Brazil to Encourage Local Solar Equipment With Cheaper Loans

Aug 12, 2014 4:55 pm ET

(Updates with comments from BNDES in seventh paragraph.)

Aug. 12 (Bloomberg) -- Brazil will offer cheaper funding to solar projects that use locally made equipment and parts in a bid to spur a national manufacturing industry as the country prepares to ban solar-cell imports by the end of the decade.

Developers proposing solar-energy projects at an Oct. 31 auction will have the cost of borrowing from the government lowered in proportion to the local content that they commit to using, the state-owned BNDES development bank said in an e- mailed statement today. The standard cost of borrowing from the bank’s Finem program is at least 6.9 percent and as low as 2 percent under a special program to help avert climate change.

Brazil, which gets less than 1 percent of its power from solar generation, is seeking to develop a photovoltaic industry to cut dependency on imports and diversify away from costly thermal plants as well as hydro-dams that are subject to droughts. The subsidized loans linked to local content are part of policies drafted by BNDES and the country’s Energy Research Agency, known as EPE.

“In Europe and in the U.S. the solar chain is already better developed,” Antonio Carlos Tovar, head of renewable energy development for BNDES, said in an interview in Rio de Janeiro on July 29. “It seems to make sense to start the insertion of solar energy in our mix.”

BNDES Program

Developers will be able to finance as much as 65 percent of their projects with funds from the BNDES’s Finem program and 15 percent with the program to fight climate change, known as Fundo Clima.

Manufacturers will have the “freedom to manage their own strategy” and choose what items to produce locally and which ones to import until 2020, said Tovar.

BNDES will allow solar developers to import photovoltaic cells until 2020 before the use of locally produced ones becomes mandatory, Tovar said in the interview last month.

“For the bank’s cheaper financing, the requirement for local production of cells starts in 2020. Manufacturers have six years to decide to produce cells in Brazil,” Tovar said today by phone. “If companies start producing cells before, BNDES’s percentage of help increases considerably.”

Until 2017, only locally produced frames and some electronic components will be required, and in 2018 more parts will be added to the list.

“It is clearly an industrial policy push for the sector in Brazil,” said Lilian Alves, a Sao Paulo analyst at Bloomberg New Energy Finance. “But the local content requirements are hard, given the current structure of the solar sector, which doesn’t have big logistical issues for importing parts.”