Brazil can expect to see the capacity of PV projects contracted under its national power auction process more than double by the end of this year, according to the head of the country’s solar trade body.
This week Brazil’s Agência Nacional de Energia Elétrica said it would hold two national auctions with specific carve-outs for solar in August and November 2015, following PV’s first successful showing in a national power auction at the end of 2014.
Speaking to PV Tech about the two 2015 auctions, Rodrigo Sauaia, executive director of ABSOLAR, the Brazilian PV association, said solar could hope to perform even better than it did in last year’s auction, when over 1GWp (889MW AC) of PV contracts were awarded.
The first auction this year will be for solar only. It will be held on 14 August and will be open to projects that must begin generating by August 2017.
The second, on 1 November, will be a combined wind and solar auction, with winning projects contracted to begin operations by November 2018.
How solar performs Sauaia said would depend on the “government’s appetite” for solar in each of the auctions, but added that the conditions looked promising for PV.
“Since we have a situation in Brazil at the moment where we are facing a significant drought, and about 60-65% electricity is dependent on hydro electric power plants, we believe the scenario is very favourable for an acceleration of investment from the government in solar electricity. This means we believe solar can contribute to some extent to the solution of the current limitations that the Brazilian electricity matrix is facing due to its high dependency on hydro electricity.
“Last year we saw 1GW of projects contracted; this year we believe the sector will be able to improve on that mark. I can't give a fixed number, but our expectation is to contract through these two auctions more than was contracted last year.”
The big story about last year’s auction, apart from the capacity contracted, was the low price at which developers were prepared to bid. This was in part driven by the low ceiling price set by authorities for bids, and resulted in a winning bid price of US$86.78/MWh.
This time around, Sauaia said he expected a higher ceiling price and therefore higher bidding prices due to a number of macro-economic factors.
“Last year the exchange rate between the Brazilian real and dollar was about 33% lower,” Sauaia said. “This will definitely impact on prices that can be offered for PV electricity in the country. This is something the government will have to take into consideration when setting the ceiling price.
“The cost of finance in Brazil has also increased from last year: the base interest rate has increased and so the development bank's [which finances PV power projects] base interest rate has increased accordingly. That will also impact the projects. And third, some of the taxation is also higher from this year onward; since the government is restructuring their expenses and incomes they changed some of the taxes applied to material imports, and this may affect the PV value chain in increasing prices as well.”
The low price in last year’s auction prompted some observers to question whether projects that won on such low bids would be feasible in a country where solar has yet to show itself to be fully competitive.
Sauaia said he “hoped” developers in the first round were “responsible in their bidding”, and therefore able to deliver projects, but conceded that this would not be known in full until 2017 when projects in last year’s auction must be complete.