Electricity production is subject to ICMS taxation in Minas Gerais, which is a tax on goods and services, but the new law provides an exemption for the first 20 years of production from 2018, up from the previous exemption period of 10 years.
The new exemption also relates specifically to solar energy commercialisation.
The Minas Gerais government will provide BRL25 million (US$8 million) for the scheme.
Rodrigo Sauaia, executive director of the Brazilian Photovoltaic Solar Energy Association (ABSOLAR) told PV Tech that this will reduce taxes on electricity commercialisation. In auctions for electricity, the taxation acts as an additional cost for the electricity generation company. Thus by exempting the tax for another 10 years, power producers are able to bid lower prices during the auction process.
Sauaia added: “It gives you a little bit more competitiveness.”
He also said that the state of São Paulo already provides a similar incentive, which could explain why São Paulo and Minas Gerais came second and third in total contracted capacity in the solarauctionof 2014.
He said: “Other Brazilian states could follow this approach to increase competitiveness of large-scale PV projects in their regions.”
Brazil state Pernambuco recently considered launching a secondsolarenergyauction after a number of delays to the winning projects from its first auction. It is also in negotiations with two unnamed solar panel manufacturers to set up facilities in the state.