28/08/2015

Enel Green Power big winner in Brazil solar auction

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Recharge News

The Brazilian government on Friday contracted 834MW of future PV capacity from 30 solar projects at an average of R$301.79 ($84.15) per MWh, with the seven-hour auction proving more competitive than many participants expected. 


In local currency terms, the average winning price was 40% higher than the R$215/MWh average in the country's first solar auction, held last October. In US dollar terms, however, the winning price was just 3% higher than last October.

Among the auction’s biggest winners were Italy's Enel Green Power, Spain's Solatio and the consortium of US and Brazilian renewables companies SunEdison and Renova.

The developers have until 1 August 2017 to build and commission their projects, at which time a 20-year off-take contract takes effect.

The contracted projects will lift Brazil’s total installed solar capacity to 1.7GW, from just 15MW at present. In doing so, they will help hurtle Brazil into a position of solar leadership within Latin America, second only to early-mover Chile, which will have 1GW by the end of this year.

The average winning price came in 13.5% lower than the R$349/MWh ceiling that was in place for the auction, underscoring the intention of many international solar players to establish an early lead in the nascent but potential-rich Brazilian solar market.

Given Brazil's economic headwinds, including a weakened currency and higher financing costs, the solar bids came in more competitive than many in the industry expected.

The 30 winning projects will result in $4.3bn of total capital investment, or R$5.2m per installed MW.

Italy's Enel Green Power was the auction’s biggest winner, with its 14 projects totaling 410MW, or nearly half the total capacity contracted.

Spain’s Solatio came in second, selling power from five plants totaling 150MW.

Meanwhile, SunEdison and local partner Renova won contracts for two projects combining for 59.7MW.

Maurício Tolmasquim, president of Brazil's energy planning authority, reaffirmed that at least one solar auction will be held each year, and said the results show that solar will follow in the footsteps of wind in the country.

"This auction has given the signal for panel makers to invest in factories in Brazil," he says. "The demand is there."

Yet Rodrigo Sauaia, executive president of the Brazilian Solar Power Association (Absolar), said that while the auction "exceeded our expectations", the government must still address challenges facing the industry.

Brazil has almost no solar manufacturing, yet local-content regulations increase the cost of buying foreign-made modules by as much as 40%.

The auction demonstrates that Brazil's solar industry "has demand and financing", Sauaia tells Recharge. "It now needs an industrial policy."

Still, Sauaia said the auction result is good news for solar in Brazil.

"The Solar PV sector is in positive mood compared to other sectors," he says.

Brazil’s government predicts the country will have 7GW of solar capacity in place by 2024.
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