The Brazilian Market Of Distributed Solar PV Generation - Annual Report 2017

I NITIATIVE:

THE BRAZILIAN MARKET OF DISTRIBUTED SOLAR PV GENERATION Annual Report

2017

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LEGAL NOTICE 1. All indications, data and results in this study were compiled and carefully reviewed by the author(s).

Nevertheless, it is impossible to rule out mistakes in its content. Thus, neither Instituto IDEAL, AHK-RJ or the author(s) can be held responsible for any claim, loss or direct or indirect damage which may occur as a result of the use of or the trust placed in the information herein, or as a direct or indirect result of mistakes, imprecisions or omissions in the information herein.

2. Duplication or reproduction of all or part of the study (including transfer to data storage media) and distribution for non-commercial purposes is permitted, provided due credit is given to Instituto IDEAL and AHK-RJ as the source of the information. Other commercial uses, including duplication, reproduction or distribution of all or part of this study, require previous written consent from Instituto IDEAL.

EDITORIAL STAFF COORDINATION: Philipp Hahn and Taynara Reisner Mighelão EXECUTION: Ana Carolina Richard and Taynara Reisner Mighelão EDITING: Ricardo Rüther and Philipp Hahn COMMUNICATION OFFICER: Andressa Braun GRAPHIC DESIGN AND LAYOUT: Andrezza Nascimento

THE BRAZILIAN MARKET OF DISTRIBUTED SOLAR PV GENERATION Annual Report

2017

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INSTITUTO IDEAL Instituto IDEAL is a private, not-for-profit organization based in FlorianĂłpolis (SC) that promotes renewable energies and energy integration policies in Latin America.

IDEAL works in two main areas: the Energy + Clean Seminar and the AmĂŠrica do Sol program, which includes, among other tools for disseminating knowledge in photovoltaic energy, the Selo Solar project and this Study, the first of the sector developed in the Brazil. All are free initiatives. All of them involve a series of initiatives that are free of cost to the participants.

By promoting events and providing incentives to research and actions aimed at developing 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: institutoideal.org.

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AHK-RJ Founded 100 years ago, the Brazil-Germany Chamber of Commerce and Industry in Rio de Janeiro (AHK-RJ) is a member of a global network of about 130 binational chambers in over 90 countries. In Brazil, it has 1,300 members and is an important link between the Brazilian and the German markets, enabling wide access to information and contacts, business intermediation and technology transfer between the two countries. In addition, it is a business and networking platform for its members in Brazil, as it also fosters business relations within the domestic market by means of its representativeness, visibility, services, and the general environment it facilitates.

The Brazilian market of photovoltaic distributed generation has experienced a significant growth, acyclical with respect to the general context, in recent years and opens up opportunities for interesting business for Brazilian, German and international companies. This publication provides first-hand important and update data and information about this dynamic market, thereby supporting its development. We wish you a good reading!

Lear more at: ahkbusiness.de/pt.

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FOREWORD INTERSOLAR SOUTH AMERICA Latin America is at the global frontier of non-subsidized solar markets. The fall in prices and a simultaneous increase in demand have resulted in multi-gigawatt pipelines in Brazil.

Enjoy reading the report published by Instituto Ideal and the Brazil-Germany Chamber of Commerce and Industry (AHK-RJ) for first-hand data on the Brazilian solar market and make sure you attend Intersolar South America 2017 and take full advantage of our global network.

Dr. Florian Wessendorf Administrative Director Solar Promotion International GmbH

PHB Since 1984, when PHB was founded, the serious search for innovation and quality, based on Brazilian technological development, have been outstanding and important factors in PHB Solar track record. It was the first manufacturer of solar inverters to be INMETRO-certified in Brazil, coordinating and drafting regulations and creating a fully equipped laboratory for testing and maintaining its own products.

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Always a leader, PHB Solar is a 100% Brazilian company, a competent technology pioneer that develops solutions for Distributed Generation as a whole. PHB engineering offers quick response and is not dependent on international consultancy. The company is a pioneer in electricity generation from renewable sources.

Ildo Bet Founding Partner and Technical Director - PHB Electronics; Director of the Photovoltaic Sector Group - ABINEE; Coordinator of ABNT / COBEI / CE03: 82.01 Commission for the Study of Photovoltaic Systems

SICES BRASIL SICES Brasil, of Italian origin, pioneers and leads distributed generation in Brazil with transparency and excellence.

These two pillars strengthen the company, allowing it to follow a successful pathway. SICES Brasil unceasingly contributes to disseminating solar energy through social actions by sponsoring events and studies in this area. Today, as the sponsor of this survey, SICES Brasil is proud of being a part of this remarkable project and of having chosen this beautiful country as its second home.

Jackson Chirollo COO SICES Brasil Operation and Expansion Board

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TABLE OF CONTENTS

Introduction 13 Methodology 15 Work of respondent companies 17 Profile of Installers 23 Socio-economic profile 29 Jobs in the Brazilian photovoltaic industry 30 Domestic prices 32 News modalities in distributed generation – REN 687/2015 37 Relationship with distributors 42 Challenges in the grid-connection process 47 Relationship with clients 54 Comments and Suggestions 58 Conclusions 60 References 64

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LIST OF CHARTS

Chart 1 Time companies in the photovoltaic energy sector are on the market 19 Chart 2 Companies geographical location 20 Chart 3 Main segments in which companies are active 21 Chart 4 With which step of the value chain is your company involved? 22 Chart 5 How many photovoltaic systems (PV) installed by your company were connected to the grid in 2016 in the REN 687/2015 and REN 687/2015 framework? 25 Chart 6 Time for completing all stages of installation and connection 26 Chart 7 Comparison of time to complete all steps of installation and connection in the four surveyed years 27

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Chart 8 Installations and connections in Brazilian states 28 Chart 9 Number of direct employees in companies 30 Graph 10 Three-year comparison of the percentage of direct and outsourced employees in the sector 31 Chart 11 Prices of PV systems in 2016 by power range as reported by installer companies 33 Chart 12 Prices of PV systems in 2016 by power range as reported by module and/or inverter manufacturer/retailer companies 34 Chart 13 Comparisons of prices of PV systems by power range as reported by installer and by module and/ or inverter manufacturer/retailer companies 35 Chart 14 Structure of PV systems total installation cost 36 Chart 15 Level of clarity of REN 482/2012 revised into REN 687/2015 39

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Chart 16 Has your company developed any PV solar energy projects based on the shared generation and residential condominium modalities? 40 Chart 17 Were there any difficulties in this process? 41 Chart 18 Do distributors update their norms when ANEEL and INMETRO make changes in norms relevant to photovoltaic mini and micro-generation? 44 Chart 19 Does the distributor’s norm include deadlines for each step of the approval of a connection to the grid pursuant to ANEEL’s REN 482/2012 (in Section 3.7 of Module 3 of PRODIST)? 45 Chart 20 Did your company face any difficulties or requirement that hindered, delayed, increased the cost of or made non-feasible the installation of a PV mini or micro-generator for any of your clients? 46 Chart 21 In which step of the project did you face this difficulty? 49

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Chart 22 Did the difficulties cause a delay in the deadlines stipulated by REN482/2012 revised into REN 687/2015 (in PRODIST) for connecting the PV system to the grid? 50 Chart 23 How long was the average delay to complete installation and connecting the PV system to the grid due to these difficulties? 51 Chart 24 Which points still need improvement in the process of requesting a distributor connect a photovoltaic system to the grid in 2016? 52 Chart 25 What are the payment options your customers use most often? 56 Chart 26 What is the primary means of attracting customers in your company? 57

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INTRODUCTION Instituto IDEAL has monitored the Brazilian PV sector, disseminating information and encouraging the use of photovoltaic (PV) energy since 2007 through www. americadosol.org. In the framework of this program, a digital knowledge platform was created de that includes tools and actions carried out with different players: power consumers, PV system owners, installers, designers, manufacturers, retailers, non-profit institutions, among others.

An integral part of the América do Sol program, and together with the Brazil-Germany Chamber of Commerce and Industry in Rio de Janeiro (AHK-RJ), “The Brazilian Distributed Photovoltaic Generation Market - 2016” survey now publishes its fourth edition in 2017. This study aims at documenting, monitoring, and offering suggestions to the PV distributed generation sector in Brazil. As this survey covers 2016 developments, this is the first year it concerns the market as it is after changes the Brazilian Electricity Regulatory Agency (ANEEL) introduced through REN 482/2012 revised into REN 687/2015.

This new system allows the owner of a renewable source generator of up to 5 MW to inject back into the grid the power not consumed at the time of generation, receiving credits (in kWh) for it in his electricity bill. The amount this consumer pays monthly concerns only the difference between the power from the public grid and the power he generates. This resolution was improved through Normative Resolution (REN) 687/2015, which came into

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force in March 2016. Among the changes that took effect in 2016 are increases in generator maximum power (from 1 MW up to 5 MW) and the extended expiration date of credits granted (from 36 to 60 months).

Five years after ANEEL first regulated distributed power micro and mini-generation, Brazil reaches 10 thousand connections. The source generator-consumers most commonly use is solar photovoltaic (9,910), followed by wind (48). As one connection can serve more than one consumer, today 11,189 consumers are using power from distributed micro and mini-generation (ANEEL, 2017).

Until May 2017, 22 Brazilian states already did not charge ICMS tax (sales tax) on the power surplus from distributed generation systems, following the adherence to ICMS Agreement 16/2015 of the Conselho Nacional de PolĂ­tica FazendĂĄria - Confaz (National Council of Finance Policy).

In this modality, state governments are allowed to levy this tax only on the power consumers receive from the grid, not on the power that is generated by distributed micro and mini-generation and injected into the grid. The Center-West is the second Brazilian region to implement this decision, as the North-East was the first to make it widely available to its private consumers and companies (ELETRICIDADE MODERNA, 2017a).

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METHODOLOGY To gather the data included in this survey, e-questionnaires were sent in June 2016 to 1.350 companies with an active profile on the América do Sol Program’s Map of Companies in the Photovoltaic Sector (www.americadosol.org/ fornecedores). The questionnaire remained available for response for 30 days. Of all the companies to which it was sent, 373 answered all questions; only answers from companies who completed the entire questionnaire were valid for this study.

However, most questions are the same so data can be compared with those from previous editions, thus outlining trends in the Brazilian photovoltaic market development.

However, as 2016 was the first year for utilities and companies to adapt to ANEEL’s regulation (REN) 482/2012, revised into (REN) 687/2015, the questionnaire was improved so to make questions clearer, as well as to meet the demands and adapt to changes in the development of this market.

To obtain clearer answers, access to questions was segmented according to each company’s role in the PV solar energy value chain (equipment installer, designer, or manufacturer/retailer), which respondents informed upon starting to answer the questions. From data segmented for different market players, it is possible to draw a more complete picture of the Brazilian distributed solar generation market. This is the second edition of the questionnaire that follows this segmented model.

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When interpreting data, we aimed at comparing and understanding the market reality in each one of the four surveyed years. Year after year, the number of suppliers on the AmÊrica do Sol Program’s Map of Companies increases, and the outcome of the survey is consolidated due to an increase in the number of respondents, pointing to a scenario in which there is a steady growth trend. Such analyses are important so the market can understand this sector’s evolution and restructure itself accordingly in order to become increasingly solid.

WORK OF RESPONDENT COMPANIES

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Prior to answering the questionnaire, companies answered a few questions about their work in the photovoltaic solar energy sector such as: how long have you been on the market, where is the company based, what is the main segment in which it operates, and in what step of the value chain is it most active today.

Most companies (42%) reported they have been on the photovoltaic solar energy market for “1-2 years.” This signals that many companies are starting to offer services and products on the Brazilian photovoltaic distributed generation market. Around 28% of them reported they have been on the market for less than one year, 23% “for 3-5 years”, 5% “for 3-5 years”, and only 2% have a longer experience, i.e., they have been on the market for more than 10 years.

Therefore, 70% of the respondent companies have been active on the market for a maximum of 2 years. This shows points to the significant growth the sector experienced over the last years, mainly in 2016, possibly due to a wider awareness of ANEEL’s regulations: REN 482/2012 and its revision into REN 687/2015.

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Chart 1

TIME COMPANIES IN THE PHOTOVOLTAIC ENERGY SECTOR ARE ON THE MARKET 5% 2% 28% 23%

42%

Less than 1 year

1 - 2 years

3 - 5 years

6 - 10 years

More than 10 years

N = 373

The second question in the questionnaire concerns the area where respond companies are based: “In what region is your company’s headquarters located?” This question was included in order to find out where the company was established and what the most favorable areas to start companies are, considering that many of them already have branches throughout Brazil. The two Brazilian regions with the larger number of companies headquarters are Southeast, with 48%, and South, with 24%; the region with the lower number is North. The regions with the larger number of companies are also those where the states with the larger number of connections are. The state with the larger number of micro and mini-generators is Minas Gerais (2,178 connections), followed by Sao Paulo (1,987) and Rio Grande do Sul (1,061) (see Chart 8).

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Chart 2

COMPANIES GEOGRAPHICAL LOCATION North 4%

Northeast 15%

Center-West 9%

Southeast 48%

South 24% N = 373

Respondent companies are mainly active in the residential segment (62%), followed by the commercial, with 31%, and the industrial, with only 7%. Comparing these and ANEEL data about consumer units in Brazil, it is noticeable that both follow the same lines: there are 8,114 consumer units in the residential rate group, with an installed power generation capacity of 33,773 kW; and 1,541 consumer units in the commercial rate group, with an installed power generation capacity of 42,298.75 kW –higher than that of the residential rate group. In the industrial rate group, there are only 213 consumer units, with an installed power generation capacity of 22,674 kW (ANEEL, 2017).

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Chart 3

MAIN SEGMENTS IN WHICH COMPANIES ARE ACTIVE Residential

62%

Commercial

31%

Industrial

7% N = 373

This is the second edition for which the questionnaire is segmented into different profiles so to ask questions that are more specific to each company’s work. The question below was phrased in a way that allowed each company to identify the step of the value chain in which it is more, even if not exclusively, active. This provides a more comprehensive view of the sector.

Of the 323 respondent companies, 47% stated they are installers; 32% said they work mainly as designers; and only 15% replied they are “Manufacturers/retailers of PV modules and/or inverters.” Relative to the previous edition, there is a 6% increase in the number of installer (from 47% up to 53%) and a decrease in the number of designer (35% down to 32%) and manufacturer/retailer (from 18% down to 15%) companies.

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Chart 4

WITH WHICH STEP OF THE VALUE CHAIN IS YOUR COMPANY INVOLVED?

32% Installer Manufacturer / retailer of PV modules and/or inverters

53% 15%

Designer N = 373

PROFILE OF INSTALLERS

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Companies were redirected to different sections of the questionnaire according to their area of work. Only installer companies answered the questions in this section.

The first question aimed at defining their profile: “Has your company installed at least one grid-connected photovoltaic (PV) system in 2016 in the REN 482/2012 and REN 687/2015 framework?” Companies having answered “no” to this question were redirected to a different section, and those having answered “yes” were directed to the following question: “How many photovoltaic systems (PV) installed by your company were connected to the grid in 2016 in the REN 482/2012 framework?”

Only 21% of the installer companies did not execute any projects in 2016, a lower percentage than in 2015, when 26% of these companies did not execute any projects. This is a very positive trend, as it shows that every year they are having opportunities to execute projects on the photovoltaic solar energy market. However, the number of companies that have no experience in installing PV systems is still considered high.

As to the number of projects each company executed, the majority (60%) stated they had executed 1-4 projects in 2016. One positive point is that the percentage of companies having executed more than four projects (40%) increased relative to 2015 (24%). Similar to 2015, the median of the number of projects/year by company is around three.

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Chart 5

HOW MANY PHOTOVOLTAIC SYSTEMS (PV) INSTALLED BY YOUR COMPANY WERE CONNECTED TO THE GRID IN 2016 IN THE REN 687/2015 AND REN 687/2015 FRAMEWORK?

22% 40% 21% with no projects

6%

14%

18%

79% with projects

NUMBER OF PROJECTS

0

1

2

3

4

More than 4 N = 195

Respondent companies were asked about the average time required for completing all steps of the installation of a grid-connected photovoltaic system –from the signature of the contract between the company and the customer to the approval by the distributor and actual connection of the system to the grid. Among the 154 companies that executed at least one project in 2016, the mean time required for installation and connection was 2 months and 15 days. This time decreased relative to 2015, when the average was 3 months and 3 weeks, as shown in Chart 6.

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In the first edition of the Survey, in 2013, this number was even higher: companies took around 6 months to complete the project, the installation, and the connection. Recent data show that time is being optimized throughout the process, and every year installation and connection are executed faster than the previous year, which is very positive for end consumers.

Chart 6

TIME FOR COMPLETING ALL STAGES OF INSTALLATION AND CONNECTION

Average time in months

8

6

4

2

0 2013

2014

2015

2016

N=36

N=49

N=111

N=154

Year

This average for 2016 nearly achieves the goal set in REN 482/2012. Section 3.7 of Module 3 of the Distribution Procedures (PRODIST), linked to REN 482/2012, in force during 2015, establishes that the maximum period for distributors to perform their activities regarding

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micro-generation is 82 days1. These 82 days include time limits set for obtaining grid access permission, inspecting the installation, submitting the inspection report, obtaining approval, and establishing the connection (ANEEL, 2012).

Chart 7 shows the distribution of answers during the four years of survey; there is a noticeable concentration on two months of 2016 relative to the other years. It can also be seen that beyond five months (time required for installation), the concentration of answers decreases every year.

Chart 7

Frequency (%)

COMPARISON OF TIME TO COMPLETE ALL STEPS OF INSTALLATION AND CONNECTION IN THE FOUR SURVEYED YEARS 50 45 40 35 30 25 20 15 10 5 0

2013 2014 2015 2016

1

2

3

4

5

6

7

Months

8

9

10

11

12 N = 154

1  If there is a need for work in the grid, the deadline for granting grid access permission is extended by 15 days for micro-generation and by 30 days for mini-generation, thus extending the total length of the process. The deadlines revised ANEEL’s REN 482/2012 sets are 34 days for micro-generation and 49 days for mini-generation.

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In April 2017, Brazil surpassed 10,000 PV system installations and connections. As shown in Chart 8, Minas Gerais is the national leader state, followed by Sao Paulo, Rio Grande do Sul, and Rio de Janeiro.

Chart 8

INSTALLATIONS AND CONNECTIONS IN BRAZILIAN STATES RR

AP

AM

PA

CE

MA PI

AC

TO

RO

RN PB PE AL SE

BA

MT DF

GO MG

ES

MS SP PR SC RS

RJ

NUMBER OF PV SYSTEMS

0 7 - 83 100 - 200 223 - 556 894 - 1,180 Above 2,000

Source: ANEEL, 2017 (Adapted by the authors)

SOCIO-ECONOMIC PROFILE

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This section outlines companies’ socio-economic profile, capturing data about job creation in this sector and analyzing installed system prices, as well as the total cost structure of a PV installation.

The companies that answered questions in this section were those that answered the first question saying they are “Installers” and “Manufacturers/retailers of PV modules and/or inverters” (Chart 1).

JOBS IN THE BRAZILIAN PHOTOVOLTAIC INDUSTRY The following question was introduced in this edition: “How many direct employees are there in your company?” Out of the 253 companies that answered this question, 21 do not yet have any direct employees and 177 only have 1-5 direct employees, which shows that most of them are small.

Chart 9

NUMBER OF DIRECT EMPLOYEES IN COMPANIES Number of companies

177

31

21 None

1-5

Number of employees

6 - 12

10 12 - 18

17 More than 18 N = 253

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Companies were also asked: How many direct and subcontracted employees were hired in 2016? The median was one direct and two subcontracted employees hired that year. Chart 9 shows a comparison between the three surveyed years; the number of subcontracted employees hired in 2016 is the highest in all editions (65%). Due to economic instability, many companies chose to subcontract a few installation steps; moreover, as some of them are active in several regions, they hired temporary workers.

Graph 10

THREE-YEAR COMPARISON OF THE PERCENTAGE OF DIRECT AND OUTSOURCED EMPLOYEES IN THE SECTOR 37%

2014

63%

N=49

41%

2015 N=210

59% 35%

2016 N=253

65% Direct employees

Subcontracted employees

In more mature markets, such as the American, 53% of the 260 thousand jobs created by the photovoltaic sector in 2016 are concentrated on the installation step of the project. This is why a significant percentage of jobs created in this sector is filled by local workers, whatever the origin of the equipment used –manufacture accounts for 14% of the jobs in the sector (SOLAR FOUNDATION, 2017).

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According to a census conducted by Solar Foundation in 2017, the average number of jobs created in the US photovoltaic sector was 34 per MW of installed power generation capacity in 2016. Based on this figure and considering that at least about 600 MWp of solar generation capacity are expected to be installed in Brazil in 2017, the potential for job creation in the sector could be close to 20,000 in 2017, including jobs in installation, sales, and distribution, as well as in power plant projects (BRASIL ENERGIA, 2017).

The Brazilian Association of Photovoltaic Solar Energy (Absolar, because of its acronym in Portuguese) estimated that about 5,000 jobs were created by the Brazilian photovoltaic sector in 2016, taking into account, in addition to system installation, jobs related to research and development. Distributed generation is expected to grow 4.5 GW in 2024 (BRASIL ENERGIA, 2017).

DOMESTIC PRICES Prices of PV system installations in 2016 were surveyed for each nominal power range, separately for installer companies and for manufacturers/retailers of modules and/or inverters.

For power ranges of up to 5 kWp, installers reported an average price of R$ 7.51/kWp. Since the start of the survey, this price has dropped about 15% for power ranges of up to 5 kWp. Chart 10 shows that, for the other installed power ranges, the average price has also dropped since 2013, year of the first edition of the survey.

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This same chart also makes it clear that the higher the installed power range of the system in kWp, the lower the price due to economy of scale.

Prices in Chile, for example, are more competitive and can vary from R$ 4.68 down to R$ 3.89/Wp for power ranges of 1-5 kWp and 30-100 kWp, respectively (GIZ, 2016).

Chart 11

PRICES OF PV SYSTEMS IN 2016 BY POWER RANGE AS REPORTED BY INSTALLER COMPANIES

Average price in R$/Wp

2013 2014 2015 2016 10 8 6

R$7,51

R$6,73

R$6,16

R$5,57

4 Up to 5

5 - 30

31 - 100

More than 100

N1=169

N2=159

N3=145

N4=134

System power generation capacity in kWp

In 2016, the average price calculated from the 47 answers provided by manufacturers and retailers of modules and/ or inverters for the power range of up to 5kWp is R$ 7.01/ Wp. For all power ranges, the average price was slightly lower than the one reported by installer companies.

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Maximum prices for each power range were R$12.00/ Wp (up to 5 kWp), R$10.00/Wp (6-30 kWp), R$9.70/Wp (31-100 kWp), and R$10.00/Wp (above 100kWp). All maximum prices for each power range were mentioned only once.

Chart 12

Average price in R$/Wp

PRICES OF PV SYSTEMS IN 2016 BY POWER RANGE AS REPORTED BY MODULE AND/OR INVERTER MANUFACTURER/RETAILER COMPANIES Average 12 10 8 6 4

R$7,01

R$6,08

R$5,51

R$5,21

Up to 5

5 - 30

31 - 100

More than 100

N1=47

N2=44

N3=39

N4=39

System power generation capacity in kWp

Chart 13 shows the price curve per power range set by both installer and retailer/manufacturer companies. Prices of PV systems reported by installer companies are only slightly above those reported by module and/or inverter manufacturers. In 2016, for the installed power range of up to 5 kWp, prices of products sold by installers are about 7% higher than those of products marketed by retailers and manufacturers, which makes sense, as these latter sell their products to the former.

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Chart 13

COMPARISONS OF PRICES OF PV SYSTEMS BY POWER RANGE AS REPORTED BY INSTALLER AND BY MODULE AND/OR INVERTER MANUFACTURER/RETAILER COMPANIES

Average price in R$/Wp

8000

7000

6000

5000 Up to 5 kWp Installer

5 - 30 kWp

31 - 100 kWp More than 100 kWp Retailer

Prices are lower than those found in the 2015 survey. This signals that international prices are lower, as most components are imported. Annual inflation as well as fluctuations in the US dollar exchange rate should be stressed.

Companies also reported the price structure of components for PV installations. As shown in Chart 14, PV modules still are the most expensive components in an installation (41%). The other items in the total cost structure include inverter (23%), metallic support structures (10%), design and installation (16%) and other components (including installations, Electrical protections, etc.) (10%).

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This was the first edition in which the item “metallic support structures” was offered as one of the options; it was previously included in “other components.”

In Brazil, the investment required to install a photovoltaic system is still high relative to other countries. In India, for example, a number of factors favored the fall in the cost of solar energy, such as reduced prices of photovoltaic modules (30% from one year to the next), declining financing costs, stable exchange rate, access to global capital for renewable infrastructure projects, and skilled workforce for major projects (Magazine Eletricidade Moderna, 2017).

Chart 14

STRUCTURE OF PV SYSTEMS TOTAL INSTALLATION COST 41% Photovoltaic modules

23% Inverters

16% Design and installation

10% Metallic support structures

10% N=198

Other components (includes installations, electrical protection, etc.)

NEWS MODALITIES IN DISTRIBUTED GENERATION – REN 687/2015

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On March 1, 2016, the new rule allowing the use of any renewable source, in addition to qualified cogeneration, came into force. Pursuant to it, distributed micro-generation refers to a power unit with an installed power generation capacity of up to 75 kilowatts (KW); distributed mini-generation refers to a power unit with an installed power generation capacity of more than 75 kW and less than or equal to 5 MW (3 MW for hydraulic sources), connected to the distribution grid through consumer units (ANEEL, 2016).

An additional innovation this regulation introduces concerns the possibility of installing distributed generation systems in residential condominiums (involving several consumer units). With this configuration, the power generated can be distributed among condominium owners according to percentages established by consumers themselves (ANEEL, 2016). ANEEL also created the “shared generation� modality, allowing different stakeholders to join in a consortium or a cooperative and install a distributed micro or mini-generator, using the power it generates to lower the amount on its members’ electricity bills.

Considering these changes, this is the first edition of the Survey for which respondent companies were asked about aspects of revised REN 482/2012, i.e., REN 687/2015, as well as about these new modalities of shared generation and residential condominiums.

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Companies in the three profiles (Installers, Manufacturers and Module and/or inverter Retailers, and Designers) answered this section of the questionnaire (Chart 1), whose first question concerns an assessment by the company’s technical team of how clear they think revised REN 482/2012 is.

A majority of companies (74%) and their technical teams stated that REN 482/2012 revised into REN 687/2015 is totally clear, and only 1% said it is not clear at all.

Chart 15

LEVEL OF CLARITY OF REN 482/2012 REVISED INTO REN 687/2015 Not clear at all Not very clear Mostly clear

1% 8%

Totally clear

74% 17%

N=373

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The second question in this section was “Has your company developed any PV solar energy projects based on the shared generation and residential condominium modalities?” A low number of companies (23%) has executed any projects in these modalities as yet, of which 17% in shared generation, 3% in residential condominiums, and 3% in both modalities (Chart 16). Those who executed no projects in these modalities (77%) were directed to Section 5.

Chart 16

HAS YOUR COMPANY DEVELOPED ANY PV SOLAR ENERGY PROJECTS BASED ON THE SHARED GENERATION AND RESIDENTIAL CONDOMINIUM MODALITIES? 17%

No projects

3% 3%

Yes, shared generation Yes, in residential condominiums

77% Yes, shared generation and in residential condominiums N = 373

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Companies that stated they had executed at least one project based on the shared generation and/or residential condominium modalities (23%) were asked whether they had faced any difficulties during the execution of the project(s), and 47% of them said yes. In order to better understand what these difficulties were, an open-ended question was included about what would these hurdles be, and they stated these were mainly the fact that the utilities are not aware of the processes these modalities involve. According one of the respondent companies, “project assessment was lengthy, there were technical inconsistencies in document assessment, and wrong electricity bills,� in addition to complication in adjusting the contract model.

Chart 17

WERE THERE ANY DIFFICULTIES IN THIS PROCESS?

53% Yes No 47% N = 86

RELATIONSHIP WITH DISTRIBUTORS

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This section deals with the relationship between PV sector companies and distributors. The discussion included issues such as distributor norm updates, whether distributor norms take into account the new deadlines to each step of the approval of a connection to the grid pursuant to ANEEL’s REN 482/2012 revised into REN 687/2015 (in Section 3.7 of Module 3 of PRODIST), and whether the company faced any challenges or difficulties in installing a photovoltaic mini or micro-generator for any of its clients.

Companies fitting one of the three profiles (Installers, Manufacturers and retailers of modules and/or inverters, and designers) answered this section of the questionnaire (Chart 1).

The first question in it was “Do distributors update their norms when ANEEL and INMETRO make changes concerning mini and micro-photovoltaic generation, as per REN 482/2012 and REN 687/2015?” These establish that distributors must update their norms every time ANEEL and INMETRO introduce changes in norms relevant to mini and micro-generation. To this question, 72% of the companies stated that this actually happens. In 2016, this percentage is slightly lower than in 2015, when 75% of the companies stated they complied with this norm.

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Chart 18

DO DISTRIBUTORS UPDATE THEIR NORMS WHEN ANEEL AND INMETRO MAKE CHANGES IN NORMS RELEVANT TO PHOTOVOLTAIC MINI AND MICRO-GENERATION?

72% Yes No 28% N = 373

Another important factor for installers are deadlines set by utilities for the connection process, since REN 482/2012 includes deadlines for the main steps of the procedure for requesting connection to the grid.

As to the question of whether the distributor norms include deadlines for each step according to what was established

by ANEEL’s REN 482/2012 (in Section 3.7 of Module 3 of PRODIST), there was a slight decrease in the number of companies’ positive answers relative to 2015. In the previous edition, 52% of the companies stated the norms include deadlines for all steps, whereas in this edition this percentage was 50%. In 2016, the percentage of companies (39%) having stated that deadlines have been set only for some of the steps of the procedure for requesting connection to the grid remains the same as in 2015. The percentage of companies having informed that the distributor norm does not establish deadlines increased relative to 2015: from 9% up to 11% in 2016.

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Chart 19

DOES THE DISTRIBUTOR’S NORM INCLUDE DEADLINES FOR EACH STEP OF THE APPROVAL OF A CONNECTION TO THE GRID PURSUANT TO ANEEL’S REN 482/2012 (IN SECTION 3.7 OF MODULE 3 OF PRODIST)?

50% 39%

11% Distributor norm DOES NOT set any deadlines Distributor norm sets deadlines ONLY FOR SOME steps Distributor norm sets deadlines for ALL steps

N = 373

The percentage of respondent companies having stated they face difficulties decreased relative to the previous year, from 63% in 2015 down to 58% in 2016. This shows that companies are learning continuously and that organizational knowledge consolidates every year.

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Companies that answered “yes” to the question “Did your company face any difficulties or requirements that hindered, delayed, increased the cost of or made non-feasible the installation of a photovoltaic mini or micro-generator for any of your customers?” were directed to Section 6, which concerns challenges arising from the grid-connection process.

Chart 20

DID YOUR COMPANY FACE ANY DIFFICULTIES OR REQUIREMENT THAT HINDERED, DELAYED, INCREASED THE COST OF OR MADE NON-FEASIBLE THE INSTALLATION OF A PV MINI OR MICRO-GENERATOR FOR ANY OF YOUR CLIENTS?

58% Yes No 42% N = 198

CHALLENGES IN THE GRID-CONNECTION PROCESS

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Understanding the relationship between installer companies, end consumers and distributor is crucial to identify difficulties that still remain in the procedure for requesting connection to the grid and formulate action plans aimed at overcoming these problems. Companies fitting one of the three profiles (Installers, Manufacturers and retailers of modules and/or inverters, and designers) answered this section of the questionnaire (Chart 1).

This is the first year in which the Survey analyzes in detail difficulties facing installer companies in 2016 in their relationship with distributors after REN 687/2015 came into force; it revised REN 482/2012 precisely in order to contribute to the sustainable development of the Brazilian distributed generation market. Moreover, installer companies could contribute their perceptions as to what distributors should do to improve the process of requesting connection to the grid.

The first question in Section 5 was “In which phase of the project did your company face this difficulty?”, and respondents were allowed to tick more than one option. This year, a new option was added: the installation of the new meter. In 2016, answers were generally similar to those given in 2015: requesting grid access permission still is the step in which most difficulties arise (69 companies); 61 respondents chose the new option, “the installation of a new meter”; and 52 pointed to “billing.” Each year, more and more states adhere to sales tax exemption on solar energy, which is why consumers have difficulties understanding their electricity bill after installing a PV system. The option “PV system operation” was the less often chose step, only by four respondents.

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Chart 21

IN WHICH STEP OF THE PROJECT DID YOU FACE THIS DIFFICULTY? Grid access permission application

69 Installation of the new meter

61 Inspection by the distributor

57 Billing

52 Project planning

10 PV system commissioning

9 PV system installation

5 PV system operation

4

N = 267

Installer companies were asked whether these difficulties had caused delays in the deadlines stipulated by REN482/2012 revised into REN 687/2015 (in PRODIST) for connecting the PV system to the grid, and a majority (85%) answered having faced delays due to the difficulties they faced. This figure is slightly lower than the one for 2015 (89%).

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Chart 22

DID THE DIFFICULTIES CAUSE A DELAY IN THE DEADLINES STIPULATED BY REN482/2012 REVISED INTO REN 687/2015 (IN PRODIST) FOR CONNECTING THE PV SYSTEM TO THE GRID? 85% Yes No 15% N = 114

After answering the question of whether difficulties had delayed the connection process, companies stated how long this delay was on average. Chart 22 shows a decrease in the average delay relative to 2015, when a majority of the companies (45%) stated having experienced an average delay of two months. In 2016, in turn, the majority stated the average delay was up to one month (47%).

Only 27% of the companies reported an average delay of three months or more, whereas this percentage was 39% in 2015, and only 5% of the companies had no predicted completion time.

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Chart 23

HOW LONG WAS THE AVERAGE DELAY TO COMPLETE INSTALLATION AND CONNECTING THE PV SYSTEM TO THE GRID DUE TO THESE DIFFICULTIES? 5%

Up to 1 month

3% 5%

2 months

14%

3 months

47% 26%

4 months More than 4 months No predictable completion time N = 97

In order to understand how to mitigate these difficulties, companies were asked to point out aspects that could be improved in the process of requesting distributors to connect a photovoltaic system to the grid.

Chart 24 describes the eight options respondents had and the distribution of their answers. Companies were allowed to tick more than one option.

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Chart 24

WHICH POINTS STILL NEED IMPROVEMENT IN THE PROCESS OF REQUESTING A DISTRIBUTOR CONNECT A PHOTOVOLTAIC SYSTEM TO THE GRID IN 2016?

Compliance with the new deadlines set by ANEEL’s REN 482/2012 revised into REN 687/2015 (within PRODIST)

76 Standardization of disclosure on grid connection procedures for all distributors

73 Specific training on distributed generation to distributor branch clerks to improve customer service

72 Detailed billing pursuant to the new requirements established by ANEEL’s REN 482/2012 revised into REN 687/2015

61

Bidirectional meters should be available from the distributor stock to streamline the replacement

60 Easier access to the grid-connection norm on the distributor's site

34 Acceptance of two unidirectional meters for low voltage customers

26

Nothing requires improvement

2 N = 404

The three points most often mentioned were: “Compliance with deadlines stipulated by REN 482/2012” (within PRODIST) of ANEEL (option D), with 76 answers; “Standardization of disclosure on grid connection procedures for all distributors” (option A), with 73 answers; and “Specific training on distributed generation to distributor branch clerks to improve customer service” (option B), with 72 answers.

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In the previous edition of the Survey, the first two options more often chosen were the same as this year, but not the third one, which was “Acceptance of two unidirectional meters for low voltage customers” (G); the number of respondents having chosen this option this year decreased (from 69 down to only 26).

In this edition, a new option was offered to respondents: “Detailed electricity bill pursuant to the new REN 482/2012 revised into REN 687/2015 requirements”, which was chosen by 61 respondents. Since these electricity bill updates were first introduced in 2016, this item is not expected to need improvement in the coming years.

As to positive distributor examples, a few respondent highlighted mainly the good customer service provided by a few utilities and compliance with all the deadlines in the process of connecting a PV system to the grid. It is important to note that, pursuant to REN 687/2015, distributors must provide, as of January 2017, an electronic system through which consumers can send access applications and all documents listed in the annexes in Section 3.7 of Module 3 of PRODIST and monitor each step of the process online (ANEEL, 2015). A few companies stated that many utilities have adopted this e-system, which made it easier to send documents, since it streamlined the process and decreased paper waste.

RELATIONSHIP WITH CLIENTS

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This section was included in this edition to identify how PV sector companies relate to their consumers. Through relationship marketing, companies are able to establish longterm relationships with clients in a mutually beneficial and effective way, making it easier to provide better customer and quality technical services to their consumers.

Companies fitting one of the three profiles (Installers, Manufacturers and retailers of modules and/or inverters, and designers) answered this section of the questionnaire (Chart 1).

The first question was “What are the payment options customers of PV sector companies use most often?” Respondents were allowed to tick more than one option.

The most commonly used form of payment by consumers was bank financing (198 answers), followed by cash payments (192 answers).

The two less mentioned forms of payment, i.e., less often found on the market, are “Equipment Leasing” and “Performance Contract” (including ANEEL’s Energy Efficiency Program)”.

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Chart 25

WHAT ARE THE PAYMENT OPTIONS YOUR CUSTOMERS USE MOST OFTEN? 1%

1%

9% 31% 31% 27%

Cash

Instalments

Bank financing

Financing by your company

Performance Contract (including ANEEL’s Energy Efficiency Program)

Equipment leasing N = 628

The other question concerned the primary means of attracting customers chosen by companies in the PV sector.

Attracting clients is a very important process if a company is to remain strong on the market. According to respondents, the most used means to find prospects are relationship networks (contacts, networking, referrals, etc.) (35%), company website (24%), and active prospection by external sales force (19%). Trade shows and events are the means companies use less often to attract clients (only 4%).

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Chart 26

WHAT IS THE PRIMARY MEANS OF ATTRACTING CUSTOMERS IN YOUR COMPANY? 24% 35% 5% 19% 13% 4% N = 801

Website

Relationship networks (contacts, networking, referrals, etc.)

Physical store

Active prospection (external sales force)

Phone calls and emails

Sector trade shows and events

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COMMENTS AND SUGGESTIONS At the end of the questionnaire, respondent companies could offer comments on or suggest changes to the Brazilian PV market.

Comments were generally very similar to those in last year’s edition, as they usually concern problems that take a long time to be solved. The online process for sending applications to utilities used to be often requested by respondents; in 2016, these e-systems started to be implemented to serve companies.

Another strong request from respondent companies concerns financing schemes that would be adequate to the market. This complaint tends to continue to come up until the market reaches maturity.

Financing There is a strong need for financial agents to develop funding lines specifically targeted to the distributed generation market.

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Taxes In Brazil, distributed generation is exempt from contributing to PIS/PASEP and Cofins (social funds) pursuant to Law 13,169/2015, which allows state governments not to levy sales tax on the power generated by distributed micro and mini-generation and injected back into the grid. The Center-West is the second Brazilian region to implement this measure in all of its states. A few respondent companies complained about states that have not yet adopted this exemption.

Distributor procedures and preparedness Comments on distributors were quite similar to those in last year’s edition of the Survey. Complaints concern distributors’ lack of preparedness for the grid-connection process and the scarcity of professionals in this area, as well as difficulties talking to this sector through the Call Center or by email. Another very frequently mentioned aspect is the lack of compliance with deadlines set by REN 482/2012 revised into REN 687/2015, mainly because this was the first year utilities had to adapt to ANEEL’s new requirements.

CONCLUSIONS

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Data obtained in this edition of the survey “The Brazilian photovoltaic distributed generation market - 2017” point to an evolution of this industry from year to year. The 2017 edition was the first one including the profile of respondent companies, as well as the main area in which they are active on the photovoltaic market.

There is a growing number of new companies in the photovoltaic solar energy sector. In 2016, 40% of the respondent companies reported they had been on the market for up to two years. Likewise, every year new companies register on to the América do Sol program Supplier Map. A majority of the companies reported having executed at least one PV micro and mini-generation installation in 2016.

Like in the previous edition, the annual median of projects per company is around three. It is clearly noticeable that consumer’s demand for PV distributed generation solutions increased; the number of systems connected to the grid by ANEEL doubled between October 2016 and April 2017 (from 5,000 up to 10,000 connections).

One negative point highlighted in the current edition is that a lower number of direct employees was hired relative to the previous surveyed year. In 2015, only 59% of the employees were subcontracted, whereas in 2016 this percentage went up to 65%, the higher in the last three surveyed years. This fact can be explained due to the economic instability in 2016 and because many companies decided to subcontract services according to the demand.

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As companies remain on the market over the years, the time required to connect systems to the grid is decreasing, as this survey has been showing since its first edition. This signals that all the different players in this industry are going through a learning curve, thus allowing the grid-connection time to go from 3 months and 3 weeks in 2015 down to only 2 months and 2 weeks in 2016. Nevertheless, when challenges and difficulties arise in connecting the PV system to the grid, companies report they can experience delays of around one month, mainly during the steps of obtaining grid access permission and installing new meters.

It is important to stress that this was the first surveyed year in which respondent companies assessed ANEEL’s REN 482/2012 revised into REN 687/2015, which only came into force in March 2016, as well as distributor’s performance in terms of the required adjustments. The new norm changed a few important points in REN 482/2012, such as deadlines for different steps of the grid-connection application, mandatory inclusion of new data on the electricity bill of distributed generation consumers, and the new connection modalities, such as shared and residential condominiums generation. A positive point respondents highlighted was that a number of utilities have already implemented an e-system that streamlines this process by allowing it to be carried out online. As to the new modality introduced by Resolution 687/2015, shared and residential condominiums generation, 23% of respondent companies stated they had executed this kind of projects; this figure tends to be higher in the next editions of the survey.

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Domestic prices charged by installer companies are falling with every surveyed year. For installed power ranges of up to 5 kWp, the price was R$8.58/Wp in 2015 and R$7.51 in 2016. Likewise, in the case of manufacturers and retailers of modules and/or inverters, the price went from R$8.42/ Wp down to R$7.01/Wp in 2016 for systems of up to 5 kWp. Many pieces of equipment required for installing PV systems are still imported, but the outlook is that, with new factories opening in Brazil, national competition will be strengthened and exposure to US dollar exchange rate will decrease. “The Brazilian photovoltaic distributed generation market� survey was born in 2013 with the purpose of reporting, monitoring, and strengthening the Brazilian photovoltaic solar energy market by collecting data on this industry.

In its fourth edition in 2017, the survey is signaling the growth of this market in the coming years. We believe that the 2018 edition, compared to 2017, will reflect new important changes in this scenario stemming from the reformulation of ANEEL’s Resolution 482/2012.

This survey helps substantiate political decision-making and actions. Furthermore, it provides companies with support for making strategic decisions and helps those who are new to this market understand how it is developing.

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REFERENCES ANEEL - Agência Nacional de Energia Elétrica. Unidades consumidoras com geração distribuída. 2017.

Disponível em: <http://www2.aneel.gov.br/scg/gd/GD_ Classe.asp>. Acesso em: 08 maio 2017. _______. Informações Técnicas. 2016. Disponível em: <http://www.aneel.gov.br/informacoes-tecnicas/ /asset_ publisher/CegkWaVJWF5E/content/geracao-distribuidaintroduc-1/656827?inheritRedirect=false>. Acesso em: 08 maio 2017. _______. Resolução Normativa nº 482, de 17 de abril de 2012. Publicado em 17 mar. 2012. Disponível em: <http://www2.aneel.gov.br/cedoc/ren2012482.pdf>.

Acesso em: 08 set. 2016. _______. Normativa nº 687, de 24 de novembro de 2015.

Publicado em 24 nov. 2015. Disponível em: <http:// www2.aneel.gov.br/cedoc/ren2015687.pdf>. Acesso em: 08 set. 2016.

Deutsche Gesellschft für Internationale Zusammenarbeit (GIZ) GmbH. Índice de Precios de sistemas fotovoltaicos (FV) conectados a la red de distribución comercializados en Chile. Nov. 2016.

Revista Eletricidade Moderna - Os avanços e as tendências da tecnologia eletroeletrônica, São Paulo: Aranda Editora, Ano 45, abr. 2017. Disponível em:

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<http://www.arandanet.com.br/assets/revistas/em/2017/ abril/index.php>. Acesso em: 08 maio 2017. _______. São Paulo: Aranda Editora, Ano 45, jan. 2017a.

Disponível em <http://www.arandanet.com.br/assets/ revistas/em/2017/janeiro/index.php>. Acesso em: 08 maio 2017.

Qualificação padrão é estratégica. Revista Brasil Energia, Edição n. 438, maio 2017.

The Solar Foundation. National Solar Jobs Census.

2017. Disponível em <http://www.thesolarfoundation. org/national/>. Acesso em: 24 maio 2017.

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