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.