Ricardo Cifu, vice president of GEF Capital Partners for Latin America, leads one of the main private equity funds focused on climate solutions.
With a history that dates back to the 90s, when GEF began its operations in Washington (USA), the fund was one of the pioneers in investments aimed at combating climate change. Since then, it has expanded its activities to different parts of the world, including Brazil, where it began investing in 2014.
With a robust portfolio of R$1,7 billion under management in the country, GEF Capital Partners has focused its efforts on three major segments: energy and energy efficiency, sustainable food and agriculture and urban solutions.
Among the companies that stand out is HCC Energia Solar, an integrator and developer of solar plants in the distributed generation market. Furthermore, UCB Baterias, focused on manufacturing lithium batteries, and Automapower, specialized in software for the electrical sector, have also received investments and played a relevant role in advancing sustainable energy infrastructure in Brazil.
In an exclusive interview with Canal Solar, Ricardo shares insights into the current energy market scenario, perspectives for the future and challenges and opportunities, highlighting the importance of energy storage, the resumption of the distributed generation sector and the potential of the free energy market.
Furthermore, it addresses the need for a stable and secure regulatory environment to attract investments and drive the adoption of new technologies, thus contributing to reducing energy costs in the country.
Canal Solar: Which companies operate in the electrical sector?
Ricardo: We operate in renewable energy, distributed generation, energy storage, automation and digitalization of the electricity sector. I would like to highlight three companies.
HCC Energia Solar is an integrator and developer of solar plants in the distributed generation market of up to 5 MW. We invested in it two years ago. The company has grown well, despite facing challenges with the entry of 14.300/22 and the rise in interest rates. We have already developed around 35 MW in solar farms and, in retail, we have exceeded 200 MW.
UCB Baterias, formerly known as Unicoba, has existed for 50 years and we invested in it 5 years ago. Located in Manaus (AM), the unit focuses on manufacturing lithium batteries, from batteries for cell phones and notebooks to batteries that reach 5 MWh, used in BESS (Battery Energy Storage System).
In recent years, UCB has been working in Isolated Systems in the Amazon, offering off-grid solutions. Today, around one million people do not have access to energy in this region. Both the government and distributors have an obligation to bring energy to these areas.
We started offering solar , inverter and battery solutions. It is possible to both serve a home and create a minigrid for a community. Since we invested in this company, almost 40 thousand systems have been installed. Today, more than 180 people have access to energy thanks to our solution. We estimate a reduction of 80 thousand tons of CO2 over the life of these systems.
The third company is Automapower (formerly Automalógica), focused on software for the electrical sector, plant management, transmission and distribution lines, substation protection and control systems, digitalization of wind and solar farms, among others. This is a growing company. Today, around 35 GW of renewable energy power uses Automapower solutions, almost 20% of Brazil's installed capacity.
Canal Solar: Speaking of batteries, how do you see the possible participation of technology in the next Capacity Reserve Auction?
Ricardo: For me, this is fundamental and UCB is very interested in this agenda. We are of the Brazilian Association of Energy Storage Solutions (ABSAE) and have already had several meetings with the Ministry of Mines and Energy and other political bodies. Even if the storage share is 10-15% in the auction, it already brings more flexibility and efficiency to asset management, especially during peak times. Companies such as UCB, Moura, BYD and Canadian are already interested in this type of product in Brazil.
Canal Solar: There are some objections to the use of energy storage. Could legal uncertainty due to the lack of regulation keep investors away?
Ricardo: Yes, that would be one of the obstacles, but we have successful cases in other parts of the world, including Latin America, the United States, Europe and Asia. It will be a big change, as today energy assets in Brazil are remunerated per kWh and would now be remunerated based on availability.
The contribution of entities to help with regulation is crucial. Otherwise, there will be great legal uncertainty and no one may be interested.
Canal Solar: So, the most important thing is the signal that the government is giving in relation to technology?
Ricardo: It's the first step. A small victory, but the process is still long. We know that it is not something that can be resolved in two days; it is necessary to have a well-structured regulatory framework.
Canal Solar: Changing the subject, the distributed generation sector suffered a little in 2023. Having overcome the first quarter, how is the market behavior this year?
Ricardo: We have already seen a recovery. The fall in interest rates has helped. The price of solar s has dropped a lot, mainly due to the abundance of solar s in Asia. With this price reduction, companies' revenues also fell, even with a higher sales volume this year than last year.
What happened in 2022 was a market anomaly. So 2023 was a year of adjustment; all companies had to adapt.
We saw a pick-up in sales in the first quarter of this year; people are recalculating and seeing that, even with the new regulations, the return is still viable.
I believe we will see in Brazil the same thing that happened in other countries. Regulation will begin to require a solar consumer to have a battery to help control the grid. Otherwise, it would place a huge burden on the distributor to carry out this control without any storage.
Canal Solar: With some integrators facing difficulties, does the fund see any opportunities to acquire new companies?
Ricardo: HCC has observed opportunities from some integrators or smaller companies that have suffered from the imbalance between supply and demand, and we are evaluating them opportunistically. But, as we already have a company in this segment, we ended up not looking to acquire competitors.
Canal Solar: In the last transmission auction, a BTG Pactual fund was the big winner. Are you also considering entering this market?
Ricardo: In this market we have some investment limitations. If we consider the size of the auctions, we are talking about multiple billions to make this investment. Our ticket is normally between R$100 and R$200 million per company.
What we do is invest in companies that provide services to broadcasters. Several Automapower customers were involved in this auction. We do not invest directly in projects, but we provide solutions that this sector. Automapower is fully committed to ing the companies that won in this auction.
Canal Solar: How have you seen the opportunities in the Free Energy Market?
Ricardo: We have studied the opening of the free market a lot. I believe it will be a turning point between distributed generation and the free market itself, as it expands more and more. I see this as very positive for reducing the cost of energy as a whole, but it is important that all participants are adequately compensated. If the opening is complete, it could overload the distributor and create problems in providing the service.
Thus, we have observed some trading companies and others that provide services related to migration to the free market. Automapower itself is a company that benefits from this, as much of its expertise lies in centralized generation in the free market.
Canal Solar: So, acting directly in the purchase and sale of energy is not the focus?
Ricardo: We have considered it in the past, but we faced some challenges that made us uncomfortable. Still, we evaluate whenever an opportunity arises, although it is not our main focus.
Canal Solar: Last question. How have you viewed the government's proposals to reduce energy tariffs?
Ricardo: There is no magic solution to solving the problem of energy costs. I believe the government should follow another path. Having a stable, secure regulatory environment attracts more and more investors and new technologies, allowing energy costs to be reduced.
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