Brazil tenders will allow gas to compete with renewables

Natural-gas projects will be allowed to compete with renewables in one of Brazil’s annual energy tenders, despite previous assurances to the contrary.

“The priority of the government continues to be renewable energy,” says Mauricio Tolmasquim, president of the government’s energy research centre, EPE.

But with a plethora of gas coming to the market, the government’s interest has been piqued by the opportunity for a cheap and stable power source.

It has announced that natural-gas projects will compete with renewables in the A-3 tender.

That is contrary to an earlier assurance that should natural-gas projects be permitted to compete in regulated bids, they would be limited to the A-5 tenders, which generally feature big hydro plants. Additionally, the EPE’s most recent ten-year plan did not account for such an increase in gas.

However, given the quantities of gas expected to become available, including that from Brazil’s new offshore oil fields, gas plants have been allowed into the A-3 tenders, which had been expected to be limited to biomass, wind and small ­hydro.

But only wind and biomass projects will be permitted to bid in the reserve tender, where they will not have to compete with natural gas. However, they will probably face lower rates than in the A-3 tender.

Wind has been the most competitive source of power in the government’s most recent tender, ahead of biomass and small hydro. A government source tells Recharge that the gas projects are expected to be competitive with biomass, and not far off the prices for wind.

The government set a ceiling price for gas projects of about R$150/MWh. Recent prices for wind have hovered around R$130/MWh.