Renewable energies in the auctions: Lessons from Brazil

Abstract

The reverse auctions are considered the main sectorial policy to encourage renewable energies in Brazil. However, since it started in 2005, the reverse auctions have allowed the purchase concentrated on only one alternative source, inhibiting the expansion of others. From 2005 to 2009, it was concentrated on the biomass source, representing 95% of the total contracted among the renewable sources. In the last two years, the situation was reversed, with wind power accounting for 85% of the total allocated to renewable sources. The policy dedicated to encouraging one source affects the energy security of the system and contributes to dismantle the other renewable sources. This study warns about the option of encouraging the development of renewable energies only through reverse auctions. Despite the appeal of low tariffs, achieved through competitive auctions, in the long run, this policy should be adjusted to avoid restrictions on the development of other renewable sources.