The Ministry of Finance, through its SRE (Secretariat for Economic Reforms), issued warnings about the risks involved in the upcoming LRCAP (Capacity Reserve Auctions in the form of Power) scheduled for March and April 2026.
In two technical notes (SEI nº 5782/2025 and nº 5786/2025) submitted to public consultations 35 and 36, promoted by ANEEL (National Electric Energy Agency) and both concluded, the Ministry expressed concerns about the strategies of the MME (Ministry of Mines and Energy) for contracting thermal power plants fueled by coal, natural gas, fuel oil and diesel.
The main point of concern is the potential harm to the viability of battery storage technologies, which may be relegated to a residual role in the system.
Hierarchy of competitions
The Ministry of Finance highlights that the current organization of the auctions establishes a "physical and chronological hierarchy" that harms clean energy sources. According to the guidelines analyzed, the auction for gas-fired and coal-fired power plants and hydroelectric plant expansions takes place first, followed by the auction for oil-fired and biodiesel-fired power plants, while the auction for batteries would be at the end of the line.
Since the first two auctions consume the transmission network's flow margin and the "slack" in capacity allocation, there would be a real risk that, when the time comes for the batteries, there will be no financial resources or technical space left to contract them.
This configuration is seen by the Ministry of Finance as contradictory to the Energy Transition Plan (PTE). While batteries add flexibility and facilitate the integration of wind and solar power, thermal power plants seek to guarantee security of supply by extending the lifespan of high-carbon-intensity fossil fuel assets, the Ministry points out.
Environmental impact and lock-in
The Ministry's analysis indicates that the focus on fossil fuel power plants, especially those fired in coal, signals a worrying "emissions lock-in." By offering capacity reservation contracts with terms of 10 to 15 years for these sources, the government guarantees fixed revenues for polluting technologies for extended periods.
This decision would reduce the urgency of replacing these plants with more modern and flexible solutions, weakening the country's climate commitments.
Therefore, the Treasury recommends that the ANEEL Reassess the role of coal and other more polluting thermal power plants, suggesting that they be treated only as transitional resources.
To that end, it proposes limiting their percentage stake and reducing contract terms, making them subject to stricter efficiency standards.
Bottlenecks and curtailment
Another central argument put forward by the Treasury refers to the worsening of curtailment – the forced reduction in renewable energy generation. The large-scale contracting of thermal power plants would occupy the system's flow margin that could be used by wind and solar power plants.
According to the technical notes, the current terms of the thermal-hydro LRCAP (Long-Term Renewable Energy Transfer Agreement) do little to optimize transmission and may, in practice, increase the amount of renewable energy wasted due to lack of space in the grid.
The Treasury Department emphasizes that, while Law No. 15.269/2025 outlines storage as a solution precisely to reduce curtailment and offer flexibility, the thermal auction could consume the sector's budget before this solution is implemented.
A burden on the consumer's wallet.
The financial impacts were also detailed by the Secretariat for Economic Reforms. Contracting power via CRCAP (Capacity Reserve Contracts) tends to generate a structural increase in the capacity charge, which is shared among all consumers.
If the contracted volumes are oversized, there is a risk of generating "idle capacity income"—that is, consumers permanently pay for power plants that remain idle, without a proportional gain in security of supply.
In the regulated contracting environment (ACR), this results in higher bills for residential consumers. In the free contracting environment (ACL), the additional systemic cost affects industrial competitiveness and the investment decisions of large consumers and self-producers.
Recommendations
In summary, the SRE expresses its agreement with the need to reinforce the capacity reserve, but argues that this should not occur in an isolated and opaque manner. It is recommended that the ANEEL and MME Coordinate the volumes and the technological mix in an integrated way, considering the batteries and the demand response mechanisms foreseen in the new legislation.
A Pasta It also suggests that each auction round should be accompanied by a systematic evaluation of previous results in terms of climate and tariffs. The ultimate goal is to ensure that capacity reservation ceases to be merely an additional cost and becomes an instrument that maximizes reliability with minimal economic and environmental impact for Brazil.
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