Solar energy is on the rise in Brazil and Chinese companies in the industry have quickly identified the South American giant as a key market for overseas expansion.
It’s the fifth largest country in the world in terms of land mass. Brazil, the biggest country in South America, occupies a land area of more than 8.5 million square kilometres – and that’s a huge amount of space for the sun to relentlessly shine on during the nation’s hot summers and at other times of the year. With this space and sunshine comes the potential for countless solar energy plants – and Chinese companies in the renewable energy sphere have begun to clearly identify Brazil as a key market for overseas expansion.
Chinese companies operating at all levels of the solar photovoltaic (PV) sector have been pinpointing Brazil for a range of projects. JinkoSolar, the world’s largest solar panel manufacturer based in Shanghai, and BYD (Build Your Dreams), the Shenzhen-based world’s largest maker of electric vehicles which also manufactures solar panels, are rapidly increasing their solar module manufacturing capacity in the colourful South American country. On top of this, BYD has joined China General Nuclear Power Group – or CGN – as solar farm operators in the Portuguese-speaking nation. On the Brazilian side, an array of state organisations and regulators have swung their support behind the renewable energy boom that could revolutionise power production in the country.
China’s JinkoSolar Holding Company, which has operated in Brazil since 2012, announced in January that it could sell one gigawatt – or GW – of solar panels in Brazil in 2020, ramping up sales quickly over the course of the year, with just 100 megawatts – or MW – in the first quarter. Its 400W units are being distributed in Brazil by Aldo Solar. This compares with JinkoSolar’s expected global sales of 20 GW, up from 16 GW last year. A total of 1.3 GW of solar distributed generation (DG) was added to the Brazilian grid last year, with JinkoSolar taking a 12 per cent share but its 1 GW target should give it a much bigger slice of the market, even if – as expected – the overall market grows rapidly.
JinkoSolar’s general manager for Latin America, Alberto Cuter, says that the Brazilian DG market – the market for distributed generation, the electrical generation and storage performed by small, grid-connected devices – is ‘actually growing impressively’ and represents ‘the first key market for Jinko in Latin America’. “We are delighted,” he says, “that Aldo Solar, one of the most professional and experienced distributors in Brazil, decided to put their trust in the superior quality of JinkoSolar modules for this huge distribution agreement.”
The distributed generation
Traditional power sectors rely on large power plants generating electricity that is then transported via the grid to commercial and residential consumers, with a proportion of that electricity lost in transmission. DG projects are still connected to the grid but involve much smaller generation projects with a far higher proportion of electricity sold locally because of the much higher number – and wider distribution – of power plants. Transmission losses are therefore much lower. DG is usually not a commercial option for traditional thermal power plants – fired by coal, gas or oil – but is now becoming much more popular because of the renewable energy boom.
It works particularly well with PV projects, on which costs have fallen rapidly because mass production has reduced manufacturing costs at the same time as solar cells have become more efficient – that is, they are able to turn a higher proportion of the sunlight that falls upon them into electricity. There is little sign of these efficiency gains coming to an end, so it seems unlikely that any new gas or coal-fired power plants will be able to compete with solar and wind power in a decade’s time.
According to figures from the Brazilian Association for Solar Photovoltaic Energy (ABSOLAR), national solar DG capacity reached 2 GW in January, from 171,000 connected arrays. By the end of April, ABSOLAR announced that the total installed solar capacity in Brazil had reached 5 GW and that is was now employing 130,000 people. Solar PV accounts for 99.8 per cent of all Brazilian DG generating capacity, with 72.6 per cent owned by residential consumers and 17.99 per cent by commercial operators. Minas Gerais has more DG connections than any other state. Brazilian solar power production was 16 per cent higher at the start of this year than at the beginning of 2019.
At the end of April, it was announced that China-based solar module manufacturer Amerisolar is planning to open a solar module factory at Belo Horizonte International Airport in Minas Gerais state. Solar panel production was expected to begin as we went to print.
Governments usually want to retain a proportion of thermal generating capacity in their generation mixes because solar and wind power production is intermittent, whereas coal and gas plants offer baseload – or generally constant – power production. However, battery storage is becoming cheaper and more effective, with ‘solar plus battery’ projects now being developed, including in the USA, so even this advantage for thermal plants is likely to disappear over the next few years. While the environmental advantages of renewables, in terms of much lower carbon emissions and air pollution, are well known, the commercial benefits are now being taken on board even by governments with more interest in economics than the environment.
A taxing time
In January, President Bolsonaro announced on social media that the Brazilian government is against possible taxation of solar generation by power sector regulator Agência Nacional de Energia Elétrica – also known as Aneel – and that followed his November veto of a bill that allowed tax exemptions for solar equipment imports. The emerging commercial benefits of solar power could explain the President’s attitude to Aneel’s plans to tax solar power production. He has been a strong opponent of environmental regulation, including restrictions on the oil and gas sector, but his tweet on 6 January said that he opposes the taxation plans and that the government would legislate to block it. Support has also come from the House of Representatives’ Finance and Taxation Committee, which has approved the introduction of incentives for renewable power investment by farmers.
In December, the Brazilian Chamber of Foreign Trade (Camex) agreed to exempt imported solar cells – used in solar panel manufacture – from import tariffs, although President Bolsonaro is concerned about the impact on his government’s finances. More establishment support came at the start of January, when Brazil’s development bank, BNDES, agreed to lend US$322.9 million (MOP 2.58 billion) to Spain’s Iberdrola, providing 80 per cent of total construction costs on 370.8 MW of wind farms in Paraiba state that are due to come on stream in 2022. The European Investment Bank is providing another EUR 250 million (MOP 2.16 billion) to support 520 MW of new Iberdrola wind power capacity in Brazil.
We are delighted that Aldo Solar, one of the most professional and experienced distributors in Brazil, decided to put their trust in the superior quality of JinkoSolar modules for this huge distribution agreement.
JinkoSolar is not the only Chinese firm to identify opportunities in the Brazilian solar power sector. BYD, which is also known for its battery manufacture, was due to double production at its factory’s solar panel output in Campinas, in the state of São Paulo, in February. The firm’s marketing and sustainability director for Brazil, Adalberto Maluf, said that falling component costs and the attractiveness of the Brazilian market had prompted the decision. BYD, which is believed to have its eye on the manufacture of thousands of electric buses in Brazil over the coming years, as well as the possible acquisition of Ford’s old São Bernardo do Campo factory which closed in October, opened its first factory in Brazil in 2015 and hopes to increase its market share from 20 per cent last year to 35 per cent this year.
As well as selling its solar panels, BYD is developing its own generation projects, including the Araçatuba solar plant, also in São Paulo state, to supply commercial customers. Until 2018, it only sold its solar modules to big projects but that year began working with Aldo Solar to market its products to the DG market. It now works with a variety of distributors in the country, including Alsol. Together, the two companies market an integrated 400 kW solar unit with a 1.36 MWh battery which allows electricity produced during the day to be stored for use in the evening, which is during peak residential demand.
BYD is to build a new lithium battery factory in Brazil to supply electric vehicles, including bus fleets in São Paulo, Brasilia and other cities. It delivered its first pure electric buses to São Paulo at the end of 2018, with electricity supplied by BYD’s own solar project. BYD’s lithium batteries enable the vehicles, each with the capacity to carry 80 passengers, to cover 250 kilometres on a single charge. More than 45,000 BYD buses now operate around the world.
The firm says that it is the world’s biggest manufacturer of lithium batteries and pure electric vehicles. The company’s vice president of sales for Brazil, Wilson Pereira, says: “Our recent deliveries, not only in the Brazilian market but also in Chile, have made BYD the leader in the electric bus sector in South America.” São Paulo’s maximum air pollution and carbon emission levels, it has been reported, are being decreased every year by the city council, encouraging the uptake of electric buses.
Last June, China’s CGN Energy International Holdings announced that it had bought 540 MW of Brazilian renewable energy generating capacity from Italy’s Enel for BRL 2.9 billion (US$567.8 million or MOP 4.57 billion), compromising the 292 MW Nova Olinda and 158 MW Lapa solar projects, plus the 90 MW Cristalandia wind farm. CGN will take over the three 20-year power purchase agreements – or PPAs – with a price of about US$0.08/kWh (MOP 0.64/kWh) that run until 2035, with Enel continuing to provide operation and maintenance support on the three projects. The Italian company intends to use the proceeds to develop new renewable energy projects in Brazil and the firm is already building the 475 MW São Gonçalo solar park, which is expected to come on stream this year.
Other news related to China, Brazil and energy includes the announcement in March that Brazilian energy management company Grupo IBS Energy had secured a contract from PowerChina to provide engineering, procurement and construction services for an 80 MW biomass project – where plant or animal material is used for energy production – in the city of Lençóis Paulista in São Paulo state. The project is expected to break ground in July. And last month, Canadian Solar closed a US$30 million (MOP 238 million) funding round from the China-Portuguese Speaking Countries Co-operation and Development Fund, which was established by the China Development Bank and the Macau Industrial and Commercial Development Fund. It will use the capital to develop and build photovoltaic projects in Brazil.
Projects defined as providing renewable energy by Aneel accounted for more than three quarters of the new generating capacity added to the Brazilian grid last year: adding up to 4,839 MW out of the 7,246 MW installed. However, large hydro schemes accounted for part of that and large hydro is not regarded as a renewable energy technology by many organisations because of the impact of construction on flora and fauna, as well as displacing those living in the affected area. Nevertheless, wind farms accounted for 971 MW of new capacity and solar for 551 MW. Wind and solar now contribute nine per cent and 1.5 per cent, respectively, of the country’s total generating capacity of 170 GW.
Although wind power is still the leading renewable energy technology in Brazil, there are signs that solar power is catching up. Aneel has launched a licensing round for renewable energy projects to be awarded 20-year PPAs, plus 30-year PPAs for hydro projects, commencing in 2024. The range of bidders has already been revealed, with 51,438 MW included in the bids, of which 20,825 MW comes from 659 wind schemes, plus an incredible 28,667 MW from a total of 794 solar projects.
Aneel’s last licensing round, which concluded on 14 January, sanctioned 1,162 MW of new capacity. Wind was the big winner, with 39 wind farms due to provide 878 MW. Similarly, the wind sector took 1,040 MW out of the 2,245 MW licensed in October. Global offshore wind development remains concentrated in the UK and other parts of the North Sea but is beginning to take off offshore the United States and now Brazil’s Neoenergia hopes to oversee the development of three big projects off the shores of the Brazilian states of Rio de Janeiro, Rio Grande do Sul and Ceará. The sun could soon certainly shine on Chinese companies who identify the Brazilian wind power industry as the next big energy opportunity in the country. All that may yet slow down, however, as it’s being predicted with solar energy. As we went to print it was reported that increasing import costs, a fall in electricity consumption and indefinitely proposed auctions are likely to impact the momentum of Brazil’s solar PV sector. Globaldata predicted that the country’s annual installed capacity is expected to decline to 0.7 GW this year from 1.3 GW last year due to the economic effects of COVID-19. But nevertheless, the solar energy sector has been rapidly growing and there is expected to be plenty of future opportunities in this market for ambitious Chinese companies.