Private PPAs for solar are proliferating in Latin America

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Auctions are not the only way for large-scale solar to gain shares in Latin America’s energy mix. Indeed, an increasing number of recent deals closed for the sale of solar power to big energy consumers is showing that the private PPA segment is gaining ground in most of the region’s markets, and that projects under this regime are now becoming a viable option, although auctions for big renewable energy projects are still in place.

Energy intensive businesses, through the signing of a long-term PPA with solar power producers, can secure a price that is cheaper than those on the market (although not that cheap as those coming out of auctions) and over a long period of time.

Brazil

The most recent deal was announced yesterday by Portuguese power utility, EPD, the Brazilian renewable energy unit of which is planning to build a 5 MW solar plant at an unspecified location in the state of Minas Gerais.

According to the company, the facility will sell electricity through a 15-year PPA to the 58 agencies of Banco do Brasil, one of the largest banks in Latin America, in which the Brazilian state has an around 70% share.

Start of commercial operations is scheduled for the second half of next year. EDP also said it would invest in two more PV plants in Minas Gerais, and expand this model for the states of Goiás, Distrito Federal, Pará, Maranhão and Bahía, without providing further details.

The Portuguese group announced that it had secured another 15-year PPA for 199 MW of solar in Brazil in mid-September.

The growing corporate PPA model for utility-scale solar projects in the country was also confirmed by Rodrigo Sauaia, president of Brazilian solar association, Absolar, which in a recent interview with pv magazine, explained how nine PV projects with PPAs spanning from 10 to 20 years are currently being planned in Brazil.

“We still cannot evaluate if these PPAs will be an exception or the rule, but it is very interesting this is happening,” he said. “They can have importance in spurring further growth, although I exclude that PPAs could be as consistent and predictable as auctions. But in the short and mid-term, they may offer a significant contribution to the Brazilian PV market.”

Panama

Another PPA-related mega solar project was also announced yesterday by Spanish companies Avanzalia and TSK Ingeniería y Electricidad SA. The 150 MW PV plant will require an investment of approximately US$160 million and will be located in Penonomé, the capital of the Panamanian province of Coclé, in the central part of the country.

The plant, which should become operational by the end of 2019, will sell power to unspecified “large customers” through a 22-year PPA, the two companies said. The project should also have the financial support of the Inter-American Development Bank (IDB).

“Our collaboration will focus on a first phase based on numerous projects that Avanzalia is developing in the South of the United States,” said TSK CEO, Sabino García Vallina.

To pv magazine’s knowledge, this is the first corporate PPA for a large-scale solar plant in the country to date.

Mexico

Mexico is the country with the largest track-record in terms of solar PPAs to date. But the most recent announcement, also made in late September, is astonishing for the size of the project: a 130 MW PV facility, which French energy giant, Engie is planning in the state of Sonora.

The plant will be located on a surface of 266 hectares and will use approximately 400,000 PV panels. The facility will sell 100% of the generated power to the steel producer, Gerdau Corsa through a long-term PPA, the company said in a press release.

Engie will invest approximately $111 million in the project, which is scheduled to begin commercial operations in the last quarter of 2019, while start of construction work is scheduled for the end of this year.

“This is a record growth of Engie in Mexico. In a really short period we are going to contribute more than 1 GW of clean energy to the service of the industry and the homes of the country. For us, this development with our client, Gerdau Corsa, is a first step towards the future of renewable energy in Mexico,” said Engie México CEO, Fernando Tovar.

The steel industry is a sector characterized by intensive energy use, and solar undoubtedly represents one of the best options to lower its electricity costs.

Furthermore, at the end of September, the completion of a 35.4 MW solar project linked to a corporate PPA was announced by Mexico’s Balam Fund in the state of Durango. The Energía Limpia de La Laguna PV project, registered under Mexico’s self-consumption scheme, will sell electricity to the nation’s leading pharmaceutical chain, Farmacias del Ahorro, under a long-term PPA.

Yet, another important industrial group, Mexican multinational bakery product manufacturing company, Grupo Bimbo, which is also known as Bimbo Group, announced a plan to cover its energy consumption exclusively with renewable energies. It indicated that corporate PPAs are one of the main tools to achieve this ambitious target.

Colombia

The latest announcement in Colombia came from its largest solar and renewable energy specialist, Celsia, which at the end of last month revealed it was building the country’s largest rooftop PV project for Bogotá’s international airport El Dorado Luis Carlos Galán Sarmiento. As many of the company’s PV projects in Colombia, the plant, which is expected to be grid-connected in 2019, will sell power to the airport’s facilities through a PPA.

Celsia is also currently planning to build an 80 MW(AC) PV power plant in the municipality of Los Santos and an 8.8 MW solar project in the municipality of Santa Rosa de Lima, in the northern Department of Bolívar. Last year, it completed its first large-scale project, the 9.8 MW Celsia Solar Yumbo project in the municipality of Yumbo, in the southwestern region of Valle del Cauca,

Colombia represents a peculiar case in the Latin American solar energy landscape, as it is the only big market which has so far not held renewable energy auctions, and in which private PPAs emerged as the first concrete possibility to construct big solar facilities.

An auction for approximately 1.5 GW of renewable energy capacity was launched in late August. Considering that the auction will award PPAs with a duration of only 10 years, it is not excluded that longer or similar contracts in the PPA segment will attract the attention of investors and developers over the next years.

Chile

Chile is another market with a long track record for private PPAs, compared to other Latin American countries. The latest PPA-related project was revealed by Chile’s environmental authority, SEA (Servicio de Evaluación Ambiental), which said in a document that France’s Engie will construct a 122.4 MW PV power plant in the northern region of Antofagasta.

“The Project aims to satisfy the industrial and residential energy demand in the northern part of the country, by generating long-term clean and renewable energy, ensuring the competitiveness of the project throughout its useful life, taking advantage of the region’s solar potential of Antofagasta, through the construction of a solar photovoltaic plant that will be connected to the current and existing Tamaya Electric Substation located within the Central Barriles,” read the document.

The planned investment for the realization of the project is approximately $101 million. The estimated start date of commercial operations is December 2, 2019.

Engie’s Chilean subsidiary, Engie Energía Chile (EECL) signed a contract in mid-July signed with the telecommunications and IT services company, Grupo Gtd for the supply of 100% renewable energy.

The agreement, which took effect in September, expects a consumption equivalent to 72 GWh per year, which will allow Grupo to supply its data center operations, corporate buildings and other operations throughout the country.

The company joins the trend of other large firms, such as the Albemarle producer and some important Chilean mining companies, like Codelco, Altonorte SA, Compañía Minera Lomas Bayas and El Abra (Freeport McMoRan), which announced in April that they would be supplied with renewable energy from EECL.

As no big renewable energy auctions are currently being planned in Chile, and only projects up to 9 MW are being supported under the country’s Chile’s PMGD Program for distributed generation, it seems very likely that the corporate segment will become the best option for the feasibility big solar parks in the near future in country’s of the Southern Cone.

Argentina

The other country of the Southern Cone, Argentina has not seen new deals related to solar private PPAs in recent weeks. Its government, however, said it suspended all auction rounds for large-scale wind and solar projects in August, while also announcing a smaller auction for projects not exceeding 10 MW in size a month later.

In its August’s statement, the Argentinean government claimed that grid constraints and difficult financing conditions would have raised prices in the next bidding round, and that the utility-scale renewable market would receive a further push over the next two years from the private PPA segment.

In a recent interview with pv magazine, the head of Argentinian power provider, SAESA, Juan Bosch, revealed that private PPAs with a combined capacity of 200 MW may have been signed already this year. “In the country there are 2,300 companies that could decide to buy energy through this kind of contract. Much will depend, however, on how the rules are improved for this [to] work,” he said.

So far, however, only big solar projects selected in the RenovAr auctions have been launched. Under the first three rounds of the RenovAr program the Argentinian government approved 1.7 GW of solar projects. In the last of the three auctions, the lowest price for solar was $40.4/MWh, with the highest and average prices $52.3/MWh and $43.5/MWh, respectively.