November 17th, 2015 by Guest Contributor

Originally published on RenewEconomy

by Sophie Vorrath

Brazil is set to add 53 new large-scale solar and wind farms to its national power generation mix, after the government awarded contracts for the development of 1.5 gigawatts of new renewable capacity in its latest energy auction.

The auction’s success – which will deliver nearly 1GW (929.3MW) of solar capacity and just over half a gigawatt (548.2MW) of wind energy – has been partly attributed to the government’s decision to raise a price cap to attract bidders.

Bloomberg reports that global solar companies including SunEdison and Rio Alto Energia were among those who bid and won contracts at the “hugely competitive” auction, which follows on from the 800MW solar only auction the South American nation held in August.

In August, the projects were awarded at an average price of around $US0.0842/kWh — which was around 13.5% below the maximum price set for the auction. This time around, solar generation was priced at an average of $US77.49 a megawatt-hour ($US0.0774/kWh), which was also below the ceiling price.

“Solar prices were a nice surprise,” said Igor Walter, a director at the Ministry of Mines and Energy, quoted in Bloomberg. “The prices are realistic. The ceiling price raise was determined to bring competitiveness to the auction and generate competition.”

A similar result was achieved last month in Chile, which awarded five global wind and solar companies 20-year contracts to supply 1,200GWh to the Chilean electricity market from 2017.

The five companies – including Abengoa, Aela Generacion, Ibereolica Cabo Leones, Amunche Solar SpA (a subsidiary of Spanish Solarpack) and First Solar (via SCB II) – offered an average bid price of $US79.3/MWh, the lowest average price per MWh for a local energy auction since 2007.

Both these results augur well for Central American neighbour, Mexico, which is planning its first-ever energy auction to award contracts priced in US dollars, in an effort to attract more international developers to the country’s newly opened power industry.

Further north, in the US state of Texas, the Austin City Council received some of the cheapest bids for solar power ever recorded in its solar auction of September, attracting more than 600MW of bids at under five US cents per kWh.

Back in Brazil, initial deliveries of the newly contracted solar and wind developments are scheduled for November 2018. The government estimates those projects will cost companies some 6.8 billion reais ($US1.77 billion).

On solar alone, Brazil has set an ambitious goal of having 7GW of installed capacity by 2024, according to Mauricio Tolmasquim, the head of Brazil’s Energy Research Agency, known as EPE. That’s an increase from last year when the government was targeting 3.5 gigawatts of solar capacity in operation by 2023.