Auction for wind contracts expected -- Hope alive in Brazil

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Brazil's wind power investors have high hopes of a government auction of wind power contracts sometime soon. Rumours of an auction have been circulating for months and it now seems certain the government is abandoning its existing support of wind power through the Programa de Incentivo às Fontes Alternativas de Energia Elétrica (Proinfa) in a favour of requesting bids for new projects in a competitive tender process. Such was the takeaway message from a wind power seminar held late last year in São Paulo co-sponsored by the Global Wind Energy Council (GWEC) and Greenpeace.

Since the introduction of Proinfa in March 2004, Brazil has brought just 229 MW of wind energy online out of 1423 MW of wind projects selected for 20-year contracts. The total was recently boosted by the addition of 10.2 MW in November from the Millennium wind farm being developed by Australian company Pacific Hydro in the north-eastern state of Paraíba.

The slow progress under Proinfa's first round, which set a price for power contracts and awarded them to qualifying applicants, has led the government to rethink its approach. To qualify for a contract, among other stipulations, 60% of a proposed wind plant's content had to be made in Brazil, a requirement that severely limited choice of manufacturer. Only Enercon turbines are so far made in Brazil, thought its monopoly is being challenged by Germany's Fuhrländer, India's Suzlon and Argentinian Impsa (Windpower Monthly, December 2007).

An auction of renewable energy contracts was tried last summer, but wind found itself unable to compete with prices of BRL 140/MWh ($71.3/MWh) set by small hydro and biomass. It was like a contest between a featherweight boxer and a heavyweight boxer, said one seminar delegate. The hope now is for a wind-only auction, to take place early next year, says Paulo Teixeiro, a deputy with Brazil's Workers' Party. He holds a prominent position in the country's ruling party and as a close colleague to President Luiz Inácio Lula da Silva is believed to have an inside view on policy.

Brazil's Ministry of Mines and Energy has confirmed there will be a wind only auction, but is less clear on the timing. The only action this spring, it says, will be determination of the rules of the auction, likely in March or April, and that there is no fixed timeframe for issuing a call for bids.

Under the right conditions, an auction is the key to getting more wind power built, believes Carlos de Mathias Martins of Ecoinvest, a São Paulo environmental investment group. "With wind auctions and less regulatory risk, suppliers will come to the market and revive dead projects," he says. Proinfa's 60% local content requirement has been a severe barrier, adds Thaisa Alcoforado of the Brazilian Wind Energy Center in Recife. The rule discourages investment and slows the ability of companies to get equipment, she says.

Renewable energy specialist at national power utility Eletrobrás, Jorge Lima, warns that auctions will need to attract "good-sized" wind projects. The tender document must be tailor-made for wind with real costs. "If we start at BRL 200/MWh ($113 /MWh), one thousand megawatt will be easily sold for the next three years," he says. If Brazil is serious about developing its wind resource, action is needed before the summer, says Pedro Perrelli of São Paulo consulting and engineering firm PTP. "Either we'll forget it or go ahead at full speed."

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