TOTAL INSTALLED CAPACITY

 

Year	2002	2003	2004	2005	2006	2007	2008	2009
MW	22	29	29	29	237	247	341	606

Wind and hydro power – perfect partners

The total electricity generation capacity in Brazil stood at 107.5 GW in early 2010, of which 74% came from renewable sources, mostly large hydroelectric power plants. Historically, Brazil has relied heavily on its abundant hydroelectric resources for power generation, and gas-fired thermal power plants for system reliability purposes. However, with most remaining larger hydro resources located in the Amazon region and growing awareness of the need to preserve forests and mitigate climate change, the addition of new large hydro and thermal plants is problematic. There is a growing interest in Brazil to develop new renewable energy sources, and the excellent seasonal complementarity of wind energy with hydro power is gaining acceptance.

A tremendous wind resource

A wind atlas published by the Electric Power Research Centre - CEPEL/ELETROBRÁS in 2001 shows a potential for onshore wind energy capacity of 143 GW in Brazil (at 50 meters height). In 2008 and 2009, new measurements carried out in several states based on measurements at 80-100 meters indicate that the real potential is considerably higher, probably more than 350 GW.

Large unpopulated land areas and a coastline of 9,650 km add to Brazil’s prime position as a wind energy giant. The best wind resources in terms of wind speed and capacity factor are in the North/Northeast region, in particular, in the states of Rio Grande do Norte, Ceara, Pernambuco and Bahia. The South/Southeast region also has good quality resources (Rio Grande do Sul and Santa Catarina).

The PROINFA scheme

In 2002, the Brazilian government established the “Programa de Incentivo às Fontes Alternativas de Energia Elétrica” (PROINFA), a programme designed to boost the uptake of renewable energy sources in the Brazilian electricity mix. PROINFA’s main objective was to increase the share of renewable energy to 10% of Brazil’s electricity supply by 2020. The first phase of PROINFA comprised an auction for 3,300MW of wind, biomass and small and medium-sized hydropower (1,100 MW for each technology), held in 2004.

In the event, wind power projects were contracted by the state-owned utility, Eletrobras, for over 1,400 MW under 20-year power purchase agreements, while the Brazilian Development Bank (BNDES) provided long-term financing to the developers.

The deployment of the new renewable energy projects was expected to conclude by 2006. A second phase of PROINFA would then stimulate investments for the remaining capacity required to lift the share of renewable energy to a 10% share of the Brazilian power supply. PROINFA’s investments could not be fully completed by 2006 due to a number of challenges, and the programme was extended.

Wind projects awarded through the PROINFA programme account for over 95% of wind power installations in Brazil. Currently, 154.4 MW are still under construction, and nearly 560 MW remain under development. As a result, it seems increasingly likely that PROINFA will achieve at least the planned target of 1,100 MW of wind projects.

Market Developments in 2009

The Brazilian wind market grew by 264 MW in 2009, bringing the total installed capacity up to 606 MW. By mid-March 2010 this figure already reached 709 MW as additional PROINFA wind farms started operations.

In December 2009, the Brazilian energy regulator, Agencia Nacional de Energia Eletrica (ANEEL), hosted the first wind only auction. Through that auction, 71 wind energy projects were contracted for a total capacity of 1,800 MW, awarded in the following regions:

•  Rio Grande do Norte – 657 MW in 23 wind farms
•  Ceará – 542 MW in 21 wind farms
•  Bahia – 390 MW in 18 wind farms
•  Rio Grande do Sul – 189 MW in eight wind farms
•  Sergipe – 30 MW in one wind farmAt

At the time, ANEEL established a price ceiling of R$189 (74 €/102 US$) per MWh. Although this was already lower than expected, the average price achieved in the auction dropped to R$148 per MWh (57.49 € / 84.06 US$ on the day of the auction), as the result of the competition among developers of the more than 13 GW of wind projects that had already been licensed by ANEEL for this purpose.

While the price achieved may well make wind power in Brazil less profitable than some may have hoped, the sheer volume of the auctioned capacity also shows that the Brazilian wind market is a sleeping giant, and that we may finally see some continuity in the development of wind energy in Brazil.

Six major wind turbine manufacturers successfully received orders following the auction: GE, IMPSA Wind, Siemens, Suzlon, Vestas and Wobben/Enercon. These foreign suppliers will gradually become eligible for BNDES financing, based on their commitment to manufacture wind turbine generators in Brazil within a short time frame.

BNDES strictly finances equipment with 60-80% of local manufacturing (or value added), and until now, foreign wind turbines were not eligible for financing, which has limited competition between manufacturers. Now that key manufacturers will become eligible for BNDES financing, capital expenditure is expected to normalize as more projects will become competitive.

There have been additional positive signs for the wind industry, with some Federal and State Tax relief designed to stimulate investment, including moves to eliminate import taxes for wind equipment, as well as the state and municipal tax on circulation of goods and services between jurisdictions (ICMS). The latter has been eliminated for wind-related equipment and services during the period of construction expected for reaching the 1,800 MW.

One or two additional auctions comprising wind energy are expected for 2010, the details of which will be announced closer to the date.

 Key Players in the Brazilian Market

 Historically, only one wind turbine manufacturer, Wobben Windpower, a subsidiary of German company Enercon, was present in the Brazilian market, with two manufacturing plants. More recently other suppliers have begun to enter the market included the Argentinean company IMPSA, as well as Suzlon and Vestas, which have both sold turbines to PROINFA projects.

The number of developers and operators in the wind energy market has also been growing considerably. This was particularly visible during the wind auction, given that two thirds of the contracted wind projects belonged to developers that had not participated in PROINFA in 2004.

Established developers also continue their activities, including foreign companies like Enerfin/Elecnor, Iberdrola, IMPSA/Energimp, Martifer, and Pacific Hydro. Local sponsors have become increasingly active, such as Brennand, Dobreve, ERSA, Renova and Servtec, as well as Brazilian utilities market, including CEMIG, CPFL Energia, Eletrobras, and EDP/Energias do Brasil.