In January Acciona Windpower signed a contract for the supply, operation and maintenance of 93 megawatts (MW) dedicated to wind farms which are jointly owned by Voltalia, CHESF and Encalso. It is the fourth contract signed by AWP in Brazil, where it...

Interview by Jason Deign

Q: What are the main characteristics of the Brazilian market?

A: As of the end of last year, the market has around 3.5GW of wind capacity installed, which covers just over 3% of electricity consumption. Last year it installed almost 1GW, made up of three wind farms in the circa-150MW range and 31 smaller ones.

You’ve got nine OEMs [original equipment manufacturers] firmly established in Brazil. The government’s Decennial energy plan sees 17GW of installed capacity by 2022, which would be almost about 10% of national electricity consumption.

So, on the whole, the government has made it very clear they have ambition. Thus far they have shown they are eager to invest and support the industry, and equally a number of OEMs have shown they are willing to participate in a crowded market.

Q: What are main barriers to entry to the market?

A: One of the main challenges right now is competition. It’s a highly competitive market, not just due to the way you tender to win the projects, but also due to the fact that you’ve got nine OEMs competing in what is a 1-2GW market per year.

That means you are operating with very low auction prices, around USD$50 [per megawatt-hour], and you’re competing against a large number of other OEMs. It’s tough to accept such low margins in an industry suffering from overcapacity, of about 6GW in Brazil.

Q: How challenging is the local content requirement?

A: It definitely is one of the major challenges in the market. I think there has been a lack of transparency in some of the regulation in regards to local content. That has not necessarily paved the way for a clear and open mechanism.

There’s also a continual drive to increase the local content requirement. It was 60%, now it’s gone up to 70%, so it has become a lot more challenging.

Now you have to produce towers in Brazil, 70% of steel plates and locally produced concrete, blades, nacelle and hub assemblies… all of these are very tight requirements.

Q: What are some of the other issues that wind industry players need to be aware of?

A: I would say there are other things that would be more of a challenge moving forward, such as lack of planning of transmission and distribution lines. There are around 50 farms yet to be connected.

There is a serious need for a coordinated grid development plan at both the regional and national level. Moreover, there are risks in the way contracts are currently structured, as there is no protection if plants remain unconnected.

Another challenge is logistics: the roads and waterways need to transport some of the larger components.

Lastly, the Ministry of Mines and Energy last year gave two updates to regulation around the ‘physical guarantee’, which increased the requirement from a P50 to a P90 probability of achieving the stated generated power.

That’s obviously a huge challenge from an operational perspective, especially when calculated using the highly variable average monthly production values.