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Brazil

Brazil

More permits despite uncertainty -- No stopping Brazil's regulator

In Brazil it is business as usual on the wind front, with electricity market regulator Aneel still issuing permits for new wind power plant despite the post-election political upheaval. In what direction President-elect Luiz Inazio Lula da Silva will lead the power sector and the rest of the economy when he takes office January 1 is still anybody's guess. Meantime, however, Aneel granted licenses for a 29 MW wind project before the October elections, and a further 600 MW in November.

Most of the permits went to Spain's Gamesa, through local unit Gamesa Serviços Brasil, for 564 MW in six projects in Rio Grande do Sul state. The projects -- Jaguarão (50.15 MW), Cassino (80.75 MW at Rio Grande), Serra dos Antunes (98.6 MW at Piratini), Tainhas (99.45 MW at São Francisco de Paula), Jiribatu (85 MW at Santa Vitória do Palmar), and Livramento (149.6 MW at Santana do Livramento) -- are all scheduled to start operation by end-2004. They represent a combined investment of BRL 1.409 billion.

The remaining 36 MW of the total of 600 MW consists of one licence for Energias Alternativas do Ceará (Enacel) to build a single BRL 90 million project at Aracati in Ceará state by February 2004. In September, Aneel licensed Eletrowind -- part of Brazil's CS Participaçoes group -- to build a 28.8 MW plant at Beberibe, also in Ceará, by November 2003. The latest round of licences means that Aneel has permitted about 4700 MW of new wind over the past year as developers rush to take advantage of the Proinfa program of renewables incentives (Windpower Monthly, May 2002).

Not ratified

But moving from the theory of Aneel permits to the reality of the sector and the January change of government -- the first in Aneel's history -- is merely the latest uncertainty holding projects back. The real culprit is Proinfa, which has still not been ratified by the president, despite it having been passed by both parliamentary chambers in April. Until Proinfa is ratified, the purchase price payable by federal power sector holding Eletrobras and subsidiaries for 1100 MW of wind is still unknown. Eletrobas has pledged to buy the power under power purchase agreements (PPAs) of up to 15 years.

Apart from price, Proinfa will provide a definitive version of sector rules and regulations and will allow developers to decide whether or not to go ahead with projects.

Gamesa will not be proceeding with its six projects until Proinfa is ratified, says the company, even though the six meet all technical and bureaucratic conditions to continue. "No investor in Brazil can proceed without this legislation," Gamesa Energia country director Pedro Cavalcanti says. The Gamesa projects all have interconnection agreements, 22-month wind studies, and are expected to get their environmental licensing by early this month.

The wait for the Proinfa law has been a long one and the patience of others is wearing thin. Some are looking towards more active markets. SeaWest Windpower of California has packed its bags and left Brazil (as well as leaving Europe), preferring to concentrate on the booming market in North America.

Moving out

SeaWest sold its Brazilian operations to Sao Paulo based Ecoinvest group, which through the deal acquired the 100 MW Pedra da Sal plans for Parnaíba in Piaui state, and the planned 40 MW Gargau project at Sao Francisco de Itabapoana in Rio de Janeiro state. Regulator Aneel authorised the projects in September. Both still need three environment permits, a municipal installation permit and a grid interconnection permit, but the real issue will be the confirmation of wind power prices.

Andre Leal, who moved from SeaWest to Ecoinvest along with the projects, says that US$60-65/MWh would be an ideal price. The Brazilian Real, however, has tumbled against the dollar this year, and now represents some R$185-190/MWh, compared to wind's normative value (the maximum that distributors pay generators for power) of R$112/MWh. Without the guaranteed buyer (at prices that remain to be seen) that Proinfa assures, wind projects are going to be difficult to develop: in the second week of October, power in all of Brazil's regional markets was trading at R$4/MWh in the wholesale market.

Assuming that Proinfa is ratified, Ecoinvest would start construction of Gargau first, possibly in early 2003. Although Aneel's authorisation said the projects would use 1 MW turbine technology, Leal says it is early days and turbine size has yet to be defined. Ecoinvest is now studying smaller turbines.

Ecoinvest, Leal continues, has the advantage of entering Brazil's wind market at a comparatively late stage and so is likely to be prepared to wait a little longer for the situation to evolve. Furthermore, it is a financing and investment group that focuses on renewables and the fledgling carbon credits market, and so could use its local know-how in these areas to its advantage.

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