Brazil’s leading solar and energy storage associations argue that updated price caps for the upcoming Capacity Reserve Auction (LRCAP 2026) could significantly enhance the competitiveness of battery energy storage systems (BESS) in the country’s power sector.
The revised price ceilings were published by the Ministry of Mines and Energy (MME) ahead of the auction scheduled for March. According to the new parameters:
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BRL 1.4 million per MW-year for hydropower projects
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BRL 2.52 million per MW-year for existing thermal power plants
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BRL 2.9 million per MW-year for new gas-fired thermal plants
ABSOLAR (Brazilian Solar Photovoltaic Association) and ABSAE (Brazilian Energy Storage Solutions Association) state that these updated benchmarks recognize the real cost of providing firm capacity and create more favorable conditions for energy storage to compete.
According to ABSAE, a study by Aurora Research (August 2025) indicates that battery energy storage systems can operate with fixed revenues around BRL 1.25 million per MW-year, provided adequate contractual and regulatory conditions are met.
These conditions include:
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15-year contract duration
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Access to REIDI (Brazil’s Special Regime for Infrastructure Development Incentives)
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No double charging of transmission network usage fees
This revenue requirement is already about 25% lower than the original price cap proposed for new thermal power plants.
Under the newly defined ceilings, ABSAE estimates that contracting 2 GW of BESS capacity, as suggested by the MME, could generate BRL 3.2 billion in annual savings in capacity charges.
For comparison, this amount exceeds the 2025 budget of the federal “Luz para Todos” (Light for All) electrification program, which totals BRL 2.6 billion.
Unlike thermal power plants, which incur additional fuel costs each time they are dispatched, BESS units have no variable generation cost when activated.
Moreover, battery storage enables the absorption of surplus renewable energy that would otherwise be curtailed. Curtailment levels in Brazil exceeded 20% last year in certain periods, particularly affecting wind and solar PV generation.
In the LRCAP framework, thermal and hydropower plants receive both fixed capacity payments and variable revenues when dispatched. By contrast, storage systems would receive fixed capacity revenues with zero variable generation costs, while energy arbitrage revenues could be passed on to consumers, according to the associations.
Equal contracting conditions key to fair competition
ABSOLAR and ABSAE emphasize that storage projects must receive equivalent contractual treatment to compete effectively with conventional technologies.
This includes:
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Equal contract tenors
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Access to REIDI tax incentives
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Eligibility for infrastructure debentures
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Fair transmission usage charges
“The published parameters are compatible with the provision of equivalent and complementary capacity services through storage solutions, provided that equal contracting conditions apply across technologies,” the joint statement noted.
The associations argue that battery energy storage is essential to reduce system costs while maintaining reliability in Brazil’s National Interconnected System.
Globally proven and rapidly deployable, BESS technology can:
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Support peak demand
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Increase flexibility of the grid
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Enhance integration of renewable energy
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Improve overall system security
ABSOLAR and ABSAE conclude that energy security and affordable tariffs should be treated as complementary objectives, and that Brazil already has access to mature storage technologies capable of delivering both.
As Brazil prepares for LRCAP 2026, the debate signals a broader shift in the country’s power market design—where energy storage may move from a complementary resource to a central pillar of capacity adequacy and grid stability.
