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Brazil's first capacity auction: A new mechanism to solve old issues
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Report summary
The A-4/A-5 existing energy auctions (LEEs) held on 25 June 2021 were intended to re-contract most of the country's existing thermal fleet, but only a single power plant was awarded. Essentially, the existing auction mechanism had relied on local distribution companies' (LDCs) demand declarations, which have been declining over time. Conscious of the mechanism's limitations and leveraging the opportunity provided by the current drought, authorities structured a new framework to provide long-term contracts to thermal power plants. The new capacity framework will debut in an auction scheduled for 21 December.
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