Sinking Brazil power demand casts doubt over new projects

Brazil is set to delay its next reserve power auction slated for July amid dwindling demand for electricity.

Under government rules, power auction terms must be published by industry regulator Aneel at least a month before bidding occurs.

But Aneel did not list the auction on an agenda for its board meeting on Tuesday, meaning the July 29 event will be delayed or scrapped altogether.

According to energy planning agency EPE, solar projects were to comprise more than 90% of the capacity on offer at the auction.

Last month the agency said 295 solar plants totaling 9.21GW had been registered for the auction.

The remaining projects were small hydropower plants totaling around 985MW, according EPE.

The auction was to offer power purchase agreements of 30 years for hydropower and 20 years for solar.

Under Brazil's reserve auction model, the government – not distributors – buys wholesale electricity to reduce the risk of a future supply deficit.

Developers bid down the price of electricity to be sold from their plants and contracts go to those making the lowest offer.

There is also doubt over plans for another reserve power auction in October featuring solar and wind projects.

This month Brazil's mining and energy undersecretary Paulo Pedrosa said the reserve model needed to be "rethought" as plummeting demand creates an electricity supply glut.