Thermal Developers Win 82% of Contracts in Brazil Energy Auction

(Bloomberg) — Thermoelectric developers won 82 percent of
power contracts sold at an auction in Brazil today as two years
of severe dryness force the country to diversify away from
hydro-dams.

Plants fired by natural gas or biomass will supply a
combined 1,627 megawatts under the deals, while hydroelectric
developers sold 356.3 megawatts, Sao Paulo-based electricity
trading board CCEE said today on its website. Genpower, a Rio de
Janeiro-based developer, was the biggest winner, with a contract
to supply power from its 1,516-megawatt gas-fired plant in the
northeastern state of Sergipe.

Brazil is promoting thermal plants, which are faster to
build than big hydroelectric facilities, as a stopgap to ensure
its energy supply in the coming years after the worst drought in
eight decades reduced output from dams.

“The auction was able to meet distributors’ demand for
2020,” Mauricio Tolmasquim, president of the Energy Research
Agency, told reporters in Sao Paulo. “With thermoelectric
plants, this auction prioritized energy security.”

The country favors thermal plants fueled by gas, which
generate less pollution than coal and oil, boosting demand for
imports of liquefied natural gas, or LNG.

While more than 70 percent of the country’s energy came
from hydroelectric plants in 2013, Brazil last year ran almost
all its costlier thermal plants at full capacity to avoid
rationing.

Plants fueled by gas, oil and coal accounted for 18 percent
of the country’s generation capacity at the end of 2013. Hydro-electricity generation decreased 5.9 percent in 2013, while
power supply from coal and gas plants increased the most,
surging 75 percent and 47 percent, respectively, according to
EPE.

Country Goal

The government plans an increase of 7,500 megawatts in
thermoelectric installed capacity by 2023.

In today’s auction, thermal developers agreed to sell
electricity at an average of 278.46 reais ($93) a megawatt-hour,
below a 281-real cap. In Brazil’s energy auctions, the
government sets a ceiling and developers bid down the price at
which they are willing to sell power. The lowest bids win
contracts.

Hydroelectric developers agreed to sell electricity at an
average of 183.66 reais a megawatt-hour, below a ceiling price
of 210 reais.

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
Carlos Caminada, Will Wade

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