Brazil - Regulatory framework for wind energy generation I

The development of wind power in Brazil started in 2002 based on the public policies adopted under the Programme of Incentives for Alternative Electricity Sources (PROINFA), which had the aim of diversifying the electricity mix in the country by increasing the use of new alternative energy sources.

The programme, which was divided into two phases, extended to small hydro power plants, biomass and wind farm power, and is divided into two successive phases. Law No. 10. 438 of 26 April 2002 set out the targets and timescales for PROINFA, as well as the mechanisms for assigning projects and determining the prices at which electricity will be sold.

For the first phase, a total capacity of 3,300 MW was assigned, distributed between wind farm, biomass and small hydropower, of which 1,429 MW were allocated to wind energy.

This first quota had to be implemented before 30 December 2008, and included provisions for a fixed tariff and grid access for all electricity produced over a period of 20 years, distributed equally across all participating sources. The first phase of the programme was based on a 20-year guaranteed power purchase agreement with ELETROBRÁS at the price defined by the government, with floors of 50%, 70% and 90% (for small hydro, biomass and wind farm respectively), of the average retail power price in the final twelve months, and where participation in the programme is via an Independent Power Producer, and provided that the nationalisation index for equipment and services is at least 60% in the first stage.

For the second phase, the law set the target for new renewable energy sources to provide 10% of the country’s annual power consumption within 20 years. This phase was due to come into force after the target capacity of 3,300 MW of the first phase had been met. The price for electricity in this phase will be equal to that of competitive energy generation, defined as the weighted average cost of the generation through new hydro power plants with capacities greater than 30 MW and natural gas power stations.

The acquisition will be again made under a 20-year PPA with ELETROBRÁS, by means of annual scheduled purchases from each producer, so that new RE sources achieve a minimum annual increase in power output of 15% to be supplied to the consumer market.

Evaluation of PROINFA: During the implementation of the first phase, several practical issues undermined the development of some wind farm projects, which led to a delay in the start of operations. These problems included:
• onerous demands and heavy bureaucratic procedures to obtain or renew environmental licences;
• problems and delays in obtaining the Declaration of Public Utility (DUP) for projects, a qualification which facilitates negotiations to obtain the right to use the assets and rights affected by the wind farm projects, in particular the land, which in many cases is affected by complicated terms of use and occupation, and disputes between owners and landholders which make it difficult to identify the property;
• obstacles in connecting to the grid, particularly in the Central Western region;
• difficulty for the domestic industry to meet high demand for equipment.

Due to these first experiences, the deadlines set out in the Programme have been repeatedly postponed and, by the end of 2010, 926 MW of wind farm plants were installed in Brazil, spread over 51 wind farms and corresponding to 40 PROINFA wind turbines projects.

Brazil has recently achieved the threshold of 1,000 MW of installed wind farm and is expected to reach the target of the first phase of PROINFA in 2011.

The rate at which new wind power capacity was installed increased during the last two years of the PROINFA programme, demonstrating a trend towards sustained growth. Currently, over 97% of the installed wind farm generation capacity was achieved through PROINFA projects.

In December 2009, and again in August 2010 (LER-2009, LFA-2010 and LER-2010), the Brazilian Ministry of Mines and Energy held regulated procurement procedures, which allowed for the participation of wind power. These auctions greatly boosted the development of wind power, and it is expected that by 2013, 5,300 MW of wind power will be installed in Brazil as a result of both PROINFA and the auctions, attracting investments in excess of $10 bn to the wind energy sector in the next three years.

The wind turbines industry:
The wind power industry and its supply chain is becoming firmly established in Brazil and, in 2010, offered a varied production capacity across the country of over 1,000 MW per annum. Rising industrial investment will significantly increase this capacity, and the sector aims to implement a manufacturing base capable of producing between 2.0 GW and 2.5 GW of wind power equipment per year.
Brazil has a wind power equipment supply chain, which includes the following key global manufacturers:

Wind Turbines assembly plants: Total manufacturing capacity of 1,500 MW/year:
Wobben (Sorocaba): 500MW/year; Impsa (Suape-Pernambuco): 600MW/year; Gamesa (Bahía) 400 MW/year; General Electric - HUB Assembly - Campinas São Paulo. Manufacturers such as General Electric, Alstom, Vestas, Siemens, Suzlon, and the Chinese manufacturer Guodian United Power have announced investments in Brazil in response to the positive results obtained in the 2009 and 2010 tenders, which could increase local production capacity to reach around 2,000 MW/year.

Rotor blade plants:
Total manufacturing capacity of 2,000 MW/year: Tecsis (Sorocaba-Sao Paulo): 1,500MW/year; Wobben (Sorocaba) for E70-E74-E82 turbines, Wobben (Pecén-Ceará) for E-40, E48 wind turbines; total Wobben capacity: more than 600 MW/year.

In addition, there are plans to establish the following manufacturing facilities: LM-Bahía 300 MW/year and announced by Suzlon- Ceará, Aerys Tecnologia. Implementation is scheduled by 2012.

Wind tower plants:
Total manufacturing capacity around 1,600 MW/year: Brasilsat, Curitiba, PR – 80towers/year, Engebasa - SAWE, Cubatão, SP 120+ towers/year; Máquinas Piratinga, Recife, PE - 80 towers/year; Tecnomaq, Fortaleza, CE - 150 towers/year; ICEQ, Mirassol, SP; INTECNIAL, Erechim, RS - 80 towers/year; RM Eólica Pernambucana (Gonvarri + Arcelor Mittal), Recife, Pernambuco. 200 towers/year.

Concrete towers are manufactured in three facilities by Wobben, as well as the Spanish manufacturer INNEO. The Brazilian Wind Energy Association (ABEEólica) is the representative industry association for the Brazilian wind energy industry. Over the last three years, it has significantly increased its membership, established itself as an important institutional presence within Brazil, and forged links with other national and regional associations. ABEEólica is a board member of the international umbrella association, the Global Wind Energy Council (GWEC).

As Brazil achieved its first 1,000 MW of installed wind farm capacity, the wind turbines manufacturers’ market was distributed as shown below:
-Enercon, 41%
-Suzlon: 37%
-Vestas: 11%
-Impsa: 10%

The tenders held in 2009 (Wind only tender), and in 2010 (Alternative energy tender and Reserve energy tender), present a wind farm developers market distributed as follows:

Market share wind power developers: 2009 and 2010 auctions:
- Renova 11%
- Energimp 7%
- Iberdrola 7%
- Martifer 6%
- Impsa 5%
- CPFL 5%
- CHESF 5%
- SM/JM 4% Gestamp 4%
- Contour 4%
- Energisa 4%
- DESA 4%
- Energio 3%
- CPE 3%
- Enerfin 3%
- SM/JM 4%

The main challenges facing the wind energy sector in Brazil in the short term are directly related to the projected growth of the wind turbines market, which will require a significant increase in the rate of wind power installations compared to previous years in order to realise the energy supply programme which will result from new auction procedures planned for 2013 and beyond. This will involve:
• mobilising and securing greater financial resources to the wind farm projects and increasing the rate of financing;
• increasing the production capacity of the wind power industry, strengthening its presence in Brazil, and developing technological innovations adapted to the specific characteristics of wind power in Brazil as well as the country’s power system;
• meeting the logistical requirements of the supply chain for both equipment and services for the professional, manufacturing and business activities involved in the development of the wind farm projects and investments.

In the short term, the potential for the development of the wind power sector is limited to the wind power capacity planned under both the ongoing PROINFA target and the results of the auctions.

It is noteworthy that over 80% of contracted wind power capacity will be sited in the North Western region of Brazil. This should be reflected in the next update of the plan for electrical infrastructures for transport and distribution. Grid access is one of the key challenges facing wind power in Brazil, and additional investments are needed to allow wind farms to be effectively connected to the power grid in order to transport the produced power to the demand centres. The Brazilian wind power sector supports the reinforcement of grid infrastructure in the North East region via a transmission line running parallel to the coast, which l should connect São Luís (MA) and Recife (PE), and would also benefit Ceará, Rio Grande do Norte and Paraíba.

By Ramón Fiestas, GWEC. Contributions from: Pedro Perrelli, ABEEólica, Mauricio Trujillo, GWEC. www.gwec.net/fileadmin/documents/Publications/Brazil_report_2011.pdf

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