Brazil

Brazil

First stage construction of series of big plant -- Brazil leads Latin America

While only a negligible amount of new wind power came online in Latin America, 2005 was the year in which Brazil progressed over 200 MW of capacity close to realisation. Five flagship wind projects are due for completion this year under the Brazilian government's Programa de Incentivo às Fontes Alternativas de Energia Elétrica, known as Proinfa. Three are being built in Rio Grande do Sul, one in Santa Catarina along Brazil's southern coast, and one in the north-eastern state of Rio do Fogo due for completion in June (table).

A further 49 projects with a combined capacity of 1137.26 MW, are waiting in the wings, according to Brazil's power regulator Aneel. All still need to clear permitting hurdles, such as gaining an environmental license, says Aneel's Sueli da Rocha Montenegro. Under Proinfa, selected renewable energy projects are granted 20 year power purchase contracts at prices ranging from EUR 68.74/MWh to EUR 77.96/MWh depending on capacity factor. The law came into force in March 2004 with a target of promoting the development of 3300 MW of renewables capacity. Wind projects for 1423 MW were selected.

"The 208 MW leapfrogs Brazil into first place for wind power projects in Latin America," says Dana Younger of the International Finance Corporation (IFC), the private sector arm of the World Bank.

A particular success story is the first 50 MW phase of the 150 MW Parque Eólica de Osório, says Fernando Henrique Carneiro Teixeirense of Brazil's ministry of mines and energy. Each phase will consist of 25, 2 MW turbines with the first phase supplied by Enercon..

The project has long suffered from the teething problems of the pioneering Proinfa program, which on more than one occasion threatened to derail the process. But the energy ministry's decision to allow national power utility Eletrobrás, which holds the power purchase contracts, to prolong the deadline for Proinfa projects to come online to December 30, 2008 has provided the breathing space needed. By the end of November, Eletrobrás had extended deadlines on 45 of the 54 power purchase contracts, representing 1123.33 MW of the total 1422.92 MW of contracted power. "With the new terms, the program will progress satisfactorily," says Carneiro Teixeirense.

Finance

Financing of the Brazilian wind projects is also looking more feasible than a year ago. Brazil's social and development bank, BNDES, and a local bank in Brazil's windy north east, Banco do Nordeste do Brasil, have established lines of credit for budding Proinfa wind projects. "We now finance up to 80% of a project's total investment, which has shifted from 70% since Proinfa started," says BNDES's Cláudia Prates. "On average, we handle 75% of the investment and the interest rate on a loan is 3.5%, with a 12-year tenure," she adds.

Last year, BNDES decided to work with private international banks, such as Dutch ABN AMRO and Spain's Santander, or the federally-owned Brazilian bank Banco do Brasil or Brazilian regional banks, to share the risk. "There has been no change in conditions, but sometimes the spread is a bit higher," says Prates.

The industry has been frustrated by the slow pace of BNDES in processing financing requests. Prates admits that work on the Osório project was slow. "We were working with five banks and wind power is a new area for us," says Prates. She points out that the second project, Rio do Fogo was closed in January in just two months. "This project was easier. I expect from now on it will be easier for everyone," she says.

BNDES is assessing the next projects. "We will close Água Doce in Rio Grande do Sul soon. We have five projects in the pipeline," says Prates, without being specific. Banco do Nordeste do Brasil also approved a 10 MW project, Millennium, in Paraiba in the north of Brazil, at the end of December. "We have a lot of hope in 2006 with this bank," says Everaldo Feitosa, director of the Brazilian Wind Energy Centre

Shortages

With Brazil's ministry of mines and energy declaring that at least 60% equipment must be produced in Brazil -- and only Wobben Windpower, a subsidiary of Germany's Enercon, making turbines in the country -- project developers have a very limited choice of supplier. Wobben is already assembling and supplying blades for Água Doce, RN Rio do Fogo and the Osório wind farms. With a decade in Brazil and a captive market, Wobben expects to boost turnover by 122% to BRL 200 million ($91 million) in 2005 from some BRL 90 million ($41 million) in 2004, report local newspapers.

Other manufacturers are keenly eyeing Brazil's burgeoning market. As well as Wobben, a smaller German operation Fuhrländer, is setting up in Ceará. "It will be necessary to expand the production capacity in Brazil," says Carneiro Teixeirense. "This concentration of projects in one or two factories can cause an increase in prices," he warns.

According to Claudia Costa from Eletrobrás, other turbine suppliers will be setting up shop in Brazil. But with the clock counting down to the 2008 deadline, any new manufacturers will be under pressure, says Feitosa. "These companies need to start research, identify suppliers and begin production. There won't be enough time for manufacturers to start operations and supply the equipment," he warns.

Proinfa II

Potential new manufacturers and developers alike are also waiting for news about Proinfa II, which is due to follow completion of the phase one 3300 MW target. "We need a sign that Proinfa II will be implemented for sure," says Prates. "Manufacturers need to know that Brazil is a reliable potential market." Feitosa fears that a decision on Proinfa II is not likely until after this year's Brazilian election.

The government is making positive sounds. "The implementation of first phase of the program was a success, in terms of meeting the time frame, generating jobs, learning about technology and, most of all, reducing the costs by average gains in scale and efficiency," says Carneiro Teixeirense. "This will guarantee the continuity of Proinfa."

Argentina

Across the border in Argentina, wind power projects are at a standstill or, at least, a crawl. "Argentina has lots of projects, but very few megawatts," says Erico Spinadel, president of the Argentine wind energy association. "The country has installed around 24 MW," he says. A government plan for 3000 MW of wind power by 2013, if realised, could dramatically change the landscape.

Two companies are developing wind power equipment in the country for home use and export. Former nuclear entity, state owned technology firm Invap, is constructing a 1.5 MW turbine and Argentine hydro and wind power technology firm Industrias Metalúrgicas Pescarmona (Impsa) is finalising the production of 1 MW and a 1.5 MW wind turbines. Impsa has invested some $10 million, in turbine development, says Emilio Guimicu, project manager for Impsa Wind. "We expect to have some limited commercial production in the second quarter of 2006," he adds.

Mexico

Northwards to Mexico, local state-owned power company CFE recently signed a MXE 60 million ($5.6 million) contract with Spanish electric utility Iberdrola for transmission works related to the 83.3 MW La Venta II wind power project in Oaxaca state. CFE awarded the long awaited La Venta II project construction of 98, 850 kW turbines to a consortium of Iberdrola and Gamesa Eólica in August after the consortium was the only bidder on the project (Windpower Monthly, September 2005). There is also up to 600 MW of further wind energy in the pipeline, says the IFC's Younger.

Chile, Uruguay, Costa Rica

Elsewhere in the region, Chile's politicians have been making positive sounds about wind power for some time. In December, Chile's state development corporation Corfo and national energy commission CNE selected 46 renewable energy generation projects, including 12 wind power projects, for funding. Corfo will offer subsidies totalling $1.32 million to carry out feasibility studies for private sector investors. Also in December, Spain's government agreed to cancel $10 million of Uruguay's debt with Spain providing the full amount is used for a 10 MW wind plant using Spanish turbines (Windpower Monthly, February 2006).

Former wind power hot spot, Costa Rica also has a number of small developments in progress, with a combined capacity of about 70 MW, according to the country's ministry of environment and energy. Other projects of note in the region include the Dominican Republic's 8.25 MW wind plant to supply tourist hotels funded by IFC in 2005; Colombia's 19.5 MW Jepirachi wind plant of 15 Nordex 1.3 MW turbines on the Caribbean Colombian coast and Jamaica's state oil company PCJ 20 MW Wigton wind project, which both go online in 2004 (Windpower Monthly, March 2005).

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