High risk pushes wind out of Brazil auction

BRAZIL: Wind projects received none of the contracts for just 278.4MW of capacity allocated to new projects in Brazil's April power auction.

Small hydropower projects were the big winners in the recent auction  Credit: VW
Small hydropower projects were the big winners in the recent auction Credit: VW

The high level of risk is being blamed for wind's poor performance. It is the first time wind has not played a major role since being admitted to Brazilian power auctions in 2009.

In the auction, 864 wind power projects were registered, amounting to 21.2GW. Over 17GW of wind power made bids.

Nearly all the 278.4MW of contracts went to small hydro, which was prioritised at the opening of the process, with wind entering only the final stages, explained a spokesman from Brazil's the Energy Business Syndicate (Sindicato das Empresas do Setor Energético).

By prioritising small hydro, which is generally closer to habitation, the government hopes to get round the grid bottlenecks caused by connecting remote wind plants.

"The risks for wind were a lot higher this time," said Make Consulting's Latin America expert Brian Gaylord, which was caused by the long lead-time in the A5 auction. Successful bidders will need to begin trading power from 2021.

Political and economic instability in Brazil is reducing market predictability and raising the cost of financing — particularly damaging for finance-heavy wind. "Rising wind turbine prices haven't helped," added Gaylord.

Wind bidders will hope to be better placed in the October 2016 reserve power auction, Gaylord suggested. The time scale is shorter, with contracts set to start 2019, "reducing uncertainties", he added. Nevertheless, wind will be facing competition from both hydro and increasingly cheaper solar.

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