Tenders still not ready for free market

Tenders still not ready for free market

Sao Paulo, 9 May (Argus) — Brazil has not yet modernized all aspects of its electricity sector, with power tenders still reflecting old models and prioritizing regulated supply.

Brazil has three power auctions approved for this year. The first — for wind, solar and biomass projects — is for projects that will go on line in four years. The other two, which are open to both renewable and thermal power projects, will take five and six years, respectively, to come to fruition.

A key update to the Brazilian power framework last year was the addition of a capacity component to an auction — where only non-intermittent sources are contracted to provide on-demand generation when interruptible sources are lower or offline. This can help reduce the risks of power shortages that may occur with greater use of some renewable sources and help share the reliability costs with all consumers — which currently are only paid by regulated consumers.

But no new capacity auctions for thermal and hydropower power have yet been approved by the government, leaving last year's auction the only Brazilian experience with capacity tenders. But thermoelectric generation association Abraget said they could happen again in three different models.

The first model would be