Brazil Biomass Energy SA, a developer of power plants that burn agricultural waste, is planning five projects with 170 megawatts of capacity, most of which it will sell directly to users, bypassing government-organized auctions.
The company expects to sign a contract this month to build its first project at a sugar-cane mill in the northeastern state of Alagoas that will run on the crop’s residues, according to Hugo Seabra de Souza, executive director of Brazil Biomass.
Three of the five plants will sell electricity on the free market to factories and large shopping centers that may pay as much as 20 percent more than power distributors offer through government-organized auctions where competition between developers has driven down prices, Seabra de Souza said.
Rates “are higher in the free market than the regulated market” for electricity contracts, he said yesterday. This allows for “a more favorable return on investment.”
Brazil Biomass, based in Rio de Janeiro, will spend 30 million reais ($14.8 million) on the Alagoas project, which includes installing a 15-megawatt turbine and upgrading the mill’s energy system, he said.
The mill will get 4 megawatts of capacity and Brazil Biomass will sell the rest for seven years. After that, the power plant will become the property of the mill, according to Seabra de Souza, who became head of Brazil Biomass on April 26.
Brazil Biomass, a unit of holding company Brazil Energy, plans to sign three similar contracts this year for projects at cane mills in Sao Paulo state and one in the northeastern state of Bahia that will be fueled by wood chips, he said.
Two of the Sao Paulo projects will be retrofits to existing plants and the others will be built from scratch, he said. All five projects will be in operation by 2016.
Prices for power in Brazil’s free electricity market may reach 120 reais a megawatt-hour compared to 100 reais in some auctions, he said.
Grupo Brazil Energy is owned by a fund managed by Rio de Janeiro-based Nova Investimentos.
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