Huge potential butaction still limited -- Brazil shows the way in Latin America

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Brazil continues to lead the way in Latin America, leaping ahead with 208.3 MW coming online in 2006. As the financing framework and government support improves, Brazil's wind market is transitioning from one of largely monopoly interests to a competitive market with potential for multiple turbine suppliers and developers.

Five projects surged to life last year, including the flagship 150 MW Parque Eólica de Osório wind complex compromising three 50 MW wind farms (table). The BRL 220 million ($101.3 million) project was built by Ventos do Sul Energia S/A and has become the jewel in the crown for the government's Proinfa program of subsidised power purchase prices for renewables. Short for Programa de Incentivo as Fontes Alternativas de Energia Eletrica, Proinfa came into force in March 2004 to promote development of 3300 MW of renewables.

The other two Proinfa projects completed in 2006 are a 49.3 MW wind farm at Rio do Fogo Rio Grande do Norte, developed and owned by Energias Renovaveis do Brasil, and the 9 MW Eolica Agua Doce project in Santa Catarina state, completed by Central Nacional de Energia Eolica Ltda. All the projects are equipped with wind turbines supplied by Wobben Windpower in Brazil, owned by Alloys Wobben, owner of Germany's major wind turbine maker, Enercon

Dana Younger, renewable energy advisor at the International Finance Corporation (IFC), the private sector arm of the World Bank, says a second group of Proinfa wind projects are not far behind the first volley. "Although I would have expected Brazil to be farther along the path at this stage, the signs are positive with a large number of projects getting regulatory approval, signed power purchase agreements and extended deadlines to be in Proinfa," Younger says. Another 48 Proinfa projects representing 1144.66 MW of wind energy are waiting in the queue, according to Brazil's power regulator Aneel.

Proinfa experienced a turbulent start but that appears to be smoothing over. Razor tight deadlines that were an initial turn-off for developers have now been extended to December 30 of next year. Likewise, the program's mandate requiring foreign manufacturers to invest at least 60% of the overall value of the project in the country now appears to be more flexible than anticipated. Everaldo Feitosa, a long time member of the Brazilian wind industry, is confident the program is steadily removing barriers. "I expect two hundred to three hundred megawatt of new wind power to make a combined total of 500 MW under Proinfa in 2007," says Feitosa.

Local content

Some of Brazil's developers are still waiting for clarity on the content mandate. Government promises to provide an exact clarification on the 60% ruling have dragged on, according to Armando Abreu, local director and shareholder for French wind power company, Siff, a subsidiary of Portugal's HLC Group. Abreu expects to start building its first wind plant in September 2007.

The 60% ruling and a global shortage of wind turbines have exacerbated Brazil's chief problem: no choice of turbine supplier. Wobben Windpower qualifies for the content requirement by partially assembling its turbines in Brazil. But it may get some competition soon, with India's Suzlon promising to establish a manufacturing operation in the country. The deal is pinned on Suzlon supplying 225 MW of wind turbines to the local unit of Siff. Another player stepping into the Brazilian market is German family firm Fuhrländer, which is investing an initial BRL 12 million ($5.7 million) in a factory in the Ceará state in the northeast. The company intends to produce 1 MW and 1.5 MW turbines this year and follow in 2008 with 2.5 MW turbines. But follow through and start dates on these intentions remain vague.

Better financing opportunities should help developers in 2007. Local federal development bank BNDES and Banco do Nordeste do Brasil recently lowered their long term interest rates for wind projects to 6.5%, according to Claudia Prates of BNDES. BNDES has finalised loans to three wind projects and is currently assessing a fourth. Furthermore, in a surprise move, a division of federal power company Eletrobrás says it intends to partner wind projects in the north and north-eastern states of Amapá, Pará, Maranhão and Roraima. Although viewed as positive by most analysts, Ricardo Pigatto, president of an association of small and medium sized energy producers, speculates the power company may try to take over the smaller developers. "These entrepreneurs don't want to lose control," Pigatto says of his members..


Most recently, Brazil has also introduced tax breaks for wind investments. On January 22, President Luiz Inácio Lula da Silva unrolled a growth acceleration program known as PAC, which exempts investment in infrastructure and energy funds from some national taxes. Augusto Campos, at the ministry of mines and energy, expects the move to improve financing conditions for wind power projects. These tax breaks will trim costs by around 5-9%, Feitosa calculates. Wobben's Eduardo Lopes is less certain and prefers to wait and see whether the program will directly benefit wind power.

The steadily improving market conditions seem be boosting confidence among Brazil's wind power developers. Fourteen wind power projects, with a combined installed capacity of 1196 MW, are lined up to bid into the government auction for new power generation, scheduled for May. Prates says the willingness of wind to compete in the auction is a good sign and she hopes BNDES will be able to finance a few of them. It is up to the government's energy research organisation, EPE, to evaluation each project and decide whether it complies with the auction's requirements.


Northwards to Mexico, construction of the 83 MW La Venta II wind farm in Oaxaca state is underway by a consortium of Iberdrola and Gamesa Eólica. The project has a $25 million grant from the World Bank's Global Environment Facility and is selling its certified emission reduction units to Spain. The revenue is offsetting investment costs by 10.8%, according to the World Bank.

Mexico's energy regulatory commission also recently launched the bidding guidelines for a 101 MW La Venta III project. Mexico's current wind capacity is spread between two small projects, the 1.5 MW La Venta I and the Guerrero Negro in Baja California at just under 1 MW.

Mexican retail chain Soriana intends to build a $300 million wind power project in Oaxaca to generate as much as 400 MW, which the company hopes will put a dent in high electricity costs in its stores. Soriana and local wind power company Vientos del Istmo intend to jointly develop the project. Vientos del Istmo has already secured permits from the power market regulator for 216 MW and could begin churning out energy in 2009.

No commercial wind power came online last year in Argentina but according to Alejandro García, with ABO Wind Energías Renovables, legislation may soon change that. A draft law known as 26.190, if approved, would require 8% of the country's energy consumption to be met by renewable sources in ten years. In Chile, wind power legislation is due to be introduced this month, says Janine Hoey from the Latin America division of Australia wind project developer Pacific Hydro.

In a one time wind power hotspot, Costa Rica, national energy company ICE awarded consortium JES, formed by local energy company Saret and German company Juwi, a 20 year build operate transfer contract for the Guanacaste wind park with 55 turbines and an installed capacity of 49.5 MW, adding to Costa Rica's installed wind capacity of almost 70 MW. The IFC also expects to see 8.25 MW of wind power come online in the Dominican Republic in the first quarter of the year to supply tourist hotels, while Petroleum Corporation of Jamaica says it wants to sell the 20 MW Wigton Windfarm, 115 kilometres from the capital Kingston, on the condition that its capacity is boosted to over 40 MW.

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