Brazil likely to overpay for gas-fired power in 2021 auction Report

Insight 19 February 2021

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Report summary

On 8 February, the Brazilian energy planning agency EPE released the Reference Prices that will be used in evaluating bids for the upcoming thermal power auction. This auction will award power purchase agreements (PPAs) for 15-year terms. The PPAs will be awarded based on a cost-benefit analysis, of which gas pricing represents a significant component. Like last year’s auction, the Reference Price used for JKM is inconsistent with other indexes used and will distort the outcome of the cost-benefit analysis. The most attractive bids will likely cost consumers more for their power in the long run and also disconnected of the government program, “Novo Mercado de Gas”, to foster gas-to-gas competition in Brazil.

Event and background
Implications
Analysis

Tables and charts

This report includes 3 images and tables including:

Figure 1 – Evolution of EPE’s reference NBP and JKM
Figure 2 – Comparison between EPE’s and past/future price indices
Figure 3 – Comparison of total PPA costs for the first 15 years by gas indexation