Lessons learned from the auction-based approach to integrate wind generation in the Brazilian electricity market

G. Cunha, L.A. Barroso, B. Bezerra

45 CIGRE Session - CIGRE 2014, Paris (France). 24-30 agosto 2014

Summary:

Since 2009 Brazil has been using energy contract auctions to integrate wind energy in its power system. Wind energy has been participating in both technology-specific auctions (where wind plants compete among themselves) and in technology-neutral auctions in which it competes with other technologies, such as natural gas. In the light of a renewed worldwide debate on the role of auctions as a mechanism to foster the development of non-conventional renewable generation (as opposed to other mechanisms, such as administratively-designed feed-in tariffs and/or renewable energy certificates), an in-depth analysis of the Brazilian experience could provide powerful insights for future applications. The results of the Brazilian auctions have been undeniably impressive: they will be responsible for increasing the wind capacity in the country nine-fold between 2009 and 2016, and has allowed distribution companies to contract this energy at prices as low as 50 US$/MWh. On the other hand, as the commercial operations date for the newly contracted plants approaches, other issues and concerns arise - especially with regards to the possibility of systematic delays and/or underperformance. This paper aims to carry out an unbiased evaluation of the Brazilian auctions' results so far, and to crossevaluate them with elements of the auction design in order to verify our hypothesis that the policymakers' choices can have a central role in magnifying inherent strengths and weaknesses of the auction scheme. We expect our analysis to provide valuable insights to the task of designing energy contract auctions, in Brazil or elsewhere. 

Keywords: Electricity auctions; Renewable generation; Wind energy

Publication date: August 2014.

Citation:
Cunha, G., Barroso, L.A., Bezerra, B., Lessons learned from the auction-based approach to integrate wind generation in the Brazilian electricity market, 45 CIGRE Session - CIGRE 2014, Paris (France). 24-30 August 2014.

IIT-14-216C