Brazil introduces auction to cancel projects selected in reserve energy auctions


The Brazilian government has published a decree for the introduction of an auction system to cancel the PPAs awarded under the country’s reserve energy auctions. Under this new type of auction, developers awarded projects in the reserve energy auctions will bid for their projects to be cancelled, with winning bidders avoiding fines for non-completion and retaining their project guarantees. The auction is intended to cancel power projects selected in the reserve energy auctions which are not being implemented.

In recent years, Brazilian authorities have contracted several GWs of power from large-scale renewable energy and PV projects, which were never built, but could now participate in this new auction.

The Government has not yet established when the auction will be held, or the volume of projects that could participate. The country’s Ministry of Mines and Energy (MME) will manage the auction following the recommendations of government-run energy agency Empresa de Pesquisa Energética (EPE).

Under the scheme, developers submitting the highest bids will not have to pay the fine for failing to complete their projects and, at the same time, will not lose their project guarantees.

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The decree also establishes that the auction winners will not have the right to claim for compensation, or to participate in the two future reserve energy auctions, which will be held after this auction is completed.

Due to the country’s difficult economic situation and an expected excess energy supply, last year the Brazilian government canceled two reserve energy auctions for PV projects that were planned for 2017. Furthermore, the Brazilian authorities have not set the date yet for an upcoming solar auction.

The EPE has allocated approximately 3 GW of PV capacity in the last three energy auctions. Currently, the projects actually under construction amount to just a few hundred MW.

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