The World's #1 Renewable Energy Network for News, Information, and Companies.
Untitled Document

Renewable Energy Recap: Brazil

Developers, manufacturers, investors and other renewable energy industry stakeholders need to know where the next big market is going to be so that they can adjust their business decisions accordingly.

Since 2003, global consultancy Ernst & Young has released its Country Attractiveness Indices, which gives a numerical ranking to 30 global renewable energy markets by scoring renewable energy investment strategies and resource availability. The indices are updated on a quarterly basis and the most recent report can be found here.

Here is the firm’s assessment of Brazil.

Wind

The third quarter of 2011 has proved to be an exciting time for Brazil’s wind energy developers, with no less than four power auctions providing opportunities to reshape the country’s electricity market. While other RES technologies, and natural gas, have also featured across the auctions, wind power has attracted the most attention when it became apparent that, for the first time, the price of wind power has fallen below the price of electricity generated by natural gas. 

The wind sector managed to secure power purchase agreements (PPAs) for 78 wind projects totaling 1,929 MW across the “A-3” auction conducted on 17 August and the reserve energy auction which took place the following day, the goal of which is to increase security of energy supplies and to avoid electricity shortages. The projects contracted under this twin auction are required to start operating in 2014. Wind projects therefore secured around half the total capacity available across the two auctions at an average price of BRL99.56/MWh (€40.01/MWh), even lower than the price of electricity generated from natural gas at around BRL103/MWh(€41/MWh). 

Less than 10 days later, Brazil’s Ministry of Mines and Energy scheduled a new auction for 20 December, with a bid deadline of 20 September. The “A-5” auction will award 20-year contracts for wind, biomass and natural gas plants, and 30-year contracts for hydroelectric plants. Contracts awarded under this auction will expect power plants to be operational by January 2016. The A-5 auction has attracted registration from 377 projects totaling 24.3 GW of installed capacity, of which 79% relate to wind projects with a total capacity of 7.5GW. EPE, the state-run energy research company, will now analyze the documentation submitted by the bids and announce which projects passed the technical qualification stage. 

There was even more good news for wind power developers who may have missed out on contract awards this year, with the announcement of yet another auction, to be held on 22 March next year. The 2012 A-3 auction requires registration by 21 November and will attract projects which can become operational by January 2014. The 2011 auctions have proved that wind and natural gas plants can compete directly in the market, and even that wind power can be cheaper. Market analysts have suggested a number of reasons for this surprising result, including the recent arrival of Chinese wind equipment suppliers in the Brazilian market, which may prompt domestic suppliers to cut prices to remain competitive. The lower cost may also be a response to an increasing number of wind turbine manufacturers in Brazil. Further, the economic slowdown has arguably caused paralysis for many European projects, which may have driven investors to seek out other potential growth markets, such as Brazil.

According to Agência Nacional de Energia Elétrica (ANNEL, the Brazilian regulatory agency for the electric energy market), Brazilian wind power capacity is on track to grow by 600% by 2014 to more than 7 GW, compared with around 1 GW at the end of 2010.

Challenges

It cannot be disputed that the auction mechanism in Brazil has created additional competition across the energy sector, resulting in a strong portfolio of RES projects, with a particular emphasis on wind power. However, Abeeolica (the Brazilian Association of Wind Power) has warned that lower return margins may mean that projects remain vulnerable to complications that could arise during construction.

More generally, it is felt that Brazil’s future electricity planning needs to reflect the positive outcome of the auctions to ensure long-term investor confidence. According to Abeeolica, improvements in the environmental licensing process and solutions to problems with logistics and ports remain the main barriers to continued growth of Brazil’s wind sector. Investors and industry participants will therefore be watching closely over the coming months to assess whether the Government intends to introduce the long-term specific policy framework required to sustain investment in the sector.

Biomass

While biomass projects have featured in the various auctions throughout Q3, only 11 projects totaling 554 MW of capacity were awarded contracts in the August auctions, and the A-5 auction generated interest from only two biomass projects totaling 160 MW. The unexpectedly large drop in wind energy prices over the past few years means biomass now faces fierce competition from wind energy as well as from large hydropower and natural gas. It is unclear how well the sector will fare in the medium to long term should it remain more costly.

Small hydro

Small hydro developers were not successful in securing PPAs for any of the plants participating in the August A-3 auction, indicating such projects are unable to compete with the low prices that appeared to dominate the auction. The sector will be keen to see whether any of the 19 small hydro projects totaling 303 MW will be more successful in the A-5 auction when the results become clear on 20 December.

For more information on renewable energy development in Brazil, contact the report’s authors Luiz Claudio S. Campo and Lucio Teixeira.

Untitled Document

Get All the Renewable Energy World News Delivered to Your Inbox

Subscribe to Renewable Energy World or email newsletter today at no cost and receive the latest news and information.

 Subscribe Now

RELATED ARTICLES

offshore wind

Hitachi Plans to Add Production Line for Offshore Wind Parts

Chisaki Watanabe, Bloomberg Hitachi Ltd. plans to expand its reach into the market for offshore wind projects by adding a production line to make...
Renewable energy

Leading US ICT Companies Renewables Use at 14%, and Growing

Andrew Burger Electricity consumption in the global information and communications technology (ICT) industry is growing rapidly. An...
Wind farms

Western: Streamlined Environmental Review Process for Wind Farms in Midwest ‘Takes Effect Right Away’

Jennifer Delony Western in an Aug. 26 record of decision (ROD) adopted a standardized process for collecting information and evaluati...

NextEra Commits to Hawaii’s Clean Power Goal, Local Management

Lynn Doan, Bloomberg NextEra Energy Inc. and Hawaiian Electric Industries Inc. made 50 new commitments as part of their proposal to merge ...

PRESS RELEASES

Canadian Solar Wins Five Solar Power Projects Totaling 185 MW in Brazil

These power projects were won under a 20-year Power Purchase Agreement (PPA) with the B...

$100 Off of 5-day Advanced PV Project Experience. Download a Topic Schedule.

Assemble, ground, energize, and commission a complete grid-tied SolarEdge system from s...

Intersolar AWARD „Solar Projects in India“ – Applications being accepted until September 18

The Intersolar AWARD in the category Solar Projects in India honors projects in the fie...

National Thought Leaders to Present on Today's Clean Energy Issues & Trends During IREC's 3iForum at Solar Power International

"An encore to the standing-room-only sessions the past two years, IREC again brings som...

FEATURED BLOGS

Washington, DC Bridges the Solar Gap

The District of Columbia has enjoyed 15 years of strong economic growth. But prosperity is spread unevenly across the...

Sell Through Hypothesis

You first learned to hypothesize, or make educated guesses, in grade school science class. Now it’s time to ref...

Cronimet / THEnergy study: In solar for mines size does not always matter - Reducing CAPEX with energy efficiency and load shifting

Munich, September 2015. Mining companies are constantly gaining interest in solar solutions because frequently solar ...

Final Program Now Available for GRC Annual Meeting & GEA Geothermal Energy Expo

GRC Annual Meeting & GEA Geothermal Energy Expo - Final Program from

FINANCIAL NEWS

CURRENT MAGAZINE ISSUE

Volume 18, Issue 4
1507REW_C11

STAY CONNECTED

To register for our free
e-Newsletters, subscribe today:

SOCIAL ACTIVITY

Tweet the Editors! @jennrunyon

FEATURED PARTNERS



EVENTS

Successfully Integrating Solar: A Proactive Approach

•      What does the increasing solar penetrati...

Doing Business in Europe – in partnership with GWEC, the Global Win...

There is now 128.8 GW of installed wind energy capacity in the EU (appro...

Doing Business in South Africa – in partnership with GWEC, the Glob...

Wind Energy in South Africa has been expanding dramatically, growing fro...

COMPANY BLOGS

Sell Through Hypothesis

You first learned to hypothesize, or make educated guesses, in grade sch...

Vacancy? No Problem!

Have you ever tried to sell an efficiency product or service to a prospe...

Final Program Now Available for GRC Annual Meeting & GEA Geothermal...

GRC Annual Meeting & GEA Geothermal Energy Expo - Final Program f...

NEWSLETTERS

Renewable Energy: Subscribe Now

Solar Energy: Subscribe Now

Wind Energy: Subscribe Now

Geothermal Energy: Subscribe Now

Bioenergy: Subscribe Now  

 

FEATURED PARTNERS