Brazil’s government will not award new licenses for wind and solar power generation projects, despite requests from the renewable energy sector, as power markets struggle with oversupply in a sluggish economy, a top official said.
Brazil was one of the world’s fastest growing markets for the wind power sector in the first half of the decade with a flurry of farms appearing along the nation’s vast, windy coast. But a deep recession that began in early 2014 and from which Brazil is only now emerging brought the trend to a halt.
The last licenses for new wind or solar generation projects were awarded in 2015. An auction for licenses was called off in 2016 and it is unlikely new licenses will be issued this year.
“We cannot choose a segment and say it is insulated from the crisis, give it a guaranteed demand,” Deputy Energy Minister Paulo Pedrosa said at a Sao Paulo conference last week. “Strictly considering the technical side, we have to say no.”
Pedrosa said the government has received requests from wind and solar equipment makers to resume licensing. He said pressure also comes from governors of states holding the bulk of the wind generation capacity in Brazil.
Despite those pressures, Pedrosa said it was impossible to even guess when the government will resume licensing for the projects.
When it was booming at the turn of the decade, Brazil attracted global wind turbine manufacturers such as Denmark’s Vestas Wind Systems, U.S.’s GE and Spain’s Gamesa, who built plants in the country. Their order books are increasingly thinner, as old projects mature and there is no fresh demand.
Newcomers such as photovoltaic panel makers BYD and Canadian Solar are likely to feel the orders’ drought as well.
Erik Rego, a power sector consultant at Excelência Energética, agreed with the government’s stance. He said there is no need for new projects unless the government decides to stimulate the industry and build a buffer for when power consumption increases.
Since there is no demand from power distributors to buy power forward, one way to create new projects would be to include them in a government plan to build spare capacity as a way to guarantee supply when demand increases rapidly, Rego said.
But since this has a cost that in the end would have to be financed by consumers, there is resistance in the government to carrying such a plan out.