Solar-only auction for Brazilian state of Pernambuco

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The Brazilian state of Pernambuco is to host Brazil's first solar-only energy tender auction on 20 December 2013.

According to the Brazilian state of Pernambuco’s news blog, the state moved the intended auction forward two months from the previous date of 18 February 2014.

The auction is part of the state government’s sustainable PE programme (PE Sustentável). The auction has been organised to promote awareness of solar energy and boost the solar market.

The auction is to be coordinated by the executive secretary of energy for the department of water resources and energy, Eduardo Azevedo, who will consolidate demands and determine the amount of energy lots traded, organising buying and selling of energy.

According to Bloomberg, Azevedo said 180MW of solar capacity is to be auctioned with an average price for the solar only auction set at BR250 (US$109) per MWh, Azevedo also said one of Brazil’s major energy suppliers has agreed to guarantee power to any companies that purchase energy at the auction.

Companies purchasing solar energy at the auction can gain discounts on the state value-added sales tax, Imposto sobre Circulação de Mercadorias e Serviços (ICMS), bringing the cost closer to market competition prices.

The auction date has been brought forward after the national A-3 energy auction on 18 November had no successful solar project bids. Before the auction took place industry experts claimed the set price, and that of the upcoming A-5 auction, was too low for solar to compete. The A-5 auction, due to take place on 13 December, has a record breaking number of solar project applications registered, but solar will have to compete with other, cheaper renewables.

Industry groups in Brazil reacted by proposing solar only auctions. According to the vice president of one of the industry groups lobbying for solar only auctions, COGEN's Leonardo Calabró, a reasonable price for the auction to offer is BRL190 (US$83) to BRL200 (US$87), per MWh, as solar is not yet competitive with wind and other energy sources in Brazil.

For the A-3 auction a ceiling price of BRL126 per MWh (US$54 was set; by the end of the auction the average price for bids was BRL124.43 MWh (US$54.92). The A-5 auction has set an even lower rate of BRL122 (US$52.0) per MWh.

The Pernambunco auction is for utility solar projects of 1MW in size and above. Entrants must register before midday, 13 December to take part, with projects generating by 1 July 2015 under a 20-year contract. Projects with locally sourced equipment will be legible for an 18-month delay on the generation date.

The Pernambuco state said previously it would hold more solar auctions, one a year, for three years after this one, allocating 60MW of solar capacity for auction each year.

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