Brazil Delays Power Auction to Attract More Hydro, Gas Proposals

Sept. 5 (Bloomberg) — Brazil has postponed, for a second
time, an energy auction for new capacity to give developers more
time to submit proposals for hydroelectric and fossil fuel-burning power plants.

The event will take place Nov. 28, according to the
country’s energy regulator Empresa de Pesquisa Energetica. It
was initially set for Sept. 12, and then pushed out until Sept.
30.

“The government has two options: to do the auction in
September and get mostly wind projects, or to wait until
November and have the possibility of adding thermal and hydro
plants,” Bernardo Bezerra, a manager at the Rio de Janeiro-based energy consulting company PSR, said in a phone interview
yesterday.

Brazil, which gets more than 75 percent of its electricity
from hydropower, is facing its worst drought in eight decades.
That’s threatening the country’s generating capacity and driving
up demand for new hydro plants.

Delaying the auction will let developers enroll four
hydropower plants with about 460 megawatts of capacity, Marcio
Zimmermann, executive secretary for the Ministry of Mines and
Energy, said by phone on Sept. 2. That’s in addition to hydro
facilities with 954 megawatts that have already applied to
participate in the event.

Developers have enrolled 1,041 power plants in the auction
with a total of 50.9 gigawatts of capacity. Most of that, 26.2
gigawatts, is for thermal power plants that will burn coal,
natural gas or biomass. The event will also include wind farms
with 17.4 gigawatts of capacity and 6.1 gigawatts of solar
power.

Gas Contracts

Many of the gas projects still lack long-term supply
contracts for the fuel, a requirement to participate in the
auction, Bezerra said

The delay will also help developers finalize plans for
thermal projects, said Sami Grynwald, consultant at Thymos
Energia in Sao Paulo.

“The government wants to give time for thermal projects to
have conditions to be qualified for the auction,” he said in an
interview.

In Brazil’s energy auctions, the government sets a ceiling
price and developers bid down the price at which they are
willing to sell electricity. The lowest bidders win long-term
sales contracts. Projects in this auction must go into operation
by January 2019.

The ceiling for thermal power is 197 reais ($87) a
megawatt-hour, Romeu Rufino, head of Brazil’s energy regulator
Aneel, said Aug. 26 at a conference in Brasilia.

To contact the reporter on this story:
Vanessa Dezem in Sao Paulo at
vdezem@bloomberg.net

To contact the editors responsible for this story:
Reed Landberg at
landberg@bloomberg.net
Will Wade, Robin Saponar

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