Energy auctions dwindle, while capacity auctions gain relevance

SAO PAULO (Reuters) – The cancellation of one of this year’s auctions for contracting long-term new energy gave a clear sign of the decline in the Brazilian regulated market, affected by the transformations in the electricity sector, and points to a future of ever more competitions. scarce, say experts.

On the other hand, auctions to contract capacity for the electrical system are gaining importance, with the objective of reinforcing the security of energy supply in the face of the expansion of wind and solar renewable sources, with more variable generation. Thermoelectric units would gain prominence in this scenario.

The declared demand by the distributors for the long-term energy auctions has been low for some years now, as a result of weak economic growth and the migration of consumers to the free market. More recently, there has been a proliferation of distributed generation of solar energy, that generated on the roofs of homes and businesses, by consumers themselves, for example, which also affects the regulated market.

In the case of the auction for contracting capacity, the government itself contracts, while the distributor ceases to manage such a contract, which has stimulated greater business diversification in the distribution sector.

Data from the regulatory agency Aneel show that the volume of energy contracted in A-4, A-5 and A-6 auctions has fallen sharply in the last five years, from 2,956 average MW per year in 2017 to 235.3 average MW in 2021 .

This week, the government informed about the cancellation of the type A-6 tender, which would hire new generation projects for supply from January 1, 2028. The reason is the lack of demand from distributors.

Specialists point out that, in addition to the fact that most distributors have surplus energy contracts in their portfolio, projections for future demand have become more difficult, causing companies not to risk entering into new long-term contracts – a scenario that should stay for years to come.

Among the main factors of uncertainty are the expansion of the free market, which may intensify from 2024 with the opening to more high voltage consumers, and the growth of distributed generation, explains Donato da Silva Filho, founder of the consultancy Volt Robotics .

“Last year, distributed generation represented around 4% of captive market consumption. This year, it should represent 8%, that is, almost double. And for 2026, our expectation is that 22% of consumption will be distributed generation. So it really doesn’t make sense for the distributor to buy energy if the consumer himself is already generating his own energy”, he said.

João Carlos Mello, president of Thymos Energia, also sees a more withdrawn posture from distributors, noting that, if they need to, they can manage energy surpluses and deficits through other regulatory mechanisms. “Buying energy five years ahead is very foolhardy.”


In this context, the A-5 auction, which was held by the government and should be held on September 16, could be the “last breath” of auctions of this type, assesses Nivalde de Castro, from the UFRJ Electricity Sector Studies Group.

“The cancellation of the A-6 is almost a milestone in the process of evolution of the electricity sector, with the expansion of installed capacity already disconnecting from the regulated market.”

For the specialist, the trend is for the sector to see very small or non-existent long-term energy auctions, while capacity reserve auctions should gain the spotlight.

A modality launched by the government last year, the capacity competition seeks to hire generation plants that can bring reliability to the electrical system, meeting load peaks and counterbalancing the variable production of wind and solar sources. At the moment, only thermoelectric plants are eligible to participate in these auctions.

Talita Porto, vice-president of the Board of Directors of the CCEE, considers that these auctions are a “good tool” to share the costs of energy security with the free market, which currently does not pay for it.

All of the country’s thermoelectric plants, which were essential to guarantee the energy supply during the water crisis of the past, are contracted in the regulated market, with costs borne only by this universe of consumers.

Maurício Tolmasquim, a professor at UFRJ, defends that new thermoelectric plants be contracted only in capacity auctions, leaving the energy auctions, so that the costs are shared with the free market.

“I believe that the A-6, A-4 auctions should no longer hire thermal plants… Today there is a distortion (of costs), it needs to be distributed better”, says the specialist, who held several positions in the electricity sector in the Lula government.

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About Yadunandan Singh

Born in 1992, Yadunandan approaches the world of video games thanks to two sacred monsters like Diablo and above all Sonic, strictly in the Sega Saturn version. Ranging between consoles and PCs, he is particularly fond of platform titles and RPGs, not disdaining all other genres and moving in the constant search for the perfect balance between narration and interactivity.

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