The postponement of long-awaited battery auctions in Brazil could lead to a concerning power capacity deficit in the national electrical system by 2028, warns Absae.
The future of Brazil’s energy security in 2028 is at stake due to the uncertainty surrounding the country’s first battery auctions. The Brazilian Association of Energy Storage Solutions (Absae) has expressed deep concern over the possibility of delaying these crucial tenders, noting that such a setback could result in a significant gap in energy supply.
The lack of clarity regarding rules, particularly the cost-sharing model for integrating these technologies into the electrical system, has created a scenario of instability. As the sector awaits the auctions scheduled for early December, Absae highlights the imminent risk of a power capacity deficit that will directly impact energy supply four years from now if the tenders do not proceed as planned.
Cost-Sharing Deadlock Threatens Auctions
The central debate stalling the progress of energy storage auctions lies in cost allocation. Currently, the proposal is for generators alone to bear the expense, a measure facing strong market opposition. There is a push for consumers to also share in this burden to create a more equitable model. Although he agrees with including consumers, Fábio Lima, executive director of Absae, emphasizes that the current model should not prevent the auction from moving forward, given the urgency of the situation.
Urgency to Prevent a Structural Deficit
The outlook for 2028 demands immediate attention. The Energy Research Office (EPE) is already projecting a need for an additional 5.5 gigawatts (GW) of capacity in the Brazilian electrical system. According to Lima, the deployment time for energy storage solutions is fixed and cannot be shortened, making it imperative that the battery auctions take place this year to ensure supply is ready by 2028.
“Holding the auction this year is essential. We have a well-documented risk of a power capacity deficit. These auctions aren’t being held to experiment with technology; they are being held to address the power capacity deficit in the most cost-effective way possible,” emphasizes Fábio Lima.
Consequences for Consumers and the System
Any delay in contracting batteries would lead to costly decisions for the energy sector and, consequently, for the average citizen’s wallet. Without the flexibility and support that energy storage provides, the government would be forced to rely more heavily on thermal power plants, driving up electricity bill charges. Beyond the economic impact, insufficient capacity increases the risk of supply interruptions, potentially leading to the feared blackout.
Regarding cost-sharing, Lima clarifies that excluding consumers from direct cost division does not exempt them from paying; rather, it penalizes them with higher prices. This is because generators, when passing on these expenses, will incorporate additional charges and taxes, making the final price of energy more expensive. Furthermore, the current methodology distorts economic signals, failing to incentivize large consumers to manage their peak demand, as is done with other energy solutions.
The decision-making process regarding battery auctions is crucial for the trajectory of the Brazilian energy matrix. In its pursuit of a future with more clean and sustainable energy, Brazil must overcome regulatory and cost-related hurdles to ensure energy security and avoid a power capacity deficit in 2028. Timely execution of these tenders will not only meet projected demand but also solidify the country’s commitment to energy transition and the efficiency of its electrical system, protecting consumers from unnecessary costs and risks.
