Brazil overrules 638MW of capacity auction

Brazil overrules 638MW of capacity auction

Sao Paulo, 4 April (Argus) — A Brazilian court has overruled the participation of six power plants in the counry's first capacity auction that took place in December.

The six projects added up to 638MW in contracted capacity, with four of them being fuel oil-powered, while the other two were diesel-run. The plants had been allowed to participate in the tender via legal injunctions, despite a government-set cap fuel cost (CVU) of R600/MWh ($130/MWh). The excluded projects' CVUs range between R1,050.78/MWh-2,050.45/MWh.

As the first capacity-only auction ever held in the country, the tender presented new rules with the cap CVU price, favoring natural gas and excluding more expensive fuel oil and diesel plants. It also determined an "F factor" — the minimum number of hours contracted plants would run and be paid for — of 120 hours/yr. That minimum is too low to make most natural gas plants competitive, but is not too low for fuel oil and diesel plants.

These clashing determinations led fuel oil and diesel plants, unable to participate in the tender because of the cap price, to contest the decision in court. Brazil's highest state court accepted the argument at the time and allowed the plants to participate in