Update: Brazil auction price caps

20/02/15 | São Paulo

The cap price for wind compares with R$117/MWh in last year's reserve auction and R$129/MWh in this year's A-3 auction in June – which has comparable time scales for the commissioning of wind projects.

The projects that are awarded wind contracts in the reserve auction next month will start operations on 1 October 2017. June's A-3 requires power projects to start operations on 1 January 2017.

The Brazilian solar and wind power associations, Absolar and ABEEólica, respectively, say the prices are in line with market expectations and would allow for competition during the tenders.

ABSOLAR's executive president, Rodrigo Sauaia, told Recharge that he even expects that aggressive bidding would reduce prices from the ceiling set by the government.

He stresses, however, that the government now needs to guarantee that annual auctions are held each year and that at least 1GW be contracted.

"Today's price is an important signal for the start of the solar power industry in Brazil," he contends.

Sauaia expects between 500MW and 1GW of solar PV to be contracted at this year's auction. Brazil's current on-line capacity stands a 14.4MW.

He also says that international solar module suppliers now have initial information to determine the price of the equipment and start negotiations with the roughly 50 developers that registered the projects for the auction.

It is first auction in which solar PV projects will not compete directly with other, cheaper technologies. The Brazilian solar industry expects between 500MW and 1GW of new solar projects to win supply contracts.

“This auction is the first incentive for the effective insertion of solar power in Brazil,” says Aneel director Andre Pepitone. “We haven't had success in implementing solar in its distributed form, and now we can try through large scale power plants.”

The auction also included for the first time waste-to-energy projects, which will have a maximum price of R$169/MWh.

Brazil's energy planning authority, EPE, still needs to approve a final shortlist of projects. So far 626 wind projects with total capacity of 15.4GW have been shortlisted. Another 400 PV  c projects with combined capacity of 10.8GW were also registered.

According to auction rules, only projects with at least 5MW nameplate capacity can sell power.

Elbia Melo, president of the Brazilian Wind Power Association (ABEEólica), expects between 2GW and 3GW of wind power to be contracted this year. So far, 551MW won contracts at the A-3 auction.

In November, the government will hold a third power auction, which will hire new power projects to start operating in 2019.