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Brazil may cancel PPAs amid 'significant' demand dip

After cancelling this year’s only wind and solar tender Brazil is considering cancelling power purchase agreements (PPAs) of contracted, but unfinished or unbuilt, power plants, as revised figures indicate a stronger-than-expected decline in demand that leaves more than 9GW of surplus firm generation capacity contracted by 2019.

After cancelling this year’s only wind and solar tender Brazil is considering cancelling power purchase agreements (PPAs) of contracted, but unfinished or unbuilt, power plants, as revised figures indicate a stronger-than-expected decline in demand that leaves more than 9GW of surplus firm generation capacity contracted by 2019.

The government also said that future tenders from 2017 onwards will depend on whether demand picks up again.

Power demand fell more than 1.7% in 2015 from the previous year and has continued declining in 2016.

The technical details supporting the decision to cancel the tender were released by the federal energy planning authority EPE this week.

“The decision to cancel the tender was taken by the [Mines and Energy Ministry] after a recent, unexpected and significant deterioration of the perspectives for the macroeconomic scenario,” EPE said in the report.

The revision of future demand projection indicated that in 2019, an extra 3.5GW of surplus firm capacity would be in the system on top of previous surplus capacity projections. Firm capacity refers to the ‘real’ supply potential of a generating asset, taking into account capacity factor shortfalls from rated peak power.  

Before the revision, demand projections indicated that little power would need to be contracted in the reserve tender “but not nil”, EPE said.

The decision to cancel the reserve tender – which distinctly from regular tenders contracts stand-by capacity and is not directly linked to demand from over-contracted power distributors – was announced seven days ahead of the event, taking the wind and solar industries by surprise after they registered 21GW and 13GW for the tender. 

EPE said that the excess contracted power estimated rose despite a reduction the projections for firm power supply by hydroelectric dams due to worsening hydrological conditions, and even after excluding from the projections dozens of power plants that are unlikely to be completed by 2019.

The government’s projections are contested by a study commissioned by the Brazilian Wind Power Association (ABEEólica) which indicates the need to continue contracting for 2019 onwards, because the physical excess capacity is much lower than the excess contracted power.

ABEEólica has argued that contracts are needed as an “insurance policy” for when demand starts growing again and the excess capacity is taken up, which is expected after 2020 by most analysts.

The government is now focused on solving power distributors’ problems and is considering “a tender for the de-contract of such reserve power” which would cancel PPAs between the financially troubled distributors and generators agreed through the reserve tender mechanism.

EPE said that since 2008 4GW of firm capacity has been contracted through reserve tenders, including solar and wind, some of which are delayed or have not started to be built. 

Apart from the 3GW total capacity of solar PV contracted through reserve tenders, Brazil also contracted 5.4GW of wind through the same mechanisms.

EPE said that a study of how many power plants could lose contracts is still being carried out.

According to a December 2016 monitoring study by power regulator Aneel there are 8GW of wind power projects being built in Brazil by 2021. Of those, just over 3.1GW are on track to come on line by 2018. Another 3.5MW are slightly delayed while 719MW are heavily delayed and Aneel doesn’t have a timetable for their conclusion.

In a similar study for the solar PV sector, of the 3GW under construction, only 526MW is on track to be completed in 2017, while the rest are slightly delayed or haven’t started to built. 


Source: http://www.rechargenews.com...

DEC 21 2016
http://www.windaction.org/posts/46121-brazil-may-cancel-ppas-amid-significant-demand-dip
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