© Reuters. Wind turbines in a park to generate solar energy 10/29/2018 – Reuters/Stringer
By Leticia Fukushima
SAO PAULO (Reuters) – Local manufacturers celebrated a tax on imports of wind turbines imposed by the government as a first step towards boosting the industry, which is considered strategic and has been facing difficulties in recent years, with its work being suspended. Operations of major companies in the country.
Manufacturers and specialists expect locally produced machines to become more competitive again compared to imported machines, helping to curb the recent movement towards increased equipment imports in this sector. However, generators have drawn attention to potential increases in project costs.
At the end of December, the Executive Management Committee of the Chamber of Foreign Trade (Gecex-Camex) announced changes in taxes on imports of solar panels and wind turbines, with the aim of boosting national production of renewable energy generation equipment.
The measure, which sets an import tax rate of 11.2% on all foreign purchases of wind turbines from 2025 onwards, comes at a disadvantage to manufacturers who install them in the country.
The repercussions of this measure on the wind energy sector were different from those seen in the solar energy chain, which is highly dependent on imports. The resumption of import tariffs for panels was celebrated by the electrical and electronics industry, but criticized by Absolar, which represents generators, manufacturers and other players in the sector, which said it had seen an impact on 18 gigawatts of source projects.
The wind energy industry, already well-established in Brazil, has faced turmoil in recent years, with supply chains disrupted coupled with pressures for more deliveries. Facing difficulties, two global giants, General Electric and Siemens Gamesa, suspended their activities in the country.
According to the wind energy association ABEEólica, the government’s action “corrects the asymmetry”, since previously companies did not pay taxes to import complete machines, but were taxed on purchasing components for their local production.
“We are putting things on an equal footing,” said Elbia Ghannoum, president of the entity, highlighting that this is just the first step in a broader industrial policy and must include other measures towards “new industrialization.”
She also stressed that Brazil has broken records in the wind energy sector, installing 4.8 GW of wind turbines in 2023, despite the more difficult context for developing new projects due to the increased supply of energy in the country.
“In a very short-term snapshot, we see lower demand, but the scenario is different in the medium and long term,” explained the president of ABEEólica.
For Danish company Vestas, this measure ensures competitive equality and is an important sign that Brazil wants to develop an industrial base for the sector at a time when major powers are doing the same to reduce dependence on imports in the energy transition.
“Brazil has already shown that it is very competitive… It is important that this industry not only remains alive, but also consistent and expands, because Brazil can become a hub for exporting wind turbines to Latin America and other markets,” Leonardo said. Euler, Vice President of Regulatory and Government Affairs at Vestas for Latin America.
The executive also stated that the decision is important for the company, which has a factory in Aquiraz (CE), to boost its expansion plans, but did not go into details. The previous day, Vestas announced the extension of its contract with Brazilian blade producer Aeris (BVMF:) until 2028.
Increased costs
Despite the excitement in the industry, the tax measure, which also included solar equipment, was met with concern by generators, who say they see potential increases in the costs of new renewable energy projects.
The CEO of AES Brasil (BVMF), Rogerio Pereira Jorge, assessed that taxes, in isolation, are not effective and could even hinder plans to attract industries to the country that seek to decarbonize their operations, because the cost of renewable energy will tend to rise.
“My biggest concern is that renewable energy has been the biggest competitive factor in Brazil in attracting industries,” the executive said, citing as an example Alcoa’s decision to resume aluminum production in the country.
“We see a movement of global producers, both solar and wind, to come to Brazil. But we also see the opposite, to leave Brazil… a sign that it is not exclusively the issue of import tax that influences this decision. Made,” added Jorge.
AES Regulatory Affairs Director Francine Martins Pesny noted that there is uncertainty regarding machinery supply contracts that have already been concluded, as the import tax is imposed when the goods arrive at the port.
“In practice, there has been no transition period for wind energy, and everyone who has a sales contract will certainly be hit with this import tax.”
Camila Ramos, founder of the Clean Energy Latin America (CELA) consultancy, believes taxes will eventually flatten the supply of equipment at the highest cost.
“I think it would be interesting for the country to have policies to encourage domestic production to be more competitive, such as tax relief, and not make imports more expensive,” Ramos said.
Ghannoum, of ABEEólica, denies that wind energy projects will become more expensive after the tax measure. “(Imports) have no relevant share, no central effect,” she said, and did not have data on the total amount of equipment imported by the sector.
(Written by Leticia Fukushima)
