Brazil’s Pernambuco state, which held the nation’s first solar-energy auction last year, said it is on the hook to buy the power after it was unable to find other bidders.

Pernambuco’s government agreed this month to buy the electricity from solar projects with the capacity to produce 96 megawatts of power, said state Secretary of Infrastructure Joao Bosco de Almeida. Contracts to build the projects were awarded in December to developers including Italy’s Enel Green Power SpA, who agreed to sell the power at an average price of 228.63 reais a megawatt-hour ($102.53) for 20 years. The contracts were only to build the projects and didn’t include buyers.

Although getting cheaper, solar power prices are still about 75 percent higher than those offered in the last wind-energy auction in June because the technology is still expensive and all of the equipment has to be imported. In addition to the high price, the duration of the contracts that Pernambuco was offering also deterred buyers, said Helena Chung, a Sao Paulo-based analyst for Bloomberg New Energy Finance. Buyers in Brazil’s wholesale market usually sign contracts for no longer than 10 years.

“Traders did not present themselves to buy the energy, so we made the decision that the state will buy it,” Almeida said in a July 25 telephone interview. “Our intention was to introduce solar energy into Pernambuco’s energy mix, and we did it. The state already had a Plan B.”

Drought

Brazil, which is seeking to diversify it’s energy matrix as a drought pares hydroelectric output, gets less than 1 percent of its power from solar systems and efforts to spur wider use have been hindered by high prices for the equipment.

The federal government is planning an auction for solar projects on Oct. 31. The country previously included solar farms in national auctions for power contracts, though photovoltaic proposals had to compete directly with lower-priced wind power and won no contracts. The October event will be the first that has a category reserved only for solar projects. In the auction, the government will set a ceiling price and developers will bid down the prices for which they are willing to sell power.

Pernambuco is well suited for solar-power production because it has high solar irradiation rates, primarily in the semiarid region. One of the developers that participated in the Pernambuco auction has since abandoned its efforts to build two proposed solar farms, Almeida said. He wouldn’t identify the company or provide additional details.

The four remaining projects are set to start operating in July 2015.