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First published on the BWEC blog, May 2013

Steve Sawyer, Secretary General of Global Wind Energy Council (GWEC), will be a keynote speaker at Brazil Wind Energy Conference 2013. Cleantech Investor caught up with Steve ahead of the event to discuss the Brazilian wind energy market – and to get his thoughts on the wind industry generally.

Q. You have been observing the emergence of wind markets around the world for many years. How has the industry changed over the years as it has matured? Have the newer markets (especially those in Latin America) learnt from the best practices (and the mistakes) of others?

A. Just the fact of now being an established global industry means that the perception, and hence the treatment received, relationship with authorities, etc., has changed and matured. It’s more of a straightforward business proposition, although there are always new challenges in new markets.

I think the key actors in newer markets tend to study the established markets very intently; and they learn a lot on the technical side. But the political and regulatory reality is quite different in each country, as are the prevailing macroeconomic conditions, electricity market conditions and somewhere between 50 and 150 years of a national electricity system with all of its particular characteristics.

As I get older, I’m not sure that humans learn from other people’s mistakes…they generally have to make them themselves!

First published on the BWEC Blog, 8 May 2013

The Torrebras wind tower manufacturing plant was officially opened in Bahia today by State Governor Jacques Wagner, providing Bahia with a full complement of wind generation equipment suppliers and consolidating its position as a key hub for the industry in Brazil.

The 120,000 m² facility established by Torrebras, part of the Spanish group Daniel Alonso, is located in the Pólo Industrial de Camaçari (an industrial complex close to the capital city, Salvador). It has has involved investment of R$ 20 million (US$10 million) and will employ a staff of 300 on the production line. It has capacity for the production of 200 towers annually and all of the production capacity for 2013 has already been sold, according to the company - for projects in the State of Bahia. There are already plans to double capacity at the plant to supply the national Brazilian market.

Bahia already has three nacelle manufacturers (Gamesa, Acciona and Alstom). With the addition of Torrebras and the imminent arrival of blade manufacturer Tecsis (which confirmed last month that it would establish a plant in the state), the core supply chain for the wind sector is complete, opening opportunities for other related activities in the area, according to James Correia, Secrretary of Industry Commerce and Mining for the State of Bahia. Both Gamesa and Alstom are locatd in Camacari. Acciona's plan is also close to Salvador.

The State of Bahia has enormous potential for the generation of wind power (an estimated potential of 14.5 GW according to Correia) and is now also firmly established as one of the principal clusters for wind equipment manufacturing. Tecsis plans to invest R$ 200 million (US$ 100 million) in a new plant, also in Camacari - both for the domestic Brazilian market and for export.

First published on the BWEC Blog,  April 2013

Brazil's Ministry of Mines and Energy (MME) has confirmed the date for the next dedicated wind energy auction as 23 August 2013. Participants must register before 27 May to participate in the auction, which will contract energy to be supplied from 1 September 2015, with a contract for 20 years.

The MME has changed the criteria by which it will assess the ‘physical guarantee’ of projects participating in the auction. In future projects will be assessed on the ‘ P90’ criteria, which will replace the previously used ‘P50’ measure. ‘P’ values measure the ‘exceedance probabilities’ for wind energy production (P50 – also known as the Central Estimate – is the mean predicted level of generation, while P90 indicates the level of annual production that is forecast to be exceeded throughout 90% of the year – i.e. the probability of exceedance). The P90 measure is commonly used by investors for risk assessment. Higher project values (which secure more favourable loan terms) are typically accorded to projects with a lower gap between P90 and P50.

In Brazil, projects which are granted a 20 year PPA contract through the auction system are eligible for funding from Government owned development bank BNDES (subject also to criteria relating to the use of locally manufactured content). The deployment of P90 criteria by the MME should – in theory – reduce the risk inherent to BNDES from this lending (which is provided at very favourable terms).

The MME has stipulated that annual energy production certified should consider the reduction of losses, should take account of the arrangement of wind turbines, local meteorological conditions, the air density, the degradation of blades and aerodynamic losses of the park itself, the effects of wake turbulence and other parks, amongst other factors.

Research director of the EPE (the agency connected to the MME and which runs the auctions), José Carlos Miranda, quoted in Jornal da Energia, commented that the new conditions mean that project developers must invest more to ensure higher performances – and he has stated that he believes that prices of wind will increase in the August auction, although he believes that wind energy will remain competitive with other energy sources (such as biomass). Prices contracted for wind projects in Brazil had fallen significantly over the last few years.

The measure has been criticized by Sérgio Marques, President of Bioenergy, a company which was a major winner of recent auctions – at extremely low prices. However, it appears to have been widely anticipated by the market: many wind operators and equipment suppliers have expressed concern over recent months about the implications of the low prices in the auction last December. Commenting in Jornal da Energia, Brazilian Wind Energy Association (Abeeólica) President, Élbia Melo, confirmed that the changes had been anticipated by the industry.