IBP Statement – The Importance of the 2026 Capacity Reserve Auction for Brazil’s Energy Security
The Brazilian Petroleum, Gas and Biofuels Institute (IBP), which represents the country’s leading oil and gas companies—responsible for 94% of Brazil’s domestic natural gas production—considers the Capacity Reserve Auction in the Form of Power (LRCAP) scheduled for March 18, 2026, and involving natural gas-fired power generation projects, to be essential.
The importance of the LRCAP for Brazil’s electricity sector is indisputable. Its primary objective is to strengthen the security of energy supply in the country, and the auction takes place within the broader context of the ongoing transformation of Brazil’s power matrix, marked by the increasing—and both positive and desirable—participation of intermittent renewable energy sources. This evolution heightens the need for operational flexibility across the electricity system.
Beyond its significance for the power sector, the LRCAP also plays a critical role in the natural gas market. A substantial portion of the capacity of Brazil’s natural gas transportation system is currently contracted by thermoelectric power plants whose power purchase agreements have already expired or will expire before 2030. In this context, the potential failure to recontract existing plants, or the lack of incentives for connecting new projects to the gas transportation network, could significantly increase transportation tariffs, with repercussions throughout the natural gas market—including industrial, commercial, and other consumers—due to the possibility of higher transportation costs.
IBP considers that the entire ordinary regulatory process has been duly observed, including public consultation procedures and broad disclosure of all auction-related documentation. As a result, the legitimacy of the auction is fully preserved, as it has involved all relevant institutions required to ensure its legality, including the Ministry of Mines and Energy (MME), the Energy Research Office (EPE), the National Electric System Operator (ONS), the National Electric Energy Agency (ANEEL), and the National Agency of Petroleum, Natural Gas and Biofuels (ANP).
In addition, it should be noted that targeted adjustments have been introduced in recent weeks. Given the proximity of the auction date, however, IBP believes that priority should now be given to regulatory stability, avoiding the introduction of further modifications at this stage.
IBP understands that maintaining the current LRCAP schedule reduces the risk of capacity shortages and the need for emergency solutions, which are typically more costly, while also providing greater predictability through a transparent procurement process.
Finally, IBP reiterates that the LRCAP is an essential instrument for reducing energy costs over the medium and long term and for supporting a secure energy transition. It contributes to the balanced expansion of Brazil’s electricity matrix through the efficient and sustainable combination of renewable energy sources and dispatchable generation resources.
