95% of projects in the electricity sector expansion auction are wind and solar

Solar and wind energy generation projects represent 95% of the entries in the New Energy Auction A-4 (LEN), of the Ministry of Mines and Energy, which will take place in May this year. In total, 75,250 MW were registered, with 73,256 MW coming from these sources.

According to data from the Energy Research Company (EPE), the 2022 LEN broke the record for project registration and power offered.

The auction, as the name suggests, seeks projects that in four years’ time will be part of the national electricity sector. The photovoltaic and wind generation poles will have contracts of up to 15 years with the Ministry of Mines and Energy.

The Northeast region has the largest number of projects and power registered for the Auction and represents about 70% of the total, with a predominant share of wind and solar sources.

Thermoelectric plants are mainly located in the Midwest and Southeast states, but represent only 1.3% of the power offered, and hydroelectric projects are the majority in the South and Midwest regions.

According to the National Electric System Operator (ONS), the expectation for the evolution of installed capacity for December 2026 is that wind generation will increase from 11.8% of the system to 13.7%.

Photovoltaic energy should represent 4.9%, compared to the 2.6% it currently occupies.

Professor at the Graduate Institute and Research in Engineering at the Federal University of Rio de Janeiro (COPPE/UFRJ), Mauricio Tolmasquin, explains that wind and solar energy sources, in addition to being renewable, usually have the highest number of proposals because they are more accessible.

“Both a large investor and a smaller investor can propose. In addition, these sources generally have easier environmental licensing than thermal and hydro sources, and prices have been very competitive. As they are getting cheaper in recent auctions, they attract a lot of interest,” he explains.

Data from the Brazilian Solar Energy Association (ABSOLAR) show that, from 2013 to 2019, the price of this source in energy auctions went from R$ 103.00 to R$ 17.62. In the auctions carried out last year, the cost of solar energy varied between R$ 20.33 and R$ 30.90.

According to Tolmasquin, who is also a former president of EPE, the cost reduction was clear, but the Covid-19 pandemic affected the sector’s supply chain.

“The price has dropped very certainly, but in the last two years, there has been an increase due to the crisis in the supply chain due to the pandemic. Panel cells are imported, so photovoltaics are more susceptible to this price variation. This does not happen with wind power, since around 80% of the material is produced in Brazil”, points out the researcher.

This is the first time that the two energy sources will compete together in the same auction. For Tolmasquin, this is an interesting move, which will show how each energy behaves competitively.