This paper reviews the Brazilian experience with support mechanisms to promote renewable energy generation, from feed-in tariffs in the early 2000 s to the current auction process, with a focus on wind energy generation. Brazil’s original and innovative approach includes investment coordination mechanisms that have reduced risks enough to make wind energy a viable option.
Brazil is a large country with regard to continental distances and its sizable power system, both in terms of generating capacity and grid extension. A prominent feature of the Brazilian power system is the significance of its hydropower, which accounts for more than 85% of the generation in the interconnected system (Ons, 2018), similar to that of Canada or Norway. Moreover, most hydro capacity in Brazil is associated with large reservoirs that work as energy regulators (Araújo et al., 2008; Harris, 2006). The transmission system has more than 100,000 kilometers of lines that operate at 230 kV and above.
This high share of hydropower energy is a natural hedge for wind power producers, as the rain period ends at the beginning of the wind period, i.e., when it rains, the wind is not blowing, and vice versa (Bittencourt et al., 1999). Wind energy, besides contributing to seasonal stabilization of the hydro-dominated Brazilian electrical system, can also play a valuable role in reinforcing the grid ends and in reducing power transmission losses (Dewi, 2001). However, the participation of wind generation in the Brazilian electric system is still not representative, with an installed capacity of just over 6 GW, less than 5% of Brazilian installed capacity (Aneel, 2015) and only 2% of the country’s wind power potential (Abeeólica, 2012). However, this scenario has been changing since 2009, when the first wind generation randomness mitigation method in energy procurement auctions was introduced. Wind power has experienced an exponential and virtuous growth in Brazil. From 2009 to 2014, 14 GW in new projects was contracted. Such projects will raise the volume of wind power installations in the country to 17.8 GW by 2019, more than two times larger than the current capacity, and will attract more than US$ 30bn in investments (Abeeólica, 2012).
This study investigates the effect of wind generation randomness mitigation methods in boosting the growth of wind generation, making it the main source of the expansion of generating capacity in Brazil. Although the subject of Brazilian electricity reformshas been addressed in some articles (Rego, 2013; Rego and Parente, 2013; Mendonça and Dahl, 1999; Jannuzzig, 2005; Dutra and Menezes, 2005; Lock, 2005; Melo et al., 2007; Araújo et al., 2008), this study presents new analysis about the growth of wind power as an energy source in the country.