The encyclopedia · Strategy & Leadership · Strategic decision · 2019–2021
Brazil auctions transmission lines to whoever asks the least annual revenue
ANEEL's December 2021 auction sold five 30-year grid concessions to lowest annual-revenue bidders — an average 50% discount, saving consumers ~R$5bn.
Agência Nacional de Energia Elétrica (ANEEL) · Taesa · Sterlite Power · Neoenergia · Energisa
The solution
Brazil needs continuous transmission expansion, and ANEEL has run a steady program of concession auctions. In the December 2021 auction, five lots covering 902 km of lines, three new substations and 750 MVA of transformation capacity were offered with 30-year concessions and required investment of about R$2.9 billion.
Winners were the bidders offering the lowest Annual Permitted Revenue (RAP) — the amount transmission companies may charge users each year. The five winning bids totalled R$202.5 million in annual revenue, an average discount of about 50% versus the reference values; winning discounts ranged from 27.83% to 66.09%.
ANEEL estimated the discounts would save consumers about R$5 billion, avoiding roughly a 3% tariff impact over coming years. The auction was the 19th in the electricity sector in three years, a period in which Brazil contracted around R$60 billion in electricity investments and expanded generation 16% and transmission 17%.
Why it worked
- Lowest-revenue bidding forces companies to reveal true cost.
- Fixed scope and term kept quality and deadlines enforceable.
- Consumer tariffs fell by the full auction discount.
- A steady pipeline of auctions kept competition alive.
What can be applied
When the asset is fully specified, bid on the revenue stream instead of negotiating tariffs: competing on annual revenue makes the grid build itself at the lowest regulated cost.
Aftermath
The December 2021 round was part of a program that contracted about R$60 billion in electricity-sector investment over three years; winners like Taesa, Sterlite, Neoenergia and Energisa took on construction, operation and maintenance of the new lines and substations.
Sources
- ANEEL auctions 5 energy transmission lots with investments of R$ 2,9 billion
- Leilão de transmissão de energia vende todos os lotes; deságio médio é de 50%
spotted an error? The archive wants to know.