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May 26, 2015 | Will Brazil Break Through in 2015?

For the past few years, most analysts have predicted Brazil would become a leading force for solar in Latin America. Until October 2014, however, the market failed to mature as most observers thought it would.

The primary obstacle was, as it is in other countries, financing.

In the residential market, the government instituted a net-metering program — a billing mechanism that credits solar-energy-system owners for the electricity they add to the grid — in 2012. In other countries, net-metering has driven some of the most successful solar markets, including the United States. So when the government instituted its plan, it was expected to spur development in the residential segment.

Here, however, is the rub: Most Brazilian solar companies are strictly engineering, procurement and construction (EPC) firms, so they, like any other borrower, have to find banks with ready money to lend. Most Brazilian commercial banks have no experience in lending money for residential solar, though, and they are only starting the process of learning what the potential risks — and rewards — are.

The utility-scale market, in contrast, is faring a little better, but it is also struggling to find appropriate financing. While the country’s development bank has a well-established solar program, the much-ballyhooed governmental solar auction in October drove electricity prices so low that some of the bid winners — a total of 890 MW were sold — won’t actually complete the projects to which they’re committed.

2015, however, could be the year Brazil’s solar market comes of age.

Within the next five years, the Brazilian government is expected to contract 5 GW of solar power, and private companies will install 300 to 400 MW of residential solar. Already, the government is improving an already excellent regulatory framework to encourage the market’s continued growth.

Initial residential installations have existed for a year, so the “missing history” banks want will now be available to them. They will see the viability of solar in action, which will make banks more comfortable with the investments. When the Feed-in-Tariff (FiT) increases from 30% to 60%, companies should be able to build their Brazilian residential portfolios more aggressively.

The utility-scale market will also expand with the guaranteed 890 MW installed this year. Utilities have largely embraced solar, primarily because the market is so small that it hasn’t affected their bottom lines — yet. But even as it begins to grow, Brazilian utilities are already figuring out how to incorporate this burgeoning market into their existing energy portfolios — and are leading the way to finding a way for residential solar and utility-scale solar to co-exist peacefully.