn electricity consuming units, which are residences, businesses and industries. Of this total, only 2mn are consumers of solar energy, whether consumers with their own generation or who use energy from some consortium. So we have 90mn energy consumption units to explore.

I see green hydrogen as an expansion frontier. We have a task force here at Absolar to assess the potential of this market and I see the possibility that the cost of producing green hydrogen in Brazil will be the lowest in the world by 2030, thanks to the support of solar and wind energy projects.

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