Legal challenge for Brazil's A-3

Brazil's A-3 power auction, scheduled for 6 June, could be delayed by small hydro developers, which have thrown up legal challenges to some of the rules and the price cap.

Next week’s auction will include more than 6GW of wind power projects. The A-3 auction is the first opportunity this year for energy developers to win power purchase agreements that would guarantee development of new projects.

Ivo Pugnaloni, president of the Brazilian small hydro plants association (Abrapch), says the government is discriminating against small hydro in favour of large fossil fuel plants.

“We have tied to talk to the government but they don't seem to be listening,” he says.

Abrapch tried a similar strategy last year, but saw its motion rejected by Brazilian courts.

Among other smaller changes in the bidding rules, the group’s main complaint is that the R$148 ($66) per MWh price cap is too low to make small hydro projects economically feasible. Abrapch wants a cap of R$160/MWh.

According to the government, over 16GW of projects were preliminarily listed for the auction, of which 75% are wind power. Small hydro project developers listed 17 projects with a combined capacity of 296MW.

Abrapch says that they will argue that not only are thermoelectric plants more expensive, but also harmful to the environment. Pugnaloni said that developers have a portfolio of 9.2GW of small hydro projects and in the past 10 years only 1% of total power commissioned at auctions were small hydro, showing the government consistently ignores the legal criteria of equal opportunities.

The Brazilian Wind Power Association (Abeeólica) also said that the R$133/MWh cap for wind power technology was low and would prefer R$140/MWh, but it will not take any legal measures to increase the price.

Instead, Abeeólica sent a letter to ministry to explain that prices needed to be higher to account for increases connection and foreign exchange risks and inflation.

But expected competition between wind developers would reduce the price anyway, said Abeeólica's executive president Élbia Melo.

She expects 1GW of new wind power to be commissioned at the auction.