Playbook of Solutions

mobile image

Tenders and Auctions

Challenges to Investment

In the early 2000s, Brazil was facing challenges with its previous feed-in-tariff system for wind energy, where high tariffs resulted in high costs for consumers. The government saw reverse auctions as a method to drive down the cost and make wind more competitive with other sources. 

However, Brazil faced several challenges in implementing its reverse auction system. Reverse auctions can lead to aggressive bidding and unsustainably lower prices if not designed properly. Brazil had to carefully structure the auctions to ensure project viability, while also attracting sufficient participation from developers to create real competition. To address this, Brazil provided 20-year power purchase agreements (PPAs) to give revenue certainty and encourage bidding.  

 

Approach

In 2009, Brazil enacted the Renewable Energy Law, establishing the legal and regulatory framework and fiscal incentives for renewable energy development, including wind energy. The auction required bidders to specify the quantity of power to be supplied and a price for their output in $/MWh. The auction was structured to allow for a 10% margin of error in supply, with power valued at the lower of the contract price, the Reference Value determined by Brazil’s electricity regulator, ANEEL, or the Price for Liquidation of Differences (PLD) based on marginal operating costs.  

The auction system was designed to balance supply and ensure that wind energy projects could be developed and operated efficiently, while ensuring that every technically qualified company could participate. The auctions also introduced safeguards such as required environmental permitting and grid access approval prior to bidding, and a deposit and guarantee system to ensure project completion. Brazil held its first wind energy auction in 2009, contracting 71 projects for a total of 1,800 MW. The price ceiling established by ANEEL was US$113.1/MWh, but the final average price was US$65.3/MWh, reflecting greater price competitiveness.  


Key Enabling Conditions

The Lei do Licitação, enacted in 2015, established the legal framework for energy sector auctions, including reverse auctions. It outlines the rules for the auction process, including criteria for bidders, the evaluation of bids, and the conditions for awarding contracts. 

The Decreto de Licitação, issued in 2018, provided detailed guidelines for implementing auctions under the Lei do Licitação. It includes specific requirements for the preparation of auction documents, the evaluation of bids, and the conditions for awarding contracts. 

These laws set the foundation for the auction process, including criteria for bidders, bid evaluation, and contract awarding conditions and ensuring rapid project commissioning through stringent requirements and financial safeguards. 


Impact / Outcomes

The first auctions played a crucial role in expanding wind energy. Brazil successfully added over 3,300 MW of clean energy generation, with projects coming online rapidly, within a 2-3 year lead time from project auction to commissioning. The reverse auctions in 2009 and 2010 established a successful model and policy framework for further expansion of wind, solar, and biomass power. Despite the dominance of fossil fuel generation in Brazil, the reverse auctions catalysed an increase in wind and solar share of total energy supply, from less than 1% to nearly 2% from 2009 to 2018. These policies helped increase wind output by over 300% by the close of the project timelines, in 2012, slowing Brazil’s overall trend towards fossil fuel-based generation during the late 2000s and early 2010s.


Additional Sources

Locations
Latin America, Brazil
Year published
01 January 2009
Policy type
Energy policy
Risk category
Power market risk, Policy and regulatory risk
Policy lever
Incentives for clean energy

Playbook of Solutions

A World Economic Forum Initiative
© 2026 All rights reserved
Privacy Policy & Terms of Service