Brazil's Energy Research Office (Empresa de Pesquisa Energética, EPE) released, on October 19, 2026, the technical note explaining how the assumptions and parameters of the Reference Marginal Cost (CMR) for the 2026 Capacity Reserve Auctions – Storage will be built. This indicator will guide the maximum price accepted in the auctions scheduled for December 2 and 4, the country's first dedicated exclusively to contracting battery energy storage systems (BESS) within the capacity reserve. The document describes the method but does not disclose the values, which will come in a later publication.
What the technical note establishes
The text organizes the calculation logic into a single structure: the general criteria, the databases consulted and the steps of the economic-financial modeling that leads to the CMR. In practice, EPE indicates which cost elements of a battery project will be taken into account to arrive at a reference value that will later be recommended to the Ministry of Mines and Energy (MME).
Among the components considered, the note highlights:
- Technical characteristics of the battery systems, which influence performance and useful life over the contract;
- Required investments, that is, the CAPEX to build the projects;
- Operating costs throughout the contract period, including maintaining the asset in condition to deliver the contracted capacity;
- Localization requirements set for the auction products, which may affect equipment costs;
- Financing conditions potentially available to developers.
The explicit inclusion of local content and financing is relevant. Local content rules, in general terms, require part of the equipment or services to be produced in the country, which tends to change the cost structure and the choice of suppliers. The available credit lines, in turn, influence the cost of capital, one of the factors that weigh most on the viability of investment-intensive projects such as storage.
Ceiling price is not the contracted price
EPE makes a point of separating two concepts. The CMR serves as a reference to set the upper price limit allowed in the auctions. The price actually contracted will result from competition among participants, according to the rules defined for the auctions. In other words, the ceiling defines the space for competition, but the market determines the outcome.
The company also justified its decision not to disclose figures in advance: releasing the values now could expose commercially sensitive information and interfere with competition. For this reason, the concrete application of the method will be recorded in another technical note, which should make it possible to trace the link between the methodology, the data used, the assumptions adopted and the recommendation sent to the MME.
Auction schedule
The auctions are scheduled for December 2 and 4, 2026, and the contracts will start supply on August 1, 2028. For the LRCAP, the mechanism through which the power system contracts available capacity to ensure supply at times of peak demand, this is a debut: until now, batteries had not had their own auction in this framework. The window between contracting and commercial operation is short for projects that depend on importing or manufacturing equipment, grid connection and permitting.
What this means for the Northeast
A well-calibrated ceiling only turns into projects if there is somewhere to connect them. In ENLACE's survey of Northeastern substations eligible for LRCAP 2026, cross-referencing the ONS technical note on connection margin with other public databases, Bahia has 14 substations with a margin of 500 MW or more, Ceará has 10 in this range and Piauí, 6. This indicates that the region has points with significant capacity to host large projects, which broadens potential competition and makes the ceiling price even more decisive in project selection.
Since connection and construction costs vary from one point of the grid to another, the way EPE treats investment and operation in the CMR will weigh differently for each location. Developers with projects in Ceará, Piauí and Bahia should compare their own estimates against each component listed in the note.
Our take
In our assessment, the publication is a positive sign of predictability. By making explicit that CAPEX, operating costs, localization and financing enter the calculation, EPE allows the market to understand the logic of the ceiling before knowing the number. We see this as an important step for an unprecedented auction, in which the lack of price history increases uncertainty both for bidders and for system planners.
Some points remain open. The ceiling price values have not been disclosed, and the outcome will depend on how the assumptions are applied, especially the weight given to local content requirements and financing conditions, which the note itself treats as potential. A ceiling that is too tight may deter participants; a loose ceiling reduces competitive pressure. We also do not yet know how EPE's recommendation will be received by the MME.
In the coming weeks, we will follow the technical note applying the methodology, the recommendation sent to the MME and the final definition of maximum prices ahead of the December 2 and 4 auctions. It is also worth watching EPE's other preparatory documents for the auctions, which may provide details on the products.
What changes in practice for the BESS value chain
- Developers: can review their financial models using the same cost structure described by EPE and test ceiling scenarios before finalizing their bidding strategy.
- EPCs: should detail construction and operating budgets over the contract, since these items will be compared with the official reference.
- Manufacturers: need to assess how localization rules affect their offering and their ability to deliver within the 2028 supply deadline.
- Suppliers and lenders: gain clarity on the role of the cost of capital in the calculation and can structure credit and equipment proposals aligned with this logic.
In short, the method is on the table; the number is not yet. Those who reach the disclosure of values with well-documented costs will be better positioned to decide quickly whether and how to compete.
Original source: EPE — EPE publica metodologia para cálculo do preço-teto dos leilões de armazenamento de energia
Julio Martinez