Wind power generation companies accounted about 80% of sales for the electricity contracted in the recent A3 auction. Wind accounted for 536MW of the 670MW traded, with hydro, biomass and thermal power plants to run on natural gas making up the remaining capacity.
Nineteen wind projects are planned to begin commercial operation in 2018. The opening price of BRL184.00/MWh ($51.25/MWh) for the power, was reduced by bidders to secure the contract, and the closing price at the end of the auction was BRL181.14/MWh, a drop of 1.6%.
For Leontina Pinto, a director of electricity sector consultancy Engenho Research, Development and Consulting, the low price of wind power hinders the profitability of the projects, especially in a high dollar scenario when foreign imports are too expensive, and there is a shortage of equipment with local content.
"It is always important to remember the industry dogma: the most expensive energy is the nonexistent one, which can be experienced if these projects do not materialise," said Pinto, for whom the auction generated frustration because several distributors bought less energy than the market was requesting.
She also noted that the Brazilian transmission network is clearly still in need of power plants capable of ensuring peak supply moments and system reliability.
Ricardo Savoia, director at Thymos Energy, an energy consultancy firm, said that the limited number of participants are in line with market expectations for the coming years, and the expected reduction in demand.