Region: Latin America and Caribbean (LAC)
Country: Brazil
Sector: Energy and Power
Topic: Climate-Smart
Keywords: PPPs by Topic *, Climate Smart **, Brazil, Financing, Renewable Energy
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Document Summary:
Fostering wind power through auctions: the Brazilian experience
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Editor’s notes
This issue focuses primarily on the various aspects of wind energy though we take time out from that subject for two articles on the oil industry. We will continue with the topic of wind energy in the third quarter issue.
Michael Jefferson writes that capacity factors are the key measure of the efficacy of wind energy developments. The UK’s relatively good wind resource is unevenly distributed and planning failures, exaggerated claims, and inducements for unsuitable onshore siting, mean a sub-optimal policy is pursued. Matthew Hulbert and Jochem Meijknecht report that oil is currently split into two parallel worlds. One is called ‘day to day reality’ where prices have just reached historic highs due to shattered supply side dynamics.
This isn’t just a short term spike, but reflects structural problems affecting international markets: oil prices averaged $109/b in 2011. The other, called ‘U. S. energy nirvana’ relays a narrative that new found oil riches across the America’s have instantly fixed American economic ills, and more importantly, will quarantine Washington from broader international energy trends. That may, or may not prove to be true in the longer term, but if the U.S. continues to play its regional card too quickly in an inherently complex energy world, expect major geopolitical gaps to appear.
Julian Silk discusses the application of international trade analysis of quotas to the economics of offshore wind power production. Current Maryland plans are discussed. Binding quotas enforce a market price for all energy, not just wind, equal to the wind energy price, except in special and unrealistic cases. Significant deadweight loss is thus generated. Price ceilings lessen the immediate consumer impact, but make the long-run market impact worse, unless there are significant increases in demand.
The prospects for such demand increases vary from case to case; Maryland’s do not seem obviously promising. Silvia Micheli explores the recent environmental economics literature on incentive mechanisms for energy from renewable sources, focusing on the learning by doing effects in the wind power industry. G. Cunha, L. A. Barroso, F. Porrua and B. Bezerra discuss the Brazilian auctions to deploy renewable energy sources with a focus in wind power. Since 2009 about 7,000 MW of wind plants have been contracted through this competitive mechanism at prices around 60 US$/MWh.
Joerg Moczadlo and Wang Ye report that Chinese energy policy, considerable electricity demand and significant wind resources predict a bright future for the wind power in China. However, a closer look, which they provide, has to be taken in order to gain a clear picture. Jean Balouga notes that Nigeria is an important OPEC member. Corruption, mismanagement and heavy subsidies, which the government can no longer bear, prompted her decision to fully deregulate the downstream sector and use the freed resources for welfare needs, with particular emphasis on the poor.
However, the sincerity of government is in doubt. Catherine Colby and Bari Dominguez report that the companies EGE Haina and CEPM have employed innovative strategies to improve the quality of life of residents in the communities surrounding the first wind farms in the Dominican Republic, the Los Cocos and Quilvio Cabrera Wind Parks, breathing new life into in the SouthWest Dominican Republic.
Tracking Number: FosterWindPowerBrazil_2012_English
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