Why costs have fallen for Brazilian offshore wind, energy storage projects

The costs of deploying energy storage and offshore wind power projects in Brazil have decreased significantly, according to a recent study by federal energy research company EPE. 

A year ago, the estimated capex for an energy storage undertaking was 7,350 reais/kW,(US$1,454/kW at the current exchange rate), but it has now come down to 6,200 reais/kW, a decline of 15.6%. 

In the case of offshore wind, the reduction was 15.9%, falling from 12,250 reais/kW to 10,300 reais/kW. 

“These are industries that are on a trial run, so the more you produce, the cheaper it gets,” Guilherme Susteras, senior fellow of the institute of electrical and electronics engineers (IEEE) and managing partner of Sun Mobi, told BNamericas. 

“Specifically In terms of offshore wind power, there's a growing volume demand, so manufacturers are learning to make equipment with the same cost and more power, or cheaper and with the same power, achieving efficiency gains,” he added.  

Brazil does not have any offshore wind projects in operation as yet. At the moment, local environmental agency Ibama is analyzing 80GW in projects of this type. 

When it comes to energy storage undertakings, a standout is ISA CTEEP's project in partnership with GE Renewable Energy at a São Paulo state substation. 

On the other hand, power generation projects based on urban solid waste registered a 17.3% hike in costs, followed by biogas (+6.7%), natural gas (+5.9%), nuclear (+5.3%), national coal (+5.1%), liquefied natural gas (+4.9%) and national gas (+3.9%). 

Source: EPE

Susteras explained that these types of projects involve gas and steam turbine technology, which advanced a great deal over the past century but has now virtually stagnated. 

“So, the variation in these costs has more to do with the variation of inputs and exchange rates, besides the issue of the pandemic that ended up affecting production chains and logistics,” he said. 

The cost increases in LNG projects, for example, mainly reflect the hike in international prices due to the war in Ukraine, while domestic gas prices have been pressured by higher demand for thermoelectric generation amid Brazil's water crisis. 

But Yuri Schmidt, president of energy waste recovery association Abren, disagrees with EPE’s estimates for urban solid waste energy projects.

“The correct figure is capex of 36,000-40,000 reais per installed kW, considering the energy tariff of 0.65 reais/kWh. And, with the auction of five plants between last year and the coming years, we may have a reduction of up to 20% in this cost as a national supply chain is created,” he told BNamericas. 

The president of Brazil’s nuclear power association Aben, Carlos Mariz, pointed out that cost comparisons must be made with equivalent alternatives.

“One cannot compare intermittent power costs with firm power costs,” he told BNamericas. 

For Mariz, it is necessary to put a price on the reliability and security guarantee that plants that can generate constantly offer to the system and include that in the final cost of intermittent plants to the national grid. 

As regards biogas, the CEO of the local biogas association, Alessandro Gardemann, attributed the cost increase to the impact of the pandemic on supply chains and the exchange rate.