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John Daly

John Daly

Dr. John C.K. Daly is the chief analyst for Oilprice.com, Dr. Daly received his Ph.D. in 1986 from the School of Slavonic and East European…

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Brazil to Invest Heavily in Wind Power

Analysts seeking reasons for the soaring economies of the BRIC nations ought to take note of their interest in renewable energy.

According to a new report by the International Energy Agency Brazil will add 32 gigawatts of renewable energy to its power grid within the next five years. The move will put Brazil tied for fourth place with Germany in renewable energy investment, exceeded only by China (270 gigawatts), the U.S. (56 gigawatts) and India (39 gigawatts).

Accordingly, BRIC nations India and Brazil occupy two of the top four places.

The Brazilian Association of Wind Energy ABEEolica reports that Brazil is already Latin America's leading wind energy market, with a current wind power capacity sector of roughly 1,400 megawatts, which is projected to grow nearly eight-fold by 2014. Supporting ABEEolica statistics, a 2011 study by IHS Emerging Energy Research states that Brazil is expected to have 31.6 gigawatts of installed capacity by 2025, which would make it Latin America’s leading producer of wind power electrical energy. During the June Rio+20 summit, Sao Paulo-based sustainability institute Ethos said it was possible for Brazil to achieve a 100 percent carbon-free power grid by 2050.

According to KuicK Research’s “Brazil Wind Power Market Analysis” report, even though the power generation is dominated by hydropower in Brazil, wind power is growing by leaps and bounds, as Brazil’s wind power generation has increased by 500 percent from 2006 to 2011. Brazil’s power policies are increasingly shifting from hydropower, which currently produces the majority of the nation’s renewable energy to wind power being the priority. Fuelling the boom, Brazil is using the same auction procedures for its wind power options as it did with its hydroelectric projects. In August 2011 at a government-organized power auction, developers of 44 wind farms won 39 percent of the total capacity on offer, contracting for an average price of $62.91 per megawatt-hour, offering for the first time a price below the average for natural gas and hydroelectric bids for power generation, which produced a further surge of interest in the Brazilian government for wind power.

International investors are already lining up to exploit the market, as lower production prices, government incentives and the country’s relentlessly increasing electricity demands produce expanded opportunities for foreign investors. During the 1990s German group Enercon subsidiary Wobben Windpower, established the first wind turbine factory in Brazil and under 2011 contracts projects are to install 22 wind farms with a total output of 554 megawatts by the end of 2012.

Other companies joining the Brazilian wind power gold rush include Spain's Gamesa, Argentina's Impsa, Germany's Siemens, Denmark's Vestas, the U.S. firm GE Wind, India's Suzlon and France’s Alstom.

And the government is bending regulations to underwrite the surge. The Brazilian development bank, BNDES, despite having regulations in place to ensure that indigenous wind equipment manufacturers comply with its 60 percent minimum national-content levels to loans in order to nurture Brazilian manufacturers of wind power equipment, reported that in 2011 it approved nearly three times more wind power sector loans than it had in 2010. According to BNDES renewables department chief Antonio Tovar, the bank’s “renewable sector is ¬doing very well.”

Brazil is thinking big. Ceara state in northeastern Brazil, the nation’s most impoverished region, is currently the state with the largest wind energy sector, over 40 percent of Brazil's total. According to the Bralizian government, Ceara has the country’s greatest potential to be exploited in the future, roughly 60 gigawatts, or four times the capacity of Brazil’s massive Itaipu hydroelectric complex.

Brazilian interest in renewable energy is some of the oldest in the world, dating back to the 1973 oil embargo, which forced their nation in light of a tripling of oil prices to become creative. Since then it has developed the world’s second largest ethanol industry.

So – a government committed to renewable energy, a banking structure willing to be flexible to underwrite its development and a determination to site a number of the wind farms in impoverished regions of the country – it would seem that Brazil has become a wind power investor’s dream.

By. John C.K. Daly of Oilprice.com




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