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BMI View: Although the economic recession continues to affect the Brazilian non-hydroelectric renewable
market in 2016 as the currency devaluation threatens multiple solar projects, reaffirmed government
support and a return to positive growth in 2017 provide some upside to our outlook. The re-scheduling of
the two reserve auctions to September and December in hope for an improved investment this year could
reinforce the already strong project pipeline, whose major obstacles remain to be financial, as well as
relate to an insufficient production chain in light of local content requirements. We currently see non-hydro
capacity to grow by 9.5% in 2016, and 4.2% by 2017.
Latest Updates And Structural Trends
- For 2016, we expect overall non-hydro renewables to see a year-on-year capacity and generation growth
of 10.7% and 16.7%, respectively. While capacity growth is significantly below 2015-levels, generation
is increasing from last year's strong growth and the slump in domestic energy consumption levels as the
wider economic downturn continues. For 2017, capacity and generation growth are forecast to fall to
9.5% and 7.6%, respectively.
Due to the political turmoil and economic uncertainty surrounding the impeachment of President
Rousseff, auctions have been rescheduled. The first reserve energy auction, originally scheduled for late
July, has been postponed until September 23. The second reserve auction initially planned for October 28
has been rescheduled to December 16. Also, the most recent power transmission auction, originally
scheduled for September 2, 2016, has been postponed; the government had expected to attract
investments of up to BRL12.6bn (USD4bn), but the Energy Ministry decided to review the terms of the
auction to ensure interest from investors.
- Wind capacity forecasts for 2016 and 2017 have been readjusted to include more projects entering the
market by the end of 2016, rather than 2017. Solar capacity growth remains at an unchanged, lower level,
due to currency pressures and delayed auctions.