By Brazil Stock Guide – Brazil’s electricity regulator Aneel unanimously approved the results of two capacity-reserve power auctions held in March, clearing contracts tied to R$64.5 billion in expected investment and reinforcing the country’s search for backup generation as renewables gain weight in the grid.
The decision, taken during an extraordinary public board meeting on Thursday, allows the government to move ahead with the award of contracts under the 2026 Capacity Reserve Auctions, known locally as LRCAP. The projects are expected to deliver power between 2026 and 2031.
Legal Challenge Cleared
Aneel’s board concluded there were no legal, judicial, administrative or external-control barriers preventing approval of the auction results. The analysis considered a later court decision, comments from the Federal Public Prosecutor’s Office and a ruling by Brazil’s federal audit court, the TCU.
Fernando Mosna, the Aneel director who reported the case, said the agency had followed all steps required under the auction rules and noted that there were no TCU injunctions or court orders suspending the process. He stressed that Aneel’s role was to operate the auction, while its design was the responsibility of the Ministry of Mines and Energy and energy planning agency EPE.
Aneel’s legal counsel, Eduardo Ramalho, also argued that the regulator must act according to the guidelines set by the concession-granting authority. Institutional disputes or criticism of policy choices, he said, do not by themselves justify stopping the auction.
Thermal Backup
The first auction round, held on March 18, contracted 18.97 gigawatts of capacity from hydroelectric plants and thermal power plants fueled by natural gas and coal. The auction generated an average discount of 5.52%, with estimated savings of R$33.64 billion.
A second round, held on March 20, contracted 501.321 megawatts from plants fueled by fuel oil, diesel and biodiesel. Those contracts will last three years and were awarded with a 50.14% discount, implying estimated savings of R$1.83 billion.
The approval is important because Brazil’s power system is becoming more dependent on intermittent renewable sources, especially wind and solar. That transition has increased the value of dispatchable power — generation that can be activated when hydrology is weak, demand spikes or renewable output falls.
Security Versus Cost
The Brazilian Association of Thermal Power Generators, Abraget, welcomed the decision, calling the approval “correct and necessary.” The group said capacity-reserve auctions are essential to protect the reliability of the national power system.
Abraget argued that renewable sources and gas-fired thermal generation must coexist to support energy security and economic growth. For the association, risking power-system reliability would put Brazil’s economic future on a more uncertain path.
The political and economic debate, however, is unlikely to disappear. Capacity auctions strengthen the country’s reserve margin, but they also revive a familiar tension in Brazil’s power sector: how to pay for security of supply without adding unnecessary pressure to electricity tariffs.
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