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Plenitude Jan./Mar.

2013

plenitude
insights -
n1






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DOCUMENT VERSION CONTROL

VERSION Last Revision Date Author Observations
V1 08-Feb-2013 PL First document version

All rights reserved, January, 2013

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Contents
1. Foreword 3
2. Executive Summary 1
3. Brief Macroeconomic Snapshot 2
3.1 GDP Evolution 2
3.2 Inflation rate 2
3.3 Interest rates 2
3.4 Country ratings 3
3.5 Real vs US Dollar market dinamics 3
3.6 Foreign Direct Investment - FDI 4
3.7 Macroeconomic resume and perspectives 4
4. Brazilian Energy Sector Status 5
4.1 Challenges and perspectives 5
4.2 Energy Demand 5
4.3 Generation 6
4.4 Electric grid - Transportation 7
5. The Brazilian Solar Resource Potencial 9
6. Actual Status of the Solar PV Energy Industry 10
6.1 Projects panorama 10
6.2 Actual Solar PV business 11
6.3 Solar PV project perspectives 12
7. Actual Legal Framework 12
7.1 General energy sector framework and official entities 12
7.2 Specific Solar PV framework 13
8. Technological Considerations 15
8.1 Local supply chain 15
8.2 Imported technology 16
9. Financial Considerations 16
9.1 Fiscality 16
9.2 Other incentives 16
9.3 Financing panorama 17
9.4 CAPEX/OPEX in Brazil 18
9.5 Solar PV energy competitivity 18
10. Risks, Opportunities and Market Trends 20
10.1 Risks 20
10.2 Opportunities 21
10.3 Market Trends 22
11. Final Considerations 23
12. Disclaimer 25








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1. Foreword

It is a pleasure to present our first
edition of plenitude insights, a
quarterly energy sector
specialized information bulletin,
where a specific industrys
hot topic is identified,
analyzed and distributed to
selected Clients, Partners and Friends.

plenitude insights aims to provide serious and
professional value adding information, together
with our views and perspectives on each topic.

The first topic chosen for plenitude insights n1 was
the Brazilian Solar PV market, where business
opportunities are starting to appear by means of
new specific distributed generation introduction.

Also some industrys expectative regarding the
possible introduction of a remuneration schema for
larger scale units like Feed-In Tariffs of Specific PV
Energy Auctions is driving the interest of both
national and international players towards the
entrance in Brazils Solar PV market taking
advantage of the countrys actual growing
economy.

Finally, just a few words to mention that plenitude
will be glad to assist your company either to
identify and develop projects in Brazil and/or to
analyze strategic opportunities to enter the market
either directly or with local partnerships, according
to Clients specific needs and interests thus
ensuring a safe and fast mode entry in the
country.

Hope you enjoy it!











































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AVENIDA MARGINAL, N6071 R/C ESQ. | 2765-604 ESTORIL | PORTUGAL
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2. Executive Summary
After some years of significant economic growth that ignited some impact on the countrys inflation rate and
after the relatively small economic growth around 1% in 2012, the Brazilian Government has taken corrective
measures to control inflation while keeping a gradually lower interest rates policy.

Having assessed the wealth of the country in terms of natural resources the Government launched 8 years ago
several developing programs like the PROINFA Program and several energy planned auctions including wind
and biomass projects, while creating supportive legislation to provide structure and investor confidence. The
Governments Ten Year Energy Expansion Plan recently published by National Energy Research Agency
(EPE), aims to 46.3% renewable energy participation on the countrys energy matrix, over the 44.8% presented
in 2010, positioning Brazil to be one of the cleanest energy producers of the world in a decade.
Many national and international renewable energy developers are taking a closer look at Brazil since that
other renewable energy sources like wind, solar and biomass could receive an extra push from the
Government to diversify the national energy matrix, while complementing the hydro source in a smooth way.
Local authorities foreseen that in 2020 its expected that electricity consumption will be 61% superior to the
2010s value, reaching the 730 TWh. The latest edition of the Ten Year Energy Expansion Plan plans an
increase of installed power from 110 GW by 2010 to 171 GW by 2020, with an especial directive to concede
priority to renewable energy sources, what makes renewable energy investors to believe that this source will
double its capacity within 10 years.

The annual average solar radiation in Brazil
ranges from 1.200 up to 2.400
kWh/m
2
/year, values that are significantly
higher than most of the European
countries, even when comparing to Spains
radiation levels, that reach about 1.900
kWh/m
2
/day in some areas.

In April 2012, ANEEL, the countrys energy regulatory body introduced a new distributed generation schema
targeting both micro-generation and mini-generation project scales with capacities up to 100 kWp and
1 MWp, respectively. The retribution schema was defined by means of a Net Metering paradigm.

While the big focus today is at the micro and mini-generation scales, some larger scale projects start
appearing in the market like the case for Tau 1MWp Project and CEMIGs 3 MWp project, paving the way for
further market development.

The local industrys supply chain is still in a building capacity mode, where several technological capacitation
projects are in the way sponsored by the countrys development bank (BNDES). While having already some
local manufactures of inverters and batteries, PV panels must be imported, meaning that local import taxes
apply, even with some reductions for PV equipment. Local CAPEX costs can present up to 25% over costs
comparing to normal European prices for EPC services.

Solar PV technology is already competitive, in the Domestic segment, at 28 out of 64 electrical distribution
concessionaries. At the Commercial segment the trend is very similar while at the Industrial segment only in
some circumstances could be interesting due to a wide variety of energy tariffs. At the Large Scale segment,
new incentive mechanisms must be created in order to make these projects economically viable. Local
players believe that a FIT or Auction schema could be introduced in the short term.

Local risk analysis shows that the most relevant types could be: resistance from electrical distribution
concessionaries, grid connection procedures, no FIT schema for large scale projects, local over costs due to
import taxes and lack of experienced installers.

On the opportunity side, the micro and mini-generation areas present already many chances of making
business, while medium to large scale projects could also start to be developed preparing for the future
introduction of FIT or Auction schemas. Many JV opportunities could show up between international players
with know-how on industry or in project development with local players.
The annual average solar radiation in Brazil
ranges from 1.200 up to 2.400 kWh/m2/year,
values that are significantly higher than most
of the European countries, even when
comparing to Spains radiation levels.






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3. Brief Macroeconomic Snapshot
With a population in excess of 195 million, Brazil represents, today, the 6
th
world economy with a GDP near
2.5 USD trillion, presenting a 4% growth rate face to 2011, only passed by USA, China, Japan, Germany and
France, by this order.


3.1 GDP Evolution
Figure I presents the GDP evolution trend on the past 6 years, were a steady growth fundamental is easily
observed, with the exception of 2010.



















Fig. I


3.2 Inflation rate
After several years of heated economy burst that fueled Government intervention, the inflation rate is now
under control and due to be stabilized within a below 7.5% envelope in the next years, according to the
Brazilian Central Bank.


















Fig. II


3.3 Interest rates
Source: World Bank
Source: World Bank






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Previously historical interest rates are now under tight control by COPOM (Central Bank of Brazil's Monetary
Policy Committee), which has been consistently pulling interest rates down, now reaching values around
7.25%. The countrys official interest rate is the SELIC (Special System of Clearance and Custody rate), which is
the overnights lending rate in the Brazilian banking system.


















Fig. III

3.4 Country ratings
The countrys ratings are considered Investment Grade, namely Triple B or better, which enables investments
from a wide community of international investors seeking both security and market upside on the long term.
Table I resumes the actual Brazilian rating over the three main rating agencies:

Rating Agencies Rating
Standard & Poors BBB
Moodys Baa2
Fitch BBB

Tab. I

3.5 Real vs US Dollar market dinamics
Regarding the Reals market dynamics, the end of 2012 showed a depreciation movement towards the US
Dollar, reaching the 2 Real/US Dollar rate by August 2012; movement that has been appreciated by the
Brazilian Government since it will help the countrys export industry to place its products overseas.


















Fig. IV
Source: World Bank
Source: World Bank
Brazil
USDBRL spot exchange rate






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3.6 Foreign Direct Investment - FDI
With exception of 2009, the Net FDI in Brazil has been rising for the last years since Plan Real implementation,
surpassing the 50 Billion US Dollar range in 2011.






















Fig. V


3.7 Macroeconomic resume and perspectives

After some years of significant economic growth that ignited some impact on the countrys inflation rate and
after the relatively small economic growth around 1% in 2012, the Brazilian Government has taken corrective
measures to control inflation while keeping a gradually lower interest rates policy.

Due to its gigantic internal market dimension, the Brazilian economy was not severely impacted by the world
crisis that started in 2008 like many European countries; even though, the total FDI slowed in 2009. Thanks to
abundant credit stimuli driven by the Government, national development banks like BNDES enjoy large
quantities of credit capacity, especially for specific sectors like the Energy sector. The same applies for fiscal
incentives where some positive measures are expected to 2013 and forward, supporting both the internal
market and foreign investment.
With the launch of the Growth Acceleration Program (PAC) in 2007, a medium term social and infrastructure
investment program, the countrys economy received a significant commitment from the central Government
enhancing competitiveness and modernization of the infrastructure, thus opening many investment
opportunities for national and international companies. This opportunity has been and will be very visible on
the countrys main international events in the medium term: the World Soccer Championship and the Olympic
Games, where the total previewed investment is around 28 billion.

In conclusion, albeit still having some limitations on converting its potential into effective value Brazil presents
strong macroeconomic fundamentals, while the Government has been taking several control measures and
enjoys a large degree of flexibility in terms of possible control measures. This situation highly contrasts with the
situation of most of the European countries with weak macroeconomic fundamentals and reduced flexibility in
terms of possible Government driven measures and controls.



Brazil
Source: World Bank
Net FDI in USDollars






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4. Brazilian Energy Sector Status
4.1 Challenges and perspectives
In structural terms, one of the most challenging issues in Brazils energy sector was how to respond to the
countrys high growth rates with thousands of new factories, buildings and a rising mid class population
demanding for increasing energy consumption
levels. As well known, the country suffered
some years ago an energy several forced
blackouts (in 2001 and 2002) due to dry year
conditions affecting the hydro energy
generation, highly dependent on the Rio de S.
Francisco basin where a large stake of Brazils
generation power is located.

Since then, the Government has been taking
measures to increase both grid and generation
assets investments and development programs
in order to keep pace with economic growth.

Having assessed the wealth of the country in terms of natural resources like water, sun, biomass, wind and
other sources, the Government launched 8 years ago several developing programs like the PROINFA Program
and several energy planned auctions including wind and biomass projects, while creating supportive
legislation to provide structure and investor certainty and confidence.

Initiatives on other areas like ethanol and biodiesel production and consumption development, have brought
the country to a higher degree of international visibility on the green energy area. The Governments Ten
Year Energy Expansion Plan recently published by National Energy Research Agency (EPE), aims to 46.3%
renewable energy participation on the countrys energy matrix, over the 44.8% presented in 2010, positioning
Brazil to be one of the cleanest energy producers of the world in a decade.

Even though, still the country is very dependent on hydro power to supply its electrical energy, where its
generation mix depends on almost two thirds of its entire generation mix on this source (in 2005 the hydro
power stake was about 80%). This factor seems to inspire many national and international renewable energy
developers since that it could mean that other renewable energy sources like wind, solar and biomass could
receive an extra push from the Government, in order to diversify the national energy matrix while
complementing the hydro source in a smooth way.

4.2 Energy Demand
In 2020 its expected that the electricity consumption will be 61% superior to the 2010s value, reaching the
730 TWh, with the industry occupying the large stake of the energy consumption increase, even considering
the effect of the industrial auto-production which its expected to rise and compensate part of this increase.

On the Domestic segment, the Government is expecting that the consumption level prior to the energy
blackouts could be reached, with values around 179 kWh/month per consumer.

This number still represents a very low consumption level per capita in comparison to other countries, showing
similar consumption levels as China as presented in Figure VI:












The Governments Ten Year Energy
Expansion Plan recently published by
National Energy Research Agency (EPE), aims
to 46.3% renewable energy participation on
the countrys energy matrix, over the 44.8%
presented in 2010, positioning Brazil to be one
of the cleanest energy producers of the world
in a decade.






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Fig. VI

New topics like Energy Efficiency are starting to enter in the Brazilian energy agenda, where the Government
counts on saving a peak capacity of 7.000 MW representing around 34 TWh in energy generation, which
represents about 4.4% of global demand in 2020.

Under these premises of energy efficiency, the expected electricity average consumption increase between
2013 and 2020 is considered to be about 4.6% of global demand, thus representing, on average, new yearly
3.200 MW of new capacity needs.


4.3 Generation
In the Generation side, the planning responsibility is taken by the National Energy Planning Agency EPE,
which issues a yearly Ten Year Energy Expansion Plan, with directives for planning needs for generation
expansion and tie line interconnection between regional systems. This study provides the basis for the national
energy auction process that brings together all the producers, with an especial emphasis on renewable
energy, in an open auction process where producers bid their energy lots for the specified time horizons
competitively.

On recent auction processes wind energy has been presenting very competitive prices competing even with
PCHs (Small Hydro Plants), which are typically competitive units (on 2010s auction hydro units presented
prices on the 58 -78 R$/MWh interval).
As previously mentioned, hydro power is the main generation source in Brazil, since the country holds 10% of
the worlds hydro technically available resource. This energy source presents 66% to 80% participation levels on
the global electricity production matrix, depending on the rainfall levels of the year, fact that has taken Brazil
to build some of the biggest hydro power units in the world with units like Itaup (14.000 MW) and Belo Monte
(11.233 MW), thus developing substantial technical know-how on this area.
Between 2016 and 2020 Brazil is planning to install further 19 GW of hydro power, with the main part to be
installed in the Northern part of the country.
Wind technology has been assuming an increasing protagonism in the Brazilian electricity production
panorama, with growing competitiveness of auction prices as mentioned before. Back in 2005, wind projects
could only be financed with a 300 R$/MWh tariff while at the last auctions in 2012 the prices reached levels
around 90 R$/MWh (approx. 33.5 /MWh
1
).
With near 2 GW of installed capacity, Brazil plans to have a total installed capacity above the 8 GW mark in
2016, thus attracting international wind turbine manufacturers to install local production units.

1
Considering an exchange of EURBRL of 2,6869 by February/2012.
2 200
750
2 200
7 700
13 800
Electricity Consumption per capita in kWh/Hab./Year
Brasil India China France USA
Source: Brazilian Government






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The latest edition of the Ten Year Energy Expansion Plan plans an increase of installed power from 110 GW by
2010 to 171 GW by 2020, with an especial directive to concede priority to renewable energy sources, what
makes renewable energy investors to believe that this source will double its capacity within 10 years as shown
on Figure VII:







Fig. VII
The mentioned priority for the renewable energy sources is dependent on the achievement of the
environmental local licenses (Licena Prvia Ambiental), so that those generation assets can participate on
the auction process.

4.4 Electric grid - Transportation
With an operating transportation grid with 100.000 Km of extension and a planned increase to 142.000 Km by
2020, the Brazilian National Transportation Grid is one of the biggest electric grids in the world, managed by
the National Grid Operator Company ONS.
A good part of this increase will be due to the need of connecting the northern part of the country with large
hydro generating units with the rest of the country. Other tie lines are being built to enable the proper flow of
exceeding generation at some areas to the big consumption centers, especially to the urban and industrial
areas, while other lines are designated to increase the supply security to these large consumption centers,
reinforcing what is called in the energy industry as the N-1 criteria, where the fault of one line cannot origin
by itself power cuts on substations, thus providing the Brazilian electric system with increased robustness.
The planed total investment on this area is R$ 46.4 billion, with 40 billion on transmission lines and the balance on
substations and respective appliance.

Even considering the huge effort to build more grid infrastructure, Brazils transportation grid cannot be
considered a meshed grid, as it is typical in developed countries, where the degree of reliability of the grid is
very high. This fact is mainly due to the enormous dimension of the country and relative dispersion between
loads and main generation units and also due to some lack of medium to large term investment policy and
execution on previous Governments.
Figure VIII depicts the Brazilian transportation grid status as per 2013 with a grid backbone that starts on the 138
kV level up to the Very High Voltage level of 750 kV distributed at a frequency of 60 Hz
2:


2
In Europe the grid frequency is 50 Hz.
0%
20%
40%
60%
80%
Hydro Thermal PCH, wind, solar,
biomass
Nuclear
Planned Mix Participation Evolution
2010 2020
Source: EPE






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Fig. VIII


















LEGEND
Existing Future Complex
2013 HORIZON
Source: ONS






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5. The Brazilian Solar Resource Potencial
After some introductory solar resource assessment studies launched back in 1998 and 2000, a recent study
(2006) has been performed within the SWERA (Solar and Wind Energy Resource Assessment) project, providing
the most updated solar resource map of Brazil up to date:












































Fig. IX

The highest direct solar radiation levels are seen on the So Francisco Rivers valley, and also on the border
line of Bahia, Paran and Mato Grosso do Sul states.

While having, in general, a good global radiation distribution, the weakest radiation levels are registered on
the east coast from Rio Grande do Sul up to the Recncavo region on Bahia state. The Northeastern region
presents the highest global radiation levels while having the best average values and the smallest inter annual
variability of solar resource.
The maximum radiation levels are measured at Bahia and part of Minas Gerais states with values up to
6.5 kWh/m
2
/day, due to climatic conditions that combine low nebulosity and high solar incidence at the same
time. On the southern part, at the state of Santa Catarina, the average global radiation levels are lower,
reaching the 4,25 kWh/m
2
/day, showing the same radiation levels on Paran state and on the south of S.Paulo
Radiation (Wh/m
2
/day)
Source: ANEEL






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state, while presenting higher levels of inter annual variability due to cold air masses and higher levels of
nebulosity.

The annual average solar radiation in Brazil ranges from 1.200 up to 2.400 kWh/m
2
/year, values that are
significantly higher than most of the European countries, even when comparing to Spains radiation levels that
reach about 1.900 kWh/m
2
/year in some areas.



6. Actual Status of the Solar PV Energy Industry
6.1 Projects panorama
The Brazilian solar PV market is still on its initial stage of growing and, historically, has been mainly concerned
with rural electrification programs designated to assist remote population aggregates that were not
economically or technically viable to supply with normal grid infrastructure. Perhaps the biggest program has
been the PRODEEM, a municipal development program specific for energy launched by 1994 with a total
investment of US$ 37.2 million with 9.000 systems
installed (total of 5.112 kWp).

Besides this program other rural electrification
programs were implemented with the World
Bank, and other local entities but always with
limited scopes and scales, the Luz para Todos
program was a good example.

According to a local study,
3
Brazil counted by 2008 only with 152.5 kWp of solar PV grid connected capacity,
mainly related to universities research and development initiatives. This paradigm changed by 2010 where the
first larger scale grid connected initiatives started to take place paving the way for other projects and
industrial investments, namely:

Tau Solar PV Project an initiative of MPX Energia (Figure X), belonging to one of the wealthiest
entrepreneurs in Brazil Mr. Eike Batista. With 1 MWp installed capacity and an R$ 10 million
investment, having already environmental licensing permits for extra 4MWp. According to MPX, the
project will serve as a learning pilot and that, if the proper conditions are met, it could reach a total of
50 MWp of installed capacity;
Megawatt Solar an Eletrosul/KfW joint project with 1MWp of rooftop installation at an Eletrosuls
building. The owners intend to sell the energy at the market, to consumers willing to take advantage
of the Solar Seal sustainable endorsement for a specific project;
CEMIG installed 3 MWp project at the Sete Lagoas municipality. The project belongs to the Cities of
the Future project and has Solaria as a partner. The first 2.5 MWp block will have commercial
purposes, the second block was be devoted to technology testing and a third component was
dedicated to research. The total project cost was estimated at R$ 25 million;
Solar Soccer Stadiums under the huge investment plan for the World Soccer Championship by 2014,
several stadium rooftop projects were initiated based on auction processes were some of the biggest
Brazilian companies were invited to buy the produced energy through a PPA schema. CEMIG has a
1.4 MWp project in Mineiro Stadium, COELBA has the Pituau project with 400 kWp and Light has a
3 MWp project at the well-known Maracan Stadium.








3
Zilles, 2005/2008
Assuming that all the Stadium projects are
approved and considering the Tau project
with 4 MWp, a total of 34.2 MWp could be
installed in the short term in Brazil.






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Assuming that all the Stadium projects are approved and considering the Tau project with 4 MWp, a total of
34.2 MWp could be installed in the short term in Brazil.
















Fig. X


6.2 Actual Solar PV business
In April 2012, ANEELs Normative Resolution n. 482 introduced a new distributed generation schema targeting
both micro-generation and mini-generation project scales where the micro-generation goes up to 100 kWp
and the mini-generation from 100 kWp up to 1 MWp. This Resolution includes several Renewable Energy
technologies like hydro, wind, solar, biomass and qualified cogeneration connected to the public electric grid
through consuming units. The retribution schema was defined by means of a Net Metering paradigm where
instead of paying the energy producers for their electricity injections in the system the Electrical distribution
concessionary awards them energy credits that redeem their future energy consumption.

This schema has many analogies with a current account system, where the consumer and the electrical
concessionary exchange energy credits and debits. Basically, in case there are any energy surplus from the
consumer injected in the grid (exceeding its internal consumption) the concessionary remunerates the
consumer by means of issuing him energy credits that expire after 36 months of invoicing date.

In addition, any potential active energy credits from one facility can be redeemed by other facility provided
that the later has the same electric concessionary and that the owner is the same. The same applies for
consuming units bind by joint legal arrangements.

The referred Resolution also elaborated on the national procedures for electric distribution grid - PRODIST that
started to include the procedures for grid connection for the new distributed units. The main elements defined
are:

steps for enable project access;
technical and operational criteria;
new connection implementation;
O&M and security requisites for connection;
measurement systems (bidirectional);
contracts.

The electrical concessionary is held responsible for the micro and mini-generation grid integration with no
expenses for the distributed units, defining all the necessary technical requisites.

Another relevant factor is that the micro and mini-generation units are waived for the need of celebrating the
CUSD (Distribution System Usage Contract) and CCD (Connection Contract). For the mini-generations it will be
necessary to sign only the Operative Agreement (Acordo Operativo) with the electrical concessionary, thus
providing some degree of support for renewable energies.



Source: MPX






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6.3 Solar PV project perspectives
During the 2011s Renewable Event that took place in Fortaleza, Cear state, the level of motivation that
mainly all the participants seemed to show ranging from university researchers to Brasilias Federal Deputies
seemed to show that the solar PV industry was definitely in the business and political agendas in the country.
Nowadays, some international developers can be seen taking positions in the solar PV market so that when
the market takes place in due scale, the proper structure and know-how/network structures are in place and
well-functioning.

Table II presents the planned cumulative capacity in MWp for several types of installations according to a
local study:

Application 2012 2013 2014 2015 2016 2017 2018 2019 2020
Specific
applications
2 4 6 8 13 18 23 28 33
Off-grid
collective
13 15 20 25 30 35 40 45 50
Off-grid
domestic
10 20 35 55 80 105 130 155 180
Off-grid mini-
grids
6 16 26 36 61 86 111 136 161
On-grid plant 26 76 126 176 226 326 426 526 626
On-grid
domestic
1 3 5 10 20 40 70 110 160
On-Grid
collective
25 75 175 325 525 775 1,075 1,425 1,925
Export 63 188,5 373 615 935 1,365 1,855 2,405 3,115
TOTAL (MWp) 146 209 766 1,250 1,890 2,750 3,730 4,830 6,250

Tab. II



7. Actual Legal Framework
7.1 General energy sector framework and official entities
The Brazilian regulatory buildings blocks are based on Laws n. 10.847 and 10.848 from the 15
th
of March 2004,
and also on the Decree 5.163 from the 30
th
of July 2004, which supports the energy generation activities.

These regulations define the responsible entities for the value-chain activities of the energy sector and also
their functions and responsibilities, namely:

EPE - responsible for the energy planning and research activities;
ONS - responsible for the national energy system management and supervision (energy dispatch,
security and grid operation);
ANEEL - responsible for market regulation and generation, transmission, distribution and
commercialization activities;
CMSE - responsible for the electric systems reliability and monitoring;
CCEE - responsible for the energy commercialization.
The energy commercialization activity is divided between two main contracting environments, namely the:

ACR - Regulated energy contracting environment to whom the generation and distribution agents
belong;
ACL - Free energy contracting environment were generation, commercialization, import/export
agents belong together with free energy consumers.
Source: Carta do Sol Project






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Free consumers are not obligated to buy energy from the distributor companies thus being able to buy from
other suppliers and to negotiate their conditions freely. In order to achieve that possibility they must have
contracted capacities above the 3 MW.

The energy commercialization responsible entity, CCEE, has defined the following client classification
categories according to installed capacities:

Installed capacity (MW) Classification
< 500 kW Captive Consumer
500 kW < and < 3 MW
Free Consumer only to buy from
renewable energy sources
> 3 MW Free Consumer

Tab. III


7.2 Specific Solar PV framework
Regarding the specific photovoltaic legislation, it can be divided in two parts: the on-grid and the off-grid
components. On the off-grid component side, the consumers, including both domestic and collective units
have in place well detailed regulations as it can be analyzed at ANEELs Resolutions 247/2006 and 286/2007.

As the solar PV generated energy is considered a renewable energy source, its commercialization is under
specific regulation. In general, the renewable energy regulation does not differentiate solar PV energy from
the other sources, albeit they enable a favorable environment for its application as for example the
Law 21.111/09 that elaborates over the electric energy services within off-grid services and reinforces on its
6
th
Article the incentives for the distributed generation. Other example of such policies can also be the revision
of Law 9991/00 that designates resources for several public electric energy universalization programs.

Also the Law 10.848 previews that Electrobrs
4
shall implement a program that develops the introduction of
solar generation using funds from the RFR Reserva Federal de Reverso, a federal fund to be directly
contracted with local concessionaries. The 14
th
Article of Decree 4.541/02 regulates Law 10.438/02 that intends
to use Federal Reserve funds to develop the access to energy for rural areas with low levels of energy
distribution coverage.

Created back in 2002, CDE is an account that is used to develop the universalization access for electric
energy, where the Luz Para Todos (Figure XI) Program is the flagship, providing subventions for low rent
consumers and to further develop the competitiveness of alternative energy sources like solar energy.
















Fig. XI





4
Electrobrs One of the biggest energy companies in Brazil, state owned, has activities on generation, transmission and distribution of
energy, with a stake on the huge Itaup hydro plant.
Source: Brazilian
Government
Source: CCEE






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Pg. 14 / 25
In terms of energy commercialization, its also relevant to mention the Decree 5.163/2004.

During 2011 the Brazilian regulator ANEEL developed several public auditions in order to gather the industry
players visions and perspectives towards developing the solar PV generation. As a corollary of this process,
ANEEL issued the Normative Resolution n. 482 of 17/04/2012 where it established the general conditions for
distributed Micro-generation and Mini-generation access to the distribution system. The three main objectives
of this regulation were to reduce the regulatory barriers to small scale distributed generation on the distribution
grid and also to introduce a new electric compensation system based on a Net Metering schema and the
supportive distribution access procedures PRODIST as previously mentioned.
At the same date, ANEEL also published the Normative Resolution n. 481 by which a discount over the
transmission and distribution grid access tariffs (TUST and TUSD) of 80% was given for solar PV units below 30 MW
that start to produce until 31/12/2017 during 10 years. After the 10 years discount a new 50% discount rate will
be applicable.

All these regulations are considered to have given a definitive contribute to the establishment, on a regulatory
perspective, of the distributed generation for low-voltage consumers on the commercial and domestic
segments.

It is also relevant to mention other ANEEL initiative like the public call regarding the R&D Project n. 13/2011,
where 17 solar PV projects were selected totalizing 23.6 MW to be installed until 2015.

On the Governmental sphere it is also interesting to refer the Plano Brazil Maior (Figure XII Brazils President
Mrs. Dilma Rousseff on a Programs event), launched on August 2011, envisaging to orientate the industrial
development policies towards increasing the countrys competiveness.















Fig. XII


On the market agents scope, several initiatives were taken like the creation of the Photovoltaic Sectorial
Group of ABINEE The Brazilian Electrical and Electronic Industry Association that congregated about 130
companies in the industry.

In respect to environmental legislation, any initiative or project due to impact on the environmental area must
be licensed by the Federal entity in charge IBAMA and also by the local state environmental organs. In
general terms, there are 3 types of sequential licenses that such a project must gather, namely:

LP - Previous License: which is conceded on a pre-planning study. Some basic requisites must be
respected regarding localization, installation, operation and non-conflicting with soil usage laws.
LI - Installation License: is obtained after the approval of the execution project, containing all the
requisites that the project must respect;
LO - Operation License: is a license that is necessary for the commencement of the activity of the
project. It is given to all the projects that respect the conditions specified at the previously issued LI.
One of the most relevant characteristics of the environmental process in Brazil is the social participation on the
decision process by means of a Public Audience. Typically IBAMA is more concerned with the licensing of
large projects with infrastructures than span for more than one state and also with oil and gas prospection
projects.
Source: Brazilian Government






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Pg. 15 / 25
The main guidelines for the environmental licensing process are defined at Law 6.938/81 and on the
CONAMA
5
Resolutions n. 001/86 and 237/97. After these regulations was published a Complementary Law n.
140/2011 that elaborates over federal and state competencies for licensing purposes, having, as a basis, the
projects localization.

8. Technological Considerations
8.1 Local supply chain
As mentioned before, Brazil wishes to become a silicon producer due to large quantities of quartz reserves,
having several technological capacitation projects in the way towards silicon production/purification and
cell/module local manufacturing, sponsored by the countrys development bank (BNDES).

On the panel side, the CB-SOLAR, the Brazilian Center for Solar Energy Development, a partnership between
the federal and state Governments plus some municipal entities, installed the most advanced laboratory in
South America for solar PV module production where R&D is taken with some results on new raw materials that
could enable some cost reductions, thus opening interesting perspectives for the national industry.

Also PUC-RS Company has a pilot plant in operation and is waiting for the market to scale-up to further
develop its production capacity. Also Kyocera has intentions of installing a local module facility during 2013
while other European and Chinese manufacturers seem to be also interested due to the high import tax levels
in Brazil.

In local technology terms its also relevant to mention the PBE Programa Brasileiro de Etiquetagem, a
national labelling program launched back in 2002 where the Solar PV Task-Force (GT-FOT) established a
national labelling norms for Solar PV systems and components. The initiative gathers manufacturers, suppliers,
laboratories and public entities. The technology scope of the program includes: modules, inverters, charge
controllers and batteries. The labelling will start by crystalline modules testing efficiency, mechanical
resistance, corrosion and other parameters, after which the modules receive their efficiency label from A to E.

The country also counts with local producers of solar components like batteries and inverters enabling some
tax reduction on the total EPC costs.

Table IV presents some of the local equipment manufacturers/dealers:

MANUFACTURER EQUIPMENT TYPE COMMERCIAL BRAND
UNITRON Inverter PROSINE
ORBE Inverter ORBE
PHOCUS AG Charge Controller PHOCUS
ACUMULADORES MOURA Battery MOURA
KYOCERA BRASIL Controller / Module MORNING STAR/KYOCERA

Tab. IV

The local Solar PV installers universe is quite reduced at the moment with few professionals and experienced
teams due to the very recent market entry of solar technology in Brazil. A big part of the local installers are
local engineering companies that have know-how on electrical installations design and implementation which
take advantage of their positioning within the energy sector value-chain in order to engage in this area.







5
CONAMA Conselho Nacional do Meio Ambiente, is the National Counsel for the Environment having both consulting
and deliberative responsibilities.
Source: Gonalves, 2008






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Pg. 16 / 25
8.2 Imported technology
Even though Solar PV equipment have some degree of fiscal benefits when importing technology, there are
still some level of import taxes that bring prices up when comparing to normal European full EPC values. Due to
this factor and also due to the countrys huge potential for technology transfer opportunities, many
international production players are now considering to enter in Brazil, either directly or by means of local
partners.



9. Financial Considerations
9.1 Fiscality
In Brazil, the two most relevant taxes regarding Solar PV components are ICMS Imposto sobre Circulao de
Mercadorias e Prestao de Servios, a tax over goods and services, and IPI - Imposto sobre Produtos
Industrializados, an industrialized products tax.

The ICMS convention provides exemption for ICMS tax for some wind and solar equipment like solar modules.
Regarding IPI tax, the Decree 3827/01 exempts some electric generation equipment from IPI, which is also the
case for solar PV modules, at the moment.

The applicable fiscal structure regarding the import of Solar PV technology is supported by the following taxes:

Import Tax;
IPI;
ICMS;
PIS (a local tax for social integration);
COFINS (Social security contribution);
ISS (tax over any business nature operations).
It is recommended due prudence on applying these taxes since sometimes the application manner is not
homogeneous. According the Solar PV sectorial group from ABINEE, the local tax application over a typical
Solar PV plant would be the following one:

COMPONENT
TAXES
Import Tax ICMS IPI PIS COFINS ISS TOTAL
Module 12% n.a. n.a. 1,65% 7,65% n.a. 18%
Inverter 14% 12% 15% 1,65% 7,65% n.a. 37%
Cables,
structures,
connectors
n.a. 18% 10% 1,65% 7,65% n.a. 31%
Project,
register,
installation
n.a. n.a. n.a. 1,65% 7,65% 5% 18%

Tab. V

Assuming these values, it could be said that an imported Solar PV unit installed in Brazil is, on average, about
32.5% more expensive than in Europe. Albeit this, if the origin country taxes are taken out of the total price, the
Brazilian total over cost would reduce down to 25%.


9.2 Other incentives
The first incentive mechanism introduced to develop Solar PV investments in Brazil was the FIES Fundo de
Incentivo Energia Solar do Estado do Cear, a Cear state fund focused on solar energy investments.
Basically, the fund was designed so that large energy consumers (above 500 kW) located in Cear state
could buy a part of their electrical energy needs from a solar source, since the companies that buy from solar
Source: ABINEE






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Pg. 17 / 25
sources have a discount on the ICMS tax and the energy buyer pays the markets reference value and FIES
covers the difference between that value and the solar energy costs under a 15 year contract.

The Ministry of Mines and Mining has published an ordinance (Portaria MME n36 from 28/11/2008) that
created a Task-Force in charge of studying and proposing regulatory and planning ideas involving both ANEEL
and EPE.

The countrys national development bank BNDES, also supports productive investments on innovative Solar
PV value chain with non-reimbursable funds from a national technology fund called Funtec as presented at
the next point.


9.3 Financing panorama
In respect to financing mechanisms targeting Solar PV projects, the Programa Fundo Clima from BNDES is the
most important initiative. The program was created by Law 12.114 from 0/12/2009 with the objective of
supporting the development of solar generation and productive investments.

The Fundo Climas minimum financing is R$ 3 million, with the operation being done directly by BNDES. The
debt cost is 1.1% per annum (financial cost) + 0.9% per annum (basic BNDES remuneration) + 3.57% per annum
(credit risk). In case of financial intermediation an extra Intermediation Fee of 0.5% per annum is charged
(albeit micro, mini and medium companies are exempted)+ up to 3% per annum of remuneration for the
financial institution to be accorded directly between the Client and the entity.

BNDESs maximum participation is 90% of the financeable items with a maturity up to 15 years including a
grace period up to 8 years.

As already mentioned, BNDES has many financing lines for items like technological innovation, equipment
production, and others that are interesting to consult. In respect to financing lines targeted for energy projects
the most relevant ones are the following:

Category Financing line Basic conditions
Independent
Energy
Producer
Renewable energy
generation projects
with Project Finance
schemas
Minimum R$ 10 million
Long term debt rate (TJLP)
0.9% BNDES basic remuneration
3.57% Risk rate
Leverage up to 80%
Maturity up to 16 years
Distribution
Substation and
distribution line
modernization projects
Minimum R$ 10 million
50% with TJLP + 50% with TJ-462
(a provisory interest rate that
represents TJLP + 1%)
1.3% BNDES basic remuneration
3.57% Risk rate
Up to 50% of financeable items
Maturity up to 6 years
Energy
Efficiency
PROESCO projects
including fossil fuel
substitution projects
Long term debt rate (TJLP)
0.9% BNDES basic remuneration
3.57% Risk rate
Up to 80% of financeable items
Maturity up to 6 years

Tab. VI

Another financial entity that is used to finance renewable energy projects offering an alternative in markets
terms is Banco do Nordeste.
Source: BNDES






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Pg. 18 / 25
9.4 CAPEX/OPEX in Brazil
CAPEX investment values will depend on several factors like equipment quality and type, volume, buying
conditions, logistical costs, installation costs and many others as usual. Table VII resumes some actual average
prices assuming different scales and project targets:

Application Scale (kWp) Cost (R$/Wp)
Residential 5 / 10 7.6 / 6.8
Commercial 100 5.91
Industrial 1.000 5.185

Tab. VII

As previously mentioned, on average CAPEX costs could assume a 25% extra cost on top of normal European
prices, due to local facility and lack of competition on local installers services. According to ABINEE, the
average system cost nowadays is around 12.000 R$ per kWp installed, including taxes.

Regarding OPEX costs, the typical values to consider, besides other fixed costs like land/rooftop leases, are in
the following levels:

Description Cost per year
Warranty insurance 0.5 % of total financing
Operation insurance 0.4 % of fixed assets
O&M
0.5 % of CAPEX
(1% for small scale)

Tab. VIII


9.5 Solar PV energy competitivity
Before analyzing Solar PV competitive position towards the Brazilians electric energy market is wise to
previously assess the average final Client tariffs in place for the various types of Client segment. Nowadays, the
actual final market tariffs approved by ANEEL in R$/MWh are the following ones:

Segment Minimum Maximum Average
Residential 444 464 457
Commercial 387 443 406
Industrial 318 432 336

Tab. IX

As seen in Table IX, the average final clients electricity prices present a wide spanning of values, ranging from
318 up to 464 R$/MWh, albeit that if distribution companies are considered individually the price range is
considerably higher. When comparing to the levelized cost of energy for the same segments its possible to
formulate some conclusions about the competitiveness of Solar PV energy, and also for its trends:


Application Scale (kWp) LCOE (R$/MWh)
Residential 5 / 10 602 / 541
Commercial 100 463
Industrial 1.000 402

Tab. X







Source: EPE
Source: EPE
Source: EPE
Source: EPE






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A graphical comparison (Figure XIII) is interesting to acknowledge the comparison of the LCOE per market
segment against the regulated tariffs per segment now assuming the full range of prices within the electrical
distributors in the market:


























Fig. XIII


On the Residential segment, and according EPE, by 2011, about 10 electrical concessionaries had the tariffs
above the LCOE for 5kWp PV units, between them: Energisa Minas Gerais (Minas Gerais), Cemar (Maranho),
Cepisa (Piau), Ampla (Rio de Janeiro) e Cemig (Minas Gerais). If the LCOE for 10 kWp PV units is considered,
18 more concessionaries would be added totaling 28 companies with tariffs above the PV units production
costs over a 64 company universe. Examples of this included companies like Coelba (Bahia) and Coelce
(Cear). This brief analysis could mean that albeit Solar PV technology is not competing will all the applicable
electricity tariffs, it is already competitive for 28 out of 64 companies, which, with more favorable combinations
of fiscality, financing and solar resource variables (without mentioning extra income opportunities like carbon
credits, green certificates and FITs in case they are implemented) could certainly further enhance this
competitive position in the short term.

Regarding the Commercial segment, the results follow a similar approach since the average tariffs are lower
comparing to the Residential segment about 89% the average Residential tariff, while, at the same, the PV
units LCOE is also 86% lower than the Residential case, thus compensating for the lower tariffs. This shows that
even larger scale units could be also competitive at todays prices.

In respect to the Industrial segment, the scale significantly reduces LCOE price levels, although in this case due
to a very wide span of tariffs arrangements combining very distinct fees according to installed capacity,
energy usage regime and others factors; Solar PV energy price could be competitive or not, according to
each individual case.

Finally, the Large Scale units installed on the ground the LCOE ranges go down to the 300-400 R$/MWh
interval, which, when comparing to recent energy auctions that resulted in energy contracts between
95 and 110 R$/MWh or even comparing with the Energy Markets Reference Price used by the Distribution
concessionaries to buy energy (151 R$/MWh on 2011) seems to show that without other type of incentives in
place the competitive position of Solar PV technology is not as evident as in the previous cases, albeit specific
arrangements over solar resource, financing, etc. could bring a competitive edge in particular cases.

R$ 0
R$ 100
R$ 200
R$ 300
R$ 400
R$ 500
R$ 600
R$ 700
Residential Commercial Industrial
Regulated Tariffs vs Solar PV Units LCOE
Minimum Maximum Average
Industrial -1MWp
Commercial -100kWp
Residential -10kWp
Residential -5kWp 602 R$
541 R$
402 R$
463 R$
LCOE
Source: Plenitude research






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Pg. 20 / 25
10. Risks, Opportunities and Market Trends
10.1 Risks
Regarding risks, one can divide them on three main categories: Technical, Economical and Regulatory.

When considering Technical risks in Brazil the following types could be identified:

Electrical Distribution Companies resistance: typically due to the intermittent profile of Solar PV energy
and the fear of lacking control due to distributed energy injection on the final grid areas. Also the
electrical losses quantification and allocation could be an issue. Albeit these items, with time and
practice its expectable that local companies start to assume Solar PV energy as an interesting
technology while developing new service offers (other international markets track-record have given
those lessons to the market players).
Grid Connection Procedures and Timings: although ANEEL has published the PRODIST rule document,
further standardizations and harmonization over grid connection procedures should be implemented,
so that all the concessionaries present the same demands. Also the average time between the
access application and the effective access and definition of the local access point could still take
more than a year, depending on the company.
Solar PV Panels: as it is well known, the PV panels efficiency largely depend on the local weather
conditions, in particular with local temperature. Hence, project promoters should bear in mind the
specific average conditions while assessing local solar resource levels in order to optimize production.
Thin-film technology could be an interesting option since it presents lower sensitivity in terms of
Temperature Coefficients. Besides this, Thin-film technology also present lower costs per kWp
comparing to crystalline technologies while needing more implantation area for the same production
levels which is not a big problem in Brazil, at least on the large scale systems.

Regarding Economical risks in Brazil one can identify the following ones:

Lack of Feed-In-Tariffs: The missing of a specific FIT for Medium and Large Scale Solar PV systems like
the PROINFA Governmental program (that successfully introduced wind power in scale in the
country), or even the lack of other similar mechanisms like Green Certificates, and other market
driving mechanisms somehow limit the huge potential of the Brazilian Solar PV market, albeit market
players believe that new measures will be implemented in the short term.
Limitation of the Net Metering system: although its an interesting schema, the pure Net Metering
schema introduced in Brazil does not consider the possibility of direct economic income to the energy
injecting Client side, only awarding him energy credits that must be redeemed over a 36 months
horizon. With the market development this mechanism should be modified enabling different
economic arrangements for distributed producers, even if for some of them the solution is already
profitable nowadays.
Over costs with import taxes and local installers: the local over costs both with import taxes and with
local installers that still lack experience on the industry could mean over costs in the 25% on top of
normal European prices.
Political will to reduce electricity prices: the announced willingness to reduce prices more than 10%
from actual levels could mean that Solar PV promoters should have to be more competitive in order
to tackle this possibility, since grid parity could be postponed in some regions.

Finally, in respect to Regulatory risks, the following ones are identified:

Projects up to 1 MW: albeit having a recent definition from ANEEL regarding the Net Metering system
and the Grid connection procedures (PRODIST) there are still missing harmonized Environmental
Licensing procedures for this project scale.






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Pg. 21 / 25
Projects up to 5 MW: even with existing specific regulation regarding this scale of generation projects,
simplifying some licensing procedures, there is still some harmonization improvement margin on the
grid connection process since local electrical distribution companies lack a uniform rule for grid
connection over this type of projects, thus analyzing project applications in accordance with local
criteria. Typically in these circumstances companies tend to be prudent over these applications due
to fear of potential hazards in their grids, which is reflected in terms of over demanding and costly
conditions to the promoters. On the Environmental Licensing process, since there is the obligation of
gathering an environmental license with no specific limitations, even for smaller scale projects,
difficulties could arise since promoters have to obtain this license with State or Municipal entities, with
their own rules.
Projects over 5 MW: regarding this project type the main issue concerns the lack of specific regulation,
since the existing regulation on this scale (from 5MW to 50MW) is mainly adapted for thermal and
hydro units with wind and biomass also being considered lately. Wind and biomass projects viability
conditions were created with the designing of specific contracts for regulated energy
commercialization, the locally called CCEARs that defined the contracted conditions in accordance
with the technology specific idiosyncrasies. The same should be adopted for solar technology soon.
In addition, its interesting to mention Decree 5.163/2004, that establishes the rules for electricity
commercialization, defines at its Article 36 that the costs of contracting distributed generation can be passed
to the electric regulated tariff up to the limit of the Annual Reference Value (around R$ 135.38 for 2011), which
restricts Solar PV producers to do so since its costs are higher than that level at the moment. Besides this, the
same Decree also defines that distributed generation capacity should be preceded by a public audition and
that only 10% of local distribution concessionaries can be contracted, which limits the Solar PV growth in some
high potential regions. Furthermore, since the law is not mandatory for the local distributor companies, some of
them may opt by not having those 10% of distributed generation in their generation mixes.


10.2 Opportunities
When assessing the Brazilian markets opportunities in Solar PV three main possibilities clearly appear, namely:

Micro and Mini-generation: due to recent introduction of specific regulation and remuneration
mechanisms, this area is the most active today, thus concentrating the main focus of both local and
international players in the market. As it
was shown in the present document, in
some cases the
Net Metering arrangement is
economically interesting nowadays.
This fact will push the market up and
will give momentum to other initiatives
in the area while providing the local
industry with a fast-mode learning
curve, were lessons from other markets
experience are introduced, or not,
accordingly with their success and local applicability.

Medium scale (Commercial and Industrial): On the Medium Scale, even when there is still a lack of
regulatory definition could also be an interesting opportunity since in some regions, were particular
energy costs, solar resource, and scale could combine and bring viable solutions both technically and
economically. The America do Sol (Figure XIV) project where some large players of the Brazilian
economic arena were called to sign PPAs with Solar PV promoters willing to install PV rooftops in the
World Cup Stadiums could be a compelling example of similar structured arrangements that could
be crafted in Brazil, especially with such a huge dimension in place where a multitude of entities like
states, municipalities, universities, industrial players, etc. are willing to introduce Solar PV technology in
the countrys energy matrix.

in some cases the
Net Metering arrangement is economically
interesting nowadays. This fact will push the
market up and will give momentum to other
initiatives in the area while providing the local
industry with a fast-mode learning curve, were
lessons from other markets experience are
introduced






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Pg. 22 / 25
Large scale: In the large scale, albeit having the same regulatory limitations of the Average scale, the
precise fact that is so new could also bring an edge factor to some players at least. Developing clever
arrangements putting together scale, fiscal incentives, and local solar resource, could make it
interesting enough for large electrical utilities to buy that energy, thus enhancing their sustainable
image and by diversifying their portfolios. Clearly, if a specific FIT or Auction schema is implemented
soon for Solar PV this type of projects could really assume a relevant role in the countrys energy mix in
the short term.














Fig. XIV


10.3 Market Trends
According to ABINEE, if the systems EPC costs reach the 6.000 R$ per kWp, one could get real (non-nominal)
IRR levels above 7.5% for consumers assuming tariff costs above 0.45 R$/kWh, which could mean the entire low
voltage consumers universe.

Up to the moment, the most common Solar PV projects in Brazil have been mostly focused in large public
buildings (Figure XV), such as schools, hospitals, shopping centers, parking lots and also small public equipment
like water pumps. Being so, it seems clear that this market will continue to grow since the country is still missing
many infrastructures on the public (like public buildings) and on the private side (like shopping centers), that
will be built on the next 10 years. Projects like the Solar Stadiums, for the 2014 FIFA, the World Cup and 2016
Olympic Games, and the Solar Airports planned for the cities hosting these major sport events could be some
sound examples of this.

Other trend that derives from the former is that the largest share of market growth will be the smaller and
medium scale systems focused on local energy production since local energy tariffs in some cases are already
higher and because that market segment has already some regulation building blocks in place.

According to the Brazilian Government recent figures and legislation publishing, new legislation introduction
will foster the higher penetration of Solar PV technology, while the Government expects this industry to assume
similar levels of development as the solar thermal industry achieved recently. If the same development policies
are taken this could presume annual growth levels of about 10 to 20% in the next decade, which certainly
would heat the market.

A special word should be given to the relevant and definitive role that Brazils Development Bank (BNDES)
could play in the development of the solar industry in the country by providing special financing conditions to
the projects and to their promoters.

In geographical terms, the southern and southeastern areas of the country with large population and industrial
universes and also the Northeast region with high solar resource levels and strong tourism units could be
playing the most relevant roles in the development of the solar industry in Brazil.
Finally, the Brazilian market due to its import tax policies and strong willingness to develop the national industry
will certainly assist the creation of several strategic partnerships along the industrys value chain joining
international players with local investors and players to cooperate both on local equipment production and
also on project portfolios development.

Source: CEMIG






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Pg. 23 / 25
















Fig. XV



11. Final Considerations
At this last chapter, the main study conclusions are shown arranged by topics, with plenitudes view and
perspective towards each of them:

Macro-economy: Brazil represents today, a stable, investment grade investment destiny, with a strong
economy that presents macro-economic indicators that are stronger than other emerging markets
like Russia and India. This makes us believe that it will continue to attract FDI in large quantities with a
growing trend over the next decade.
Renewables within the Energy Sector: the country has a structural need for energy, with a planned
national consumption growth of 61% from 2012 to 2020 and with an increase of installed capacity
from 110 GW in 2012 to 171 GW in 2020. Under this scenario, we believe that renewable energy will
play a very important role in the countrys matrix due to local sustainability awareness and local
abundance of renewable resources with a gradual introduction of technologies under competitive
market remuneration mechanisms towards a planned 100% growth of RE capacity by 2020.
Local Solar Resource: the solar resource in Brazil is considered to be very high, with level up to 2.400
kWh/m2/Year, values significantly higher than the maximum values measured in Europe (like Spain for
example). Due to the countrys latitude and low clouding levels in some areas, some areas present
record annual solar radiation levels. This fact may help project promoters to tackle some initial
industrys inefficiencies due to import taxes and lack of experienced installers, thus making projects
closer to grid parity.
Solar PV Status: the industry is starting in Brazil, although there is already stable regulatory frameworks
for micro and mini-generation scale projects (100 kWp and 1 MWp). At the Residential segment, some
unit are already competitive with local electricity tariffs within 24 of a total of 64 electrical distribution
concessionaries. The Commercial and Industrial scales present, in some cases, some viable projects
already while the Large Scale is still depending on the introduction of a specific Solar PV remuneration
schema under a FIT or Auction mechanism. Even though, some local associations foreseen, at an
aggressive growth scenario the possibility of a total installed capacity of 6 GWp on Solar PV. We
believe that with market scale growth, the entering of international players and equipment cost
reductions, Solar PV projects will make a fast entrance on the Brazilian energy mix, especially in some
states where energy is more expensive. If a generous remuneration schema is introduced for the Large
Scale, the local industry could definitely develop, reducing EPC costs and further approximating solar
projects from grid parity.
Source: UFSC






PLENITUDE, LDA.

AVENIDA MARGINAL, N6071 R/C ESQ. | 2765-604 ESTORIL | PORTUGAL
www.plenitude-energy.com




Pg. 24 / 25
Local Fiscality: Local taxes are an important variable to analyze since it could assume significant levels
over the total EPC cost. The most important taxes to consider are ICMS and the IPI. At todays costs,
the total EPC costs can have 25% over
costs comparing to normal European
prices. Over this topic, our view is that
some specific international players with
industrial capacity and project
development know-how could take
advantage of this situation and try to
assemble panels and other appliance
in order to cut costs from competitors,
thus gaining a cost advantage.
Local Financing: BNDES, the countrys national development bank has many credit lines to support
local investment and some of them developed specifically for Solar PV technology, like the Fundo
Clima Program. Nonetheless, we believe that the bulk incentives will be directed to local industrial
investments, with project promoters having to gather solid warranties to be able to bank their projects
locally, which, somehow, will favor large groups over smaller ones.
Local Risks: Main local risks identified were: local electrical distribution concessionaries resistance,
timing and procedures for grid connection, the limitation of the Net Metering mechanism, local over
costs due to taxes and lack of know-how and experience and also some political will to bring
electricity prices down, which could mean more time to reach grid parity, at least in some cases.
Albeit this, we believe that most of these risks are typical in a new RE technology introduction, and
many other countries have passed for the same problems which could mean that Brazil could take
advantage of lesson learned abroad and go for a fast learning curve approach over Solar PV
introduction.
Market Opportunities: micro and mini-generation scale projects represent actual business already
while larger scale units should receive a push in case the Government implements some FIT or Auction
remuneration schema. Our view is that companies gathering the proper conditions, namely:
know-how, track-record, industrial capacity, project development capacity and others, should get to
know the market and engage it by taking position in advance, which will enable them to be in the
pole position for harvesting the maximum return when Brazils Solar PV effectively takes off.
Having this said, plenitude is honored to assist potential interested companies on assessing the Brazilian market
and then, give local practical support to entering the country effectively either by means of strategic local
partnerships or even by establishing local teams and operations organically.

We look forward to assist your company soon!




















companies gathering the proper
conditions, namely: know-how, track-record,
industrial capacity, project development
capacity and others, should get to know the
market and engage it by taking position in
advance






PLENITUDE, LDA.

AVENIDA MARGINAL, N6071 R/C ESQ. | 2765-604 ESTORIL | PORTUGAL
www.plenitude-energy.com




Pg. 25 / 25
12. Disclaimer
Although plenitude prepared the present document with maximum care and due professionalism, it does not
constitute any type of offer or contract of sale or any part of an offer or contract of sale. It is intended only as
a guide and an aid to further investigation by potential Investors.

Any potential Investors or Clients accept this document on the condition that they will make their own
enquiries and obtain their own independent legal advice in order to verify the accuracy of the information
presented in this document.

The content of this document has been derived, in part, from sources other than plenitude and may be based
on assumptions and perspectives. In passing this information on, plenitude does not warrant that such
information or assumptions are accurate or correct.

To the extent that this document includes any statement as to a future matter, that statement is provided as
an estimate and/or opinion based upon the information known to plenitude at the date of preparation of this
document and assumptions could be imprecise.

plenitude does not warrant that such statements are or will be accurate or correct.

plenitude provides this document on the condition that, subject to any statutory limitation on its ability to do
so, plenitude disclaims liability under any cause of action including negligence for any loss arising from
reliance upon this document.

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