Brazil searches for a rooftop PV model

By Alexandre Spatuzza in Sao Paulo 

 Monday, December 21 2015

A few days after the revision of Brazil’s net-metering regulation, and before the government announced a new distributed power generation incentive plan, a researcher in the Federal University of Bahia (UFBA) launched a new 'Solar Condominium', spearheading the country’s search for new business models for rooftop solar.

“The project has been developed to be adapted to the new net-metering rules,” Hungarian born Csaba Sulyok told Recharge.

Brazil's rooftop sector has huge potential but is yet to take off

Brazil's rooftop sector has huge potential but is yet to take off

In a country where financing is scarce because of rates that can top 5% a month and average earnings stand at around $20,000 a year, a $15,000-$20,000 investment on a rooftop array of less than 10kW capacity is only available to the few.

As an example, despite a potential for more than 50 million rooftop arrays, just over 1,000 roofs have solar modules installed under the 2012 net-metering rules.

“The Solar Condominium (Cosol) is a 5MW plant that will sell or rent out panels to consumers,” said Sulyok, who has been living in Brazil for about half a decade and saw the opportunity to make money in solar power.  

The idea to build ground-mounted solar PV to supply power to homes and businesses through net-metering arrangements was only firmly permitted in the nine-month-long revision of the 2012 rules that concluded in November.

These rules, combined with rising power prices, wire-fee discounts and tax reductions now allow for this and other business models which promise to boost rooftop solar to over 4GW by 2030, from a current 9MW capacity.

“Brazil's electricity sector is facing a difficult moment and power prices will continue high for the next four to five years,” Leontina Pinto, a partner at Rio de Janeiro-based consulting firm Engenho told Recharge. “These factors have brought the payback rate down to four or five years from around eight years previously.”

Like Cosol, others have already come up with new business models.

Also in the state of Bahia, local Brazilian solar firm Brasil Solair built 2MW in a horizontal condominium of low-income houses. With financing from Brazil's National Savings Bank (CEF) the panels were installed and the power generated is now sold in the wholesale market, generating a monthly R$90 revenue per family after the managers of the condominium pay off all expenses.

In the state of Ceará, Prátil – an electricity services subsidiary of Italian power company Enel – built a 1MW ground-mounted solar plant to supply the retail shops of a local chain of chemists.

Rodrigo Sauaia, executive president of the Brazilian Solar Power Association (Absolar), said that under the new rules Prátil's project is now legal, since before the revision of the net-metering rules, it wasn't clear whether this business model was allowed.

In November, Sauaia had dubbed the revision a “historic day” for solar power in Brazil, and he was even more optimistic after the government announced a broad distributed generated power programme in December, which indicated that power distributors should contract 10% of their needs from small arrays in the concession areas and signalled new financing mechanisms.

“Private banks are looking more and more at solar power, but if the government created a credit line through one of its state banks it would grow in scale,” said Sauaia, pointing out that there is resistance from distribution companies to the installation of new solar arrays.

They consider that a growing number of rooftop arrays implies the use of the existing network, or new investments to upgrade it. As result they are questioning the exemption of wire usage fees. The solar industry says they fear losing revenue.

For Engenho's Pinto, however, for the rooftop solar market to accelerate and for banks to really commit with financing, power distribution companies would have start to investing in the sector.

“This is the only way for solar power to gain scale. In the middle of [an economic] crisis I don't see many people investing in solar power, especially because there is still a lot of doubts about its benefits in Brazil,” she said.

Among her clients are several power distribution companies and their trade group, Abradee, whom she advises on new business models.

“They could rent out roofs to install solar modules and resell the excess power through their network, making the modules free for consumers,” she said. “This works for consumers also: if someone doesn't have a roof, they could rent out roofs from other houses [according to the new rules]”.

Still, convincing power distribution companies will be an uphill struggle.

“In the long term, they are right, but, for now, with such a small number of arrays it doesn't have a big impact. But they should look in the long term because they could gain in other areas such as network stability, since the power will be produced close to where it is consumed,” Pinto said.

With surge of interest in solar PV, Brazil has now over 500 module installation companies, up from around 300 in 2014. As demand grows these companies will have to seek new business models to overcome the inherent problems of a developing economy that is currently facing a crisis.

“Many of these companies will fail. Let’s hope they won't harm the reputation of solar power,” Pinto said.

Meanwhile, Cosol's Sulyok has already obtained support from the university, keen to see a start up arise from its ranks, a green light from the National Development Bank (BNDES) that it would finance, and is looking for investors.

“People are interested, I just hope the rules don't change,” he said.