At the end of 2012, Brazil had 2.5 GW of installed wind capacity, enough to power four million households, accounting for 2% of national electricity consumption. In 2012 alone, 40 new wind farms came online, adding more than 1 GW of new capacity to the Brazilian electricity grid and creating 15,000 new jobs. This represents an investment of USD 3.43 billion (€2.63 billion), which is expected to increase to USD 24.50 billion (€18.8 billion) by 2020. Steve Sawyer of the Global Wind Energy Council gives his opinion on wind energy in Brazil, the “country of the future”.
How would you compare the current status of the Brazilian wind market to how it was five years ago?
Five years ago, Brazil’s wind industry was in its infancy, with a cap of just 1100 (later 1400 MW) of wind power development. Since the introduction of the auction scheme in 2009, the industry has taken off in a big way.
Why is the Brazilian wind energy auction system successful?
The key reasons for the success of the Brazilian auction system are:
a) A pretty high bar to clear before entering the auction, keeping out the speculators
b) A guaranteed 20 year power purchase agreement
c) A binding contract to supply the power – if you are in to bid, you better be serious
d) Brazil’s superb wind regime
e) The availability of BNDES financing
f) The fact that the rest of the global market was in a downturn when things were heating up in Brazil meant that everyone was willing to do what it took to get in on the ground floor.
I do believe that the system is sustainable – with some tweaking.
What are the main challenges for the wind industry?
As wind penetrates the system more and more, there needs to be coordinated grid planning to go along with it, and regionally based planning as well as national. The market can only take you so far.
How do you see the Brazilian wind market in 2020? Wind has been excluded from the A-5 Auction – will this have an impact on the projected 2 GW annual growth?
The changes to the auction picture in Brazil are worrying, but on the whole I believe the government remains committed to seeing the wind power industry grow and become the ‘second source’ of electricity in Brazil, as the government announced last year. Both the industry and the government’s relationship to it are in the early stages and there will inevitably be both positive and negative changes to the government’s policy in the short-term. It’s ironic, after hearing for so many years that wind power was too expensive, that wind has been excluded from the A-5 auction in August – because it’s too cheap! However, I have high hopes that government policy will stabilise over the medium-term and that the industry will meet the current government target of about 16 GW of wind energy by 2020.
How will the growing ‘Local Content Requirements’ impact the wind market and costs?
Just recently, Canada lost its appeal at the WTO. The problem with local content requirements for us is that we are faced with two conflicting imperatives: one, to deliver the largest quantity of carbon-free electrons at the lowest possible price; and two, to create local jobs and industries. We are constantly being accused of ‘living on subsidies’, even though renewable energy subsidies pale in comparison to the annual 550 billion USD to subsidise fossil fuel energy. We have brought our costs down substantially, but local content requirements generally drive costs up, interfere with the development of an efficient global supply chain, and often create non-competitive situations in countries where you might only have one or two manufacturers able to supply a critical component needed to meet local content requirements.
As elsewhere in the world, Brazil is struggling to find the right balance between the regulation of a natural monopoly such as the power sector and harnessing the forces of the market to the benefit of both producers and consumers. It’s a difficult balance to get right. While we in the industry think that the local content requirements proposed at this stage are overly stringent and overly meddlesome and that more ‘intervention’ is required on the grid-planning side of things, this balance will no doubt shift back and forth over the coming years, hopefully ending up at a happy medium.”
Does Brazil face public opposition to wind?
In the early stages of wind power’s development in Brazil, there were some siting decisions which aroused opposition from some of Brazil’s environmental watchdogs, but the overall attitude towards wind from both the general public and environmental groups is very positive.
What do you think will be the hot topic discussed at Brazil Windpower in September?
Certainly anything related to the auctions will be on the top of the agenda together with challenges including grid upgrading needs and local content requirements. We are expecting to know the results from both the A-5 auction (see above) and the special A-2 auction for wind only sometime in August, so the conference should prove to be very timely in that regard.