The deployment of distributed PV (under 5 MWp) in Brazil has surged from a total capacity of 500 MW in 2018 to 7 GW in September this year. In addition to soaring electricity prices, the trigger for the increase was Proposition 5829 in 2019, wrote IHS Markit analyst Angel Antonio Cancino. The proposal is expected to pass into law by the end of this year and will gradually introduce grid access charges to residential and commercial system owners.

On August 18, the Brazilian Chamber of Deputies approved a revised version of Law 5829. The new version of the proposed law is the result of a lengthy negotiation process. It aims to remove some of the grid access that Brazil's distributed generation (DG) projects have. Currently, DG systems are exempt from grid charges when they benefit from Brazil's current net billing scheme. The program allows DG system owners to offset their energy bills by generating electricity from their rooftops and feeding it into the grid. Law 5829 is currently awaiting Senate approval and will be published by the end of the year.

While it was originally planned to limit the DG section, the revised version of the law is expected to drive an installation boom past the deadline by which fees will be charged. This is similar to other markets where there are grace periods or specific connection periods when such laws are introduced.

From January 2021 to September 2021, 2.2 GW of DG systems were connected, a significant increase from the 5 GW that was operating at the beginning of the year. Brazil's worst drought in nearly a century has exacerbated high electricity prices, low interest rates due to the Covid-19 crisis and economic entities that offer 5 to 10-year loans to finance solar projects make solar PV an attractive investment option. The opportunity to avoid paying grid bills makes near-term installations more attractive.

As most developers and end-users will scramble to apply to build distributed generation systems before the grace period ends, we expect annual installations of distributed generation projects to peak in 2022 and 2023, with nearly 30 percent of new distributed generation added each year. 6 GW. Due to the boom in project installations, we forecast strong installation activity in the PV industry, which could lead to as much as 37 GW of new additions over the 2021-2025 period. This is expected to be split between 22 GW from distributed generation projects and 15 GW from the utility-scale market.