A weak economy and COVID-19 affects Brazilian solar PV sector

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Increasing import costs, fall in electricity consumption and indefinitely postponed auctions are likely to impact the momentum of the Brazilian solar PV sector.

The country’s annual installed capacity is expected to decline to 0.7 GW in 2020 from 1.3 GW in 2019, according to Globaldata.

The weakening of the Brazilian economy due to the pandemic is causing an increase in import costs, which would impact the viability of projects that have secured financing. The slowing of the economy will make it difficult for the developers to close the financing deals and stall the market growth.

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A big driver of the solar PV market in Brazil is the A-4 and A-6 auctions, which of late, have resulted in substantial PV capacities being contracted.

The government’s strategy, before the COVID-19 outbreak, was to implement the A-4 public auction in the first half of 2020 and the A-6 auction in the second half and to repeat the same in 2021. With the outbreak of the pandemic, these auctions are to be held when normalcy is restored, which is hard to predict.

Somik Das, a senior power analyst at GlobalData, comments: “Brazilian solar PV developers generally procure most of the PV components from China. With the outbreak of the pandemic, the delivery of the PV components is experiencing delays because of disruption in the global supply chain. Although the country has a domestic manufacturing industry, the manufactured panels are on average 20 per cent more expensive than imports, due to the taxes and the lower production scale in comparison to China.

“Added to this, the Brazilian Real has experienced a significant drop against the USD going from 4.1 in December 2019 to 5.3 in April 2020. The depreciation of the local currency will make it difficult for project developers and owners to seek financing from international capital markets.”

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