'Today, wind power's biggest competitor is solar energy'

Norway’s Scatec plans to start building its third solar plant in Brazil in the second half of 2024.  

Located in Minas Gerais state, Urucuia will have 142MW of installed capacity and requires an investment of around US$94mn.  

The plant's power purchase agreement (PPA) covers around 75% of the energy that will be generated. 

The plant is part of Scatec's 2GW local pipeline, whose country manager, Aleksander Skaare, speaks to BNamericas about its projects and the local business scenario.

BNamericas: How is the business environment for energy trading in Brazil’s free power market? 

Skaare: It's favorable. Last year, the price of energy was at in the doldrums and the forecast wasn't very positive. But the scenario has improved and this is improving negotiations.

In the case of our new project in Minas Gerais, we signed a 10-year PPA with Statkraft. And today, all renewable solar and wind power plants are practically private contracts, 

BNamericas: The conditions for the development of greenfield projects, particularly wind power, aren’t easy, given the still-low prices and surplus of energy, as well as relatively low growth in demand.  

Skaare: Companies that are working on wind projects are suffering a lot because the prices of solar plants have fallen, the technology has improved, while wind projects haven't seen the same level of price drops. 

Today, wind power's biggest competitor is solar energy. Of course, that could change, but in the short term, investments in renewables in Brazil will be very much focused on solar. 

BNamericas: Is this particular to Brazil, or do you see the same thing happening in other parts of the world?

Skaare: The natural conditions for both wind and solar projects in Brazil are excellent. Nordic countries, for example, don't have very good radiation. So in these cases, wind projects are more interesting. 

Our focus today in Brazil is on solar and onshore wind in the short term. We also have expertise in batteries. We have a hybrid plant [solar with batteries] in South Africa. We're waiting to see if there are any moves in this direction here. 

BNamericas: The federal government is considering including batteries in the backup capacity tender scheduled to take place in August. Is Scatec considering taking part?

Skaare: We're following it, we're interested. The auction is an opportunity, and we're even in talks with the MME [mines and energy ministry]. Scatec has the knowhow. 

But we feel there’s a lack of regulation on the energy storage front, combined with renewable energy production. We say this with propriety, given our hybrid plant in South Africa. Similar solutions are an important response to the instability of energy supply that is typical of renewable sources such as solar and wind, with peaks and valleys of production in very sudden oscillations.

BNamericas: What investments have been made in Scatec's projects in Brazil?

Skaare: Mendubim [inaugurated in April, in Rio Grande do Norte] was around 2.1bn reais [US$410mn]; in Apodi [also in operation, in Ceará], around 1bn reais. And for Urucuia, it's US$94mn. 

Editor's note: Scatec will have a 100% equity stake in Urucuia, with the aim of attracting partners once commercial operation is achieved to increase value generation. The company will also be the project's EPC manager, but with a limited EPC scope.

BNamericas: To which customers is the energy from Mendubim and Apodi being sold?

Skaare: Around 60-65% of Mendubim’s energy goes to Alunorte. It's a PPA [power purchase agreement] in dollars, with a term of 20 years. Today, Alunorte is also a partner, with a 10% stake in the project. Equinor holds 30%, Hydro Rein 30% and Scatec the rest. The remaining energy is sold on the free market. 

Apodi’s energy was totally contracted in a regulated tender.

BNamericas: Are there any other projects in the company's pipeline?

Skaare: We have a strong development and project finance team evaluating various projects. Today, our pipeline in Brazil is around 2GW, with wind and solar undertakings, including the greenfield one in Minas Gerais. 

BNamericas: What is Scatec's total installed power generation capacity?

Skaare: Globally, Scatec has 4.6GW in operation and under construction. Of this total, 835MW is in Brazil: Apodi and Mendubim, as well as the Minas Gerais project that we will start building in the second half of the year. 

Brazil is an important market for us. We have more than 50 employees in São Paulo, Brazil as a whole has more than 100 employees. It's a good place to make investments, with a lot of long-term potential. 

BNamericas: Does the path indicated by the federal government today in terms of energy planning favor the development of new renewable energy generation projects? Is the country well positioned to deal with the energy transition?

Skaare: We agree with President Luíz Inácio Lula da Silva when he says that now is the time to work towards an economy that is less dependent on fossil fuels. 

It's undeniable that the Brazilian government is seeking to position itself worldwide as an active protagonist in building a green and renewable economy. This, in fact, happened when the country took over the presidency of the G20 last December. On that occasion, Brazil invited nine other countries to take part in this very select forum as observers. Among them was Norway, a country which, like Brazil, is an oil producer, but which is investing globally in the energy transition, including in Brazil. 

It was also interesting to note that Brazil agreed to take part as an observer in OPEC+ in order to influence its members to promote a faster energy transition.

But we also see that there’s still a long way to go to fully decarbonize the Brazilian economy, with the implementation of a robust plan to gradually abandon fossil fuels. 

Even though the country already has the technology in a wide variety of areas to produce renewable energy on a large scale, we realize that the nation lacks a more robust legal framework that provides greater legal certainty for investors, as well as for society.

The same is true of green hydrogen. This is a relatively accessible technology, but it has depended, in its early days, on adequate subsidies and/or incentives for its development, as has happened with other sources in the past. In this respect, we are following the debate in congress with interest.