Incentive policies for promoting wind power production in Brazil: Scenarios for the Alternative Energy Sources Incentive Program (PROINFA) under the New Brazilian electric power sector regulation

The Alternative Energy Sources Incentive Program (PROINFA) was designed in 2002 to stimulate the electricity generation from three energy sources (wind, biomass and small-scale hydro) in Brazil. The Program was divided into two phases. The first one uses feed-in tariffs for promoting the development of 3300 MW. The second one that was originally based on feed-in tariffs was modified in 2003, in order to be based on biddings for renewables. These biddings are capped to limit their impact on the final electricity tariff. Due to this bound, the highest-cost power option promoted by PROINFA (wind power generation) might have development problems. Simulating different scenarios for the biddings, it was verified that the only way to reach the original goal set by PROINFA (10% of the annual electricity consumption provided by alternative sources up to 2020) and, simultaneously, not overcome the bidding bound is to promote biomass-fired power generation alone, during the Program's second phase. However, this action contradicts one of the targets of the Program, which is to diversify the energy matrix. An alternative option could be biddings for renewables according to specific criteria (complementarities, industrial and technological development and cost), based not only on their cost-effectiveness.