Accusations of favouritism - Brazil restricts wind turbine imports

Brazil's first auction of power purchase contracts for wind energy has blown into a barrage of protests after new rules restricting the use of imported turbines were unveiled. Projects using imported machines rated at 2 MW or below will not be eligible for contracts, says the ministry of mines and energy.

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The auction is slated for November 25. Contracts for around 1 GW of wind capacity to be delivered by July 2012 are up for grabs. Government power company Eletrobras will buy the electricity generated under 20-year power purchase agreements.

The 2 MW rule comes as a blow to manufacturers of smaller machines already pencilled in as suppliers to projects intending to bid for contracts, says Ivo Albuquerque of Braselco, a renewables consultancy. Global suppliers likely to be affected include Acciona and Gamesa from Spain, American GE Energy, Japanese Mitsubishi, Siemens in Germany and Danish market leader Vestas.

The deadline for companies to submit notice of their intention to bid was pushed back to allow for revison of projects, but they were only given until June 29. Brazil's wind association, Associacao Brasileira de Geracao Eolica (Abeolica), is resolutely against the restriction on imported turbines, says its executive director Pedro Perrelli. Abeolica will fight the government to get the rule changed, he says.

Some manufacturers can adapt their plans by supplying larger machines instead, but Perrelli warns that projects are likely to be stung by higher prices for bigger turbines that are not necessarily more efficient. In many remote areas, transporting bigger turbines can be a big logistical challenge or impossible because of road and truck limitations, he adds.

A mistake

The turbine restriction rule is reminiscent of the content requirement, mandating that 60% of wind farm equipment must be produced in Brazil, which dogged the early stages of the country's previous wind incentive plan, the Programa de Incentivo as Fontes Alternativas de Energia Eletrica (Proinfa). The 60% ruling in Proinfa was a mistake and this new ruling threatens to similarly discourage investment, says Marcelo Picchi, director of Brazilian wind project developer Siif. "It is a bad sign for investors." Siif had intended to use Vestas 1.8 MW machines for its projects. "We are now revising the situation," says Picchi. Siif had planned to submit bids for contracts for up to 400 MW of wind projects in the auction, but may now focus on its best 100-200 MW as it renegotiates with suppliers.

As with Proinfa, the new ruling means that turbine manufacturers with facilities in Brazil - Wobben, part of Germany's Enercon, and Argentina's Impsa - are likely to benefit most. India's Suzlon could also emerge as a winner. It has been promoting its 2.1 MW machine in Brazil for some time. Brascelo alone is working on 33 projects totalling 796 MW, all of which are to use Suzlon turbines.

Impsa's Emilio Guinazu is not entirely happy with the auction rules. Impsa produces 1.5 MW turbines at its Brazilian factory in Pernambuco state. Guinazu says when it set up its factory last year Impsa was expecting some kind of import tariffs or a ruling similar to Proinfa's 60% content requirement to protect domestic manufacturers. But he adds: "The good news is that the auctions are going ahead." The company intends to submit bids using five projects of its own as well as possible projects for customers totalling around 200 MW.

To take part in the auction, developers must submit full details including grid access authorisation, environmental studies, network assessment, land leases and at least one year of wind data as well as details of the turbines they plan to use. Bids covering around 4 GW of projects are expected, although the pricing rules, including the total sum the government is prepared to pay, are yet to be determined. Abeolica hopes the price will be around BRL 210/MWh ($109/MWh).

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