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News Article

How Brazil Beat Mexico in Solar Energy Generation

By Cas Biekmann | Tue, 07/21/2020 - 09:27

When examining which Latin American economies have the biggest solar energy booms, Mexico and Brazil are often immediately mentioned because of the size of their economies and the potential for solar projects. Currently, Mexico seems to trail behind Brazil, even though it was leading in previous years. MBN’s experts weigh in on why this is the case, citing Brazil’s stance toward distributed generation as crucial.

Brazil has a larger GDP than Mexico. But this alone is not enough to explain the adoption of renewables in the energy matrix. As figures from BloombergNEF show, Chile beat Mexico in attracting renewable energy investments in 2019, despite its significantly smaller size. Therefore, we need to zoom in on the country’s particularities to explain the situation better. Brazil celebrated several recent milestones in relation to incorporating renewable energy. The country reached 6GW of installed solar capacity, reported Renewables Now. Mexico is not far behind, with recent numbers from BN Americas suggesting it only trails by approximately 310 MW. Nonetheless, Brazil achieved its 6GW without any program nearly as ambitious as Mexico’s 2014 landmark Energy Reform.

Shifting government attitudes are certainly influencing the issue. Where Mexico started off explosively after the Energy Reform, the shift toward the López Obrador administration also meant a renewed focus on national resources, making  private companies more wary of their investments. Brazil’s transition to Jair Bolsonaro’s presidency caused similar anxiety, Reuters reported. Bolsonaro received angry responses for his favoring of the national industry over environmental protection, leading some to fear that this approach would spill over into decreasing Brazil’s significant progress in renewable energy adoption, as reported by Foreign policy. Bolsonaro’s actions seemed to put little in the way of solar energy, however. The president even scrapped a proposed solar tax to projects under 5MW. This means that Brazil’s booming distributed generation segment retains its competitive advantage, reported PV Magazine. The cap before interconnection and all the legislative requirements rests at 1MW in Brazil. In Mexico, 0.5MW remains the norm, despite requests from prominent industry players to raise the cap.

Even though Mexico was leading Latin America’s solar market, Brazil caught up last year. “Mexico is now in a transitioning stage and solar development has stalled. Brazil is gaining quite a bit of interest as well. That country is strongly promoting utility-scale projects and distributed generation, which allows for stronger development. Mexico had always been more focused on utility,” said Álvaro García-Maltrás, President of Latin America and the Caribbean of Trina Solar in an interview with MBN. Jinko Solar’s General Manager for LATAM, Alberto Cuter, agrees with this reasoning. Despite similarly huge potential “Mexico does not have optimal legislation like in other markets, such as Brazil. Last year, the distributed generation market in Mexico added around 200MW. In Brazil, they already have over five times this installed capacity,” Cuter said.

If Mexico wants to be again leader in Latin American, another action could be to raise the interconnection cap to 1MW. “The country’s large projects could benefit from financial incentives on imports of solar panels. Some costs can be avoided if the project is large enough and under certain conditions, but costs are much harder to avoid for smaller projects,” argues García-Maltrás.

The data used in this article was sourced from:  
BNEF, Renewables Now, Foreign Policy, PV Magazine, Reuters, MBN
Cas Biekmann Cas Biekmann Journalist and Industry Analyst