Brazil puts July solar tender on ice amid switch of top energy officials

Brazil's interim government will postpone to a date to be fixed a reserve auction planned for 29 July, for which more than 9GW of solar PV projects were registered.

The Mines and Energy Ministry said in a short statement that the decision to postpone the tender aims to allow officials to assume their posts, especially Luiz Barroso – the new president of Brazil's energy planning authority EPE – who is expected to be sworn in at the end of June.

The energy ministry also said that projects already registered will not have to undergo new registration procedures. The tender included solar PV and small-hydro projects.

The government didn't say whether a second reserve tender scheduled for October, which includes solar and wind, will be maintained.

The decision to postpone the tender comes amid discussions promoted by interim energy minister Fernando Coelho Filho over revision of electricity sector rules, to solve the problems faced by cash-strapped power companies by excess power contracts due to a decline in demand since 2014.

When he assumed his role in April, Coelho Filho signaled that the reserve tenders will be maintained.

Local press have cited the interim ministry's executive secretary Paulo Pedrosa as saying that although reserve tenders maintain demand for the supply chain, in times of excess power supply they could burden consumers with a higher bill.

Distinct from the A-3 and A-5 tenders, which are regulated-market auctions that depend on future demand from power distribution companies in three and five years' time respectively, the reserve processes are based on stand-by contracts, under which the government guarantees extra power supply in the future independent of demand projections, and whose costs are then divided as a surcharge on all consumers' bills in Brazil.

Declining demand has been one of the factors that have reduced contracts for new wind since last year. In 2015 1.6GW was contracted and no new wind contracts were signed in the A-5 tender earlier this year.

Since 2014, Brazil has contracted around 3GW of new solar through reserve tenders which needs to be built by mid-2017. In wind, the regular tenders, which include contracts with power distributors and reserve tenders, have a horizon of projects to start operations by 2019. After that, no wind or solar is currently contracted.

The Brazilian Wind Power Association (ABEEólica) should conclude in the coming days a study designed to convince government officials of the need to continue reserve tenders – which have been responsible for a significant amount of renewables contracts since 2009 – in order to guarantee supply security in the future.

Unlike the solar PV industry, which has a small supply chain in Brazil, the wind sector is also concerned with continued demand for the five turbine makers that have invested around $1bn in Brazil in recent years to set up assembly plants and develop a supply chain.

While the Brazilian Solar Power Association (Absolar) has said that Brazil needs to contract at least 1GW a year to justify investment in a supply chain, ABEEólica says 2GW of new wind needs to be contracted yearly to keep the five OEMs busy.