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Subsidies on electricity tariff are an obstacle for developing Brazil’s market for distributed solar generation

October 10, 2017

A new Climate Policy Initiative analysis shows that energy policies should be redesigned

The Brazilian government should address energy demand-side factors such as electricity tariff, income and population to boost the development of Brazil’s market for distributed solar generation – which generates power from sunlight on-site at the point of consumption. This policy need emerges as the main recommendation from Climate Policy Initiative (CPI)/PUC-Rio’s new study, which looks at the consumer uptake of solar distributed energy generation in 5,563 Brazilian municipalities.

CPI study shows that the Northeast Region of Brazil has the highest annual solar radiation levels, as well as lower electricity tariffs, partly due to subsidies. This policy design makes the price of electricity in the region artificially low, reducing the profitability of investments in photovoltaic solar panels. The price variation between localities ultimately concentrates the market for distributed solar generation in the Southeast Region, which has the highest electricity tariff in Brazil.

“The subsidies policy in the Northeast is important, but one of its collateral effects is that it does not stimulate the development of the market for distributed solar generation in the region,” says Juliano Assunção, CPI executive director and professor in the Department of Economics at PUC-Rio. “Policymakers need to design policies that encourage renewable energy sources while incorporating economic development strategies for the poorest regions of the country.”

The study also finds that municipalities with higher Gross Domestic Product (GDP) and population have greater numbers of photovoltaic consumer units. Nevertheless, the percentage of municipalities with this type of energy generation is only 26%: as of June 2017, only 1,478 municipalities had photovoltaic units. Rio de Janeiro ranks as the top municipality with photovoltaic units in Brazil, with 436.

“What we have learned from this study is that the availability of natural resources alone is insufficient for increasing the adoption of photovoltaic units in Brazil,” says Assunção. “Therefore boosting renewables in Brazil’s energy matrix will depend on revising and tailoring policies developed for this sector.”

See publication at https://goo.gl/xFLXoV.

Media Contact

Mariana Campos
mariana.campos@cpirio.org
+55 21 35272520 / 972993553