Brazil debates new power transmission tender

Brazil is proposing a new tender model to access transmission lines, which could bring significant changes to the power sector by developing a price mechanism for that part of the electricity supply chain.

The mines and energy ministry is taking public comments on its new tender model proposal from 3 November to 5 December. These transmission auctions would alter how generation projects receive authorizations to connect to the grid.

Generation projects are currently queued to request permission to connect to the grid, but many of them do not come to fruition, delaying or outright blocking projects in line behind them. The new auction would create a financial incentive for these projects to be completed, because companies would have paid for the connection, according to Brazilian wind power association Abeeolica's president Elbia Gannoum.

This issue is not a huge concern for the Brazilian power market, but the end of renewable generation subsidies proved that there was a need to improve the current model. A 2021 law ended transmission and distribution subsidies to renewable power projects authorized after March 2022. As a result, there was an abundance of new projects — caused by what the sector called a gold rush — trying to avoid the deadline. The lack of enough access points for all new projects led to discussions about a more efficient way of granting entry into the grid.

Gannoum said the tender could completely solve the issue, but market sources point to some loose ends. Participants agree that the tender will eliminate competition with authorized projects that did not materialize for financial or corporate reasons, but believe it will not solve the issue of the lack of delivery capacity for the amount of new renewable power from authorized projects.

Participants also say, contrary to the government's expectations, that the tender will not efficiently stimulate generators to go to areas where there is an excess of access capacity. The decision of where to install a renewable plant considers that source's availability in each region — solar projects prefer places with more sunshine, for example. If changing these projects' locations was a simple task, the market would already have done it by itself, as the lack of transmission access points reflects negatively on revenue, sources said.

The new tender model would not greatly affect state distributors for now, as it seems to be more focused on free market renewable energy projects, according to Ricardo Brandao, executive director of regulation for Brazil's power distributors association Abradee.

By Rebecca Gompertz