OVERVIEW – Grid constraints BNDES over-reliance impede renewables growth

Nov 16, 2016 16:10 CET by Lucas Morais

November 16 – The lack of adequate transmission capacity and the over-reliance on finance from Brazil’s Development Bank (BNDES) are key factors contributing to renewable energy investment bottlenecks in the country, say experts.

Such issues were discussed during the Brazil International Renewable Energy Congress (BIREC) last week in Sao Paulo city.

As announced in October, the country faces projects delays due to the lack of transmission lines, with Brazilian renewables investor Renova Energia SA (BVMF:RNEW11) being forced to hold back 460 MW of wind power projects because of insufficient grid capacity. The transmission systems in the states of Bahia, Rio Grande do Norte and Rio Grande do Sul, the top states in terms of wind and solar power generation, are reaching full capacity, according to a technical analysis from state-owned energy research firm EPE and the National Electric System Operator (ONS).

According to the head of power sector regulator Aneel, Tiago de Barros Correia, the main reason for the delays with the construction of new transmission lines is the large volume of works demanded by new power projects. One option to give investors greater control over the situation and help guarantee no delays is for power project developers to invest in transmission capacity for their own projects, the director added.

On a related matter, BIREC discussions revolved around the topic of BNDES finance and the concern that as long as the bank remains the sole renewable energy financier in Brazil the sector will not evolve. Since 2003, BNDES’s support for wind generation has reached BRL 27.5 billion (USD 8bn/EUR 7.4bn). Recently the bank also raised to 80% from 70% the share of solar project costs that it is willing to support.

What can be done in that direction is for the bank to gradually reduce the percentage, and not increase it, so as to allow other banks to pitch in and break the BNDES dependency. It is also necessary to re-evaluate the project contracts in Brazil and reformulate them, said Antonio A.T. de Bastos Filho, CEO of Omega Energia Renovável.

According to Eduardo Klepacz, president in Brazil of Cubico Sustainable Investments, it is necessary to open the market more and give projects more time to complete construction and start generation under energy contracts so that investors can evaluate the total cost.

(BRL 1 = USD 0.292/EUR 0.272)

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