Brazil Holds Auctions for Power Projects Totalling 23,332 Megawatts

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Researched by Industrial Info Resources Latin America (Cordoba, Argentina)--Brazil's Empresa de Pesquisa Energética (EPE) (Brasília, Brazil), a federal bureau that fosters research and development in both public and private energy sectors, issued a statement last week confirming that, so far, 568 projects have been registered for participation at both the renewable and the A-3 energy auctions. These projects make a total of 23,332 megawatts (MW) that will be tendered in July this year on a date still to be determined.

The first of these two events is the Renewable Energy Auction, which intends to secure energy purchasing contracts exclusively for new wind- and biomass-based generation projects. Any contract with a distributor agreed upon at this event will have a validity of 30 years, and startup of the projects must be completed by July 1, 2014.

The second event that should occur next quarter is the A-3 Energy Auction. All projects tendered or negotiated at this auction must be ready to produce electricity no later than January 1, 2014. The A-3 Energy Auction will include new power projects that are fueled either by water (hydro), wind, biomass or natural gas.

Most of the registered projects are eligible for participation at both auctions. The signup deadline was May 4 for most projects, with the exception of natural gas-fired projects, which have a time limit for registration is May 19. Thus, the definitive numbers of the auctions will be confirmed after that date.

According to the information made public by EPE, preliminary figures show that 429 projects with a combined capacity of 10,935 MW (46.87% of the total power output) are windfarms. Thermo projects account for 81 biomass-fueled registrations, or 4,580 MW (19.63%); and another 16 that will be powered by natural gas, representing 6,642MW (28.47%). Also, there will be 41 small hydro projects with a total capacity of 725 MW (3.11%).

Finally, Energia Sustentável do Brasil (ESBR) (Rio de Janeiro, Brazil), the build-own-operate joint venture responsible for the 3,750-MW Jirau Hydro Power Station, which is currently under construction, also signed up, wanting to sell the additional 450 MW that will come from Jirau's capacity upgrade. Jirau will be the only major hydro project that will be involved at the events (1.93% of the energy output to be auctioned).

Based on the site of the projects, the preliminary figures let it show that planned wind-based capacity is heavily concentrated in the states of Rio Grande do Norte, Rio Grande do Sul, Bahia and Ceará. These four states have 401 registered windfarms, with an overall capacity of 10,223 MW, that is, 93.49% of all wind generation to be auctioned. The states of Rio de Janeiro and Sào Paulo have the greatest number of gas-fired projects: six projects, accounting for 3,266 MW, or 49.17% of the total gas generation.

Industry specialists have pointed out that the high relative importance that windfarms will have in these auctions is because of the success this source of energy has experienced in the last auctions. Also, the fact that the world's most important wind equipment manufacturers recently established their own industrial facilities in Brazil has helped foster development and investment. Incentive programs implemented by the government also contributed to this situation and laid the groundwork for cost reductions that have had a positive impact on investment.

Regarding natural gas-fired projects, the recent discovery of large oil and gas reserves along the Brazilian shore has created a renewed interest in conventional sources of energy at the perspective of lower future costs. However, this has raised some environmental concerns, as well as disappointment from the sugar and ethanol industries, which see this move as negative for their long-term development.

For additional information on the energy auctions in Brazil, view related March 7, 2011 article - Brazil to Hold Federal Auction for Power Generation Projects.

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