Natural Gas Thermal Auction Enables Construction of Three Power Plants in Amazonas (AM), With Annual Cost of R$ 2.5 Billion to Consumers

Michel Leodonio, Coordinator of New Business at Trinity Renewable Energies, states that this was just the initial process, with an estimated average impact of R$ 4.00 per MWh consumed. Understand better how the construction of the plants and the auction in Amazonas (AM) will take place.

The Capacity Reserve Auction in the form of Energy 2022 (LRCE) was held by the Electric Energy Commercialization Chamber (CCEE), Amazonas (AM), on 09/30, aiming to contract energy from new generating plants, from thermal power sources to natural gas.

The implementation of the LRCE is based on Law No. 14,182/2022, which originated from Provisional Measure No. 1,031/2021 and aimed primarily to establish the conditions for the privatization of Eletrobras. The original text of the MP addressed only the privatization of the state energy company, but the National Congress included the requirement for the contracting of thermal generation powered by natural gas in pre-defined volumes for the years 2026 to 2030, totaling 7,000 megawatts (MW) of installed capacity from new plants.

Electricity in Amazonas Could Be Produced with the New Plants, Reducing Costs for Consumers

Michel Leodonio, Coordinator of New Business at Trinity Renewable Energies, one of the largest electricity traders in the country, says that the LRCE was just the first stage of the process, aiming to target and expand the contracting of installed capacity in the region.

“This was just the initial stage, to enable the contracting, for a period of 15 years, of 1,000 MW of capacity in the North region, with the start of supply scheduled for 12/31/2026. In the Northeast, there was a subdivision into two products: one aiming to contract projects in the state of Maranhão and another in Piauí – with 70% of the total to be allocated to the latter, totaling another 1,000 MW to be installed in the region, with supply starting on 12/31/2027”, clarifies Michel.

According to data released by the Energy Research Company (EPE), 37 projects were registered for participation in the LRCE, totaling a qualifying capacity of 11,889 MW. However, only three plants with a total capacity of 753.763 MW were contracted, all located in the North region, with no proposals for the Northeast.

Thus, 669.5 average megawatts (MWm) of energy were negotiated, without a discount in relation to the ceiling price established for the Auction, of R$ 444.00 per megawatt-hour (MWh).

Natural Gas Plants in Amazonas: Project’s Annual Fixed Revenue is Around R$ 2.5 Billion

“The total annual Fixed Revenue to be received by sellers will be slightly below R$ 2.5 billion, adjusted annually by the IPCA. This amount will be borne by all consumers in the country, through the Energy Reserve Charge, with an estimated average impact of R$ 4.00 per MWh consumed,” says Michel Leodonio.

For him “it is also important to highlight that this charge will compensate not only the Fixed Revenue of the plants but will also reimburse the fuel cost associated with the inflexible generation portion – meaning the generation that will occur regardless of the determination by the National Electric System Operator (ONS) – as well as the Variable Unit Cost (CVU) associated with the flexible portion whenever the plant is dispatched to generate energy,” comments the specialist.

Regarding the remaining energy that should have been negotiated in the LRCE, completing the 2,000 MW defined by Law No. 14,182/2022, the MME stated to the press that it will look into the matter to analyze legally the treatment that should be given. If it is understood that a new auction should still be held in 2022 for the contracting of the remaining volume, the potential is that the cost to be borne by consumers will more than double.

However, for Michel Leodonio, even if this does not happen, as mentioned earlier, the legal determination is for total contracting of 7,000 MW by 2027, through auctions that will follow the same rules as the LRCE and, thus, no other outcome is expected besides continuous increases in charges paid by Brazilian consumers in the coming years.

Currently, Amazonas leads the use of natural gas for energy production.