
Brazil's backup capacity tender expected to contract up to 10GW

Some 372 electric power projects representing over 74GW of installed generation capacity have registered to participate in Brazil's next backup capacity tender, according to federal energy research company EPE.
Local experts believe the tender will hire between 8GW and 10GW, in line with the power demand foreseen by the government by 2030.
The projects include 228 gas-fired undertakings with 61,635MW of potency, 87 biofuel-fired plants (6,962MW) and 12 hydroelectric plant expansion projects (5,476MW).
Of the total, 67% are new (greenfield) thermoelectric projects, 30% existing thermal projects and 3% hydroelectric expansion undertakings.
Scheduled for June 27, the auction will meet national power demand between 2025 and 2030.
Potential thermoelectric bidders have been outlined by BNamericas here and here, using gas supplied by companies such as Brazil's federal oil firm Petrobras, Eneva and Gás Verde (Urca Energia), US-based New Fortress Energy, the UK's Shell, Argentina's Tecpetrol and Bolivia's YPFB.
Meanwhile, companies like Engie Brasil, São Simão Energia, Cemig Geração e Transmissão, CEEE-G, CSN Energia, Eletrobras, Copel, Itapebi Geração de Energia, Enel Green Power, CESP and Light Energia had hydroelectric expansion projects approved by watchdog Aneel to take part in the competition.
Henrique Casotti, a partner at power generation and commercialization company Genco Energia, underscored that the registered volume of existing power plants is well in line with expectations, as many thermal plants have expired or soon-to-expire contracts in the coming years.
He highlighted that fuel oil plants with expiring contracts have also entered the tender, planning to switch to other fuels (gas or biofuels).
"Regarding existing plants, it's worth waiting for technical qualification to see if they will all meet the flexibility requirements. As for new plants, the qualified volume is significantly higher than the expected auction demand," Casotti said.
The expert believes the auction will be large, given the need for recontracting power as early as this year.
"This volume will grow in the coming years. The latest 10-year plan [of EPE] indicates a need for 10GW by 2030, assuming there are no changes to the supply criteria."
Franceli Jodas, a partner at KPMG, says there are great expectations for the tender due to the lack of new energy auctions in recent years, reflecting the surplus of available energy in the country.
"But we have a need for capacity to compensate for energy shortages resulting from the intermittency of renewable sources, such as solar and wind. So, to meet peak demand starting at 5pm, there is a need for around 5GW of capacity," Jodas told BNamericas, adding that demand is expected to reach 10GW by 2030.
She highlighted that the auction has important requirements, such as flexibility, response time and the CVU limit (unit variable cost), which represents the amount needed to cover all variable operational costs of a given plant.
"The capacity auction is a great opportunity for players with dispatchable energy surpluses who have been impacted by the lack of new energy auctions, as these have lost importance with the growth of the free market," added the KPMG partner.
Walter Fróes, director of energy trading company CMU, described the volume registered for the auction as "monstrous."
"It represents more than a third of Brazil's installed capacity [currently around 210GW]," he told BNamericas, adding that the projects will still undergo technical evaluation by the mines and energy ministry (MME).
But the executive questioned the need to contract capacity for 2030 now.
"This could have been done later, but it seems the government wants to hold a mega-auction as a hallmark of its administration."
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