Brazil changes wind energy rules

Cheap wind energy re-writes market rules in Brazil

Wind energy has become so competitive in the Brazilian electricity market that the government has had to change the rules of its capacity auctioning system, and exclude wind energy from some bids, to ensure that some gas-fired generation is built.

Bloomberg reports that wind farm developers have won 55 per cent of contracts auctioned by the national energy agency, Empresa de Pesquisa Energetica, since 2011, with the cost of wind falling to less than $45/MWh, down 41 per cent from 2009.

At this price, coal fired, gas fired and biomass generation is priced out of the market, so to ensure that at least some new gas-fired capacity is built, the agency is introducing separate categories – allowing fossil fuel and biomass plants to bid against each other, while wind projects compete in a separate auction.

“Wind energy is the most competitive, so if they mix together all the technologies they won’t be able to contract the amount of thermoelectric they want because thermoelectric plants are much more expensive,”said Elbia Melo, president of the local wind energy association told Bloomberg.

The decision means that the cap on bidding prices will need to be raised to cater for more expensive fossil fuel generation.