The electricity regulator (ANEEL) will hold Brazil’s first battery-only capacity auctions on 2 December and 4 December, offering 15-year capacity contracts starting in August 2028.

Projects meeting the local-content rules compete first, so their awards can reduce the grid room left for projects using imported equipment. That risk adds to an already crowded registration pool in the Northeast, which holds roughly seven in ten registered MW but only about a quarter of available grid room.

For investors, how much competition a project has for local grid connection capacity is central to how they bid. A win also brings a commitment to fund construction: sponsors cannot sell control outside their group between authorisation and operation, while the resulting 15-year contract leaves performance costs and penalties with the seller.

Part 1 set out Brazil’s battery plan. After the auction roadmap, we examine where projects can compete and how the local-content and open auctions interact. We then explain the contract’s revenues, operating costs and risks, followed by guarantees and the commitment to build.

Part 3 examines the price needed to meet those commitments.

To discuss this with the author, contact santiago@modoenergy.com.

Key takeaways

• Connection choice changes how competitively a project can bid. The locational bonus lets eligible projects bid around 11% more than rivals without it and achieve the same ranking.
• Qualifying local equipment gives projects first access to grid capacity. Awards on 2 December reduce what remains for the open auction on 4 December, when projects using imported equipment can bid.
• The fixed contract leaves sellers exposed to delivery delays and availability penalties without trading upside. A complete failure in a capacity test costs more than a month’s revenue, and total penalties have no annual cap, so the bid needs to cover that exposure.
• Developers without sufficient financial backing should secure a partner before bidding. A 200 MW bid requires R$120m of guarantee cover, alongside R$120m of qualifying equity on the balance sheet, before the battery earns anything.

Eligibility, grid and financial checks filter the field before bidding

ANEEL published the final auction rules, Editais 5 and 6/2026, on 29 October. They set out who may take part, where projects can connect, and the guarantee cover and qualifying equity bidders must show.

Every battery must be standalone: it charges only from the grid, and the system operator (ONS) dispatches it. Co-located batteries, built beside a generating plant and able to charge from it, cannot bid. Sharing a substation or line is allowed if each project keeps its own meters and grid contracts.

Transmission companies may bid directly, distributors may not, and foreign firms bid through a Brazilian project company.

A busy connection point can matter more than national demand

Brazil may have ample grid capacity overall, yet projects can face intense competition at individual connections. ONS caps injection at substations, groups that share lines and wider areas. These limits determine how much capacity each project can win.

The volume bought depends on the energy ministry’s demand and the auction rules, while shared grid limits constrain where projects can connect. A connection point’s headline capacity cannot be treated as independent of its neighbours. Across nine Northeast and north Minas areas, 77 GW of individual bus margins sits behind shared limits totalling 11 GW. Projects at different substations can therefore compete for the same restricted capacity.

Each bidder receives only its own qualification result from the planning agency, so it may not know which rivals will compete behind the same grid limit. Not every registered project will qualify and bid; investors therefore need to consider several possible sets of competitors.

The Northeast ranking bonus helps against other regions, but not against equally favoured neighbours

At eligible connection points, mostly in the Northeast, bids are multiplied by 0.9 for ranking, but winners receive their full submitted bid. A project can therefore bid around 11% more than a rival without the bonus and achieve the same ranking. That advantage disappears against an equally favoured rival competing for the same grid capacity, so bidders should not assume the incentive leaves room for a higher price.

The bonus also helps explain the Northeast crowding: the energy ministry published the list of eligible locations in June, before registration opened. The planning agency chose weak points, mostly in the Northeast, where grid-forming batteries can help ONS control voltage. But selection did not account for available grid capacity: the ministry removed only points with no room. Bonus points show 61.6 GW of capacity individually, yet account for at most 13.8 GW of the national 56.2 GW after shared limits.

Local-content projects compete for grid capacity first

First-day awards reduce the grid capacity available on 4 December. Projects with imported equipment may find less room, or none, at their registered connection or a shared limit. Registration reserves no capacity.

There is an exception for projects that presented qualifying grid-use and connection contracts at technical qualification. If those contracts cover the project’s full injected power, a lack of remaining grid room does not exclude its bid at the initial stage.

Local-content projects that lose on 2 December can return on 4 December. The registration lists already show substantial overlap: 246 GW of the 261 GW registered for the first auction was also registered for the second. Qualification, first-day awards and location will determine which of those projects actually compete against imported-equipment bidders.

Local content brings a lasting obligation of its own. Equipment for the first auction must be credentialed by the national development bank (BNDES), and its local content has to hold for the whole contract: losing it is grounds for termination.

Choosing imported equipment also means competing later for grid access, and under a lower ceiling: the open auction’s cap is R$1.58m per MW a year, against R$1.76m for local-content projects. Investors need to weigh any equipment-cost savings against that lower ceiling and the risk that first-day awards consume the capacity their project needs.

Fixed revenue leaves bidders responsible for delivery and performance

The arrangement resembles a tolling agreement: the seller receives a fixed payment, indexed to inflation, for making the battery available. Here, though, ONS controls charging and discharging rather than a commercial buyer, and all trading gains and losses pass through to the capacity account that pays the contracts. The bid therefore needs to cover the cost of providing that service, including degradation and penalties.

The seller must maintain the required storage capacity and efficiency as the battery ages. That means allowing for maintenance and any capacity replacement needed to sustain performance as ONS dispatches the battery. Higher costs reduce what the project keeps from its payment, which does not adjust to actual usage or upkeep costs.

Performance failures can also reduce receipts. Missing an instruction to charge or discharge results in a penalty, while a complete failure in a capacity test costs more than a month’s revenue. With no annual penalty cap, bidders should include an allowance for that risk in their price and seek supplier commitments to help manage it.

A guarantee fund and extra charges cover defaults by those funding the capacity account. A shortfall delays payment, with interest, rather than cancelling it. The seller must keep delivering in the meantime, so investors need to assess whether the project can continue servicing debt and meeting operating costs.

Who pays into the account is also unsettled. Under current law, generators will pay the charge, but ANEEL has yet to finalise how it is split among them. That rule must be in place before payments start. The Chamber has agreed to fast-track a bill shifting the charge mainly to consumers, but has not yet voted on it.

Guarantees and liabilities make the bid a commitment to build

Before backing a bid, investors need to establish which company signs the contract and how construction will be funded through to operation. The commitments become harder to unwind as the project progresses, and the contract can create liabilities beyond the guarantees.

Termination can trigger a fine worth three years’ revenue, including when a project is more than 180 days late. We read that fine as falling outside the guarantee cover, making the identity of the signing company important. Foreign bidders and fund-backed consortia must use a project company, whereas a Brazilian developer may sign in its own name and put the liability on its own balance sheet.

On our reading, a revoked authorisation can keep the bidder and its direct parent out of later ANEEL auctions for three years, extending the consequences beyond the project.

The bidder must support the guarantees through construction and show sufficient equity, either on its own balance sheet or its parent’s. The equity requirement is a balance-sheet test, rather than a second cash deposit. Developers that cannot meet both requirements themselves will need a partner before bidding.

Control restrictions also limit an early exit: from authorisation until the battery starts operating, a sponsor cannot pass control of the project to a buyer outside its own group. A developer therefore cannot rely on an external sale of control during that period to finance construction.

Set the minimum fee and identify who bears the liability

Successful bidders wait about 20 months from the auction for their first payment. Bid guarantees are lodged from 18 November, so the funding plan needs to allow for financing costs well before revenue begins.

Three uncertainties could still change the decision:

• The funding law. A change before the auctions could delay the timetable: ANEEL’s head has said the rules would need republishing. If the law changed after contracts were signed, it would need to specify how existing contracts were treated.
• The volume. The energy ministry sets the quantity only on auction day, and the auction buys less if too few projects bid. A bidder cannot know in advance how much capacity is on offer.
• The link between the auctions. The open auction must take account of the local manufacturing capacity identified on 2 December, but the rules do not explain how. That adds uncertainty to the volume it will buy.

Before committing capital, investors need to establish whether the project can compete for capacity at its connection and the minimum fee required to meet their return target. That assessment must account for the grid room left after first-day awards, the cost of funding and operating the battery, and which company bears the liabilities. The funding plan must work without selling control outside the group between authorisation and operation.

Part 3 sets out that price.