Brazil's blustery coastlines and booming electricity demand have spurred a wind-power gold rush as investors flock to build turbines and set up wind farms.
Yet, as wind projects slowly shed government protection to compete head-to-head with traditionally cheaper fossil fuel energy, government power auctions this week may reveal whether the wind-power investment euphoria is overblown.
Developers of natural gas power plants, biomass thermoelectric plants and wind farms will compete in an auction on Wednesday to offer the lowest prices for the electricity their facilities will sell in the coming years. A second auction on Thursday will not include natural gas projects.
The results will show whether Brazil's wind industry can continue lowering generation costs, a trend that has spurred investment in wind farms and equipment factories — and could help diversify Brazil's hydro-dependent energy system.
A strong showing by natural gas projects may validate some skeptics' claims that the wind boom has gotten ahead of itself, possibly cooling investor interest or requiring new government efforts to support the industry.
Government leaders, excited to promote an alternative to hydro-power, say tumbling wind costs are a sign Brazil has helped the industry evolve from an environmentalist dream into a competitive money-maker.
"Before you had a situation in which wind power always needed someone holding its hand, or to have the government behind it — now wind power is strong enough that it can scare the big players," said Mauricio Tolmasquim, head of the government-run energy research group EPE.
Wind power accounts for 240 of the 321 projects participating in the auctions and more than 40 percent of the 14,083 megawatts in generating capacity on offer.
Brazil's current 1,400 megawatts of installed wind power represents only around 1 percent of its total capacity.
Wind power is still roughly double the cost of power produced by the large hydroelectric dams that provide most of the country's electricity.
Nonetheless, it is slated to grow almost eight-fold between 2010 and 2014 to reach 4.2 percent, according to wind energy association ABEeolica.
EPE expects Brazil's total power consumption to rise 60 percent between 2010 and 2020, reflecting Brazil's brisk economic growth and expansion of its middle class.
ABEeolica expects 25 billion reais ($15.7 billion) in wind investments between 2009 and the end of 2013.
