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Brazil Solar Auction Expected to Ignite PV Growth in Latin America

11 July 2014

Brazil plans to auction off 3.5 gigawatts (GW) of photovoltaic (PV) capacity during the next five years.

While this is a boon to solar manufacturers in and of itself, the plan could be a catalyst for growth in the solar market for all of Latin America, according to a new report from IHS Technology.

Brazil’s Electricity Regulatory Agency also said it will auction off a reserve capacity contract to ensure against unexpected power drops, such as if hydroelectric power levels fall as the result of a drought.

How much capacity will be awarded is yet unknown, but IHS said it believes 500 megawatts (MW) will be available for PV projects in the first round. The ceiling price for the 20-year power purchase agreement (PPA) for bids is likely to be set at approximately RS250 per megawatt-hour (MWh), or $112 per MWh.

Josefin Berg, senior analyst for solar demand at IHS, said she expects bids to be “highly competitive” and bid prices “to fall to less than RS200 per MWh” that is in line with other Brazil auctions where PV couldn’t match up to cheaper wind technology.

As a result of Brazil’s new solar plans, IHS has changed its installation forecast for the country and now sees an annual installed solar capacity in Brazil rising to 1,023 MW in 2018, up from 167 MW in 2013, as shown in Figure 1. IHS also raised Brazil’s attractiveness score to 41, out of a possible maximum of 100, in the IHS Emerging PV Markets Attractiveness Ranking, elevating the country from eighth to sixth place among the world’s most attractive solar markets.

IHS raised the level of Brazil on the PV attractiveness scale due to international power producers taking an active interest in the country – for example GDF Suez’s established 3.5 MW solar plant and Enel getting awarded a 15MW contract in February. Further influence was gained from the high competition the auction will bring from locally established utilities and independent power producers that offer sufficiently low bid prices to take home the bulk of the awarded PV capacity.

These findings are available in the latest edition of the “Emerging PV Markets Tracker” report, from the Power & Energy service of IHS Technology.

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