In another important step towards improving electricity pricing mechanisms in Brazil, the Chamber of Electric Energy Trading (CCEE) and PSR held the third workshop of the project “Goal II – Price Formation”. The event presented the advances in the evaluation of the “cost-based” pricing models currently adopted in the country and “supply-based” pricing models used in other markets, in addition to proposing a hybrid approach that combines characteristics of both formats to obtain prices that are more in line with reality.

“This is a project that aims to make changes. I would like to highlight the commitment of all institutions in the sector to seek concrete improvements in price formation. The goal of this project is to find the best balance between these approaches so that we can have energy prices as the real messenger of the supply and demand conditions for electricity in the country at each stage of time,” stated PSR CEO Luiz Barroso.

“The conclusion of this phase and holding this workshop were a significant step in the construction of a modern, resilient and sustainable electricity sector, whose main objective is to explore and improve the models for setting prices based on cost and prices based on supply, seeking to reduce price volatility and promoting a structured transition that meets, in a safe and consistent manner, the specificities of the Brazilian market,” said the chairman of the CCEE Board of Directors, Alexandre Ramos.

As in the two previous workshops, the meeting included representatives from society and the electricity sector in the technical and conceptual discussions developed in the project. In addition to the participation of authorities from the sector, including the Ministry of Mines and Energy, the Energy Research Company (EPE) and the National Electric System Operator (ONS), the event was attended by representatives from the hydroelectric, thermoelectric, wind and solar generation segments, as well as technicians and specialists.

The IARA model was also presented on the occasion, an innovative open-source computational tool for analyzing the results of electricity markets, which allows for the comparison of different electricity market design alternatives. Through quantitative simulations, the software is able to compare the effects of elements studied in the project, such as double settlement, the “cost-based”, “supply-based” and “hybrid” models, and the virtual reservoir mechanism, which was also discussed during the event.

Started in June 2023 and lasting 30 months, the Meta II – Price Formation project is financed with resources from the World Bank, via the Meta project, totaling an investment of US$ 11.7 million. And holding the workshops reflects the commitment of CCEE and PSR to publicize and provide transparency to the work that has been done. The project also plans to hold two more workshops, one virtual and one in person.

The full recording of the third workshop can be seen here and all the material developed in the project is available at the link: https://www.meta2formacaodepreco.com.br/.