Brazil is blessed with a wealth of natural resources. It gets almost two-thirds of its electricity from hydropower facilities, and it also has enormous potential for wind, solar, and natural gas-fired power. Yet, the country is saddled with higher than average electricity prices compared to most developed nations. A study conducted by McKinsey & Company analysts found that Brazil’s electric power rates for captive industrial consumers were 65% higher than rates in the U.S. in 2019, and 35% greater than Canada’s, which has a similar reliance on hydropower.
“The price of energy in Brazil only goes one way, and that’s up,” Lisarb Energy Chairman Jamie MacDonald-Murray said as a guest on The POWER Podcast. “It’s driven by inflation, but largely, it’s also driven by the fact that the grid operators are having to reinvest in the infrastructure. They’re having to renew the grids. They’re having to add capacity and modernize the grid, and that cost they’re passing on to the consumer.”
Lisarb Energy is focused on developing large-scale solar projects in Brazil. These include distributed energy solar parks for the corporate power purchase agreement (PPA) market, as well as high-yielding utility-scale solar parks for the free market and government auctions. The company was established in 2017, and has already become one of Brazil’s fastest growing solar developers. “We’ve been very successful,” MacDonald-Murray said.
The ability to lock in power prices through a PPA is one of the key incentives for Lisarb Energy’s corporate clients, according to MacDonald-Murray. “We now have over 200 MW of PPAs signed with some of Brazil’s largest companies, and we have another 700 MW in various stages of negotiation that I think will close out 2021 with just over 1 GW of corporate PPAs signed,” he said.
The fact that legislation will be enacted next year requiring solar generators in Brazil to contribute money toward distribution costs has incentivized PPA agreements in the near term. “The price that we can offer won’t be as attractive [in 2022] because obviously, if we’re going to have to start contributing to distribution costs, then, obviously, we’re not going to be able to offer such a competitive price to our off-takers,” said MacDonald-Murray.
Still, Lisarb Energy believes solar power’s growth potential in Brazil is enormous. The company cited a forecast by the Brazilian Solar Photovoltaic Energy Association, ABSOLAR, which says “solar will take the largest share (38%) of the Brazilian electricity matrix, producing 125 GW by 2050.” Brazil’s government recently exempted various types of solar equipment from a 12% import duty, which Lisarb Energy said shows that officials recognize “the strategic importance of the solar market.”
Lisarb Energy has already secured land for 3 GW of solar PV development in Brazil. The majority of the company’s existing projects are smaller in size (about 2.5 MW), but it is currently working with a mining company on a 250 MW system. “That one’s slightly different,” said MacDonald-Murray. “We’re working with a partner to provide a battery system to obviously increase the usability of the energy that’s generated.”
To hear the full interview, which includes more about Brazil’s power grid and the energy transition that’s taking place, listen to The POWER Podcast. Click on the SoundCloud player below to listen in your browser now or use the following links to reach the show page of your favorite podcast platform:
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—Aaron Larson is POWER’s executive editor (@AaronL_Power, @POWERmagazine).