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Brazil

Brazil

Brazil wind expected to grow by 2GW

BRAZIL: Despite Brazil's wind industry competing in only two energy auctions in 2016, it is expected to maintain average market growth in the coming years.

Auctions are hoped to continue 2GW annual growth of wind power in Brazil
Auctions are hoped to continue 2GW annual growth of wind power in Brazil

Investors have already registered interest for the first auction, which will take place on 29 April and requires energy generation to begin within five years — by 2021.

The second auction, announced in March, is scheduled for 28 October, and generation must start within three years, by 2019.

In April's A-5 auction, 864 wind power projects have been registered, accounting for 21.2GW of the 47.6GW registered.

Wind power generation will have a capped price of BRL 223/MWh ($63.90/MWh), and will be competing directly with hydro, small hydro and thermal (natural gas, coal, biomass and biogas).

Investors had been seeking a capped price of BRL 240/MWh from the government, to cover exchange rate, equipment cost and the risk associated with the unstable situation of the country.

The capped price means that profit is not impossible, but margins will be lower, according to the industry.

The best hope for the industry is through the government’s reserve auctions, said Elbia Gannoum, president of Brazilian wind energy association Abeeolica.  

The reserve auction differs from standard auctions in that it is not designed to meet the anticipated growth in demand, but rather provide energy security by creating a reserve capacity beyond that.

Brazil's wind players had expected to be included in two reserve auctions this year, but wind has only been selected for the second one — in October — which is also open to solar power generation. It too has a price cap of BRL 223/MWh.

Despite being excluded from the July reserve auction, which is for solar and hydro, investors trust that the wind market will be able to maintain the growth average of 2GW a year of new capacity on the grid.

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