Published on April 18th, 2013 | by Nicholas Brown


Cheap Wind Power Disrupting Brazilian Energy Market

April 18th, 2013 by  

As the cost of wind power drops, and the wind industry grows, wind farms have a greater impact on electricity markets. And one of those big impacts is reducing the price of electricity.

As we’ve been writing for years, due to the merit order effect, wind power lowers the price of wholesale electricity. At the same time, due to technology improvements and cost reductions from economies of scale, the overall cost of wind power has been coming down. As an example of that, the cost of wind power in Brazil has fallen 41% since 2009!

Wind Turbine And EV

Wind turbine & EV in field via Shutterstock.

Wind farms have won 55% of contracts awarded by Brazil’s national energy agency, Empresa de Pesquisa Energetica, and wind power now costs about $45/MWh (4.5 cents/kWh) in the country. This has been deterring the construction of gas-fired power plants, prompting the decline of some bids from wind farms so that at least some gas-fired plants are built.

When the wind picks up, wind farms generate electricity very cheaply. So cheaply that they undercut the prices of the rest of the power plants.

Furthermore, as noted above, there’s the merit order effect. Here’s a short explanation of the merit order effect: “Electricity providers bid in order to sell their electricity on the electric grid. Because solar and wind don’t have fuel costs, the extra cost to supply electricity (when the sun is shining and the wind is blowing) is basically $0. With subsidies or feed-in tariffs, they can even sell for negative prices and make a profit. As a result of these clean energy sources’ $0 fuel costs, they can outbid every other energy source. And the overall effect from down-bidding everyone is that the wholesale price of electricity is lowered.”

Empresa de Pesquisa Energetica is now introducing separate categories for the electricity market, where fossil-fueled power plants can bid against other, and wind projects compete in a separate auction.

The reason cited for this is that low-cost wind energy prices biomass and fossil-fueled power plants out of the market.

“Wind energy is the most competitive, so if they mix together all the technologies they won’t be able to contract the amount of thermoelectric they want because thermoelectric plants are much more expensive,” said Elbia Melo, president of the local wind energy association.

Imagine if there was a cheap energy storage medium to capture the cheap wind energy generated and sell it at the times it is needed most, such as during peak hours, when electricity is expensive.

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About the Author

writes on CleanTechnica, Gas2, Kleef&Co, and Green Building Elements. He has a keen interest in physics-intensive topics such as electricity generation, refrigeration and air conditioning technology, energy storage, and geography. His website is:

  • Ronald Brakels

    I suppose that I should mention that solar is also cheap and taking off in Brazil, so while they’re already doing a great job, there’s no reason why Brazil’s electricity sector can’t easily go completely carbon neutral.

  • tibi stibi

    energy is getting cheaper by the day

  • Mohan Raj

    Excellent. Wind energy is becoming bigger.
    Install under water wind / wave turbines in Amazon river to generate more electricity. Natgas is ideal for heating/cooking/ industrial melting. So lets keep natgas for that purpose.

    • Bob_Wallace

      “current speeds range from 0.5-1.0 meters per second at low water, and twice that at flood stage. In localized areas, current speeds can reach as high as 3 meters (9.8 feet) per second”

      Converting that into numbers that make sense to me, 1.1 to 2.2 miles per hour. 6.7 MPH in localized areas. Sounds like turbines would be workable if the best spots were used.

      BTW, anyone know the average speed in the areas where tidal generators are now being installed in the UK?

      • Ronald Brakels

        The amazon’s twice daily tidal surge is an immense potential source of energy for run of the river turbines, but there are practical difficulties in siting them.

  • James Wimberley

    The game to watch in Brazil is wind power’s undermining the case for huge new dams wrecking the Amazon rainforest. Hooray!
    It’s s hard to see what justification the Brazilian government agency has for sheltering fossil fuels from competition. Brazil doesn’t have much gas and the offshore oil is declining.
    Expect this to change. Luckily the wind resources is in the Nordeste: overpopulated, poor – and politically over-represented. Its state governors and senators must all be lobbying hard for wind.

    • the interests on said dams are more about water courses diversion and subsequent rare earth exploration in drained areas.

  • Ronald Brakels

    Fortunately Brazil’s huge hydroelectric capacity matches well with wind power and if they need to add pumped storage they probably have suitable sites.

    • Wayne Williamson

      very good point…

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