Call for $110 FIT extension as projects delayed

URUGUAY: Developers have asked the government for an extension to a temporary higher feed-in tariff rate as processing delays threaten the viability of much of the 750MW of projects that responded to last year's tender rounds.

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State utility and grid operator Usinas y Trasmisiones Electricas (UTE) allocated power purchase agreements (PPAs) totalling 300MW last year. A further 450MW is still being processed. The government wants to see the country's installed capacity rise from 53MW now to 1.2GW by 2015 and has set the feed-in-tariff rate at $110/MWh, for projects that obtain a PPA by the end of March that year, in order to boost the market.

Once the tariff expires, wind power sales will drop to the ultra low prices set in last year's calls to tender, which were $81/MWh for those commissioned in January and $64/MWh for those in August and November. One Spanish developer confided: "It's a cheap way for UTE to get new power but much of it simply cannot be viable."

On average, developers need to operate for at least 16 months at the premium $110 price for their projects to be viable, according to Brian Gaylord, an analyst at Make Consulting. Doubts over whether developers will qualify for the special tariff for long enough complicate financing, causing delays. Developers have also complained about delays in obtaining environmental permits and the need to negotiate new power lines and interconnection points on UTE's weak system. UTE declined to comment on the delays.

However, Gaylord said he expected most of the 750MW lining up to go forward despite low margins. Manufacturers and developers are making cut-price agreements, keen to get a foot in the door both in Uruguay and the South American region. "Many of their other markets are in doubt or levelling off, like the USA, Spain or China," he explained.

Progress is being made. In May, Spanish developer Abengoa handed a 50MW turbine contract to Gamesa for its licensed Peralta project. While neither company will reveal conditions, Gamesa - which calls Uruguay an "attractive market" - is renowned for being very aggressive on pricing. Cheaper turbines from China could make inroads, and Nordex is known to be scouting the market.

Also, Argentina's Impsa, one of Latin America's top turbine makers, announced plans to build a concrete tower factory - the country's first dedicated wind industry manufacturing plant. It will be located in the southern department of Maldonado, where the company's own development wing has a PPA with UTE to build 115MW for the nearby Libertador I-IV projects. Of that, 50MW represents the first known allocation stemming from the 450MW November call to tender. It expects to start building it in August and plans to export to nearby projects in Brazil and Argentina.

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