Demand for clean energy drives projects even in the pandemic

The growing interest of companies in supplying their operations with clean energy should be the main factor driving generation investments in Brazil in the coming years, with the reduction of the costs of building wind and solar plants making these businesses viable even with the coronavirus pandemic, several industry experts told Reuters.
According to data from the National Electric System Operator, wind generation in the Northeast hit a record on August 2: 8,780MW average - enough energy to supply the equivalent of 99.7% of the region. Wind energy is now 9.1% of the energy produced in Brazil.
The market for "green energy contracts" in Latin America's largest country has attracted heavyweights from the global electricity industry, such as France's Engie and U.S.-based AES, as well as funds such as British actis and even oil companies such as Shell, not to mention project developers that include the local Casa dos Ventos.
The strong movement of these and other companies through contracts closed directly with consumers comes amid low expectations regarding the auctions generally promoted by the government in Brazil to enable new generation plants.
On the other hand, from giants such as mining companies Anglo American and Vale to companies not considered electro-intense, such as tivit, technology, are among those that have taken advantage of the wave to close long-term purchases of renewable energy.
"We have seen a strong acceleration of these structures. It's a super trend, everyone is looking at it and trying to sign these contracts, both generators and consumers," Camila Ramos, director of clean energy Latin America consulting firm, told Reuters.
Although Brazil is heading for an economic crisis due to the impacts of the pandemic, which has forced several companies to close for months due to isolation measures taken to contain the virus, the appetite of investors and companies for the corporate energy contract market seems to remain intense.
There is even an expectation that the market will gain momentum over renewed sustainability concerns in the post-coronavirus world, after the European Union approved a crisis recovery plan that provides for clean energy incentives.
"This market stopped the pandemic at first, everyone was worried. But we are already seeing a return, we are working with several possible projects and contracts," Julian Nebreda, president of U.S. AES for South America, told Reuters.
"The pandemic also had a fairly large effect on the concept of sustainability. Companies today are even more concerned with being sustainable than before," he added.
AES' generation unit in Brazil, AES Tietê, has reached recent agreements to supply wind power to Anglo American for 15 years and to build a wind farm in a joint venture with chemical company Unipar Carbocloro, which will buy the plant's production for 20 years.
Also keeping an eye on this niche, the British solar generator Atlas Actis, has signed recent 15-year agreements to supply power to Anglo American and Dow with plants it will deploy in Minas Gerais and Bahia.
"The pandemic obviously affected the whole world. But it has been surprising for us to see that in the Latin American markets, the first in which we began to have a renewed interest in energy contracts was in Brazil. We are beginning to see a resumption of processes to hire clean energy in search of renewable energy," Atlas CEO Carlos Barreira told Reuters.
The negotiations are helped by the falling cost of solar and wind power plants and the price scenario in the Brazilian energy market, affected by lower demand due to coronavirus.
In addition, most of the talks are for supply contracts from 2022 or 2023, when many companies believe they will have overcome the worst of the Covid-19 crisis.
"We only had prices similar to these, in real terms, back in 2012 and after the 2016 crisis. It's a window of opportunity for the consumer. Of course, the timing is one of crisis and uncertainty, but these low long-term prices can have a positive effect on competitiveness in the industry," said Henrique Leme, director of price consultancy Dcide.
The movement in the "green contracts" market contrasts with uncertainties about government auctions for new energy projects, previously seen as the main way for an investor to be able to put a new plant on its feet in Brazil.
With impacts of the coronavirus crisis on energy demand, Brazil decided in April to suspend all 2020 auctions indefinitely.
As a comm, investors found themselves even more inclined to seek to enable ventures in the so-called free market, where large clients such as industries and companies negotiate directly with generators and traders.
"The sector was very well guided by auctions... as now does not have the auction, a series of projects that are ready has as its only way the free market", said the partner of the market intelligence platform ePowerBay, Andre Felber.
The French Engie, for example, which has already enabled a wind farm in Bahia only with private contracts, including with the telecom group Claro, now develops a third phase of the wind farm, for which it has already sought new contracts.
Shell also targets customers in the free market to take its first solar generation projects in Brazil off the ground, which could start operating in 2023. Among Brazilian companies, Casa dos Ventos has built plants to serve customers ranging from vale giant to companies such as Tivit, technology, and Moura Group, batteries.
There are also eye movements on even smaller consumers. Energy trader 2W evaluates a public stock offering (IPO) to capture about 1.5 billion reais to build wind and solar plants with an eye on the demand of small and medium-sized consumers in the free energy market.