Brazil Switching Funds from Coal to Solar
Brazil’s development bank has announced a switch in funding away from fossil fuel plants and hydro towards solar.
BNDES will no longer provide subsidised loans for oil and coal powered plants, while gas fired plants and big hydro-electric schemes will now receive a maximum of 50% funding – down from the 70% previously permitted. Wind, biomass, and small hydro projects will continue to attract up to 70% financing, but the big winners in the switch in funding will be solar where new schemes will now be eligible for financing up to 80% of the costs compared to the previous 70%.
While BNDES is the worlds biggest investor in cleantech, this move is not simply about helping Brazil reach its 23% non-hydro clean energy target by 2030 – it is largely down to tough economic conditions meaning there is less money to go around.
The bank has therefore decided to concentrate on renewables and hopes private finance can be used to make up any shortfall in funding for the big hydro projects.
While oil fueled generation is expected to have fallen to 3.201GW by 2024 from today’s 3.58GW, the use of coal is still increasing and is expected to reach 3.404GW in the same period, up from 3.06GW. BNDES therefore hopes to encourage renewables in order to mitigate against this and help reach Paris.
Speaking to Bloomberg Carla Primavera, superintendent of energy at BNDES said: “Solar energy is still a source under development in Brazil, which justifies our participation increase, to further strengthen the industry”.
Brazil already has a highly successful ‘green’ electricity generating policy. Approximately 85% of its domestically produced electricity was sourced from hydro in 2009, but a decision was made to move towards other forms of renewables following a prolonged drought which caused a power crisis.
A target of 20GW of wind power has been set for 2020, compared to 2014’s figure of 5GW – with the country having the potential to install 143GW of wind power capacity. Utility-scale solar has a target of 7GW by 2024 – up from an expected 3GW by the end of 2018.
Biomass too is important in Brazil, with 1 million people working in the sector. While electricity is produced from biomass, by far the most important use is in the production of ethanol, which largely fuels road vehicles.
Dilip Kuner for OPEN Opportunities in Envirotech