Annual Report 2015 - The Brazilian Market of Distributed Solar PV Generation by Instituto ideal

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ANNUAL REPORT 2015 – THE BRAZILIAN MARKET OF DISTRIBUTED SOLAR PV GENERATION www.renewables-made-in-germany.com

Imprint Publisher (A) Instituto para o Desenvolvimento das Energias Alternativas na America Latina (Ideal) and German-Brazilian Chamber of Commerce and Industry (AHK) Rio de Janeiro Status 29.02.2016 Illustrations Fotovoltaica/UFSC Solar Energy Research Laboratory at Universade Federal de Santa Catarina / Credit: Grupo Fotovoltaica UFSC Text Gabriel Konzen Paula Scheidt Manoel Peter Krenz Collaboration Marcos Antonio Hidalgo Arellano, AHK Rio de Janeiro Revision Ricardo R端ther

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INSTITUTO IDEAL Instituto Ideal is a private, not-for-profit organization based in Florian贸polis (SC), which promotes renewable energies and energy integration policies in Latin America. Ideal has three main work projects: the Academic Essays Award Eco-L贸gicas, the Seminar Energia+Limpa and the America Do Sol program. All of them involve a series of initiatives that are free of cost to the participants. By promoting events and providing incentives to studies and actions dedicated to the development of clean energies, Ideal has strengthened its role as a link between government and the academic and business worlds, and has become a reference for the energy sector. The search for a diversified and integrated energy matrix throughout Latin America has set the path for this Brazilian organization. Learn more at http://institutoideal.org

AHK RIO DE JANEIRO The German Brazilian Chamber of Commerce and Industry (AHK) Rio de Janeiro fosters the economic ties between Germany and Brazil. Founded in 1916 in Rio de Janeiro and S茫o Paulo it also comprises offices in Porto Alegre, Curitiba and Blumenau. The AHK Rio de Janeiro offers a wide range of services. Benefiting from being close to the huge industrial centers in the Southeast it supports industry sectors such as IT, biotechnology, renewable energies, Logistics, Health Care and Oil & Gas.

Table of Content INSTITUTO IDEAL ......................................................................................................................................3 AHK RIO DE JANEIRO ................................................................................................................................3 LIST OF TABLES .......................................................................................................................................... 7 INTRODUCTION......................................................................................................................................... 8 Methodology ................................................................................................................................................ 8 1. Profile of INSTALLERS AND INSTALLATIONS .......................................................................................9 Incipient industry in Brazil ...........................................................................................................................9 Duration of the connection process ............................................................................................................ 10 Jobs in the Brazilian photovoltaic industry................................................................................................. 11 Prices in Brazil ............................................................................................................................................ 12 Determining the appropriate size of photovoltaic systems ......................................................................... 15 2. RELATIONSHIP WITH DISTRIBUTORS .............................................................................................. 17 Technical standards and procedures .......................................................................................................... 17 3. CHALLENGES IN THE GRID CONNECTION PROCESS ......................................................................23 4. POSITIVE EXAMPLES FROM DISTRIBUTERS, GENERAL COMMENTS AND SUGGESTIONS ....... 29 Comments and Suggestions ....................................................................................................................... 30 5. FINAL CONSIDERATIONS .................................................................................................................... 31 REFERENCES ............................................................................................................................................32

LIST OF GRAPHS Graph 1 - Number of projects completed by each company in 2014?............................................................9 Graph 2 - Number of PV systems connected to the grid in 2014 by company ............................................. 10 Graph 3 - Time for completing all stages of installation and connection .................................................... 11 Graph 4 - Percentage of direct and subcontracted workers in the industry ................................................ 12 Graph 5 - Average PV system price by power range in Brazil in 2014 ......................................................... 13 Graph 6 - Price range of installed PV systems (<5 kWp) ............................................................................ 13 Graph 7 - Average price by region (< 5 kWp) .............................................................................................. 14 Graph 8- Comparison of mid-sized photovoltaic system prices .................................................................. 14 Graph 9 - Composition of PV systems installation total cost ...................................................................... 15 Graph 10- How important is each one of the criteria below for your company when sizing a PV system? . 16 Graph 11 - Evaluation of their own knowledge about Section 3.7 of Module 3 of PRODIST – ANEEL ....... 17 Graph 12- Evaluation of PV system installers about their own knowledge of the technical standards about connecting to the distributor’s grid. ............................................................................................ 18 Graph 13- Evaluation of the level of clarity of Section 3.7 of Module 3 of the distribution procedures (PRODIST) from ANEEL ............................................................................................................ 18 Graph 14- Evaluation of the level of clarity of the technical standards for connection of PV generators to the distributor’s grid ................................................................................................................... 19 Graph 15- Does the distributor revise its standards when ANEEL and INMETRO.................................... 20 Graph 16 - Does the distributor’s technical standard contain deadlines for each step of approval of a connection to the grid according to what was determined by ANEEL’s REN 482/2012 (in Section 3.7 of Module 3 of PRODIST)? ...................................................................................... 20 Graph 17- Degree of satisfaction with the distributor’s standard ................................................................ 21 Graph 18- Degree of satisfaction with the handling of the process by the distributor................................. 21 Graph 19 - Reason(s) for dissatisfaction or low satisfaction with how the distributor conducted the process in 2014. .......................................................................................................................................22 Graph 20 - Did your company face any difficulty or requirement that impeded, delayed, increased the cost of or made nonviable the installation of a mini or micro PV generator for some of your clients? ....................................................................................................................................................23 Graph 21- In which phase of the project did this difficulty occur? If there was difficulty in different steps, you can indicate more than one option. ......................................................................................24 5

Graph 22- Did the difficulties prevent a project from being connected to the grid? ................................... 25 Graph 23- Did the difficulties cause a delay in the deadlines stipulated by REN482/2012 (in PRODIST) for connecting the PV system to the grid?................................................................................... 25 Graph 24 - Avg. time of delay to complete installation of the PV system due to the difficulties ................ 26 Graph 25 - Total time for connection of distributed generation in 2014 (ANEEL, 2015b). ......................... 27 Graph 26 - Which points could be improved in the process of requesting a distributor connect a photovoltaic system to the grid? ................................................................................................ 28 Graph 27- Which positive points of the distributor(s) serve as an example for others? ................................2

LIST OF TABLES Table 1 - How important does your company think each of the criteria below is for sizing a PV system? ... 16 Table 2 - Reason(s) for dissatisfaction or low satisfaction with the distributorâ&#x20AC;&#x2122;s handling of the process in 2014. ...........................................................................................................................................................22 Table 3 - What points can be improved in the process of requesting from the distributor connection of a photovoltaic system to the grid? ................................................................................................................. 27 Table 4 - Which positive points of the distributors serve as an example for the others?............................ 29

INTRODUCTION Since 2013, Brazilians who want to generate their own electricity from renewable sources can connect their system to the electrical grid and benefit from an energy compensation system known internationally as net metering. The system was enacted by Normative Resolution 482 of the National Electrical Energy Agency (ANEEL), published in April 2012. It allows the owner of a small generator that uses a renewable energy source to inject electricity that is not consumed at the time of generation into the grid and receive credits in kWh that can be used for up to 36 months. The Brazilian resolution distinguishes the so called micro generation systems with a capacity up to 100 kW and mini generation with a capacity between 101 kW and 1 MW. Instituto Ideal has accompanied the development of this market since the beginning, and has close contact with owners of photovoltaic (PV) systems, installers, designers and other important actors. As a result, in 2014 Ideal decided to conduct a study to understand the main challenges to greater adoption of PV based distributed generation in Brazil. This work included interviews at companies registered in the Map of Companies in the Photovoltaic Sector1 (http://www.americadosol.org/fornecedores), of the América do Sol program. Given the good repercussion of the 2014 study, Ideal continued the work, to construct a history of the evolution of the market for distributed PV generation in Brazil. In this context we present the study entitled “Annual Report 2015 - The Brazilian market of distributed Solar PV generation”, which is intended to carry out annually. Preliminary results of this study were included in documents sent by Instituto Ideal in response to audiência pública [Public hearing] 026/2015 by ANEEL, open from May 7 to June 22, 2015, to collect suggestions and comments for the improvement of REN 482/2012 and Seção [Section] 3.7 of Módulo [Module] 3 of PRODIST (ANEEL, 2015a).

Methodology For data collection, in May 2015 questionnaires were sent to 504 companies with an active profile in Instituto Ideal´s Map of Companies in the PV Sector (http://www.americadosol.org/fornecedores). The questionnaires remained available for response for 34 days. Of all the companies registered, 172 (34%) started completing the questionnaire and 106 (21%) responded to all the questions. Responses valid for this study were only those from companies who completed the entire questionnaire. Of all the companies participating in the study, only 27 (25%) had also responded to the questionnaire in the previous edition. One of the causes of the low participation of companies that worked in the sector in the past year was precisely the intensification of the market in the first half of 2015 due to electricity tariff increases. Installers with more experience faced a demand for services above normal and therefore reported not having time to participate in the study. For the second time, the responses allowed establishing a profile of the Brazilian distributed PV market and analyzing its changes. The first edition of the study was published in November 2014 and presents data referring to 2013. Some questions included in the past edition were changed to improve clarity. Moreover, questions were added that were not applicable in 2014 due to the level of development of the market. Since Instituto Ideal intends to carry out this study annually, it decided to change the title, and beginning with this edition it is identified by the year of realization of the survey and no longer by the year to which the data collected refer, as was the case in the first edition. With over 500 companies already registered, it is the main tool for offering support to those who look for PV services in Brazil, which is focused on mini and microgeneration. 1

1. PROFILE OF INSTALLERS AND INSTALLATIONS Access to this section was only granted to those who answered "yes" to the first question: “Has your company completed the installation of at least one grid connected photovoltaic system according to REN 482/2012 standards in 2014?” The purpose of this research stage was to learn about the level of activity of Brazilian companies in the PV industry, particularly information regarding their average installation time, the amount of jobs created in the sector, and the prices of installed systems. This information is crucial to be able to characterize the industry and enhance its transparency and competitiveness. Moreover, these elements can help identify policies and actions required to increase PV use in the country. Whenever possible, we will compare recent data with those from the previous edition of the survey, conducted in 2014, and with international figures, to better understand the current state of the distributed PV industry in Brazil.

Incipient industry in Brazil Of the 106 companies that responded to the survey, 57 (54%) reported that they had not completed the installation of any micro or mini PV systems in 2014. This percentage was slightly lower than in the previous year (2013 data) when 59% answered no to the same question.

* “N” is the number of companies that responded to each question.

Graph 1 - Number of projects completed by each company in 2014? * “N” is the number of companies that responded to each question. The 2014 survey found that nearly half of the companies had installed only one PV system in 2013. Graphs 1 and 2 indicate that there was a slight increase in the number of projects each company completed in 2014. However, the majority of companies that conducted a project, completed only one installation (35%)

Graph 2 - Number of PV systems connected to the grid in 2014 by company Therefore, Brazilian companies have made little progress in terms of completed projects. Overall, these results reinforce what was affirmed in the methodology section about the profile of installers who participated in this yearâ&#x20AC;&#x2122;s survey, which are mainly companies that did not participate in the first survey. A significant number of new companies entered the industry during the year 2, which may have contributed to the maintenance of the same quantity as in the previous year. In any case, these figures can also be explained by the fact that micro and mini generation are relatively new in Brazil.

Duration of the connection process Section 3.7 of Module 3 of the Distribution Procedures (PRODIST), pursuant to REN 482/2012, which was valid in 2014, established that the maximum time period for distributors to perform their activities concerning micro generation was 82 days3 (ANEEL, 2014), almost three months. These 82 days is the time limit set for obtaining grid access permission, inspecting the installation, submitting the inspection report and approving and establishing the connection. Theoretically, any additional time required to conduct these procedures would be the responsibility of the consumer/company. To evaluate this issue, the survey included a question about the average time required to complete all the stages of the installation of a grid connected photovoltaic system â&#x20AC;&#x201C; from the signing of the contract between the company and the customer to approval by the distributor and actual connection of the system to the grid. This period varied widely among the 49 replies. The shortest time, reported by only one company, was one month, while two companies said the average time was "12 months or more." Graph 3 illustrates this variation and the average time, considering the responses of "12 months or more" as 12 months.

The register maintained by Instituto Ideal listed 352 companies in September 2014 and 504 in May 2015.

In the case of mini generation and if there is work to be done on the distribution grid, t h e m a x i m u m t i m e a l l owed is 112 days.

Graph 3 - Time for completing all stages of installation and connection In 2014, the average time was 4 months and 3 weeks.4 This was a significant decrease of about six weeks since 2013 in the duration of the full process for connecting micro generators to the distribution grid. Nevertheless, the 2014 average is still higher than the sum of the maximum deadlines set by PRODIST in 2014. ANEEL also confirmed this result in a survey the agency conducted with distributors (ANEEL, 2015b), which led to the proposed change in deadlines announced in Request for Comments 026/2015, to speed up connections of micro and mini generators. Indeed, as shown in IDEAL (2014), in some countries such as the UK, Germany, Netherlands, Austria, and Italy, connection processes are standardized and agile, allowing projects to be completed in less than 1-2 months. This is crucial to the diffusion of distributed generation in that it reduces the populationâ&#x20AC;&#x2122;s perception that this innovative technology is complex (ROGERS, 2003; JAGER, 2006). This is one of the reasons for the level of development of the PV sector in the countries mentioned; therefore Brazil should seek a similar standardization and debureaucratization model.

Jobs in the Brazilian photovoltaic industry Regarding jobs, we surveyed the number of direct employees5 and subcontracted employees6 hired by the companies surveyed in 2014.

Further details on the relationship between companies and the distributor and hurdles that delayed the process can be found in the second result section 4

Direct employees are those with whom the employer signs an employment contract, after which they are on the payroll and entitled to all labor rights established by the Brazilian labor law (ConsolidaĂ§ĂŁo das Leis do Trabalho - CLT). 5

Subcontracted employees are those who do work for the company but are not on its payroll . These include service providers and contingent workers. 6

Graph 4 - Percentage of direct and subcontracted workers in the industry Graph 4 shows that most of the workforce involved in distributed PV generation sector in Brazil are not direct employees of the installation company surveyed. This is due to the still small number of installations each company performs and the long process for connecting new generators. In these circumstances, hiring contingent workers to meet specific demands is economically more advantageous than having idle employees. In absolute terms, the 49 companies in distributed PV generation that reported that they had completed a project in 2014 stated that they had 97 employees and 163 subcontracted workers. This figure, which is related to the capacity installed by these companies, represents 9.4 direct and 15.8 subcontracted jobs per installed megawatt (MW). These numbers are very close to what is found in Europe in a survey conducted by the European Photovoltaic Industry Association (EPIA, 2012). The European survey found 9.5 direct and 15 indirect jobs, not considering jobs in equipment manufacturing, according to the EPE analysis (2014).

Prices in Brazil Prices of installations performed in Brazil in 2014 were surveyed for each nominal power range of installed capacity. We received 44 replies related to the most popular system sizes, those up to 5 kWp,7 which indicate an average price of R$ 8.81 / Wp. This was slightly higher than what IDEAL (2014) found for 2013, when the reported average price was R$ 8.69 / Wp. At first, this nominal increase may seem strange; however, considering inflation and the stronger U.S. dollar relative to the Brazilian real in this period, it is estimated that there was an real drop of 6.5% in the average price of small-scale photovoltaic systems8. Larger installations usually benefit from economies of scale. Fixed costs are diluted due to higher installed capacity, inverters are less expensive (R$/W), and, depending on the installer, other materials and components are purchased at a lower price because of the volume purchased (BARBOSE et al., 2014). This expectation was confirmed by research, which shows a drop of about 10% in the price per power unit for each range of installed capacity that was surveyed (Graph 5). However, despite being instructed not to, many companies reported prices for higher power ranges, even though they had not installed any systems in this range. Therefore, the values for larger systems include a few estimates. 7

The survey did not separate systems by type of installation (on the roof, on the ground, etc.), but only by the nominal power installed.

Supposing that modules are imported and all the other components are made in Brazil. Thus, the dollar exchange rate fluctuation relates only to the PV module share, whereas domestic inflation is taken into account for the other parts. 8

Graph 5 - Average PV system price by power range in Brazil in 2014 A wide variation in prices between companies is found in Brazil. The biggest differences were found among smaller systems, of up to 5 kWp, with prices ranging from BRL 5.9/Wp to BRL 15/Wp. However, most systems were found to cost between R$ 8/Wp and R$ 9/Wp, as shown in Graph 6. Additionally, data in this graph show that 77% of the installed photovoltaic systems were between R$ 7/Wp and R$ 11/Wp.

Graph 6 - Price range of installed PV systems (<5 kWp) Below is an overview of prices by region in Brazil. This analysis concerns the lower power range (<5 kWp), since it had more responses. 13

Graph 7 - Average price by region (< 5 kWp) On average, the highest prices for photovoltaic systems are represented in the South, and the lowest in the Midwest. In the Southeast, the average price is R$ 9/Wp, which is above the national average of R$ 8.81/Wp. Nevertheless, in the same region, some companies charge the lowest prices. It is important to consider the number of replies in each region. We received 27 replies from the Southeast, but only 2 from the North. This may also explain the higher or lower variation by region. Compared with international levels, prices are still high in Brazil, especially compared to Germany, as shown in Graph 8. Systems up to 100 kWp, for instance, are 76% more expensive in Brazil than in Germany.

Graph 8 - Comparison of mid-sized photovoltaic system prices * Price in Germany for the third quarter of 2014 based on Fraunhofer ISE (2014), considering â&#x201A;Ź 1 = R$ 3.00 (the exchange rate at that time)

Finally, we analyzed the average price of installations to identify the price composition. According to the 49 replies we received, photovoltaic modules account for 43% of the total price; inverters 24%; system design and installation 17%; and other components such as physical infrastructure, installations, and 14

electric protection devices 16% (Graph 9). The percentage for the modules dropped from 47% to 43% in 2013, while the share for inverters’ increased 1%, other components’ decreased 1%, and design and installation costs rose from 13% to 17 % of the total price.

Graph 9 - Composition of PV systems installation total cost

Determining the appropriate size of photovoltaic systems Determining the size of a PV system depends on energy demand, economic, architectural and other criteria. Installation companies must assess the relevance of each of these factors to design projects that suit customers’ needs. The challenge is to provide the most satisfactory solution considering the opinions of the customer and supplier. To understand which factors they consider to be the most relevant to the size determination, we asked respondents to rank the level of importance of various criteria. The 49 replies we received consider item "(A) - Energy demand of the customer as identified by consumption history on the electricity bill" - as the most important criterion. Next comes item "(B) -Area available at installation site." While item "(D) - Equipment available in stock" seems to be less important as a sizing criterion, item "(F) - Efficiency of PV modules" had the highest percentage of replies as a “not important” criterion (Table 1 and Graph 10). Consumers without knowledge about the technology are often concerned about module efficiency; however, answers to this question indicate that other criteria are more relevant to ensure appropriate sizing of a PV system. Furthermore, it is important to emphasize that a very important criterion is (C) Budget constraints, which often tends to outweigh other factors.

Table 1 - How important does your company think each of the criteria below is for sizing a PV system?

A. B. C. D. E. F.

Customer energy demand as identified by consumption history on the electricity bill Area available at customer installation site Customer budget constraints Equipment available in stock Architectural or structural constraints of the building PV module efficiency

Median of the answers concerning the level of importance of criteria for sizing

1 Not important 2 Of little importance 3 Important 4 The most important

Graph 10 - How important is each one of the criteria below for your company when sizing a PV system?

2. RELATIONSHIP WITH DISTRIBUTORS The purpose of this research phase is to understand the installers’ perceptions about the existing technical standards and the process of requesting connection to the grid for PV systems used by Brazilian electric utilities in Brazil, in the realm of micro- and mini-generation.

Technical standards and procedures Those interviewed evaluated their own knowledge about Section 3.7 of Module 3 of PRODIST and about the utility´s technical standards. The percentages are very similar to those found in the previous year’s survey, indicating familiarity with the technical standards. As seen in Graph 11, most of those interviewed state that they have moderate knowledge – 58% compared to 54% in the last study – while 29% said they have a lot of knowledge – while the year before 34% said they did. Only 2% said they have no knowledge and 11% said they had little knowledge about Section 3.7 of Module 3 of PRODIST. The Brazilian PV market has been growing recently and attracting new companies. It is important to remember that most of those responding said they did not install any PV system in 2014 (54%, see Graph 1) and that the practical application of the current technical standards increases the knowledge and the degree of familiarity of the companies with the entire process of connecting to the grid.

Graph 11 - Evaluation of their own knowledge about Section 3.7 of Module 3 of PRODIST – ANEEL In relation to the distributor’s technical standards for connecting to the grid applicable in 2014, the perception of the installers in general is that they have considerable knowledge. Most (49%) said that they have “a lot of knowledge” and 42% said they had “moderate knowledge.” It is interesting that none responded that they had “no knowledge” about the technical standards (Graph 12). The percentage of those who assess that they have a lot of knowledge increased slightly in relation to the previous study (42%), with a consequent drop in the responses for the other options.

Graph 12- Evaluation of PV system installers about their own knowledge of the technical standards about connecting to the distributor’s grid. “N” represents the number of companies responding to each question.

Concerning the clarity of the rules established by ANEEL for micro and mini PV generators to connect to the grid, most of the installers (75%) indicated satisfaction. Sixty-seven percent (67%) affirmed that most of Section 3.7 of Module 3 of PRODIST is clear and 8% said it was totally clear (Graph 13). Thus, there was an increase in the perception of clarity in relation to the study in the previous year, when 59% indicated that the ANEEL standards were “mostly clear,” 26% reported “some portions were not clear” and 5% said they were “not clear” in general. The percent of those who consider them totally clear remained the same.

Graph 13- Evaluation of the level of clarity of Section 3.7 of Module 3 of the distribution procedures (PRODIST) from ANEEL A recent measure taken by ANEEL to improve the text of the standards even more was the realization of a Request for Comments period (026/2015) between May 7 and June 22, 2015, to collect support for 18

improving REN 482/2012 and Section 3.7 of Module 3 of PRODIST. The agency received suggestions from 101 institutions and individuals, which should lead to even more positive evaluations in the next edition of this study. This year an advance was also noticed in the evaluation of the clarity of the technical standards for gridconnection compared to the previous year’s study. While in 2014 41% found most parts of the standards to be clear, this percentage also rose to 54%. As a result, there was a reduction in the number of those who found some portion not clear (from 36% to 26%) and those who found it to be not clear in general (from 16% to 9%).

Graph 14- Evaluation of the level of clarity of the technical standards for connection of PV generators to the distributor’s grid

The coherence between the Brazilian technical standards and the specific standards of each distributor is also a factor that must be considered when evaluating new procedures that are enacted. For this reason, the installers were asked if the distributors revised their standards when ANEEL and INMETRO made normative changes related to mini and micro PV generation. The percentage of “Yes” answers fell from 61% in the previous survey to 49% this year, which indicates a scenario of alert for the distributors. The distributors must pay more attention to revisions and their proper publication to guarantee positive development of the Brazilian market.

Graph 15- Does the distributor revise its standards when ANEEL and INMETRO make changes concerning mini and micro photovoltaic generation? Another important factor for the installers are the deadlines established by the utility for the connection process. When asked if the distributor’s standard had deadlines for each step according to what is established by ANEEL’s REN 482/2012 (in Section 3.7 of Module 3 of PRODIST), an advance is seen by the installers in comparison with the responses in the previous year. While in the past survey 53% stated that the standards defined periods for all the steps, this rose to 58% this year, while 33% reported deadlines for only some steps of the procedure for requesting connection to the grid. (Graph16). Even three years after publication of ANEEL’s normative resolution, 9% of the companies reported that the deadlines are not defined by their local distributor’s standard.

Graph 16 - Does the distributor’s technical standard contain deadlines for each step of approval of a connection to the grid according to what was determined by ANEEL’s REN 482/2012 (in Section 3.7 of Module 3 of PRODIST)? The degree of satisfaction of the installers in relation to the applicable distributor’s current standard was evaluated using a scale of 1 (one) to 5 (five) stars, considering 1 as dissatisfied and 5 as very satisfied. In general, the trend is towards satisfaction, with scores very similar to those found in the previous year’s 20

survey. The highest percentage of responses was in the middle of the scale: 41% chose three stars; 26% four stars and 9% the maximum value of 5 stars. Meanwhile, 24% indicated a certain dissatisfaction, with 10% scoring 1 and 14% scoring 2 stars (Graph 17).

Graph 17- Degree of satisfaction with the distributor’s standard The process for requesting connection to the distributor’s grid, however, is a source of greater dissatisfaction. As shown in Graph 18, those that gave one or two stars totaled 57%, given that the highest percentage of responses (35%) was for only one star. Only 3% of those responding gave five stars and 17% four stars.

Graph 18- Degree of satisfaction with the handling of the process by the distributor The situation is worse than reported in the study of the previous year, when 51% of the respondents gave only one or two stars, with 29% of them indicating they were “dissatisfied” (one star). Another 29% had given three stars, 10%, four stars and 9% five stars. Those who state that they are dissatisfied (one or two stars) with the process of requesting connection to 21

the grid by the distributor were asked the reason for this opinion, according to the options presented in Table 2. Table 2 - Reason(s) for dissatisfaction or low satisfaction with the distributor’s handling of the process in 2014. A. B. C. D. E. F.

An evaluation of the most frequent responses shows that the cause most mentioned is the delay in the approval process or lack of compliance with the deadlines established by ANEEL’s REN 482/2012 (D) (Graph 19), the same factor mentioned in the survey of the previous year. The second major complaint was that the analysis varied depending on the technician who conducted it (A). In the previous year’s survey, the second item most cited was the lack of knowledge (B).

Graph 19 - Reason(s) for dissatisfaction or low satisfaction with how the distributor conducted the process in 2014. “N” represents the number of companies that responded to each question.

Analyzing these responses and what was reported in the item “Other” (E), it is seen that in general, the standardization of the procedures and the training of the team are two measures that help to improve this situation. Below are the responses given to item E: 1.

Low number of people involved in the process...;

2. An independent agent should conduct the technical inspection (as in Europe, for example). 3. The distributor creates impediments and bureaucracy to delay the process; 4. The distributor makes up problems – wants to block microgeneration; 5.

Long delays;

6. Letters sent to the client do not arrive; other processes (increased load) delay the DG; 22

Lack of internal communication between the staffs, generating errors of interpretation and delays in the procedures;

8. The distributor uses its “power” of approval to ask for reviews that are not ”reasonable”; 9. After the connection, the bill does not explain the calculation of the net metering or of the taxes. It is all obscure; To better understand the challenges in the relationship between installers and distributors, the companies were asked if they faced some difficulty or requirement that impeded, delayed, increased the cost or made nonviable the installation of a mini or micro PV generator for some of its clients. Once again, the percent of those who affirmed that they had some difficulty increased in relation to the last study, rising from 64% to 75% (Graph 20). These respondents were led to the third section of the questionnaire, which had the purpose of collecting information about the difficulties faced, which will be detailed in Chapter 3 – Challenges in the process for connecting to the grid.

Graph 20 - Did your company face any difficulty or requirement that impeded, delayed, increased the cost of or made nonviable the installation of a mini or micro PV generator for some of your clients?

3. CHALLENGES IN THE GRID CONNECTION PROCESS The objective of this third phase of the research is to analyze in detail the challenges in the process of requesting the connection of micro and mini PV generators to the grid. This section only involved the 79 companies (75%) that affirmed that they had faced some problem or requirement that had made difficult, delayed, increased the cost of or made nonviable the installation of a PV system for a client. The installers were first asked in which phase of the project implementation process to grid connection did these difficulties occur, with the option of indicating more than one response. In general, they identified the same trends as in the year before. The installers indicated the steps that directly involved the distributor as those that had greater difficulties. This result was expected, 23

considering the responses given in the previous section referring to the handling of the process of connecting to the grid. As in the research from the previous year, the step most mentioned is that of “Request for access report” with 57 responses, followed by “Signing of the term of the Operational Relationship between the client and the distributor” with 29, and “Billing (electrical bill)” with 24. Following are the other steps most connected to the relationship with the customer: “Commissioning” with 13 and “Operation” with 7. It is important to emphasize that this partially involves a self-evaluation by the installers. Therefore, the trend is to identify more problems in steps that involve third parties than in those for which they are directly responsible, which in this case would be “Design planning” which had six responses and “Installation of the PV system”, which had only five (Graph 21). As the study continues, a deeper analysis will be conducted of specific points at each step that could be worked with to improve the process of requesting connection to the distributor’s grid.

Graph 21- In which phase of the project did this difficulty occur? If there was difficulty in different steps, you can indicate more than one option. Even with the difficulties, most of the respondents stated that this was not a reason to limit the finalization of the projects (65%), which was similar to last year when this percentage was 62% (Graph 22).

Graph 22- Did the difficulties prevent a project from being connected to the grid? The percent of respondents that indicated delays was slightly lower than in the previous study, dropping from 90% to 82% (Graph 23). This decline was to be expected considering that the first study was conducted precisely in the year after the enactment of REN 482/2012, when the distributors were still adjusting to the new regulation. Although a minority, the percentage of respondents who were not able to complete the connection to the grid of a PV system (35%), added to the high percentage of indications of delays, indicates that the difficulties represent a barrier to the expansion of the distributed PV generation market.

Graph 23- Did the difficulties cause a delay in the deadlines stipulated by REN482/2012 (in PRODIST) for connecting the PV system to the grid? Graph 24 below details how much time the projects were delayed, with responses quite similar to those in the previous year’s survey. Of the total of 65 respondents to this question, the average time of delay most cited was two months. In the past edition of the research, there were more responses to the period “more than four months.” 25

The number of companies that indicated they could not forecast when they would complete the installation because of the difficulties raised here remained the same (13 compared to 12 in the previous year).

Graph 24 - Avg. time of delay to complete installation of the PV system due to the difficulties A comparison of these results with those obtained by ANEEL in a study of distributors, described in technical note n째 0017/2015 of SRD/ANEEL (Graph 25), indicates that the total time for connection to the grid is still a point that needs to be improved. It is possible to observe the large variation in time among distributers throughout Brazil, which in many cases exceeds that established by REN 482/2012.

Graph 25 - Total time for connection of distributed generation in 2014 (ANEEL, 2015b). The installers were asked to indicate which aspects could be improved in the process of requesting connection of a photovoltaic system to the distributor’s grid. (Table 3). Since each company had the option to choose more than one response, “N” was equal to 394 and represents the total number of responses by the companies that participated in the study. Table 3 - What points can be improved in the process of requesting from the distributor connection of a photovoltaic system to the grid? A. Standardization of publication of procedures for connecting to the grid for all the distributors. B. Simplification of the steps of the process of requesting connection to the grid. C. Specific training about distributed generation for staff at the distribution utility to improve service. D. More direct access to the standard for connection to the grid on the distributor’s site E. Sending copies of the responses about the analysis of the documentation to the installers that conduct the project, not only for the consumer. F. G. H. I.

Compliance with deadlines stipulated by REN 482/2012 (within PRODIST) of ANEEL Availability in distributor’s stock of bidirectional meters to facilitate the exchange Acceptance of two uni-directional meters for low voltage clients Clear identification of the credits and of the kWh generated by the client in the electrical bill

J. Standardization of the electrical bill and publication of the billing model on the distributor’s website.

The items most highlighted (A, B, C and F) refer to the procedures in the phase of requesting the access report and the training of distributorâ&#x20AC;&#x2122;s attendants. When the responses are related with the results shown in Graphs 19, 21, 24 and 25, the need is seen for greater attention by the distributors to the procedures used for approval of the connection of distributed generation to the network, mainly concerning the deadlines stipulated by REN 482/2012 (within PRODIST) of ANEEL (F). A study by the Solar Electric Power Association (SEPA,2014) shows, for example, that the use of digital technology to send the requests for connection to the grid reduces the total time of the process and offers other benefits such as automatically restricting the beginning of the procedure to only those requests sent with the complete documentation and allows the consumer to accompany the process online. The study was based on interviews with 400 U.S. electrical utilities. In addition, another aspect that could be improved concerns the preparation of the employees who serve the public and their knowledge of the specificities of PV technology, which could be met with training and classes. These measures, if adopted, could represent a large gain for the PV market, and even greater acceptance of mini and micro-generators by the Brazilian population. This is because difficulties found in the process of requesting connection to the network discourage the already limited public that is currently seeking to generate its own electricity.

Graph 26 - Which points could be improved in the process of requesting a distributor connect a photovoltaic system to the grid? Responses I and J are the next most mentioned, confirming the challenge raised in Graph 21, which indicates difficulties in relation to precise billing within the rules defined by REN482/2012. The question of correct billing still does not appear significantly because many installers have still not reached this phase. In the future this will probably be a point of greater importance. It is interesting to observe that the point most mentioned in the last edition of the survey - (G) the availability in the distributorâ&#x20AC;&#x2122;s stock of bidirectional meters to facilitate the exchange â&#x20AC;&#x201C; is now less important. 28

This indicates precisely how the distributors were still adapting to this new market in 2013 and therefore, the future trend is that all the points mentioned here can be easily resolved if they receive the proper attention.

4. POSITIVE EXAMPLES FROM DISTRIBUTERS, GENERAL COMMENTS AND SUGGESTIONS In order to identify good practices that can serve as examples, the study also sought to identify positive aspects recognized by the installers in their relationship with distributors. Table 4 indicates some options in the order presented in the questionnaire. Graph 27 shows the positive points most mentioned, given that the respondent could choose more than one option. The points mentioned in the field “Other” are analyzed together with the comments and suggestions, in the next pages.

Table 4 - Which positive points of the distributors serve as an example for the others? A. B. C. D. E. F. G. H.

The staff is attentive and open to suggestions The staff treats mini and micro generation positively The distributor complies with the deadlines established The distributor’s standards are in accordance with PRODIST The distributor’s standards are detailed and complete The billing is handled properly The distributor uses a low-cost meter with good technology Other

Graph 27- Which positive points of the distributor(s) serve as an example for others? As in the study of the previous year, it was noticed that there are distributors who have addressed microand mini-generation quite positively, with employees who are open to suggestions and properly adhere to 29

the PRODIST standards (responses A, B and D). A positive development in relation to the cost and technology of the meter used by the distributor was found, because there was an increase in the number of companies that mentioned item G as a positive point since the previous survey. In general, it is possible to conclude that exchanges of knowledge among the distributors can help them to improve the process of connection to the grid as a whole, given that there are good experiences in the country precisely in the themes indicated as the greatest difficulties for installers and clients.

Comments and Suggestions As in the last edition, at the end of the study, the installers were invited to make comments or suggestions not considered in the questionnaire. Many reinforce or provide greater detail about points mentioned in the questionnaire, like a lack of compliance with deadlines, a suggestion that more components of photovoltaic systems be accepted, a difficulty in meeting the demands because of a lack of explicit technical regulations and knowledge of the procedures for distributed generation by the distributor’s employees. Below, the contributions presented in this phase of the study were summarized and grouped by theme:

 Procedures and preparation of the distributors

– One respondent reported the “lack of willingness and cooperation” of the distributors; another mentioned the absence of a formal procedure to accompany the process at the distributor, and a third reported that the distributor created “technically absurd impediments” because of a lack of experience. Finally, one respondent affirmed that more flexibility and speed in the process for liberation of the connection to the network could reduce the costs of the project.

  Online p r o c e s s

– While one respondent mentioned the case of a distributor that already has an online process, another requested that documents be accepted by e-mail and a third reported the requirement to submit and register all the documentation in printed form at the distributor, even the response to questions made by the distributor during the analysis.

  Certification and labeling – One respondent complained of a lack of promotion of the models of approved meters and of information about the possibility to use micro-inverters. Two respondents suggested that international certifications could be accepted, which would lead to lower costs.

  Financing – Two respondents mentioned difficulty in finding specific financing for PV systems, complaining of the currently available interest rates.

 Fees and Taxes

– Four respondents referred to the question of Brazilian taxes suggesting exemptions, both for the items produced in Brazil and in relation to the ICMS on the energy generated.

  Billing and compensation of energy

– One respondent reported that he had to accompany the distributor’s meter reader on the day of the reading because the reader had a lack of knowledge. Another respondent asked for an explanation on the electrical bill about the rate used for the ICMS [Sales and services taxes]. 

  Standardization of procedures – Two respondents requested a national standardization for all the distributors to facilitate the process of those who work in different regions. Finally, two respondents made comments about the study and the need for studies like these:

“Great study! The points mentioned are those in which we usually have problems! “Good question (...) about the number of projects underway, this way the Instituto Ideal understands the real scope and can identify the difference between [that] and what is found in the ANEEL Database on Generation (BIG).

5. FINAL CONSIDERATIONS The data gathered in this study indicate that the market for distributed PV generation is still in its “infancy” because there is a large number of new companies that have not completed any installation 54% of the companies participating in the study. Among those that have completed a project, most reported only one installation, which also indicates little experience in the field. This limited activity may be the explanation for the fact that most of the labor used in the sector is subcontracted or temporary. The trends perceived in the first edition of this study conducted in 2014, which collected data referring to 2013, were similar to those found in this second edition, with problems in similar areas. The actors in the PV market also faced challenges like delays, lack of knowledge among the distributor’s technical staff, and problems in the electrical bill, according to the regulation of the system for compensation for electrical energy (net metering). The norms are found to be clear, in particular REN 482/2012 and PRODIST, but the understanding of them and their practical application is a problem. On the other hand, great change was found in the length of the connection process, with the average time reduced from six months and one week in 2013 to four months and three weeks in 2014. The results of this study show that there are subjective criteria in the process, given that it is highly dependent on the technician from the distributor who conducts the analysis, while the process should be objective. Moreover, considerable dissatisfaction was found with the lack of compliance with deadlines by the distributors. It was found that the total time period of the process varies throughout Brazil and by distributor, in many cases going beyond the determinations of REN 482/2012. The results surveyed show a troubling situation in relation to the difficulties faced today, which must receive the proper attention so that the market can develop its true potential. The step for requesting an access report continues to be that in which the companies face the most difficulties (Cap. 3). Suitable training of staff at the agencies of the distributors would be an essential measure to accelerate the process and increase customer satisfaction (Graph 26). The question of correct billing did not stand out, because many installers have not reached this phase. In the future this issue will probably be more important. In terms of the prices charged in Brazil, the average value of R$ 8,81/Wp was found for systems up to 5 kWp. This amount is nearly equal, in absolute terms, to that found in the previous study. Nevertheless, considering the devaluation of the Brazilian currency and inflation, it was estimated that there was a real reduction of 6.5% in the average price of small-scale photovoltaic systems. In any case, the prices found in the country are still quite high, in relation to the international market (76% higher than in Germany, for example). This second edition of the study “The Brazilian Distributed Photovoltaic Generation Market” sought to not only identify the current situation of the sector in Brazil, but, above all, to accompany its changes since the previous year and identify trends. This information is extremely important for making policy decisions and determining actions to make the use of PV energy more expressive in the country. For this reason, the results obtained in this study have already been included among the documents sent by Ideal to ANEEL during the Request for Comments period 026/2015, held to obtain support for the improvement of REN 482/2012.

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