Investors seek more incentives for wind, small-scale hydro

Brazilian investors want the government to bring forward from 2007 the second phase of its alternative energy program Proinfa and create other incentives to make more than 7.1bn reais (US$2.3bn) investments in wind and small-scale hydroelectric projects feasible, local press reported. The investors want to include the projects which exceeded the 3,300MW in projects contemplated by the program. Proinfa gives incentives, such as a 20-year power purchase contract with federal power company Eletrobrás and below-market rates financing from national development bank BNDES for wind, biomass and small-scale hydroelectric projects. Eletrobrás will sign contracts to buy 1,100MW from each source, but projects registered summed up to 6,600MW. Wind and small-scale hydroelectric generation projects exceeded the maximum contract levels, while biomass generation projects registered were under the 1,100MW limit. Investors registered wind projects totaling 3,682MW capacity and small-scale hydro projects totaling 1,924MW. Wind projects need incentives to make the investments viable, among them reduction in transmission costs and facilities to make sales of power to independent consumers more profitable, Gazeta Mercantil reported. The wind projects are also viable because they produce power at an average cost of US$50/MWh, below the US$100/MWh that Eletrobrás buys emergency thermoelectric power at, Gazeta Mercantil quoted Everaldo Feitosa, vice-president of the world wind power association, as saying. Brazil's electricity regulator Aneel has approved 251 small-scale hydroelectric projects totaling 3,740MW capacity, 2,749MW more than will be included in Proinfa, with total investments estimated at 7.1bn reais, according to estimates by Brazil's small-hydro association CndPCH. CndPCH is now making contacts with investors which did not register in Proinfa to see how to make that investment feasible. One of the proposals is to create a fund with BNDES to finance the projects. Aside the long-term profitability, small-scale hydro projects could benefit regional development and stimulate the equipment industry. Proinfa is expected to include about 200 different projects throughout the country which will rely on local producers, since the rules determine a minimum of 65% national content for the equipment used, Canal Energia quoted Newton Duarte, director at the Brazilian association of electric and electronic equipment makers Abinee, as saying.