Brazilian solar auction draws globally low bids, cheaper than coal, gas

Brazil’s first “solar only” energy auction has attracted bids among the lowest in the world, bringing the South American nation closer to achieving the world’s cheapest solar contract prices – without subsidies.

The auction for solar PV projects was held last Friday, looking to set contract prices for at last 500MW of solar capacity. More than 400 projects with a total capacity of over 10,000MW were bid into the auction, easily beating the ceiling of 262 reais per megawatt-hour. 

The average offer for more than 1,080MW of accepted bids was 215.12 reais, or $US87/MWh – among the lowest solar prices anywhere in the world and cheaper than building new coal or gas fired generation.

“It was the most competitive energy auction Brazil ever had,” Mauricio Tolmasquim, president of the Energy Research Agency, told Bloomberg. “The sale was a milestone for the entrance of solar energy in the Brazilian energy mix.”

According to Bloomberg New Energy Finance analyst Yayoi Sekine, at this level, projects are unlikely to return more than 10 per cent on investment.

Brazil has set a goal of having 3.5GW of solar capacity in operation by 2023, producing about 1.8 per cent of the country’s energy.

Currently it gets less than 1 per cent of its electricity from solar, with only 14.6MW of solar power connected to grid and another 30MW off-grid.

The Brazil auction follows a tender last week in India’s Andhra Pradesh for 500MW of solar capacity, which resulted in First Solar submitting the cheapest bids with on offer of $86/MWh and $US87/MWh for two 40MW solar plants – a significant result, because it is below the price required to make coal imports economically viable.

In the US, they are making similar discoveries. Last month, the utility in Georgia, reeling from cost over-runs at its nuclear plant, attracted an average price of $65/MWh for 500MW of solar capacity (that includes a 30 per cent tax credit).

In previous months, Austin Energy in Texas recently signed a PPA for 150MW of solar for $US50/MWh; in Colorado, Xcel Energy said it can buy electricity from 170MW of solar plants for less than buying from natural gas plants; and in Utah, Rocky Mountain Power also chose to go solar as their default energy source.

Australian solar developers believe costs of solar plant in Australia can also fall, but only with policy certainty that encourage development so that the cost of finance, in particular, can fall.

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Giles Parkinson