Still waiting on prices in Brazil -- Government delay

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Wind power developers in Brazil have been waiting for months for the federal government to specify what price it will pay for power under its Proinfa renewable energy program, but just when the decision deadline was looming at end-March, a presidential decree put the date back three months.

The delay is not necessarily bad news. The new government of Luiz Inacio Lula da Silva at least showed that it has not rejected outright Proinfa, which was an initiative of his predecessor, Fernando Henrique Cardoso. And as Marcelo Poppe at the mines and energy ministry, pointed out to local media Canal Energia, "The previous deadline was incompatible with the complexity of the issue."

Indeed, the complexity of Brazil's power supply is the nub of the problem: when it rains it pours, and power in Brazil's huge (65,000 MW) hydro park falls to as little as BRL 4/ MWh ($1.3/MWh). In times of drought, most recently in 2001-2002, prices rocket. How wind is going to compete against BRL $4/MWh is for the mines and energy to work out. As the Proinfa regulation stands, federal power sector holding Eletrobrás and/or its subsidiaries will pay a specified fixed amount for the 1100 MW of wind power that make up the 3300 MW installed renewable power capacity included in the Proinfa program.

News on what this amount will be is what has been delayed. Within 30 days of setting the amount, the ministry will select which of the projects that have authorisation from federal power regulator, Aneel, will be included in Proinfa. Competition can be expected to be cut-throat: there are 87 wind projects with a combined capacity of 5952 MW that have not started construction yet, awaiting definition of the power prices.

Despite the effective limbo that the country's wind power sector is in, Aneel has continued to give permits. The latest are for Empresa Energetica Santa Marta to install 39.6 MW at Laguna in Santa Catarina state, and Guascor Empreendimentos Energeticos to build a 60 MW plant at Crispim in Para state. Aneel authorised 3680 MW of wind power at end-2001. At the time it was expected that many of the projects would have been in operation by now. Recognising that the delays have been beyond the control of the companies, in April Aneel stretched the deadline for four projects belonging to Enerbrasil to December 2005 and 2006 from 2002.

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