The rest is divided between natural gas thermoelectric power plants (6.6GW over 16 projects), biomass thermoelectric generators (4.58GW across 81 projects), and small-scale hydroelectric power projects (725MW in 41 projects). The remaining 450MW will come from the expansion of one conventional hydroelectric power plant.
The wind projects are mostly located in the north-eastern states of Ceara, Pernambuco and Rio Grande do Norte, where most of Brazil's mapped 1TW wind power potential is located. Nevertheless, Bahia - which has been indicated to have one of the largest potentials, but is well behind the other states - will stand out in this auction with 90 projects adding up to 2.3GW.
"Wind power is here to stay. With competitive prices, it is no longer a promise, it's a reality," said Luiz Eduardo Barata, chairman of the board at Brazil's power trading chamber, CCEE.
CCEE is currently finalising the bidding rules for the auction but is not expected to change them much from previous auctions. The rules will probably follow national legislation that allows a 50% discount on transmission and distribution rates and 20-year contracts. "This advantage, combined with falling prices, are the drivers of wind power," Barata says.
Prices have fallen by 12% from BRL 148/MWh ($94.23) at an exclusive wind power auction held at the end of 2009 to BRL 130/MWh at an auction in August 2010, making wind power cheaper than other renewable sources. Conventional, larger hydropower projects are the only providers that are currently cheaper than wind.
Although the government has yet to set maximum bidding prices for July's auction, controllers of the projects on offer expect aggressive bidding. The newly created CPFL Energias Renovaveis, for example, registered nine wind projects with combined installed capacity of 278MW.
"I expect prices to fall by about the same amount as in the last auctions," says the company's CEO Miguel Saad. In the last auction, average final prices for wind were 21% below the starting price of BRL 167/MWh set by government power authorities.
These attractive prices have already created a secondary market for wind power in the country, Barata points out. Companies are starting to trade power from wind farms in bilateral contracts between suppliers and consumers, something seen only for conventional power up to now.
"Brazil's power sector is starting to reach a consolidation point as projects start to come online and look to sell their power, but it is still attractive since it has a lot of room to grow," says Fabio Moura, partner at Sao Paulo-based legal firm, FH Cunha, which specialises in wind power.
Brazil has an estimated potential of 1TW of wind. According to Brazil's power regulator Aneel, the government has granted concessions for 107 wind projects with combined capacity of more than 3.5GW since 1998. There are 50 projects with a combined capacity of 928MW in operation and another 38 projects with combined capacity of 997MW being built.
Cheap government financing from national development bank BNDES and the presence of equipment suppliers such as Wobben, Siemens and GE in Brazil are steadily reducing equipment prices, according to Moura.
"It's a total turnaround from four or five years ago when the government created the first rules for wind power. Now Brazil is on the wind power world map and there are still a lot of wind power companies from places such as Scandinavia and Germany that will start operating in Brazil," he says.
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