More than double the price for half the benefit
Aneel directors voted unanimously to homologate contracts for 19 gigawatts of thermal capacity through 2031, ignoring a judicial order and technical warnings from federal auditors. The auction heavily favored fossil fuels (86.6% of contracts) over renewables, costing R$515 billion and potentially raising electricity bills by 10-20% for consumers and businesses.
- R$515 billion in fossil fuel contracts approved for 2027-2031
- 19 gigawatts of thermal capacity contracted (more than Itaipu dam output)
- Thermal plants: 86.6% of contracts; hydroelectric: 12.8%; biofuels: 0.6%
- Electricity bills could rise 10% for households, 20% for businesses
- Battery storage would have cost less than half the thermal plant price
Brazil's energy regulator Aneel unanimously approved a R$515 billion fossil fuel energy contract despite a court injunction, prioritizing expensive thermal plants over cheaper battery storage solutions.
Brazil's energy regulator moved forward this week with one of the country's largest infrastructure commitments in years, approving contracts worth R$515 billion for fossil fuel power plants despite a court order blocking the decision just hours before. The Aneel board voted unanimously through an electronic system on Tuesday, with the formal ratification scheduled for a public meeting the following week. The timing was deliberate: the Ceará state industrial federation, which had filed the lawsuit that produced the injunction, had requested an oral hearing, forcing the regulator to bring the matter before the full board.
The auction, held in March, fundamentally reshaped Brazil's energy strategy for the next five years. The government contracted 19 gigawatts of thermal capacity—more than the entire output of the Itaipu hydroelectric dam—locking the country into fossil fuel dependence through 2031. Thermal plants accounted for 86.6 percent of the total contracts, while hydroelectric facilities claimed 12.8 percent and biofuels just 0.6 percent. The choice came with a steep price tag: electricity bills could rise by 10 percent for households and 20 percent for businesses, according to the federal public prosecutor's office.
What made the decision particularly contentious was the existence of a cheaper alternative. In 2023, Brazil's energy research agency had recommended battery storage systems to capture excess renewable energy generated during daylight hours and deploy it at night, preventing the 37 terawatt-hours of wasted clean energy recorded in 2025. Battery storage would have cost R$1.25 million per megawatt annually. The government instead accepted bids for thermal plants at up to R$2.9 million per megawatt—more than double the price. The battery approach would have cost less than half what the thermal contracts demand.
The path to approval was marked by irregularities that caught the attention of federal watchdogs. Three days before the auction, the Energy Ministry abruptly doubled the price ceiling for thermal plants to R$112.8 billion, citing rising infrastructure costs. An audit by the Court of Accounts found the actual investments declared by winning companies totaled R$53.4 billion—less than half the inflated ceiling the government had set. The Court of Accounts and the federal prosecutors both requested that Aneel suspend the contracts. The technical staff at the Court of Accounts warned that the massive spending was unnecessary; returning daylight saving time and importing electricity from neighboring countries would ensure grid stability without burdening consumers.
Yet Aneel's directors proceeded anyway. The thermal power industry welcomed the decision. The Brazilian Association of Thermal Generators argued that the contracts were essential for national electrical security, claiming that without them Brazil would face estimated costs of up to R$970 billion over 15 years in blackouts and rolling rationing. The association contended that natural gas plants must coexist with renewable sources to support economic growth and grid reliability. The regulator's approval, despite the court injunction and the technical objections from multiple federal agencies, now faces ongoing legal challenges that could reshape the decision in coming months.
Citas Notables
The realization of the reserve auction is an essential measure to guarantee security in the management of the national electrical system— Brazilian Association of Thermal Generators (Abraget)
Risking the country's energy security puts Brazil's economic future on a dangerous and uncertain path— Brazilian Association of Thermal Generators (Abraget)
La Conversación del Hearth Otra perspectiva de la historia
Why did the regulator move forward when a court had just blocked it?
The court order came down the day before the vote, but Aneel had already scheduled an electronic ballot. The industrial federation that sued requested an oral hearing, which forced a public meeting the following week—so the board voted first to establish their position, then held the public session to formalize it.
The price difference between batteries and thermal plants is striking. How did that gap exist?
The government set the thermal price ceiling at R$112.8 billion just three days before the auction. An audit later showed the actual costs were half that. It appears the ceiling was inflated, possibly to ensure the thermal bids would be competitive, but the audit revealed the real infrastructure spending was far lower.
What was the federal prosecutor's main concern?
The immediate impact on consumers. They calculated that these contracts would raise household electricity bills by 10 percent and business bills by 20 percent. But there was also a deeper concern: the choice ignored a 2023 recommendation to use battery storage instead, which would have been cheaper and cleaner.
Did anyone argue the thermal plants were actually necessary?
The thermal industry did. They said natural gas plants are essential for grid stability and economic growth, that you can't rely only on renewables. They also claimed that without these contracts, Brazil would face R$970 billion in costs from blackouts over 15 years.
Is this decision final?
Not yet. The Court of Accounts and federal prosecutors are continuing to challenge it. The public ratification meeting was scheduled for the following week, but the legal battles are ongoing.