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The worldwide development of natural gas industry resulted in an integration process between electrical and gas sectors in several countries. In Brazil, this process has been taking place in a consistent manner, especially on account of the increase in gas consumption for industrial use and of the installation of thermoelectric plants. Due to the predominance of hydro plants in electric power generation, thermoelectric energy production is basically dependent on hydrology and, as a result, presents a wide annual variability. Consequently, the investment applied to gas production and transportation infrastructure may become under-utilized during a large part of the time; thus, it is important to find mechanisms apt to improve its utilization. In this respect, the present work investigates the creation of a flexible market for gas, where contracts for flexible gas supply would be offered to industrial users, who would receive the gas assigned to thermal power plants when the latter are not dispatched, and would resort to an alternate fuel when these plants are dispatched. The attractiveness of such a contract would depend, of course, on its price. The purpose of this work is to develop a stochastic model for pricing flexible gas supply contracts, taking into account the uncertainty associated to the supply – dependent on the dispatch of the thermal power plants, which have the priority of use of the gas – and the risk profile of potential consumers.

Renewable energy has recently emerged as a generation option for many countries in order to provide a clean energy development. In the case of Brazil, small hydros and the cogeneration of sugarcane waste (bagasse) have been the most attractive options during the past years, with hundreds of MW constructed since 2004. In spite of their advantages, both alternatives suffer from the highly, but yet complementary, seasonal availability of their resources. This forces producers to discount (or price) the risks faced when selling energy contracts and may ultimately lead to projects being commercially unattractive. We propose a stochastic optimization model, which aims at defining the optimal composition of a portfolio based on these two renewable sources that maximizes the revenue of an energy trading company. At the same time, such model would mitigate the hydrological and fuel unavailability risks, providing a safe and competitive firm energy delivery over a given time horizon. A practical case study is shown with data from the Brazilian system.

Economic efficiency, energy security, and environmental sustainability are concerns that must be considered in any energy policy in any given country. These key aspects remain challenged currently in South America. High energy consumption growth (near 6%), worldwide rising fossil fuels prices, strong environmentalist pressure toward reducing greenhouse gas effects, and promotion of renewable energy production have been a common challenge in South American energy markets. The development of vast unexploited hydroelectric resources is also at the center of attention, where its renewable character is being confronted with its environmental impact.

The objective of this work is to discuss the generation options and challenges to meet an increasing electricity demand in Brazil. Emphasis will be put on the challenge of conciliating generation system expansion and environmental constraints under a cost-effective framework.

South America has emerged in recent years as one of the most dynamic regions for natural gas and electricity development. The continent boasts natural gas reserves and highgrowth energy markets. The need to diversify away from heavy investments in hydropower and expensive oil is driving many countries to promote the use of natural gas, especially for power generation. On the other hand, challenges are being observed such as competition between hydro- and thermal generation, the breaking of cross-country natural gas agreements, competition between natural gas and other resources for power generation and electric transmission, and others. More recently, LNG started to be considered an option to ensure the adequacy of natural gas supply for power generation. Brazil and Chile are leading the implementation process of regasification facilities. However, the region has also potential to become an exporter of LNG in the medium-term once the potential gas reserves that require deep drilling become commercially available. This paper discusses the introduction of LNG in South America, focusing on the markets, the prices and the security of supply.

The objective of this work is to discuss the modeling of auctions of long-term electricity supply contracts for new capacity in Brazil. The modeling of risks such as price-quantity (hydrological) risk, project completion risk, environmental constraints, climate change and regulatory risks are discussed. An analytical model will be developed to price these risks and case studies will be presented for real projects that have participated in the Brazilian contract auctions for new capacity. We also discuss selection of projects with different risks.

The need to stimulate generation investment is a growing challenge in deregulated electricity markets worldwide. Capacity payments and capacity markets have been investigated for this purpose. Latin American markets are exploring energy supply auctions, an avenue that is assessed in this paper. Auctions mechanisms are studied through auction theory by using Bayesian equilibrium concepts. Two sealed bid auction formats are reviewed: a single object first-price auction and single object secondprice auction. These formats are analyzed under a pseudo common value and symmetric equilibrium framework. In order to solve the first order conditions of the programming models and to compute the price market, numerical and sampling method are used as Monte Carlo heuristic. The developed models are applied to assess future auctions in the Chilean electricity market.