Wind Dominates Brazil Power Auction as Developers Brave Risks

(Bloomberg) — Wind developers are showing more confidence
in Brazil, selling six times as much power through an energy
auction Friday as they did in April.

Developers won contracts to sell power from 538.8 megawatts
of wind farms for an average price of 181.14 reais ($51.90) per
megawatt hour.

They’re betting there will be enough turbines available to
finish construction by 2018 when the wind farms must go into
operation. Brazil’s slumping currency is making imported
components more expensive, and domestic suppliers are struggling
to meet growing demand. Similar concerns kept some developers
from bidding in a similar auction in April, when just 90
megawatts of capacity was sold, well short of the 500 megawatts
expected by Bloomberg New Energy Finance.

“Developers who haven’t yet signed deals to buy turbines
are running a risk,” Helena Chung, a Sao Paulo-based analyst
for New Energy Finance, said in an interview Friday.

Prices were 2.1 percent more than the 177.47-real average
in April, helping allay concerns about rising costs. That was
only slightly below the ceiling set by the government of 184
reais, showing that costs are increasing and higher rates are
needed, according to Elbia Silva Gannoum, president of Brazil’s
wind power association known as Abeeolica.

Another concern is a lack of transmission capacity. The
wind farms that won contracts are those that will be able to
connect to the national power grid more easily, according to
Gannoum.

“This was an auction for those projects with ease
connecting,” Gannoum said in a phone interview from Peru.

The developers that won contracts included Grupo
Votorantim, a relatively new participant in Brazil’s wind
industry, and Tractebel Energia SA, which hasn’t participated in
a government auction for a while, Gannoum said.

Wind projects accounted for about 80 percent of the 669.5
megawatts of capacity that sold in the auction. Small hydro,
biomass and natural gas plants also won contracts to provide
power. An auction for solar projects will be held next week.

To contact the reporter on this story:
Christiana Sciaudone in Sao Paulo at
csciaudone@bloomberg.net

To contact the editors responsible for this story:
Edward Dufner at
edufner@bloomberg.net
Will Wade, Charlotte Porter

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