Generating power from the wind in Brazil is less costly than using natural gas or hydro, according to the results of a government tender to supply electricity this week.
National energy agency Empresa de Pesquisa Energetica (EPE) invited developers to bid for a total of 1.5GW of capacity to come online in 2014.
Developers of 44 wind farms bid an average of R$99.58 (US$62.24) per MWh – below the average price for the two natural gas projects (R$103.26), one hydro (R$102) and four biomass projects (R$102.41) that burn the woody waste from sugar cane processing.
In a second auction for 1.3GW of reserve capacity, which excluded natural gas, a further 34 wind firms bid an average of R$99.54 and seven biomass plants bid an average R$100.40.
EPE said a total of 1.9GW of wind capacity could be installed, alongside 1GW of gas, 555MW of biomass and 450MW of hydro.
EPE president Mauricio Tolmasquim said the auction signified two important shifts in the economics of power production – that wind can compete directly with natural gas, and the steady reduction in the cost of wind projects. A price of less than R$100/MWh for wind was “unthinkable until recently”, he said. The bids for wind in this auction were about 24% lower than in a similar auction last year.
However, participants and observers voiced concerns that wind developers would struggle to profit from such low prices.
Robert Klein, director of Rio de Janeiro-based wind developer Voltalia Energia do Brasil, said he didn’t expect prices to fall so much. “Definitely, we are a bit worried about the prices,” he told Bloomberg News. “We will have to fight to make it.”
Adriano Pires, an energy expert with the Brazilian Center for Infrastructure, said the government has spurred excessive optimism about wind power, leading project developers to promise power rates that they may not be able to deliver.
“Brazil has a history of euphoria when it comes to power generation," he told Reuters. "Right now wind power is the darling of the government, but that doesn't mean it's going to be sustainable in the long run.”
By. Christopher Cundy
Source: Environmental Finance