Brazil Wind Power Industry Fears Closures as Demand Plunges

Brazil's wind power industry, once one of the fastest growing in the world, faces a challenging outlook as projects are delayed due to sluggish electricity demand while new licensing rounds by the government are in doubt, two industry participants said on Thursday.

 

Vestas Wind Systems A/S Brazil head Rogerio Zampronha estimated that Brazil's production capacity for wind turbines is around 3.5 to 4 gigawatts per year, but last year only around 1 gigawatt of new projects was added in the Latin American country.

 

So far in 2016, no new licenses have been awarded for wind parks, he said.

 

"The current pipeline of orders is too small for the size of the industry," Zampronha told Reuters.

 

Brazil was a late entrant to the wind power sector. It had relied on massive hydroelectric dams, which left the country in trouble three years ago after a harsh drought depleted reservoirs.

 

The government gave incentives to speed up development of alternative energy sources such as wind, which allowed for a manufacturing base to be quickly formed.

 

But the deepest recession in generations sharply reduced power consumption and made credit for new projects scarce and expensive.

 

João Paulo Gualberto, wind power director at local wind turbine producer WEG, said the policies of the former government had attracted investment in factories to produce wind power turbines.

 

"We invested, our competitors invested," Gualberto told Reuters. "Now the plants are empty."

 

Brazil's power demand, which grew on average 4.5 percent per year in the decade until 2014, fell 2 percent in 2015. It is expected to fall another 0.5 percent this year while the country struggles to resume economic growth.

 

WEG believes orders will still be low in 2017 and 2018.

 

Brazil's Energy Ministry scheduled a new licensing round for wind farm projects for next month, which analysts see as crucial to breathe life into the sector.

 

Odilon Camargo, a power sector expert for consultants Camargo Schulbert, expects the round to award licenses for at least 1 gigawatt of new projects.

 

While that is not a very large volume, he said, it could guarantee the continuation of several firms in the supply chain.

 

"Many in the sector have basically no orders currently," he says.

 

Vestas' Zampronha, however, believes foreign companies would lead the bids in the auction, since local builders are struggling to guarantee adequate financing.


(By Luciano Costa and Marcelo Teixeira; Editing by Daniel Flynn and Leslie Adler)