Palmas City, the capital of the state of Tocantins in north-central Brazil, aims to generate 100% of its electricity from solar power by 2022 and to have 100% of its local electricity energy supply based on solar energy by 2035 (foregoing the use of hydropower from the regional grid). Hydroelectric dams located on the Tocantins River account for nearly 97% of the electricity consumed in the city, in addition to providing power elsewhere in the country. However, electricity bills in Palmas are among the highest in Brazil, and growing uncertainties about hydropower’s stability and climate and environmental risks have heightened interest in exploring the local solar resource.

The Palmas Solar project, established in 2015, provides tax incentives for companies and households to install solar PV panels and to feed surplus generation to the electricity grid. The benefits include reducing the city’s dependence on hydropower and non-renewable energy sources, improving air quality and reducing greenhouse gas emissions. The main drivers for reducing hydropower are rising energy bills and the environmental risks of this generation source.

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At first, the project focused on solar PV installations only in new buildings, but it has since extended city-wide. Users are encouraged to install solar panels in exchange for a discount of up to 80% on two municipal taxes – the Property and Urban Land Tax and the Real Estate Transfer Tax – for a period of five years. The costs for private users are drastically reduced, as the solar power they generate is fed into the grid and discounted from their energy bills. The local utilities maintain the distribution infrastructure, for which users pay a minimal equipment cost.

For Palmas, the tax incentives did not affect public revenue because the project was launched right after a tax increase, foreseeing that a share of municipal revenue would be allocated to this project. Three private banks, Banco da Amazônia, Banco do Nordeste and Banco do Brasil, have helped finance any remaining costs. The programme has led to the creation of a solar PV market with more than 20 local enterprises selling and installing imported or locally manufactured solar panels. As of October 2020, the city had granted discounts totalling BRL 415,785 (around USD 103,000) and supported 3.8 MW of installed decentralised generation capacity under the Palmas Solar programme.

In parallel, Palmas implemented the Parque Solar project. During phase 1 of the project in 2018, the government-owned bank Caixa Econômica Federal provided financing to install solar panels on public schools, saving the municipality an estimated BRL 5,000 (USD 1,240) per month. Phase 2 involves building a 5 MW solar farm to power all municipal buildings with solar energy, although funding is yet to be secured.

Source: See endnote 6 in the Financing and Investment in Cities chapter.