12/05/2014 15h11

Companies see sunny outlook got renewables

Sector unlikely to cool as foreign interests eye attractive auction prices and ideal climate for alternative power

Financial Times

Brazil is known for having one of the cleanest energy supplies in the world. With hydropower supplyingmore than three-quarters of the country’s electricity, there are many opportunities forcompanieswilling to invest in the growing market of alternative energy.

But the country is facing its second year of drought. To compensate for a reduction in electricity output, the government has had no option other than to turn on more thermoelectricplants.
According to the Energy Research Company, the result was a decrease of 6.15 per cent from 2012 to 2013 in the share of renewables in themix. Despite that, in the same period, solar andwind energy increased from 1.894MW to
2.207MW,agrowthof 16.5per cent.
To have an idea of Brazil’s potential for solar energy, consider Porto Alegre,the capital city of the southern state of
Rio Grande do Sul. The city lies in a region in the country that receives less intense sunlight, but more hours of sunlight
the another regions.
Seeing big opportunities, the Chinese electric carmaker and battery manufacturer BYD decided on Campinas, in the São Paulo region, to openthe company’s first South American manufacturing facility, with an investment of R$200m ($80m).
The company plans to build solar panels and energy storage systems. In the first phase, BYD will produce electricbuses andrecyclable ironphosphate battery packs. It then plans to build a research and development centre for its photovoltaic, smart grid and LED lightingbusinesses.
Brazil is enjoying a greatmoment for renewable energy, says Adalberto Maluf,BYD’smarketing director: “With short-term issues such as drought and less generation of conventional energy, we think solar energy will grow 70 percent for large auctions and 30 per cent for smallerprojects.”
The ministry of mines and energy predicts a 15 per cent fall in the installation cost of solar power by 2015. By 2020, the ministry expects a cut of 30-50 per cent, because of industrialscale production and improved performance.BYD plans to produce 1,000 electric buses a year from2015.The bus can travel 300km a day on a single charge and has a battery that is charged in two hours and has a life expectancy of 40 years. Consumption is 1kWper kilometre at a cost of R$0.20, while a conventional bus requires 1 litre of diesel per2km,atacostofR$2.50.
The falling cost of renewablesmeans they can, at times, compete with fossil fuels. Lower energy costs also mean greater competitiveness. Since auctions were introduced,price shave dropped to a record low.At the last auction in October,the solar energy pric ewas settled at £54 per MWh; a few years ago it was £127 per MWh. Last year, the cost of onshore wind was as low as £27 per MWh, against£95 per MWhinthe UK.

Brazil’s secretary of energy planning, Altino Ventura, says wind and solar energy receive no government subsidies. “Because of our climate, wind farms have greater potential of electricity per unit of installed capacity than elsewhere,” he says. The farms have a capacity of 60-65 per cent, against a global average of 40-45 per cent.
On the other hand, the UK think-tank Policy Exchange says that despite auctions, unusually highwind speeds and a surplus of discount wind turbines, the cost reductions in Brazilianwind power reflect hidden incentives in grid charging structures.

In 2009,GE won its first contract for a wind energy project in Brazil. “Despite initial challenges,we are making equipment at a competitive price,” said Sergio Souza,head of sales forLatinAmerica. 

Since 2011, GE has manufactured equipment in Campinas. In 2012, it developed a turbine specifically for the Brazilian market. This year, it celebrates its 1,000th hub produced locally. The company has invested R$1bn in a researchand development centre in Rio de Janeiro.
Analysts predict that wind will account for 9.5 per cent of Brazil’s installed capacity by 2022.GE forecasts the market will grow 40 per cent by 2016 and that 900 GE wind turbines will be installed by the end of the year. Mr Souza says Brazil is consolidating as one of the main wind power markets in the world. In addition, it is one of the few countries that produces 2GW a year.
“There is no way this sector will cool down in the next few years,”he says. “Its future is bright.”