(Updates with wind financing in 10th paragraph.)
July 31 (Bloomberg) -- Brazil’s BNDES development bank will allow solar developers to import photovoltaic cells until 2020 as part of efforts to spur domestic solar manufacturing capacity.
From 2020, local content rules will require developers to use components produced in Brazil to qualify for its low-cost financing, Antonio Carlos Tovar, head of renewable energy development for BNDES, said in an interview in Rio de Janeiro July 29.
Brazil currently gets less than 1 percent of its electricity from solar power and has almost no domestic photovoltaic production. Banco Nacional de Desenvolvimento Economico e Social, the development bank’s formal name, used similar local-content rules to promote the wind industry.
The rules from BNDES and the country’s Energy Research Agency, known as EPE, have two parts. In the first phase, which runs through 2017, developers must use solar panels with locally produced frames and some electronic components. From 2018 through 2020, additional parts of the systems must be manufactured in Brazil.
After that they will need to use Brazilian cells, the most important part of the solar panel.
Manufacturers will have the “freedom to manage their own strategy” and choose what items to produce locally and which ones to import until 2020, according to Tovar. “It would be a great breakthrough if in this period we already had in fact the cell manufacturing in Brazil.”
Panels represent about 40 percent of solar farms’ total investment, according to Pedro Vaquer, director of the Brazilian developer Solatio Energia. BNDES will also provide additional support for companies that use other locally manufactured equipment.
Financing for the plan will come from BNDES itself and a 560 million-real ($247 million) government fund to combat climate change known as the Fundo Clima. Tovar didn’t give details about the funding mix. The new local-content policy will be announced in mid-August, according to Tovar.
Brazil needs to install more than 500 megawatts of solar energy capacity a year to support local panel production, according to Helena Chung, a Sao Paulo-based analyst for Bloomberg New Energy Finance. “If BNDES wants the plant, the government also has to give a signal that it will create the demand.”
BNDES is seeking to create a supply chain for solar manufacturing, just as it did for wind turbines, said Tovar. It stopped offering loans in 2012 to developers using gear from five turbine producers that weren’t complying with requirements that they source components from within Brazil.
Brazil is also planning its first national auction in October, with a separate category for contracts to sell power produced from sunlight. With the auctions, the country expects to contract 3.5 gigawatts of solar power between 2014 and 2018. That would have sunlight producing about 1.8 percent of the country’s energy by 2023, said Mauricio Tolmasquim, the head of EPE, in an interview in the beginning of July.
The plan depends on customers being prepared to pay more for locally made panels, according to Markus Vlasits, the country manager of Yingli Green Energy Holding Co., the largest solar-panel maker.
“Brazil does not have competitive advantage for module manufacturing,” Vlasits said in an e-mail response to questions. “We estimate that local assembly would be 25 percent to 50 percent more expensive than in China.”