Which companies won big at the Brazil Energy Auction?

Bloomberg | Oct 31, 2014 — Solar-power developers including Solatio Energia and Rio Energy won contracts to deliver 1,048 megawatts of energy installed capacity in Brazil’s first energy auction with a specific category for photovoltaic projects.

That was 57 percent of the 1,817 megawatts of total capacity sold, Sao Paulo-based electricity trading board CCEE said today on its website.

Brazil gets less than one percent of its electricity from solar and more than 70 percent from hydroelectric plants. The country is seeking to promote wider use of photovoltaic systems as part of an effort to diversify its energy supplies as the worst drought in eight decades reduces power output from dams.

“It was the most competitive energy auction Brazil ever had,” said Mauricio Tolmasquim, president of the Energy Research Agency. “The sale was a milestone for the entrance of solar energy in the Brazilian energy mix.”

Brazil has set a goal of having 3.5 gigawatts of solar capacity in operation by 2023, producing about 1.8 percent of the country’s energy.

Solar developers agreed to sell electricity at an average price of 215,12 reais ($87) a megawatt-hour, after starting at a maximum price of 262 reais. In Brazil’s energy auctions, the government sets a ceiling price and developers bid down the price at which they are willing to sell power. The lowest bids win contracts.

The “price is too low,” Yayoi Sekine, a Sao Paulo-based analyst at Bloomberg New Energy Finance, said in an e-mail.“We’re trending toward the cheapest solar contract prices without subsidies in the world.”

Project Returns

At this level, projects are unlikely to return more than 10 percent on investment, she said.

The investors “who won contracts, got it because they calculated their projects will have return,” Tolmasquim told reporters.

Solar energy developers applied to sell power from 400 power plants in the event with total capacity of 10.79 gigawatts. Companies competed for 20-year contracts to sell electricity from projects that must go into operation by October 2017.

Wind energy developers won contracts to sell 769 megawatts in installed capacity, at an average price of 142.34 reais a megawatt-hour, below the ceiling price of 144 reais. Developers registered 626 proposed wind farms and eight biogas projects for the auction. There were no bids for biomass energy.

“Wind is usually the big winner in the auctions,” said Helena Chung, a Sao Paulo-based analyst for Bloomberg New Energy Finance.