Farmers in Brazil are looking at solar energy as one way of reducing costs and breaking their dependency on the country's energy companies after years of rising electricity bills.
Those costs are likely to keep climbing as Brazil experiences the worst drought in at least 91 years. The country may face a shortage of almost all energy resources by November, according to the National Electric System Operator (ONS), prompted by three key factors: deforestation of the Amazon, global warming, and the effects of La Niña.
So far this year, the average cost of electricity has climbed by 7pc to R607.56/MWh ($114/MWh). It averaged R477.5/MWh in 2017.
Solar energy is perhaps the most promising component of a menu of technologies and strategies farmers are considering to contain what appears to be a burgeoning energy crisis for their sector. Wind power and biomass are also in the mix, although they are behind solar in terms of development in the country. Farmers, as well as the government, are also considering and enacting conservation strategies to generate savings.
Solar is a small but rapidly growing segment of the energy matrix. Solar energy started having significant energy generation in Brazil in 2017 with 993MW, according to Aneel. By 2020 it represented 1.9pc of the Brazilian electrical matrix, and ONS says it should rise to at least 2.6pc by the end of this year, reaching 3.9pc by 2025.
Brazil today has 35 photovoltaic solar energy plants with a combined capacity of 1,304MW that should be in operation this year. By 2022 the number should increase to 129 plants with combined capacity of 4,828MW, rising to 617 plants with capacity of 24,747MW by 2026. Most of these plants will be in the southeast, northeast, and central-west regions of the country.
The lack of rainfall in the country has led to low reservoir levels and is affecting operations at hydroelectric plants, causing them to produce less energy than normal. That prompted thermoelectric plants to be activated to offset the supply shortage.
But the cost of activating the plants is high, so in recent months Aneel has been raising what is called the "rates flag," which warns the public of impending increases in energy bills, depending on the conditions of electricity generation. At the end of June, the agency issued "Red Flag 2" announcing an increase of 52pc to R9.49/KWh from R6.24/KWh for each additional 100KWh consumed. This week, the ministry of mines and energy issued a new "Water Shortage Flag," warning of an additional cost of R14.20/KWh for every 100Kwh consumed, beginning this month.
Conservation measures
The increase in energy rates has impacted farmers' production costs, with fertilizer expenses alone up by nearly 35pc from a year earlier.
To offset higher costs of energy and to try to replenish reservoirs, farmers are already reducing their water use for irrigated crops such as rice, cotton, and in some areas corn. The soybean crop, usually planted in September, may face delays as farmers wait for the seasonal rains and for more water to become available.
Another solution found by farmers is to alternate crops that need more water like cotton with crops that need less water, and to use energy at times when the rates are lower.
But solar energy appears to be the most promising long-term solution. Even though it is expensive to install as it requires panels and other technologies, solar electricity generation is cheaper than fossil fuels, prevents energy instability and guarantees distribution as it is predictable and can be stored.
Solar energy also receivessupport from the government. The surplus energy generated is passed on to energy companies and generates a discount in bills received by consumers. Some market participants have reduced their bills by 90pc using this system.
Solar is also well capitalized. According to Brazilian Photovoltaic Solar Energy Association (Absolar), by August more than R51.3 billion was earmarked for new private solar energy investments in the country. About 13.3pc of installed solar capacity is on rural properties.
The costs of acquiring and installing solar technology may initially boost farmers' production costs and lower profitability. But in the longer term, markets sources said, the technology generates greater benefits, as the lower use of electric energy requires less water, which can be used in irrigation, lower energy costs and hence lower prices for the farm products.
