Brazil's first energy-only/capacity-only auction led to contracts with 17 power plants, offering 5,126MW on a capacity-only basis to start in July 2026.
The nine natural gas-powered plants that successfully bid in the auction represented 81pc of the total capacity hired. There were five fuel oil plants, two run on diesel and one using biomass.
There was a 15pc discount to the government's previously determined price cap of R974,000/MW in a year, with the highest bid being R881,000/MW.
Although there were no offers for the energy-only product, the tender represented a first step toward a more developed market, allowing for the transition to the free market by sharing the costs of a more reliable matrix among all consumers, according to Alexandre Viana with energy trading firm Thymos.
The power demand was in line with Thymos' predictions and the prices were even lower than their projections of around a 12-13pc discount on the cap price, Viana said.
The auction hired three new plants that will be constructed and represents an expansion in capacity, with R5.98bn expected to be spent for the amount of power sold.
Adding the capacity component to an auction introduces a key update to the Brazilian power framework by defining the cost of power stability. This can help reduce the risks of power shortages resulting from the increased use of intermittent generation, such as wind and solar, and by sharing the reliability costs with all consumers — currently only consumers getting power through local power distribution companies are paying for the reliability attribute.
