With the reintroduction of import taxes on Chinese solar panels, Brazil hopes to develop its own industry

The image is a courtesy of Laís Martins.

For years, Chinese solar panels were king in Brazil. In 2022, around 99 percent of all photovoltaic panels purchased in Brazil were imported from China, which is the leading global manufacturer of solar energy equipment. Only 1 percent was produced locally. Now, thanks to a government decision to scrap a tax exemption that reduced the cost of importing solar energy equipment that had been ongoing since 2020, this landscape could start changing. 

The explanation for this wide-ranging adoption of Chinese products is multifaceted. It is partly due to tax reasons: Solar panels imported from China were, until recently, exempt from import taxes, which makes them 50 percent cheaper than panels produced domestically inside Brazil. Another reason Chinese panels have dominated the Brazilian market is the immaturity of the local sector, which has failed to develop itself in the absence of government-led incentive programs and policies. 

Chinese solar panels are not only cheaper in Brazil. According to estimates from the European Commission, the total cost of photovoltaic manufacturing in China is 35 percent lower than in Europe, 20 percent lower than in the United States, and 10 percent lower than in India. And even in recent years, the manufacturing price in China has continued to decrease. According to Info Link, a solar energy information agency, in 2023, the average price of modules from China was around EUR 0.25 per watt. Just a little over one year later, in early March, that price was under EUR 0.1 per watt.

Globally, China has a strong edge compared to local manufacturers thanks to its mature industrial chain — the result of more than 15 years of investment in developing technology. China’s solar PV sector development initially followed a bottom-up pattern and has gone through three distinct stages. First, until 2009, the solar PV industry primarily developed as an export-oriented manufacturing policy with the support of subnational governments. Second, China’s central government intervened by creating domestic solar markets to save the solar PV industry. Third, beginning in 2015, and somewhat unsuccessfully, the Chinese central government began removing domestic subsidies and again focused on technological efficiency, production cost, and grid integration in its domestic solar PV industry.

The low cost of acquiring Chinese-made panels has enabled countries like Brazil to initiate their green energy transition. Currently, 18.2 percent of Brazil’s energy is obtained through photovoltaic panels. But now that could be under threat thanks to a decision by the Brazilian government to slap new taxes on Chinese imports. This could lead to a reconfiguration in the sector, and not necessarily a positive one.

Being one of the cleanest and lowest-impact sources of energy, solar power is at the forefront of environmental justice. Ensuring equipment costs remain low means the population can afford to purchase and install equipment, therefore democratizing the use of solar energy. It also reduces dependency on other forms of non-renewable energy. 

Starting in January of 2024, the Brazilian government announced that it is reintroducing a 10.8 percent import tax on Chinese solar panels. “The production of equipment to generate solar energy is strategic for the country,” said Geraldo Alckmin, Brazil’s vice president and minister for Development, Industry, Commerce, and Service. “It contributes to our energy security and is aligned with the ecological transition program for a low-carbon economy,” he said, according to a government publication.  

Absolar, the Brazilian Photovoltaic Solar Energy Association, is against any new import taxes. “Increasing taxes on the equipment that is used today only makes the technology more expensive for consumers, it would hinder access to technology and would, including, destroy ‘green jobs’ that Brazil has today for people who install these systems,” said Rodrigo Sauiaia, Absolar’s president. Today, there are around 1.2 million jobs generated around the photovoltaic industry in Brazil.

Sauaia added that markets that pursued increasing import taxes saw a reduction in technological development and a delay in green energy transitions because it makes it harder for the final consumer to access the technology. 

How to support the domestic solar industry?

Experts in Brazil and China told Global Voices during phone and online interviews there are other potential measures to support the national industry instead of applying taxes. He Jijiang (何继江), Deputy Director at the Research Center for Energy Transition and Social Development at Tsinghua University told Global Voices that the Brazilian government could support the localization of “downstream industries,” such as factories to produce brackets and accessories, training personnel for assembly and establishing large-scale local photovoltaic power plants. These measures could also create local jobs, Jijiang added. 

Sauaia, from Absolar, said one of the first steps to be taken by the Brazilian government would be establishing a national industrial policy with a series of incentives for local manufacturers, including a tax reduction on the raw materials necessary to produce photovoltaic modules. A second measure would be to have the government purchase Brazilian-made solar equipment to install in government buildings, as part of government housing programs and even in the case of emergencies caused by extreme climatic events, like the one in Rio Grande do Sul, south of Brazil. Sauaia said:

The government aims to decarbonize the Amazon, to replace the diesel-based generators that are expensive and polluting. These could be replaced with battery-powered renewable systems, like solar and eolic. Why not utilize Brazilian-made equipment in this program?

But even such measures may be insufficient to counter Chinese prices. Tan Youru (谭佑儒), a photovoltaic analyst at Bloomberg New Energy Finance (BNEF), believes that a continued price drop in the photovoltaic supply chain might stunt many regions’ ambitions to develop their domestic manufacturing. According to Youru, despite the government’s efforts to promote local manufacturing plans, there will be pressure from price declines, challenging the profitability of local factories. 

He Jijiang maintains that the best path to pursue is one of a division of labor, where countries develop different industries that complement China’s expertise in the core photovoltaic industry. He said Brazil’s involvement in the upstream industry would require years and a large amount of capital investment, which would inevitably delay the green energy transition and increase its costs.

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