Brazil holds emergency energy auction to mitigate impact of water crisis

Brazil’s energy regulator Aneel held an emergency energy auction on Monday to purchase reserve electricity to reduce the impacts of the ongoing water crisis and guarantee the supply of electricity for the coming years. The auction resulted in the procurement of 1.22 gigawatts of electricity.

This energy is to be supplied between May 1, 2022, and December 31, 2025, and involved 17 generation projects at a fixed cost of BRL 39 billion (USD 7.02 billion). Throughout the three and a half years, the projects are expected to attract some BRL 5.26 billion in investment. André Patrus, head of Aneel’s auctions department, said today’s sale will result in savings of BRL 474 million to Brazilian consumers.

“The resources will contribute to the strengthening of the system and the recovery of the reservoir volumes at hydroelectric plants, with prices lower than those currently charged for the additional resources used,” said the Mines and Energy Ministry, in a statement.

Of the 17 projects awarded energy contracts, 14 are natural gas thermoelectric plants, with the remainder made up of solar and biomass facilities. The majority are located in Brazil’s Southeast region.

Indeed, more than 99 percent of the investments foreseen until the end of 2025 are allocated to thermoelectric plants, criticized for being overly polluting and more expensive to run. “There was nothing stopping other sources from participating [in the auction],” said Thiago Prado, director of the Mines and Energy Ministry’s strategic department.

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