Editorial

Wind and solar are peaking in Latin America

Tender by tender, wind and solar energy have undersold other renewables in Brazil and Argentina

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December auctions in both Argentina and the region’s largest wind power market, Brazil, brought exceptionally favourable results for wind and solar.

Argentina’s RenovAr causes surge in new projects

Big renewable projects supplying electricity to large offtakers could especially benefit from the latest announcement from Argentina’s market operator CAMMESA. In what is set to become the next growth market for wind energy in Latin America, 273MW of renewable power projects went to mostly wind developers.

The positive developments in Argentina are largely thanks to the new RenovAr auction program, which awarded power purchase agreements worth 1GW of new wind power capacity in its Rounds 2 and 2.5 last December. Since the introduction of the new auction scheme in 2016, Argentina has awarded more than 4.7 GW of renewable energy projects.

Annual electricity volume sold by technology for RenovAr Rounds 1 and 2

Brazilian wind recovers from years of uncertainty

Brazilian wind power developers made a comeback to electricity auctions for the first time after an economic recession and drawn-out political crisis since 2015. In Argentina, wind made up 90% of the awarded capacity, winning over biogas, biomass and small hydro.

Latin America’s strongest wind market traditionally has been Brazil. But two years of political and economic uncertainty threatened its position in the region. The market picked up pace again in Brazil’s recent tenders A-4 and A-6, with wind developers bidding aggressively for the first time since 2015.

Brazilian wind power prices at these tenders have dropped by 51% since the last time power purchase agreements were awarded to wind power developers at an auction in 2015. The two auctions in December 2017 saw average bid prices as low as $US30/MWh. 

Marginal profit strategy no longer sustainable in future

Turbine OEMs have successfully followed a marginal profit strategy in Brazil, which has resulted in historically low prices. This strategy, however, is neither sustainable in the future nor viable for smaller and less established OEMs.

Siemens Gamesa Renewable Energy and Nordex are expected to be the big winners of the recent auctions in Brazil. Their well-positioned in-house tower productions should enhance the competitiveness of wind from Brazil in the long run. On top of optimizing the supply chain, locally produced towers are paid a premium that is the highest among domestically sourced components.

Never lose track of the underlying factors affecting energy prices and market developments. Our research and advisory teams specialise in providing you with the invaluable insight that allows you to understand and react to renewable energy industry trends and events.