Brazil sets ceiling price of $69.7/MWh for upcoming A-4 auction

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The Brazilian energy regulator ANEEL has set a ceiling price of BRL276/MWh ($69.7, or 0.0697/kWh) for the A-4 auction planned for June 28.

Wind technology was assigned the lowest ceiling price, at BRL208/MWh, while the highest – BRL331/MWh, was set for thermoelectric and biomass projects. The cap price of hydropower was slightly higher than that for PV, at BRL288/MWh.

By way of comparison, in the last auction of the kind, held in April last year, ANEEL established a maximum price of BRL312/MWh for PV. In the A-4 auction of late 2017 the ceiling price was the same for solar, thermoelectric and biomass projects, at BRL329/MWh, a cap that was, surprisingly, slightly higher than that seen in the auction held the previous year, which had been BRL320/MWh, and much lower than the maximum of BRL381/MWh set in the first auction, of 2015.

For the next A-4 procurement, ANEEL reiterated only hydropower projects will receive a 30-year PPA. Solar and other renewables will be entitled to 20-year contracts. In early April, Brazilian energy agency the Empresa de Pesquisa Energetica (EPE) revealed it had admitted 1,581 wind, solar, hydro and biomass projects with a combined capacity of 51.2 GW for eligibility to compete, including around 26 GW of solar project capacity.

Lower energy price anticipated

That may result in a final average price for selected solar projects in June’s auction that is lower than that set in the A-4 auction last April, which was around BRL118/MWh.

In that procurement round, the EPE and the Electric Energy Trading Chamber allocated around 807 MW of PV capacity. This year’s exercise, however, could see lower volumes due to reduced demand for contracting new projects. The Brazilian government has also decided that in this exercise, unlike previous A-4 auctions, developers will be granted a different kind of contract, with deals now awarded “by quantity” rather than “by availability”.

A quantity contract is a standard financial arrangement in which the power generator submits a bid in Brazilian real per kilowatt-hour and the risk of delivery by national grid operator ONS’ central dispatch is assumed by the plant owner. In that kind of contract, the risks deriving from plant unavailability – and resulting lower energy output – are assumed by the generator.