Brazil’s energy sector has been historically characterized by its vast hydrological resources, its sugar cane ethanol industry and the oil giant Petrobras. However, a new report from Bloomberg New Energy Finance finds that Brazil could become one of the world’s fastest growing markets for wind power – IF (and that’s a big “if”) the country can drastically reduce costs and increase system production.
Brazil recently agreed to sign contracts with wind developers totaling just over 1.9 gigawatts (GW). For the first time, wind power was purported to be cheaper than the cost of natural gas-fired power projects, and, curiously, below the wholesale electricity prices in Latin American markets. Bloomberg’s report, “Brazil’s 2011 tenders: low prices, high risks,” found that Brazil could add as much as 1.4 GW of wind power in 2012 and 1.5 GW in 2013, up from 392 megawatts (MW) in 2010.
However, wind power developers must now make good on these remarkably low bids, a task that Bloomberg analyst Eduardo Tabbush says might be easier said than done. According to the report, nearly half of these new projects will have to operate at considerably higher efficiency or lower cost than has been seen in other parts of the world.
For these projects to become viable, Bloomberg finds that turbine costs in Brazil must fall to $1.2 million per MW, or 10 percent below the current global average. As it stands, many of the new bids pencil in investment returns of less than 10 percent, a prospect that will likely prevent many of them from ever being financed or built. The report hints that this could potentially open up the Brazilian market to lower-cost Chinese-made wind turbines; but none of the projects bids have specified plans to use Chinese equipment.