Why a Brazilian solar power fintech is bullish about the domestic market

Brazil recently reached the milestone of 1mn small solar power generation units installed on rooftops, building facades and open land. 

A survey conducted by local solar power fintech Meu Financiamento Solar (MFS), based on data from watchdog Aneel, revealed that 77.7% of the PV solar panels in the country are installed in homes, 12.3% in businesses and 7.7% in the agricultural sector.

High electricity bills have encouraged the Brazilian population to seek ways to make savings. This year, the adjustments to regulated power rates made by Aneel have reached almost 25%, while the consumer price index measured in April shows that residential electricity rates in the country have seen 20.5% inflation in the last 12 months.

Distributed generation is a recent phenomenon in Brazil. The first system was installed in 2008 and there is now 11GW being generated by solar panels in homes and companies or on agricultural land, with more than 1.2mn consumers benefiting.

BNamericas speaks with the commercial manager of MFS, Iasmym Jorge, about the outlook for business. 

BNamericas: How are increases in inflation and interest rates affecting sales of solar panels in Brazil?

Jorge: Given this scenario, which still includes the logistical bottlenecks arising from the war in Ukraine and restrictive measures against COVID-19 in China, in the first quarter of this year we have seen growth similar to that recorded in the same period of 2021.

Although we don’t have control of this macroeconomic scenario, we avoid passing on costs to customers as much as possible. For us, the main point is to make solar energy more accessible to everyone. 

However, even with rising inflation and interest rates, solar energy continues to be a great investment and a consumer defense against inflation. Therefore, the most interesting focus is on the cost of installment and not on the interest rate. This is because photovoltaic systems generate autonomy and monetary savings in the medium and long term. Right from the first month of operating the solar kit, the consumer obtains a reduction in their electricity bill that can reach 95%, leaving them to pay the minimum rate and the financing installment.

If more energy has been generated than was consumed in the month, the credits accumulate and can be used in up to 60 months. Therefore, if in the following month the system generates less energy than was consumed, it can be offset with credits from previous months. After five years, the financing will be paid off and the client will have electric energy almost for free for another 20 or 25 years. 

BNamericas: What are the sales perspectives for 2022? Which segments are expected to stand out most?

Jorge: The trend is for an increase in energy rates, new players in the market and the expansion of financing lines, which will make the purchase of photovoltaic kits even more favorable. 

In 2021, MFS recorded a 256% increase in financing volume and 220% in paid proposals compared with 2020. For this year, we expect to double the result and generate 1bn reais [US$210mn] per month in business opportunities.

BNamericas: What are the main financing solutions offered by MFS?

Jorge: It’s possible to finance up to 100% of the project, including the installation. The payment is always made directly to the suppliers, which is one of the differentials of our credit line, allowing the value of the service to be paid directly to the companies that install the solar energy kits. 

The most popular financing range is up to 30,000 reais. This is focused on the residential public (individuals), which has shown the greatest interest in financing solar energy.    

The financing payment can be made in up to 84 months and the deadline to start paying is up to 120 days. Most customers still prefer to finance in 60 installments. However, the 84-installment plan is often considered for small and medium-sized commercial projects.  

The grace period most often requested by our clients is 90 days. We also have a grace period of 120 days, which is often considered for large projects, given that the client seeks to “match” the energy bill savings with the maturity of the financing installment. The extended grace period is beneficial because it allows the entire installation process to be completed before the first installment is due.

BNamericas: Is there growing interest for these solutions? Has the legal framework for distributed generation contributed to this?

Jorge: Yes, there is growing interest. The legal framework promoted advances in the way solar energy credits are offset. Since 2012, the market has operated with regulatory incentives for pioneering consumers. This means that there was no charge for the use of the distribution grid. With law 14,300, the consumer will have a discount on the credits to offset the service provided by the utility. 

Theoretically, this could lead to an increase in the payback of a project. However, the inflationary trajectory of energy rates in Brazil, combined with the innovation of photovoltaic equipment technology and the offering of financing lines, has created a scenario in which solar generation will become more and more competitive, opening up space for new technologies, such as battery storage systems.

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