Rationales For Technology-Specific RES Support: The Impaired Brazilian Solar Expansion

by Gustavo Andreão, Michelle Hallack and Miguel Vazquez

Renewable energy promotion mechanisms have two main dimensions: enhancing project revenue and decreasing costs. Capital costs are one of the most relevant. Brazil is used as case study. Financial tools intertwined with industrial policy were applied: first to successfully promote wind generation, and then for solar photovoltaic (PV). The tools applied for wind were transposed to solar PV. Nevertheless, this has led to important challenges caused by the maladaptation of incentives to the solar PV industry specificities (e.g.high effort of innovation, lower transportation costs, and high importance of soft costs). We show how the use of similar financing support mechanism indistinctly for renewable sources (such as solar and wind) can create actual disincentives. We conclude that the financing mechanism has been fundamental for the viability of renewable energy projects, especially in countries without mature capital markets, where most of the infrastructure has received some sort of government financing support. The design of this mechanism needs to take into account the technological specificities and the national characteristics in order to successfully insert a certain renewable source in a determined country. The framework developed can be applied to other study cases