Brazilian Wind Power shows the way

The Brazilian Government announced this week that electricity generated from wind turbines was now cheaper than power produced by natural gas and hydro-electric power. The news came following a series of energy auctions held last week. In all, 92 of these auctions were held, 78 of which saw wind power generators undercut other forms of electricity generation successfully.  The auctions were held by Brazil’s National Electric Power Agency and at the end of proceedings the 78 successful bids from wind energy totalled 1,928MW worth of power being sold at a price of 99.5 reals (£37.40) per MwH (megawatt-hour) on average. This was in comparison to an average price of 103 reals (£38.70) per MwH for natural gas and 102 reals (£38.57) per MwH for hydro-electric power. The average cost of a single MwH of energy from no specific source was 102.07 reals (£38.60). A number of other energy generation technologies, such as biomass, were also involved in the auctions.

The success of wind power generation in this year’s energy auctions has been dramatic. Wind power has dropped in price by 19% compared to last year. Such a substantial drop in price is perhaps indicative of the increased competitiveness and maturity of the technology.

Brazil currently has 1.4 GW of installed wind power. The Brazilian Electric Energy Research Centre (CEPEL) has estimated that the country has the potential to produce up to 145 GW of wind generated electricity. Another body, the Energy Research Company (EPE), has, however, recently announced that this figure could increase to 300 GW as a result of improved turbine technology, better turbine arrangement in wind farms, and reduced costs in the future. Welcome news to be sure, particularly as the EPE also announced that they expected Brazil’s total power consumption to increase by 60% over the next decade due to the country’s economic takeoff and the rapid expansion of the Brazilian middle class.

A press release from the Brazilian government stated that the auctions were significant for two reasons; “they reflect a new feasibility of market competition between wind and natural gas sources – something [as yet] unheard of internationally; and they demonstrate that wind prices continue to fall in Brazil.” Indeed, according to Eduardo Tabbush, an analyst at Bloomberg New Energy Finance’s London office; “These are the lowest power-purchase agreements for wind energy in the world.” So how has this situation been arrived at?

Firstly, it should be remembered that an auction system inevitably makes competition and price undercutting that much more cutthroat. Secondly, it is significant that the Brazilian government has placed an import tariff on foreign turbines. Such a move has encouraged turbine manufacturers to open up manufacturing or assembly facilities within Brazil. Indeed a major multi-national turbine manufacturer has recently announced plans to open their first turbine assembly plant in the country. The tax has served to both attract new businesses into the Brazilian economy and to lower the development costs of wind energy generation within the country.

However, it should also be noted that the cost of wind energy is not just falling in Brazil. The average international cost of a wind turbine (which accounts for around three-quarters of a wind energy projects costs) has fallen 7% from last year and is 22% lower than it was in 2008. Brazil may be slightly ahead of the curve due to its flourishing economy but the price of wind energy is expected to continue to drop internationally. Wind turbine technology continues to improve and mature which not only makes prices drop but also increases the amount of power that can be generated by a wind farm or single turbine. Good news for both developers and consumers.