Brazil could end 2024 with no greenfield power generation tenders

Brazil could close 2024 with no power generation tenders involving greenfield (new) projects. 

According to market sources that talked to BNamericas, this will intensify energy supply risks in 2026. 

Three sources familiar with the subject told BNamericas that the backup capacity tender, initially scheduled for August, could be carried out in December but will most likely be postponed until 2025. 

The auction foresees the contracting of green and brownfield thermal and hydro plants, with the possible participation of solar and wind plants coupled with energy storage systems, though the government is still assessing this possibility. 

The isolated system and the A-4 and A-6 auctions, which were originally planned for December but whose bidding documents have yet to be published, are also expected to be delayed for 2025.

The isolated system tender seeks to contract a supply solution for 15 municipalities in the states of Amazonas and Pará.

The auction was designed to meet the objectives of the federal Amazon energy program and features improvements such as the inclusion of a minimum percentage of renewable energy, besides thermal power.

The A-4 and A-6 auctions aim to supply the power distributors' market for 2028 and 2030, respectively.

Greenfield hydroelectric (up to 50MW), wind, solar and thermoelectric projects are expected to participate, as well as hybrid solutions, with contract terms of 15 and 20 years.

On Monday, the mines and energy ministry MME opened the deadline for power distribution utilities, submitting forecasts for the need to purchase electricity for the 2025 A-4 and A-6 new energy auctions.

The announcement said the tenders will be held in August 2025 but made no mention to the A-4 and A-6 of 2024. 

BNamericas asked the MME if the backup capacity, isolated system and A-4 and A-6 tenders had effectively been delayed for 2025 but the ministry did not respond.

The electric power watchdog Aneel’s agenda for this year include the A-1, A-2 and A-3 tenders in December, when only existing undertakings are eligible to compete.

SUPPLY RISK

In a recent report, the national grid operator ONS indicated the possibility of explicit risk of insufficient power supply (loss of load probability, or LOLP) in 2026. 

Sources told BNamericas that not contracting backup capacity this year is a risk, considering the drought affecting the hydro-dependent country.

“We're dispatching thermal plants to save water. That's a sign that things aren't so good,” a local source told BNamericas, requesting anonymity. 

BNamericas learned that power generators intend to pressure the government to release the backup capacity tender notice this month so it can be held in December, though the most probable scenario is to have the process taking place toward the end of the first quarter of 2025.  

Another source with knowledge of the matter pointed out that the delay could be a way of giving more time for regulating energy storage to develop in order to enable its participation in the auction.

“I also see uncertainty about the hydroelectric product. Its participation was already certain, but some details have yet to be decided,” the source added. 

ACTIONS 

Given the worsening of the hydrologic scenario, the government approved the following measures last week: 

 - Maintaining the pre-defined early dispatch of the Santa Cruz and Linhares LNG-fired thermal plants throughout November;

- Enabling the availability of the Santa Cruz, Linhares and Porto Sergipe thermal plants in a flexible manner to meet the system's peak load between September and December 2024;

- Recognition of the importance of operating the intermediate reservoir of the Belo Monte hydroelectric plant with a minimum flow of 100m3/s;

- Recognition of the importance of putting into operation five new transmission lines: LT 500 kV Porto do Sergipe - Olindina, LT 500kV Olindina - Sapeaçu; LT 500 kV Terminal Rio - Lagos C1 and C2 and LT 345 kV Leopoldina 2 - Lagos, in order to ensure the full flow of power from the Porto Sergipe thermal plant and other thermal plants located in the Rio de Janeiro and Espírito Santo areas. 

OUTLOOK

ONS projections indicate that reservoir levels should continue to fall until the end of November. 

In the southeast/center-west subsystem, the stored energy (EAR) estimated for the end of February 2025 ranges between 50.8% in the unfavorable scenario and 79.2% in the more positive one. In the first case, it would be 13.7 percentage points (p.p.) lower than in February 2024, while the highest projection would be 14.7 p.p. higher than in the same period this year.

The southeast/center-west subsystem accounts for more than 70% of the national hydroelectric storage capacity. 

The EAR outlook for the national power system for February 2025 is similar, with EAR expected to vary between 56.4% (9.2 p.p. lower than in February 2024) and 77.9% (12.3 p.p. higher than in the same month this year).