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Brazil Wind-Farm Rule on Power Cables May Scuttle Some Projects

A new rule that requires Brazil wind-energy companies to shoulder the costs for transmission lines may scuttle some projects and reduce participation in government-organized power auctions, developers said.

The country’s power regulator Agencia Nacional de Energia Eletrica announced yesterday that developers participating in auctions for contracts to sell electricity from wind farms will also have to connect the power plants to the grid, a job that’s currently handled by utilities.

Installing transmission lines may boost project costs by about 10 percent, according to Andre Pepitone da Nobrega, director of the power regulator. That will make it harder for developers to finance proposed wind farms, said Antonio Luiz Curioni Vieira de Barros, director of commercialization and new business at Dobreve Energia SA.

“This could make some projects unviable,” de Barros said today in an interview at a conference in Sao Paulo. “We’ll have to pay for everything. It’s a generation and transmission project we all have to do now.”

The rules will apply to projects enrolled in so-called A-3 government-organized auctions, Nobrega said.

The requirements may cut by half the amount of projects developers will enroll in the next A-3 auction, which is expected to take place in May, according to Arthur Lavieri, chief executive officer of India-based Suzlon Energy Ltd. (SUEL)’s Brazil unit.

Developers may seek sites that won’t require significant investments in new power lines, said Renato Volponi, country manager for EDP Renovaveis, the renewable-energy unit of Portuguese utility EDP-Energias de Portugal.

“We could build projects near existing substations,” he said. “But those options are finite.”

Delayed Lines

Brazil is seeking to avoid delays in connecting completed wind farms to the power grid after the utility Cia. Hidro Eletrica do Sao Francisco failed to connect 26 wind farms in the northeast before a May deadline, Nobrega said.

The unit of state-controlled power company Centrais Eletricas Brasileiras SA (ELET6) expects to complete the three transmission lines linking about 620 megawatts of wind farms by the end of the year.

To contact the reporter on this story: Stephan Nielsen in Sao Paulo at snielsen8@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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