How to finance environmentally friendly projects in Brazil?

As an emerging market Brazil has a lot of resources to invest in the development of environmentally friendly projects. Yet, accordingly to the experts’ announcement the problem is that “there are not enough decent projects to finance”. We hope that through the cooperation with German leading green companies and research institutions Brazilian project proposals could gain additional value to enable them to have more chances to obtain different national and international funds.
Brazil has different state programmes that aimed at supporting the innovation and sustainable project development

1. Federal funds

One of the low cost access to financing is confined to credit lines provided by Brazilian National Development Bank (BNDES), which offer rates between 2.5% - 5.5% under their climate fund (Fundo Clima) program,. The program provides a credit interest rate lower than the current reference rate (11%) stated by the central bank of Brazil. The financing is granted for products with nationalization (local content) index, in value and weight, higher than 60%, and what is making more difficult to obtain it for solar energy projects.
BNDES has also other funds such as Fundo Amazônia, Technology development fund (FUNTEC), support for energy efficiency projects (PROESCO) etc. All these funds are aimed to support  the innovation projects and differ in the project location or its specification.
More detailed information can be found here: http://www.bndes.gov.br/SiteBNDES/bndes/bndes_en/

Funding Authority for Studies and Projects  (FINEP)
According to the law about innovations (Lei de Inovação) companies might obtain public resources from 10% to 200% of applying amount (depending on the size of the company) to develop innovative projects. Generally projects should be from the strategic areas selected by the Federal Government to be able to receive such support. FINEP is responsible for this subsidy and it is publishing the information about the beginning of a tender on its site http://www.finep.gov.br/editais/vigentes.asp

In the process of selection foreign companies might take part only if they have partners in Brazil. However, for this purpose a company should be in a category of “leading companies”.  According to established for this program criteria a “leading company” should have gross operating revenue equal or higher than 4 926 790 Euro (R$ 16 000 000) or equity equal 1 231 699 Euro (R$ 4 000 000) in the latest fiscal year.

To apply for this program a company should send a note of interest.  After this leading companies will be selected to present their business-plans.  For selected business-plans will be elaborated an instrument of support with conditions of a credit and a financing amount.

2. Regional programs in Sao Paulo

Many regions in Brazil have the funds for the innovation projects financing and it is possible to negotiate the conditions with local government that depending on the projects. Regional autority are usually offering the place for free or under subsidies, special fiscal treatment and many other incentives in order to attract a foreign investor/company that could bring an economic development and jobs creation in the region. As an example we could see the offer of regional bank in São Paulo.

Desenvolve SP

The São Paulo state provides to investors credit facilities and specific tax incentives for activities related to the sector. There is the green economy credit facility, from São Paulo Development Agency – Desenvolve SP. The interests of this bank is a bit higher than the one of than BNDES, but it is easier to get, because it requires less bureaucracy and it allows to import material needed for the construction (while  to get BNDES credit company should guarantee to use at least 60% of materials produced in Brazil ).

Name of credit line	Interest rate/ per month	Repayment period (months)	Repayment period (months)
FIP	0, 57%	Up to 120	Up to 24
Linha Economia Verde	0,41%	Up to 120	Up to 24
Linha Economia Verde – equipment	0,41%	Up to 60	Up to 12

Concentrated solar power in Brazil

Solar thermal power plants for the production of electricity until now have been mainly built in Southern Europe, North and South Africa and the United States (GIZ, 2014). 

Power plants with concentrating solar power systems use the sun, instead of the fossil fuel, as a heat source. The steam from the boiling water spins a large turbine, which drives a generator to produce electricity (NREL, 2014). The key advantage of this system in compare with the other renewable energy sources is a possibility to implement a thermal storage system. This opportunity of energy storage makes this system a reliable and flexible energy generation unit (IRENA, 2012).

Brazil offers a great potential for the CSP technology. The data from NREL shows very good values of direct normal solar radiation. In addition the values near the equator showing the constant optical conditions for the plant operation that add the stability to energy producing (GIZ, 2014).

Furthermore, Brazil possesses a developed industrial sector that can be adapted to produce components of CSP plant, such as steel and glass industry, chemical and petrochemical companies. 

As part of the German Climate Technology Initiative (DKTI), Brazilian government together with GIZ (German Federal Enterprise for International Cooperation) are working on the creation of conditions for the development and dissemination of CSP in Brazil. The project consists of different components as training and education, research and development, building of the experimental plant, matching industry and universities etc. This cooperation is aiming at the creation of foundation for further CSP development in Brazil and the strengthening the German-Brazilian cooperation.

As CSP technology requires for the moment high investments. In Brazil it’s seen currently as a good opportunity for the steam generation. There are many industries that need the heat for the production processes. At the moment these companies use wood that sometimes favors illegal deforestation. Indeed, CSP technology could be already a competitive alternative for the steam production and clean energy producer in the future.

Where the energy is coming from?

When I was working at the International trade Center, I learned one very important rule: always ask in the shop where the product is coming from! This small action could influence the supply chain of that product as if the customers are asking then the shops will start to do the same.
Apparently, now I can ask even where the energy is coming from! IDEAL institute in Brazil introduced the solar energy label called "Celo Solar" in order to give visibility for solar energy. It's been a long time, Brazil needed something to encourages companies to install the solar energy at least for the marketing reasons. Yet, this label is unknown in Brazil even within the specialists in this area. Moreover, after I went through the guide to obtain this certificate, I got an impression that it's not so easy. Many papers are required including the marketing plan on how it's going to be promoted. Indeed, these criterias will provide a certain credibility for a label, yet it will require a long time to be well-known.

For more info: http://www.selosolar.com.br/en/selo-solar/

Ideal financial lines for PV system in Brazil

Yesterday, I participated at the defence of one Master's theses concerning the regulation measure for solar energy in Brazil. The objective was to identify the main regulation barriers to develop solar energy, which one of the most important is the lack of an appropriate financial support mechanism.

Indeed, in Brazil there are already some support mechanisms as auctions for solar energy, net-metering and even some financial lines for the energy plants provided by BNDES (development bank). Yet, there is no any adequate financial line for the distributed generation.  If I want to install the Photovoltaic (PV) panel on the roof of my home it will cost me around 20-30 thousand real (or $700-$1000) with the payback achieved in 10 years. There are some governmental banks, as Caixa that provides the credit lines for solar heaters and it's possible to take for PV energy, but still with very high-interest rates.

The work made by Helena Mian proposed the introduction of special financial incentive with the interest rates of 5% that could be adequate for the viability of solar energy in Brazil. However, when I talked with some of the financial sector representatives in Brazil and asked them about the possibility to open a special credit line, they were complaining about the lack of demand. They were saying that until the time when solar energy will be accessible for the majority of consumers they are unable to provide a special financial line for it. In other hand, we understand that without the adequate financial line for solar energy it will take long time before it will be accessible for a consumer.

Nevertheless, he agreed, that it would be possible to create a "consórcio" that is used very often in Brazil to finance concrete products as car or homes. Basically, it means that group of people who wants to buy the same product, without the immediate necessity to have it, make installment payments over a fixed period.  A bank could create this consórcio specifically for the PV system, that will bring the financial costs down and become a more budget-friendly product.