Bidding strategies in auctions for long-term electricity supply contracts for new capacity

Abstract

the objective of this work is to discuss the modeling of auctions of long-term electricity supply contracts for new capacity in Brazil. The modeling of risks such as price-quantity (hydrological) risk, project completion risk, environmental constraints, climate change and regulatory risks are discussed. An analytical model will be developed to price these risks and case studies will be presented for real projects that have participated in the Brazilian contract auctions for new capacity. We also discuss selection of projects with different risks.

Long term impacts of RES-E promotion in the Brazilian power system

“…Barroso et al [14] explain in a very concise way the main features of the Brazilian power system after the sector was reorganized in 2004. Mandatory, ex-ante and physically backed contracts are required for all consumers.…”

Bidding strategy under uncertainty for risk-averse generator companies in a long-term forward contract auction

“…This means that if 100% of the demand is contracted, there is physical generation capacity to supply the correspondent load even under low systems resources (dry periods); • Mandatory open PPA purchase auctions for Discosdistribution utilities must contract their energy through open PPA auctions, with standardized rules and contracts, designed to allocate risks between generators, distributors and consumers, and to promote efficient energy purchases. There are two main types of regulated auctions: (i) "New Energy" [11], carried out five and three years in advance; the contracts are intended for the construction of new capacity, that will cover the forecasted load increase; and (ii) "Existing Energy" (EE) , which are intended to cover the existing load. Both auctions (i) and (ii) are carried out for the "sum" of the loads of all Discos, which means that auction winners must sign bilateral contracts with all Discos in proportion to their energy needs.…”

Risk-averse portfolio selection of renewable electricity generator investments in Brazil: An optimised multi-market commercialisation strategy

“…Since its second stage of reform in 2004, Brazil's electricity sector offers two different environments for electricity procurement: the Regulated Contracting Environment (RCE), in which distributors acquire energy in a procedure regulated by the government [11], and the Free Contracting Environment (FCE), in which sellers and buyers freely and bilaterally negotiate contract terms [12]. Either environment can be used by Generation companies (Gencos) to sell energy and by traders to buy or sell energy.…”