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Brazil Lowers Wind-Energy Prices by 20 Percent in August Auction

July 23 (Bloomberg) -- The Brazilian government lowered the maximum price developers may sell energy by 20 percent in next month’s auction for new wind farms.

Developers that win contracts in the so-called reserve energy auction won’t be allowed to charge more than 117 reais ($52.70) a megawatt-hour, Brasilia-based electricity regulator Agencia Nacional de Energia Eletrica, known as Aneel, said today on its website. A similar event in 2011, which included biomass plants, had a top price of 146 reais, according to the national energy agency Empresa de Pesquisa Energetica

Developers expected a maximum price of at least 125 reais after the government required turbine makers to source more of their parts locally, Elbia Melo, president of the Sao Paulo-based trade group Associacao Brasileira de Energia Eolica, said today in a telephone interview. Domestic content rules are boosting project costs and making power more expensive.

“The market was hoping for a higher price,” she said. “We’ll only be able to know how sensible this ceiling price is from the results of the auction.”

High inflation and the declining real makes it more expensive for turbine makers to import components, which also led to expectations for a higher ceiling price, Melo said.

In Brazil’s power auctions, the government sets a ceiling rate and developers submit bids for the prices at which they are willing to provide power. The lowest offers win contracts to sell electricity.

The auction is scheduled for Aug. 23 and winning companies must complete their projects by September 2015, Aneel said.

Developers of fossil-fuel power plants, biomass facilities and hydroelectric dams may sell power for as much as 140 reais a megawatt hour in another auction set for Aug. 29. Companies bidding to build the 400-megawatt Sinop hydro project in the same event must sell electricity for no more than 118 reais.

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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