Feb. 6 (Bloomberg) -- As a drought in Brazil strains hydroelectricity production, 48 wind farms stand idle because they’re not connected to the power grid.
State-run Chesf, a unit of Centrais Eletricas Brasileiras SA, is running behind by as much as 19 months on projects to build transmission lines to wind farms built by companies including Renova Energia SA and CPFL Energias Renovaveis SA. The farms, which could power 3 million homes, are part of a government plan to more than double energy from wind, biomass and small hydro-power plants by 2022, according to the government’s energy planning company, known as EPE.
Five years after Brazil first started auctioning the contracts to buy power from wind farms, the delay highlights the challenges the government is facing in diversifying from dams, which account for two-thirds of national supply. The driest January in 60 years is draining reservoirs at the nation’s biggest hydro-power plants, raising concern there may be blackouts and water rationing if rains don’t arrive soon.
“A director of Chesf went on television and said the company bit off more than it could chew, but that was the way it had to be,” said Jose Carlos de Miranda Farias, director of studies at EPE. “To me, that’s a scandal. It’s as though it’s acceptable to miss deadlines.”
Consumers still have to pay for the unused energy even if wind farms remain unplugged because government contracts with developers guarantee minimum purchases. They are paying about 560 million reais ($233 million) for unattached wind power, and about 3 billion reais to turn on thermo electric plants that are replacing the missing wind power, according to wind power association Abeeolica.
“Ideally, the company would be delivering already, which would be good for the system and good for the equipment because it was made to be generating power and not to be stopped,” said Jorge Augusto Saab, an analyst for Renova shareholder Rio Bravo Investimentos SA, in a telephone interview. “The fault lies with an incompetent state-owned company that couldn’t deliver.”
Power regulator Aneel has fined Chesf 12 million reais for its wind transmission delays. The Recife-based company plans to appeal the fines and will connect some wind farms in Rio Grande do Norte state by the end of February, Chief Executive Officer Marcos Aurelio Madureira da Silva said. The rest of Chesf’s lines will be completed by the end of the year, he said.
“We have a lot of projects on deadline and often those deadlines aren’t found to be viable once execution begins,” Silva said in a telephone interview. The company has about 100 transmission projects in its portfolio. “Today, our priority is to conclude those projects.”
Delays were caused by environmental licensing, property negotiations and archaeological findings, he said.
Silva said Chesf is considering entering the auction for contracts to build a 5 billion-real transmission network for Belo Monte, the Amazon dam project that’s set to become the world’s third-biggest hydro-power plant. The company would take a minority stake in any bid. The auction is scheduled to start at 10 a.m. tomorrow at the Sao Paulo Stock Exchange.
While Renova and CPFL are getting paid for the wind under contract, they are missing out on additional revenue because they can’t sell any excess energy in the spot market. Spot prices have more than doubled in the past year and reached a record last week, according to the electricity trading chamber, known as CCEE.
Renova declined to comment through an outside spokeswoman. CPFL said companies could benefit from selling excess wind once transmission lines are linked.
“The winds observed indicate a favorable situation, but the company doesn’t divulge estimates,” CPFL said in an e-mailed statement.
A blackout on Feb. 4 affected 6 million people in parts of 11 states and was caused when short circuits were automatically triggered to avoid a shutdown of the wider system, a press official for grid operator Operador Nacional do Sistema Eletrico, who asked not to be identified in line with company policy, said in a telephone interview yesterday. Government officials and companies will meet today to discuss what happened, the official said.
“Between 2011 and 2012, the state of Rio Grande do Norte simply stopped all work related to wind power,” said Jean-Paul Prates, director of the natural resources and energy strategy center, a think-tank in Natal, the capital of Rio Grande do Norte, where several wind farms are located. “When they woke up to the problem, two years had passed, two years that would have made a difference.”
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