Solar dominates Brazil A-4 tender as record low is contracted

Solar was the big winner in Brazil’s first power tender since 2015, as low demand and transmission bottlenecks hampered trading and resulted in just 674MW (AC) being contracted.

PV accounted for 574MW (AC) – around 791MW DC – or 85% of the total capacity contracted at an average price of R$145.68 per MWh ($45.42/MWh). This was 55% below the cap price of R$329/MWh.

Wind, however, only contracted 64MW (AC) in two projects owned by France’s Voltalia in the Northeastern state of Rio Grande do Norte. Wind came in at an average price of R$108/MWh ($33.67/MWh), or 61% below the cap price of R$276/MWh, said Brazil’s Power Trading Chamber (CCEE).

The solar and wind winners will sign 20-year PPAs and the contracted projects will have to start operation by January 2021 under the process, known as an A-4 tender.

Biomass and small hydro projects accounted for the other 35.5MW contracted. In US dollar terms, wind and solar prices were below prices in the last tenders held in 2015 of R$203/MWh for wind and R$298/MWh for solar. This, at exchange rates then, was equivalent to $53/MWh and $78/MWh respectively and at today’s rates are equivalent to $63/MWh and $92/MWh.

The volume contracted was below the amount expected, and was only a fraction of the 18.5GW and 26GW of solar and wind registered for the tender respectively. By comparison, Brazil had contracted 548MW of wind and 1.1GW of solar PV in 2015.

This is the smallest amount of wind and solar contracted at tenders since the two technologies were included in competitive tenders in 2009 and 2014 respectively.

Prior to the tender government studies showed that transmission bottlenecks linking Brazil’s solar and wind states in the Northeast to the industrialised south would limit the amount of power contracted. Rio Grande do Norte, for example, which accounted for over 25% of wind projects registered had only transmission capacity for 200MW, the government had said in a study.

Analysts said this could spoil bidding in this tender despite the strong appetite from investors. Tender rules say projects not connected to the grid in time for the start of PPA could face heavy penalties.

As a result, analysts said that many investors in wind would likely wait for this year’s second tender scheduled for December 20.

This second tender – known as A-6 – will contract power for January 2023, when transmission bottlenecks would likely be solved following recent tenders for new lines and the expected conclusion of delayed projects.

Solar investors, however, will not be able to bid in the A-6, so many took the opportunity to contract their projects at today’s tender.

The amount contracted was also dependent on future demand projections from power distribution companies, which could have also resulted in the small volume contracted since Brazil’s economy is still recovering. Distribution companies have been facing financial troubles due a sharp decline in demand in recent years which left them overcontracted. The projection of future power demand, however, is not published by the government.

Out of the more than 60 power distribution companies, only seven bought power. A total of 39TWh will be delivered over the 20 and 30 year period, CCEE said. By comparison, Brazil’s 12-month power demand stands at 461TWh currently, according to government data.

Government officials weren’t readily available for comments on the tender results.

While France’s Voltalia expanded its presence in wind power in the country with two new projects, Italy’s Enel consolidated its lead in Brazilian solar power contracting 240MW of new capacity in eight projects, adding to its 716MW of solar PV already in operation and under construction.

The new projects will be built in the state of Piauí where Enel is already operating and building solar plants.

The tender also ushered the entrance of US utility AES Corp into Brazil’s solar market. AES, through its local unit AES Tietê, contracted a total of 75MW of new solar capacity in the state of São Paulo.

Other players in solar power includes two local developers and Spain’s Solatio, which sold power from two projects with a combined capacity of 57MW.

Fonte: Recharge Brazil | Alexandre Spatuzza

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