Brazil contracted 1.4GW of new wind power projects to start operations in January 2023 at an average R$98.62/MWh ($30.76/MWh) – a record low price of for the technology in the country – with foreign players Enel, Iberdrola and EDPR the biggest winners.
The intense bidding in Wednesday’s tender came as developers battled it out to win deals for a fraction of the 26GW of projects readied for auctions over the past two years.
“It was not surprising that such an amount wind was contracted and that the auction was very competitive – everybody wanted to sign new contracts,” Jean-Paul Prates, president of renewable energy think tank Cerne told Recharge.
In terms of capacity contracted, wind was the number-two technology in the tender, known as A-6, which included other renewables except solar and thermoelectric projects. A total of 3.8GW of new capacity was contracted, of which 2.1GW came from two natural gas-ﬁred plants, 177MW from biomass and another 76.5MW from small-hydro plants.
After staying out of the A-4 tender on December 18 – in which projects for 2021 were contracted – wind power investors took the opportunity to win their ﬁrst contracts since 2015,when 548MW of wind was procured.
Even so, the volume was below the 2GW yearly average contracted between 2009 and 2015 – the minimum amount that the Brazilian Wind Power Association says is needed to keep the six OEMs in the country busy.
Today’s A-6 tender allows investors six years to build the wind farms, which indicates that they believe that most of the transmission bottlenecks that kept them out of the A-4 tender will be resolved.
Still, most players played it safe: Piauí and Paraíba, which have fewer transmission grid bottlenecks, were responsible for 510MW and 281MW respectively. But investors also ventured into states where transmission line problems still need to be solved, and 381MW was contracted in Rio Grande do Norte and 108MW in Bahia.
“The government now needs to pull its weight to get this problem solved. After all, there are more than 9GW of projects in Rio Grande do Norte for example,” said Prates.
The longer time period also allows investors to negotiate lower prices with turbine makers and engineering services suppliers.
Such competition and forward looking projections knocked down the price for wind to a historic low of around $30/MWh, from over $50/MWh at auctions up to 2015.
Today’s price was 64% below the cap price of R$276/MWh set by the government.
These new prices are aligned with those seen in recent auctions in Mexico and Chile, and below the levels in neighbouring Argentina, which were around $40/MWh.
“Two years without contracts shook all the market, making the supply chain more ready to accept lower prices in order to end the fast of contracts,” said Prates.
Although competition for new contracts was the main driver for lower prices, Brazil’s learning curve in the wind sector – from government licensing to engineering services and logistics – also helped reduce costs of construction, which before this tender was estimated at $2m per MW.
The auction also signalled that power distribution companies – which bought the output – are projecting bigger demand by 2023. A total of 573TWh was contracted over the 20-year and 30-year period of the contracts.
This is almost tenfold the amount of power bought at Monday’s tender.
But following a trend that had started in 2015, Brazil’s market continues to consolidate as large international utilities took most of the contracts, leaving no space for smaller developers who were much more present in earlier tenders.
Italy’s Enel contracted a total of 618MW, Spain’s Iberdrola – through its local unit Força Eólica – 281MW, EDP Renováveis – controlled by China’s Three Gorges – 219MW, and France’s Voltalia added another 91MW to the 64MW of wind it had already contracted in Monday’s tender.
Omega Energia – the Brazilian renewable energy arm of investment fund Warburg Pinkus – and local player Eólica Tecnologia contracted 95MW and 82MW respectively.
The government didn’t comment on the tender. In 2018, it plans another three tenders which will contract power for 2022 and 2024.
Fonte: Alexandre Spatuzza | Revista Recharge Brazil