By Brazil Stock Guide – Brazil contracted 18.977 GW of capacity in its largest-ever reserve capacity auction (LRCAP), securing system reliability at an annual cost of R$ 38.9 billion and total contracted payments of R$ 515.7 billion over the life of the agreements, while delivering an estimated R$ 33.6 billion in savings versus price caps.
The auction mobilized roughly R$ 64.5 billion in investments and drew strong interest, with 330 projects registered totaling around 120 GW of capacity — underscoring deep supply on paper, though actual competition proved uneven across products, with prices in several rounds clearing close to the ceiling.
Thermal power plants dominated the results, reaffirming their role as the backbone of system reliability. In the 2026 product, focused on existing gas and coal plants, winning assets included units linked to Eneva, Petrobras and Âmbar, such as Santa Cruz, Juiz de Fora, Seropédica and Termobahia. For 2027 delivery, projects included Petrobras’ Termomacaé and Três Lagoas, as well as Porto do Pecém I and Suzano’s Celpav IV.
New-build capacity expanded the field of winners. The 2028 product contracted 7.4 GW, with highlights including Eneva’s Porto de Sergipe expansion, Âmbar’s Uruguaiana plant and projects such as Monte Fuji and Nova Era, alongside assets from KPS. In 2029, projects such as Eneva’s Jandaia II and III were selected, alongside Barcarena II, Pilar I and II, and Tupã. Hydropower upgrades for 2030 included Jaguara (Engie), Segredo and Foz do Areia (Copel), and São Simão (SPIC). The final 2031 product added projects such as Jandaia I, Presidente Kennedy, Porto Norte Fluminense II B, coal plants Itaqui and Pecém II, and the Luiz Gonzaga hydropower expansion (Axia).
“There is no energy transition without security of supply — and no security without flexible capacity,” said Mines and Energy Minister Alexandre Silveira, capturing the rationale behind the auction.
The contracts are structured across delivery windows from 2026 through 2031, combining existing capacity — aimed at immediate system needs — with new projects designed to support medium-term reliability. Unlike traditional energy auctions, generators are paid for availability rather than output, effectively creating a capacity insurance mechanism for the grid.
That model is becoming increasingly central as intermittent renewable sources such as solar and wind expand their share in Brazil’s energy mix. Flexible thermal capacity, particularly gas-fired plants, is emerging as the system’s balancing anchor.
Still, limited discounts in near-term products and prices clustering near caps suggest tighter-than-expected supply of dispatchable capacity. The auction reinforces a key message for investors: Brazil is willing to pay for reliability — but, for now, that reliability remains heavily dependent on thermal generation, with storage and demand response yet to scale as viable alternatives.