Brazil Pushes Up Solar Tariffs To 25 Percent

Brazil, which has emerged as an important destination for Chinese solar exports after the challenges in the US and India, has hiked import tariffs to 25% on module imports, crimping yet another key market for Chinese manufacturers. The new rate follows an earlier tariff of 9.6% that the government has imposed to support the growth of domestic industry in the largest South American country, earlier this year.

The notice from Brazil’s  Ministry of Development, Industry, Trade and Services (MDIC) on 12 November states that the tariff will see an increase of duties for solar cells built-in solar panels or modules – as described in the government’s Official Gazette of the Union – and entered into force on the same day.

Interestingly, Brazil has two large and ‘national’ solar module manufacturers, BYD Energy Brazil and Brazilian module manufacturer Sengi Solar. BYD Brazil is a subsidiary of leading Chinese EV automaker, BYD.

From being a country powered primarily by Hydropower, Brazil took tentative steps towards other renewable options before settling on solar as the option of choice. With over 48GW in operation, Solar PV represents 20% of the country’s total installed electricity capacity. Of the close to 10 GW capacity added in 2023, over 9 GW came from solar and wind, with Solar dominating with over 8 GW.  In fact, in Q4 of 2023 (Calander year), the total imports of solar modules crossed 5 GW, marking the country as a critical foreign market for Chinese makers.

Like every other country, developers are not impressed with the order, claiming that over 25GW of solar PV projects are at risk of being canceled by 2026 due to the decision. This represents more than BRL97 billion (US$16.7 billion) in solar investments.

Brazil’s decision will further roil an already depressed solar scenario, with many worried about the sustainability of the current capacity additions pace worldwide if prices start to creep back up thanks to tariffs. The US, India and now Brazil are three key markets that have indicated a willingness to bear higher prices, besides smaller countries like Turkey as well.

All this has worked until now due to depressed prices for wafers and cells in China, which have allowed projects to proceed even with the higher tariffs as consumer end tolerance for these prices remains. However, a really sharp recovery or rise in prices in China, however unlikely it might seem in the immediate future, could cause disruptions in all large markets with protective tariffs, as customers might push back. Keep in mind that the cost gap between Chinese imports and domestic prices is as high as 90% to 130% across these markets already.