15/12/2016

Wind and solar fury as Brazil tender axe 'threatens investment'

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WindAction

Yesterday the government said it would cancel the tender, claiming that distributors have contracted 9GW more than they need through 2020 and that the auction would overburden consumers if extra power was bought.

Brazil’s wind and solar industries have slammed the cancellation of the nation’s 19 December reserve tender as a “hard blow” and “counter-sensible”, warning that billions of dollars of investment are at risk and factories could grind to a halt in 2018.

“It’s a sad day for the solar sector in Brazil,” Rodrigo Sauaia, CEO of the Brazilian Solar Power Association (Absolar) told Recharge.

“In the end, it’s a very negative signal for a sector that has been contributing to the recovery of the country’s economic growth.”

Sauaia said the decision would affect potential investments of some R$9bn ($2.7bn) in new projects and supply chain on offer if the 1.5GW in new solar contracts promised by government earlier this year were fulfilled.

The wind sector predicted that more than R$65bn invested in the past decade to build 11GW of capacity and six wind turbine assembly plants would be at risk.

Élbia Gannoum, executive president of the Brazilian Windpower Association (ABEEólica), said: “At a time when the government itself signals it will announce a series of measures to stimulate new investments, it’s very counter-sensible do demobilise a young industry based on very high investments made in recent years, [an industry] that doesn’t need extraordinary measures and that has been registering consistent growth.”

She warned: “With no contracts in 2018, we’ll have factories standing practically idle in 2018.”

Yesterday the government said it would cancel the tender, claiming that distributors have contracted 9GW more than they need through 2020 and that the auction would overburden consumers if extra power was bought.

The 19 December tender had attracted 21GW of wind and 13GW of solar projects in what would have been the last chance to contract power in 2016 after the cancellation of tenders earlier this year.

This will be the first year since 2009 that Brazil will not contract any new wind projects, while for the solar industry it puts a brake on the government’s 2014 policy to introduce that technology into the country’s power mix.

Steve Sawyer, secretary general of the Global Wind Energy Council (GWEC), said the cancellation reflects the economic and political difficulties facing a nation that “has been one of the bright spots” for the industry, but which could now face “a rough couple of years”.

“It does not bode well, especially for the companies that have invested in plant in response to the local-content requirements,” Sawyer told an online seminar today.

He said while previous year’s tender rounds would keep the industry humming for a while, the Brazilian market “could shrink dramatically unless there’s some new procurement in the next year”.

Today local press reported that Brazil’s economy could shrink by almost 4% in 2016 after contracting by 3.4% in 2015, resulting in reduced demand for new power.

Led by the industrial sector, electricity consumption fell 1.7% in 2015 from 2014, and in the first 10 months of 2016 demand shrunk another 1.1% compared to the same year-ago period.  

ABSOLAR said it would continue its dialogue with the government in an effort to understand fully the reasons behind the cancellation, and to urge Mines and Energy Ministry officials to implement five- to 10-year visibility for the sector.
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