In the absence of a comprehensive national renewable energy policy, the discount is one of the few legal advantages that renewable energy sources enjoy over conventional rivals, Elbia Melo, CEO of Brazilian wind energy association Abeeolica told Windpower Monthly.
Removing the discount would have meant a BRL 25/MWh ($11/MWh) increase in the cost of wind energy in Brazil, hampering its ability to compete, she said.
This would have threatened the future of a 20GW portfolio of wind projects waiting to be developed, as well as Brazil's nascent wind turbine industry, which has grown fast in recent years thanks to the country's stringent local sourcing rules.
However, with wind power dominating recent auctions and installed capacity forecast to rise by 2GW annually to more than 20GW by the end of the decade, some feel that wind power is already very competitive and no longer requires special treatment.
But after intense lobbying of lawmakers and policymakers, wind industry supporters were able to have the clause scrubbed from the provisional measure 641.
"We convinced them that it could not happen. They could not single out wind like that," Melo explained.
The sector was aided by house chairman Henrique Alves, who is planning to stand as candidate for governor of the northern state of Rio Grande do Norte, one of the country's wind power producers.
The legislative skirmish follows 18 months of rule changes that are gradually whittling away wind power's cost advantages over other energy sources.
These include a higher domestic sourcing requirements and tighter rules on how accurately wind speeds must be measured, putting up the minimum level of certification from 50% to 90%.
In addition, transmissions rules have been tightened following delays that threatened energy supplies in 2012.
These changes, plus alterations in the value of the Brazilian currency, have helped push up wind energy costs, to around BRL 130/MWh from less than BRL 100/MWh in 2011, Melo said.
Wind farms continue to dominate new energy build, accounting for 551MW of the 968MW awarded at the latest A3 energy auction, held in June by national energy agency Aneel.
But the increased costs explains why the average price at the auction of BRL 126.18/MWh, was so close to the cap price of BRL 130/MWh. In fact, most wind farms are awarded contracts only just below BRL 130/MWh. Only the lowest bid of BRL $121/MWh for a 417MW expansion of Eletronorte's Santo Antonio hydroelectric project in the Amazonian state of Rondônia helped drag down the average price.
Still Melo expects wind power to continue to take the bulk of contracts at upcoming auctions, such as the reserve capacity auction scheduled for October.
Changed auction format
This auction is particularly attractive to investors as it gives them three years to build and begin supplying electricity. According to Melo, many developers held back in the June auction to participate in October.
Unlike previous auctions, the government is offering differing prices for different technologies, to make room for most costly energy sources such as solar and small hydroelectric.
But Abeelica forecasts that wind farms will still win around 1GW of the 3GW thought to be on offer in October.
That could depend, however, on the changing regulatory framework. In the meantime, lobbyists for the sector will have to stay vigilant, said Melo. "We will need to work hard all the time. There are a lot of groups interested in stopping wind power," she said.