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Brazil’s Goal: Getting from Wind 10% of All Its Energy in a Decade

Wind energy in Brazil Nowadays, nearly 70% of the energy generated in Brazil comes from large hydroelectric plants. The contribution of other sources of energy, such as wind, for instance, to the National Interconnected System (SIN, in the Portuguese acronym), the country’s electric power production and transmission system, is still small.

However, the scenario is changing, and will change even further as a result of ongoing and future investment in the sector.

Presently, Brazil has an installed capacity for wind energy of 927 megawatts (MW), equivalent to 0.6% of the country’s entire electricity output. By 2013, the rate should be five times as high, at 3.5%, and should grow much more within one decade.

“Up until 2022, it should account for 20% of Brazilian energy,” forecasts Ricardo Simões, the president of the Brazilian Wind Energy Association (ABEEólica).

The rise of wind energy started with the establishment of the Incentive Program for Alternative Sources of Electric Energy (Proinfa) by the federal government, in 2004. The program is recognized by the leading businessmen in the industry as the first step for increasing the share of wind energy in Brazil.

“The Proinfa was very important, because it was the first effort to introduce wind energy in Brazil. On the other hand, it was a subsidized program. (The Brazilian power utility) Eletrobrás used to purchase the energy for prices much higher than market prices,” says Roberto Honczar, the managing/financial and investor relations director at (alternative energy company) Renova Energia.

“When we got started in Brazil, there used to be no specific contracts for energy sales. There were no set tariffs of how much should be paid for wind energy,” says Eduardo Lopes, the commercial director of Wobben Windpower, one of the country’s leading manufacturers of wind turbines.

It was only in 2009 that the country had its first wind energy auction, which regulated the price of the megawatt sold. There have been three major auctions thus far, two for the purchase of backup energy, in 2009 in 2010, and one for alternative energy sources, in 2010. In the three auctions combined, 5,250 MW of wind energy were commissioned to be installed by 2013. The average price paid by the government to wind power generating companies at the auctions was 141 Brazilian real (US$ 84) per MW/hour.

“The Proinfa set a tariff and a 20-year contract for the purchase of energy,” explains Lopes. At the auctions, energy was also commissioned from biomass and small hydroelectric plants.

Currently, Brazil has 50 wind farms built and 19 planned. The bulk of financing comes from the Brazilian Development Bank (BNDES). From 2003 until 2010, out of 4.3 billion reais (US$ 2.5 billion) invested in the industry, 2.7 billion reais (US$ 1.6 billion) were financed by the bank.

“The Bank’s investment represents around 70% of everything the businessmen invest,” says Antônio Tovar, head of the Department of Alternative Energy Sources at the BNDES. Lines of financing to the industry last up to 18 years, but the companies only start paying once the plants start operating. Payment usually begins six months after the wind farms enter into operation.

According to Tovar, the BNDES has 35 other projects that meet the bank’s financing requirements, but are still pending analysis. “The prospects are good,” says the executive, the expectations of the institution regarding the new wind farms.

“We hope to approve all of the projects this year. If they all obtain financing this will be the year in which the Bank will approve the largest number of projects, as well as the highest figure. In comparison with 2009 and 2010, the financing volume should increase threefold.”

The last major financing line issued by the Bank was approved early this year and granted to Renova Energia. The company is going to build 14 wind farms with capacity for producing 294 MW, enough to supply approximately 100,000 families.

The farms, which should start operating in July 2012, represent investment of 1.17 billion reais (US$ 701 million), of which 588 million reais (US$ 334 million) come from the BNDES, 315 million reais (US$ 188 million) from Banco do Nordeste, and the remainder from the company itself.

Renova has the permits for building six other wind farms, which will supply 163 MW of energy and should start operating in 2013. Currently, the company’s revenues come from three small hydroelectric plants in the south of the state of Bahia.

“In 2010 we posted 37 million reais (US$ 22 million) in revenues. If our 14 farms were already operating, the figure would be nearly 170 million reais (US$ 101 million). The other six farms would generate nearly 70 million reais (US$ 42 million) in commissioned revenues,” claims Honczar.

The Future

With a potential for installing up to 300,000 MW, Brazil still has a long way ahead before it uses all of the power that its winds can provide. Most of the wind farms in Brazil are in the Northeast and South regions. Renova, for instance, is going to build all its farms in the (northeastern) state of Bahia.

“When you have got several projects in one single region, you can share investment, such as access surveys, which bring increased efficiency, the cost of moving cranes for turbine assembly, and you can use one single transmission line for different projects,” says the director of the company.

There is a chance, however, that new areas will start being used for wind power generation. “The map of wind energy in Brazil was drawn nearly one decade ago. Now it is being reviewed, and new regions should come up,” says Simões, of ABEEólica.

Lopes, of Wobben, adds: “as a result of the new measurement, which enables towers higher than 100 meters (the previous standard was 50-meter towers), it is estimated that wind power generation capacity in Brazil should increase three- or fourfold.”

In addition to being a clean and renewable source, in Brazil, wind energy supply works in tandem with hydroelectric plant generation. “In Brazil, there are very strong winds precisely during the drier spells, which makes wind energy into a Siamese twin of the hydroelectric system, because when the water is lacking, wind energy complements it. By installing wind farms, you build virtual water reservoirs,” says the president of ABEEólica.

Simões also highlights other factors that boost the development of wind energy in the country. “We understand there is a worldwide concern with wind energy generation. This includes a secure supply, independence from foreign oil and natural gas prices, and reduced carbon dioxide emission because of climate change. “

The growth of the sector is also creating jobs, aside from boosting the development of all companies involved in the production chain.

Renova Energia only has 70 direct employees, but its new projects should create a significant number of indirect jobs. In order to implement its 14 parks, the company has hired five enterprises to supply turbines, civil construction and electromechanical equipment. “These companies should employ approximately 700 people. Our projects create a significant number of jobs, says Honczar.

Among the enterprises that supply the equipment to the wind farms, the advantages of the sector’s progress are also quite significant. “Considering only the plants that we are going to implement thus far, Wobben alone is going to implement over one gigawatt by 2013, counting only what has already been commissioned,” says Lopes. “We are going to have 35 farms by 2013, and that is if nothing else comes up.”

In order to foster that growth, the BNDES’ financing lines are also available for the companies that manufacture equipment for the wind farms. “There are more than seven manufacturers of wind turbines in Brazil, all of which are registered with the BNDES and have [sufficient] domestic capital to allow the bank to finance the making of the equipment,” says Tovar.

Out of all the advantages possible, wind power generation also helps to foster the economy of the areas in which the farms are located, because the owners of the plots in which the farms are built receive a share of the revenues. “It is a socially fair type of energy, because it generates income in impoverished communities,” says Simões. Each wind farm earns the owners 20 to 30 of royalties, which range from 0.5% to 1% of net revenues.

Given the industry’s potential for development and profit generation, specialists are looking at an exponential growth of wind energy in the country. Tovar claims, for instance, that the National Electric Energy Agency (Aneel) has authorized the implementation of another 2,700 MW, which now are only pending environmental licensing.

“In the next few years, Brazil should grow more than the world average. That entails doubling the installed capacity every three years,” says the BNDES representative.



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