Publication: Promoting Renewable Energy through Auctions : The Case of Brazil
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Date
2014-06-13
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2014-06-13
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This knowledge note singles out auctions as an important mechanism that has been implemented in a growing number of countries in recent decades. It features a case study of auctions designed to promote the generation of electricity from renewable sources in Brazil. The Brazilian experience with wind energy auctions illustrates that even carefully designed policies often must be reconsidered in the light of a complex and changing environment. Many considerations need to be taken into account to ensure competitive prices while also delivering the required renewable energy supply. This case study is interesting, because Brazil's initial success with developing wind capacity had unforeseen consequences. Challenges introduced in the first stage of wind power development had to be solved in the second. The chief challenges were (i) the Brazilian system had to be able to balance supply and demand more accurately; (ii) investors were overoptimistic about the amount of electricity able to be generated; and (iii) the government's arrangements for coordinating the planning of generation and transmission left too little room for error. The benefits offered to the auctioned plants were reduced, as was government involvement in planning and coordinating transmission expansion. The key lesson from this case study is that existing policies should be challenged and revised in response to a changing environment.
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“Elizondo Azuela, Gabriela; Barroso, Luiz; Cunha, Gabriel. 2014. Promoting Renewable Energy through Auctions : The Case of Brazil. Live Wire, 2014/13. © World Bank. http://hdl.handle.net/10986/18675 License: CC BY 3.0 IGO.”
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