Visit windpowermonthlyevents.com for the latest on our upcoming conferences and webcasts

Peru

Peru

Brazil's trends make regional impact

URUGUAY/PERU: Two tender processes in South America are returning dramatically lower prices for wind-power projects due to a combination of slacker markets overseas, state support for Brazil and improved technology.

Uruguay's state-run Usinas y Transmisiones Electricas (UTE) looks set to buy wind power this month at prices of $63-67/MWh, or around 25% cheaper than its first auction, which ended in March. After opening submissions at the end of August, UTE is checking each project for viability and planning to assign contracts in early October.

The strikingly lower prices come despite only a modest increase in competition — 17 companies offered 23 possible projects compared with 15 offering 22 projects in the first auction. On both occasions, UTE has committed to commission only three 50MW projects.

Paulina Zorrilla, who is managing UTE's wind-purchasing process, said that the prices had fallen due to international developments. "We had much lower prices, but Brazil did too," she said. Brazil's August auction settled on prices of around $62/MWh. "We believe it is due to international factors, not due to here," citing the knock-on effects of Europe's financial crises.

The Brazil effect

Latin American developers tend to be owned by or have close ties to European firms, in part because of long-standing migration links. These companies are increasingly looking for opportunities in emerging markets as installed capacity in Europe is now growing at a slower pace than before. According to European Wind Energy Association statistics, there were 9.3GW of wind power installed in Europe last year, down more than 11% from 2009.

Tim Stephure, an analyst at IHS Emerging Energy Research in Boston, argues that financing and capacity growth in Brazil are driving the whole region. The giant state-run Brazilian Development Bank (BNDES), which can fund projects outside the nation's borders providing they have a minimum content from Brazilian firms, has had a particularly strong effect in Uruguay, he argued.

"There are 11 equipment manufacturers that qualify for BNDES funding with 1GW of capacity," he said. "There are around 6GW of projects in the pipeline, which represents 1.5-2GW a year over the next few years." Uruguay's plans for 300MW in this year's tenders and a further 200MW by 2015 enter into the dynamic led by northern neighbour Brazil, he said.

Developers across South America are now in a buyer's market, Stephure added. "This competition has been helping developers," he said. "It has also put a lot of emphasis on having the best technology available."

Stephure pointed out that innovation and improvements by equipment manufacturers worldwide had deepened the trend towards lower prices.

Peru, which launched a tender for all renewable technologies, assigned contracts in late August for a 90MW wind farm close to mining and port city Marcona. This will pay producers $69/MWh. The country's process attracted five wind-power proposals, most of them in the $70-$80/MWh range, also significantly cheaper than Peru's first round, which ended two years ago and saw offers in the $110/MWh range.

The Peruvian government views wind power as expensive and experimental. It assigned around 100MW of hydropower, spread across seven projects, all cheaper than $56.50/MWh.

No new wind capacity is scheduled to come online until the end of next year. Uniquely in the region, Peru's Mining and Energy Investment Supervisory Body Osinergmin, which runs the tender process, held a beauty contest seeking the largest total energy-production commitment for the lowest price. "There were very competitively priced bids that we set aside because they didn't offer enough energy," said Riquel Mitma, Osinergmin's engineer responsible for the process.

Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus
[DAYS_LEFT] days Subscribe Now

Left of your Windpower Monthly free trial

Your free trial Subscribe Now

to Windpower Monthly has expired

Windpower Monthly Events

Search more than 4,500 companies in the Windpower Directory

Latest Jobs