IDB grant to provide electricity for 1,500 homes and roadmap to spark investment in solar power in Latin America and the Caribbean
With the rise in energy demand in Latin America and Caribbean over the last decade and growing pressure to tackle climate change related issues, countries in the region are looking to solar and other renewable energies.
However, high startup costs and financial issues can make such investments challenging for companies. Financial support provided by national governments or multilateral organizations can help overcome these barriers and boost the advance in solar technology. A solar project in Brazil’s sundrenched northeast, supported by the Inter-American Development Bank, is providing a roadmap on how to spark private sector investment in solar energy.
The solar project located in the municipality of Tauá in the State of Ceará will be the first ever large scale power generation project to connect a photovoltaic (PV) system into the national interconnected system in Brazil. In its pilot stage, Tauá will generate 1 MW of direct current, and represent the largest PV project incorporated to a grid in South America.
Tauá will produce sufficient energy to supply approximately 1,500 residencies initially. The capacity of the solar power generation facility is expected to be expanded to 5 MW and can eventually reach a maximum of up to 50 MW. The pilot project will create 47 jobs in the construction phase and 14 in the operational stage in addition to providing skilled labor training.
Energy produced from solar power contributes to reducing greenhouse gas emissions and mitigating climate change effects. However, the cost per MWh of electricity generated by PV solar plants is higher than the cost of electricity generated by conventional sources of energy. To reduce investment costs, the IDB has provided two grants totaling $700,000.
The grants have paved the way for MPX Energia S.A., a Brazilian energy corporation and the executing agency, to take on this ambitious project. It finances the acquisition of solar panels, which are the key and most expensive elements of a PV power plant, and engineering required.
“IDB’s support was key for us to carry out this effort. Tauá will serve as an important example on how utility companies can scale up solar power generation in Latin America and the Caribbean” said Mario Sergio Gomes, Financial Director at MPX Tauá Energia Solar.
Grant financing for Tauá will also support the preparation and dissemination of a study on solar PV technology and incentive mechanisms for solar generation through utilities. The study looks to provide a replicable model that can be applied in Latin America and the Caribbean and will help promote solar PV generation at large scale. The study will look into how local governments can help attract and retain private sector investments in solar energy successfully. It will also identify economic benefits that could result from a solar PV market development.
The lessons learned from this project will provide important inputs for local governments such as the northeastern state of Ceará, which is currently looking to develop incentives to boost investment in solar power. Tauá demonstrates how such a mechanism of grants combined with technical assistance can lower startup costs and help attract new investment into environmentally sustainable projects.