Regulatory Context
On November 10, the Ministry of Mines and Energy (“MME”) published Ordinance No. 878/2025, submitting for Public Consultation No. 202/2025, for a period of twenty days, the draft normative ordinance to establish the guidelines and framework for the Capacity Reserve Auction in the form of Power (LRCAP 2026 – Storage).
The auction aims to contract electric power from new battery storage systems (“BESS”) connected to the National Interconnected System (“SIN”), with supply starting on August 1st, 2028, and a contractual term of ten years.
The measure seeks to ensure the ability to meet the SIN’s instantaneous demand, especially during peak hours, given the growing share of non-controllable sources such as solar and wind, in addiction to the provision of ancillary services, guaranteeing operational flexibility, locational benefits, and system reliability.
Furthermore, the use of the auction mechanism, combined with long-term contracts, helps improve financing conditions for storage projects, boosting the development of this market in the country — as already indicated by the Energy Research Office (“EPE”) in its studies.
Topics Under Public Consultation
The draft available for contributions covers the following key points:
- Auction Guidelines: definition of the “Storage Power” product, participation rules, and obligation to fully comply with the National System Operator (“ONS”) dispatches.
Technical Requirements: minimum qualification parameters, including power, duration, efficiency, recharge time, and compliance with grid-forming requirements. - Contractual Conditions: supply start date, term, remuneration method, penalties, and energy accounting rules.
- Registration and Technical Qualification: procedures, environmental licensing flexibility, and disqualification criteria.
- Locational Criteria and Bonus: methodology for defining strategic points and application of the β constant.
- Operational and Regulatory Aspects: requirement for Transmission System Use Amount (“MUST”) or Distribution System Use Amount (“MUSD”) contracting, transmission margins, early operation, and application of Transmission System Use Tariff (“TUST”) or Distribution System Use Tariff (“TUSD”).
Auction Structure
The draft defines a single product called “Storage Power,” whose delivery commitment consists of power availability in megawatts, not energy delivery itself. BESS that will be directly connected to the SIN connection point or installed at SIN points shared with other agents may participate in the auction. The proposal establishes the mandatory full compliance with charge and discharge dispatches defined by the ONS, both in daily scheduling and real-time operation. Operational control will be entirely assigned to ONS, and the injected energy will be settled in the Short-Term Market at the Spot Price, with these resources allocated to the Capacity Reserve Power Account (CONCAP), subject to regulatory limits.
Proposed Technical Requirements
Among the minimum participation parameters, the following stand out:
- Minimum power of 30 MW;
- Continuous operation duration of 4 hours, with the possibility of longer dispatch periods at proportionally reduced power;
- Minimum efficiency of 85% (round-trip efficiency);
- Maximum recharge time of 6 hours;
- Compliance with Technical Note NT-ONS DPL 0111/2025 requirements, including grid-forming functionalities and fast frequency response (Fast Frequency Response – FFR).
Additionally, systems must allow up to two full cycles per day (charge and discharge), with an annual limit of 365 cycles (366 in leap years), and present a Unit Variable Cost (“CVU”) equal to zero.
Proposed Contractual Conditions
Capacity Reserve Power Contracts (“CRCAPs”) will start supply in August 2028 and last for ten years. Remuneration will be through an annual fixed revenue, paid in twelve monthly installments, covering all project costs, including investment, operation and maintenance, connection, charges, insurance, taxes, and reinvestments. Penalties include unavailability above reference indices, failure to meet delivery commitments, and non-compliance with ONS dispatches for both injection and recharge.
CRCAPs must establish that the seller is not exempt from delivering the contracted power even within the limits of the Equivalent Forced Outage Rate (TEIF). Additionally, scheduled outages (Programmed Unavailability – IPs) must occur exclusively during periods previously agreed with ONS, as established in the Network Procedures.
Registration and Technical Qualification
Registration will follow the usual energy auction rules, with submission to EPE of the data sheet from the Energy Generation Project Monitoring System (AEGE) and documents required by Ordinance No. 102. The draft relaxes the requirement for prior environmental licensing at the qualification stage, without prejudice to subsequent regularization.
The draft suggests that BESS with the following characteristics cannot be qualified:
- CVU greater than zero;
- Maximum power availability below 30 MW;
- Continuous operation capacity with maximum power availability for less than four consecutive hours;
- Candidate busbar with remaining transmission capacity below the injected power and the amount required for recharge;
- Charge and discharge efficiency (round-trip efficiency) below 85%.
Locational Criteria and Bonus
The draft refers to the Technical Note NT-ONS DPL 0111/2025, which defines minimum technical requirements for connecting storage systems to SIN, aligned with Submodule 2.10 of the Network Procedures, applicable to LRCAP 2026 – Storage.
The resulting points will be disclosed to agents at the start of project registration for the auction. The draft introduces the location bonus constant (β), applied to recognize additional electrical benefits from installing BESS at strategic SIN points, with β equal to 0.9 for projects located at systemic benefit points and β equal to 1.0 for others. The methodology for defining these points, developed by EPE, uses the MISCR indicator (Multi-Infeed Short Circuit Ratio) to identify regions with lower electrical robustness, considered priorities for system installation, and refines the concept through busbar-level analysis considering higher voltage drop and sag rates (Available in: Technical Note EPE-DEE-NT-086/2025). According to the analysis, the selected busbars for the auction are concentrated in the states of Rio Grande do Norte, Ceará, Piauí, Pernambuco, Parnaíba, Bahia, and Minas Gerais, due to the high concentration of variable renewable generation.
For this first auction, only Level 1 of the methodology will be applied, with regional analysis and percentage cut for less robust areas, complemented by preliminary verification of transmission margin.
Operational and Regulatory Aspects
The draft requires contracting MUST or MUSD sufficient to enable full dispatch and recharge of BESS, avoiding grid restrictions. Remaining SIN transmission margins will be considered as a criterion for project classification. There is also provision for the possibility of early commercial operation upon approval by the Monitoring Committee for the Electric Sector (CMSE), provided that SIN benefits and connection availability are demonstrated.