COMPETITIVENESS ASSESSMENT WITH THE IMPLEMENTATION OF AN ENERGY CAPACITY MARKET IN BRAZIL

Abstract

Purpose: This article investigates issues related to the need to implement a capacity market in the Brazilian electricity sector to add security to the system and increase market competitiveness to benefit its energy consumers, as well as attract investments to the supply segments of this industry. Theoretical Framework: This research focuses on the Market Design Theory and the transition to the capacity market, detailing its principles and relevance in the current context. Through it, we seek to understand the mechanisms that shape the contemporary market. Design/Methodology/Approach: This research adopts an applied research approach. It is structured as a case study, where Brazil is analyzed in the context of implementing a capacity market. Techniques such as interviews, and documentary research were used to collect data. Findings: The study delves into the intricacies of establishing a capacity market in a competitive environment. The central findings encompass distinctions between the separation of backing and energy versus the capacity market; the blueprint of the auction and regulation of contracting; shaping the long-term market perspective; and the methodology for deducing the capacity market demand. Research, Practical & Social Implications: This article contributes to the literature by surveying cases on capacity market development in developed countries. Furthermore, as a practical contribution, it details the benefit of implementing a capacity market in the Brazilian case. Originality/Value: This research provides innovative solutions for Brazil, drawing from global benchmarks and tailoring them to Brazil's unique challenges and recent legal changes.