Wind faces A-5 gas battle

Brazil's wind industry seems content with the price ceiling set for the country's upcoming A-5 power auction, but there is concern that wind will have to compete with natural gas — which has received a far more attractive price cap than wind.

At R$137 ($60.5) per MWh, the price cap for wind is considered a continuation of past price cap levels, once inflation is factored in. At last year's A-5 auction, the government had set a cap price of R$122/MWh.

"With a level of inflation of about 5%, I think they just moved the price up in line with prices," Jean-Claude Fernand Robert, GE's head of renewable energies in Latin America, told the Recharge Thought Leaders Lunch in Rio.

Elbia Melo, the president of Brazilian wind-power association ABEEólica believes this year's the price cap reflects awareness among policymakers that risks for the Brazilian wind industry have increased, given the increases in local-content requirements.

However, Melo added, it would seem "strange" that at the same auction Brazil will pay a far higher rate of R$197/MWh for thermal power generation such as natural gas.

Mauricio Tolmasquim, the head of Brazil's energy planning agency EPE, told the lunch that the government in Brasilia is granting the higher price for gas in order to guarantee the security of Brazil's energy supply, especially when hydroelectric reservoirs are running low.

"We put a very high price in order to allow us to make thermal plants competitive," Mauricio Tolmasquim explained. "The auction is structured in a way that we are contracting small hydro and thermal, and wind will complement the demand."

Tolmasquim said it was impossible to know, at this stage, how much energy will come from wind in the auction.

"Our priority will be thermal, but we may also contract a very large amount of wind," he said. "It depends on the thermal power plant demand."

Brazil will hold the A-5 auction at the end of September, and a reserve power auction at the end of October. At that auction, wind virtually will have no competition with other power sources, Tolmasquim assured his audience.