Capacity Auction: everything you need to know about the event
The Capacity Auction is an initial step to price the safety and reliability of the national electricity system. The event, scheduled for December 2021, allows for better pricing of the attributes of the sources, that is, the availability of generation at any time starts to be quantified independently of the energy generation itself.
Today, we have a great expansion of intermittent sources in the Free Market, which makes the hiring of instantaneous generation to be attributed only to the Regulated Market. With the Capacity Auction, this attribute is now paid by all consumers – including those in the Free Market – through a new charge.
Check here the main guidelines for future Capacity Auctions defined by the Ministry of Mines and Energy:
- Now, Capacity Auctions will be able to consider the location factor, taking into account the economic benefits that the project brings to the place where it is inserted.
- Capacity Auctions can have existing and new projects, creating a separation between the energy ballast and contracted energy for the future.
- The bodies responsible for defining the demand that should be contracted in Auctions are EPE and ONS. The methodology used will be discussed in public hearings with the presence of sector agents. The novelty alters the previous procedure in which Distributors declared the demand.
- Capacity Auctions contracts will be signed by CCEE and paid by all consumers via system charges. It has not been defined whether any defaults will be shared in the system or assumed by the Seller.
- The associated energy resulting from the capacity sold by a specific project in the Energy Auctions may be freely traded by the project in the captive and free markets. Additionally, Capacity Auctions may also consider the acquisition of this energy and serve as a complementary auction of new or existing energy.
- Capacity Auction contracts will have a maximum duration of 15 years.
About the December 2021 Capacity Auction:
- The Energy Auction is scheduled for December 2021
- Projects with more than 30% inflexibility will not be allowed
- There will be a preliminary phase for new projects to compete for the flow capacity available in the system. This step is usual for Auctions with supply beginning with less than 5 years.
- Projects that won the Auction will have to comply with the daily dispatch schedule of the ONS and will be subject to penalties and reduction of their respective fixed revenues from their capacity contracts in case of unavailability greater than declared.
- Fuel supply must be proven for an initial period of 8 years.
Two products will be marketed at the December Capacity Auction. The product must be defined in the act of registering the projects. Are they:
- Flexible Power – Only capacity is negotiated, and thermoelectric and hydroelectric plants may participate. A high level of flexibility is expected from the machines. Start of commercial operation in July 2026.
- Power with Inflexibility – Allowed 10-30% inflexibility. Only thermoelectric plants can participate in this case. The dispute on this product will be divided into two phases (capacity supply and energy supply). Start of commercial operation in July 2026 for Contracted Capacity and January 2021 for Energy offers. If the bidder fails to sell the energy associated with inflexibility, it can withdraw the capacity offer.