SAO PAULO --
Renova Energia SA's strategy to produce wind energy cheaper than
anywhere else in the world will be tested as it brings its first
turbines online, helping to transform Brazil into the world's
fourth-biggest market.
Renova, which counts utility Light SA as among its biggest shareholders, started operating South America’s biggest wind farm cluster in northeastern Brazil last week. The company, based in Sao Paulo, plans to build at least six farms next year.
Brazil aims to more than double its capacity to generate wind power next
year by harnessing the same weather system that brought Portuguese and
Spanish sailors to the continent in the 1500s. Renova is betting its
farms can produce energy for as little as a quarter of the price needed
to make some European projects viable.
“There’s uncertainty over whether these turbines will
perform as expected,” Unai Otazua Aranguren, director of renewable
energy consultant Garrad Hassan Group Ltd.’s Brazil office, said by
telephone. “The wind here behaves differently to what we have in Europe
and the U.S.”
Renova rose 0.3 percent to 31 reais in Sao Paulo
trading on June 29, bringing its year-to-date gain to 16 percent. It has
more than doubled since it first sold shares in 2010.
Brazil’s government is promoting wind and other
renewable energy projects in a bid to diversify away from hydroelectric
plants, which account for 66 percent of the nation’s installed capacity.
Wind farms can help shore up the supply of electricity in drier months
when dam reservoirs diminish.
$16.9 Billion Investments
National energy agency Empresa de Pesquisa Energetica,
known as EPE, expects 10 gigawatts of wind farms to come online between
2012 and 2020, requiring investments of about 34 billion reais ($16.9
billion).
Developers including Spain’s Iberdrola Renovables SA
and Renova signed wind contracts in six auctions through December to add
6.8 gigawatts of generating capacity. The first of the farms are
required to start operating this month.
Brazil was the world’s 11th market for the renewable
energy last year, Steve Sawyer, secretary general of the Brussels-based
industry lobby group Global Wind EnergyCouncil, said in a Feb. 7 interview.
Europe Projects
In an August auction, companies agreed to generate
power at an average rate of 99.54 reais, or about $49.31, per megawatt-
hour, according to EPE. Wind developers receive about 150 euros ($190) a
megawatt hour in Italy, 75 euros in Germany and 74 euros in Spain,
Bloomberg New Energy Finance analyst Eduardo Tabbush said by telephone
from London.
Renova estimates its turbines will spin more than 50
percent of the time, compared with an average of 25 percent for wind
farms in Europe. The gusts that blow westward over the Atlantic across
Brazil’s northeast are the most consistent weather system in the world,
the American Meteorological Society says, allowing companies to use
cheaper and lighter turbines.
Renova declined to comment when contacted by Bloomberg News.
Brazil’s drive to become a major producer of wind energy has
lured France’s Alstom SA, the U.S.’s General Electric Co. and India’s
Suzlon Energy Ltd., which have all built factories to make equipment in
Brazil in the past three years.
‘Tight’ Margins
Turbine makers likely agreed to cut prices for the
Brazil auctions after the market for the equipment collapsed in the U.S.
and Europe as the debt crisis prompted governments to scale back the
size of subsidies for renewable energy projects, Tabbush said.
Even with the discounts, margins will be “very tight”
on the projects, Tabbush said. A weaker local currency, which makes
imported parts and equipment more expensive, may erode margins, he said.
Brazil’s real has weakened 23 percent against the U.S.
dollar in the past 12 months, the worst performer of the 16 most-traded
currencies tracked by Bloomberg.
Pacific Hydro Pty., a Melbourne-based developer that’s
built two wind farms in the northeastern state of Paraiba, chose not to
participate in the auctions on concern the rates being offered were too
low.
Unsustainable Returns
“We’re pleased we didn’t take part,” said Rob Grant,
chief executive officer of Pacific Hydro, which aims to develop wind
farms and sell to the free market. “After the 2010 auctions, we realized
the regulated market wasn’t the place to make sustainable returns.”
Light SA, a Rio de Janeiro-based utility, bought a 26
percent stake in Renova Energia for 360 million reais last year and
agreed to purchase power from 400 megawatts of wind farms on the free
electricity market, the companies said in a statement last July.
Renova expects to raise at least 250 million in a
private stock offering to BNDES Participacoes SA, a unit of Brazil’s
development bank, to fund current and future projects, according to a
June 25 regulatory filing.
“We’ll see what will happen — maybe there will be
problems,” said Garad Hassan’s Aranguren. “When you’re bidding, it’s
like a gamble, like a game.”
http://www.renewableenergyworld.com/rea/news/article/2012/07/renova-strives-for-worlds-cheapest-wind-power-in-brazil
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