The auction aims to supply energy through the contracting of electrical power and associated energy, from new and existing thermoelectric generation projects, with power supply starting in July 2026 and energy in January of 2027.

The Ministry of Mines and Energy (MME) published in the Official Gazette of the Union (DOU), this Wednesday (18/8), Ordinance 20/GM/MME/2021 with the Auction Guidelines for Contracting of Electric Power and of Associated Energy, called “Capacity Reserve Auction, 2021”, which will be promoted on December 21st.

The 2021 Capacity Reserve Auction aims to ensure the continuity of the supply of electricity, with a view to meeting the power requirement required by the National Interconnected System - SIN, through the contracting of electrical power and associated energy, from new and existing thermoelectric generation projects, with power supply starting in July 2026 and energy supply starting in January 2027.

The definition of guidelines for the Auction was possible due to changes in the legal framework promoted by Provisional Measure No. 998, of September 1, 2020, converted into Law No. 14.120, of March 1, 2021, of Decree No. 10.707, of 28 of May 2021, which regulated the contracting of capacity reserve in the form of power, as well as contributions received in Public Consultation No. 108, of 2021. The public consultation held between May 28 and June 14, 2021 counted on the participation of around 50 agents from the Electric Sector, which resulted in approximately 388 proposals for improvements.

At the 2021 Capacity Reserve Auction, energy associated with inflexible generation, coming from new thermoelectric projects with operational inflexibility of up to 30%, as well as the availability of power from new and existing thermoelectric projects, will be traded in different products. The details of the system to be adopted in the Capacity Reserve Auction of 2021 will be subject to public consultation to be published by the MME.

The projects contracted in the 2021 Capacity Reserve Auction must meet all the orders established in the daily schedule established by the ONS for the scheduled day, without prejudice to the service on the following day. Additionally, they will be subject to a deduction from fixed revenue due to unavailability and/or operational restriction, in addition to penalties for not complying with the aforementioned orders and for the declaration of unavailability above the reference rates.

For the event, the participation of projects whose Variable Unit Cost (CVU) is less than R$ 600.00/MWh will be allowed. The establishment of such a maximum limit at a higher level than the values practiced in recent energy auctions is justified, as, to meet peak demands, generation solutions with high variable costs, but reduced fixed costs, may prove to be viable. at lower final cost to the consumer. The higher ceiling for the CVU, therefore, allows for greater offer and competition in the auction, with disputes that result in a reduction in fixed costs, benefiting the final cost for consumers. More information about the definition of the CVU for this auction is presented by Empresa de Pesquisa Energética - EPE in a note published on its website.

The guidelines also establish the adoption of remaining flow margins as a classification criterion for sellers to define the winners of the auction, using different criteria for each product to be traded. Another important point is that, in order to participate in the event, all generation projects must have their physical guarantees defined or reviewed in light of the current methodology.

The Capacity Reserve Auction of 2021, object of the Ordinance published today, stems from Law No. 14,120, of 2021 and represents another step in the Modernization of the Brazilian Electricity Sector, as it will allow efficient allocation of costs for the structural expansion of the electricity system so that all consumers are served at any time, with reliability and security, even in critical periods. The contraction is motivated based on planning studies, in particular on the content of the Ten Year Plan for Energy Expansion - PDE 2030, which points to the need for additional power in the system from 2026, in order to ensure structural reliability in the energy supply electric.

Regarding the possibility of contracting a capacity reserve from the decision of the Electric Sector Monitoring Committee - CMSE and approval by the Chamber of Exceptional Rules for Hydroenergy Management - CREG, as provided for in Provisional Measure No. 1.055, of 2021, we inform that this it is measured in an evaluation by the MME with the participation of the other institutions that make up the governance of the electricity sector (ONS, EPE, ANEEL and CCEE). If the measure is adopted, in compliance with the provisions of the Provisional Measure, it must be of a cyclical and emergency nature, in order to ensure the continuity and safety of electricity supply in the country in the context of the current situation of water scarcity.

Finally, still in the matter of contracting capacity reserve, in respect of the MME's commitment to maintaining transparency and dialogue with the sector's entities, we inform that work has started and is in progress to comply with Law No. 14.182, of 2021 which provided for the privatization of Eletrobras and determined the contracting of thermoelectric generation powered by natural gas by the granting authority, in the form of a capacity reserve auction with specific conditions. Compliance with this legal command will be given through an auction with the perspective of taking place in the first quarter of 2022.