Investigating the Impact of High Penetration of Variable Renewable Generation on Electricity Prices of the Brazilian Power System

The expansion of power capacity in the Brazilian power system over the next decade will consist mainly of variable renewable energy (VRE) generation, which in turn may affect the flexibility requirements of the system along with the volatility of energy prices. This work presented the operation conditions of the Brazilian power system under the future grid configuration. Day-ahead prices on an hourly basis were also simulated for different scenarios of VRE generation, hydrologic states, and load profiles. The results show that the requirements of hourly ramps will become more challenging. They also show that day-ahead price curves will change towards more responsive pricing in the late afternoon, indicating that the future provider of flexibility may no longer be hydroelectricity alone. Intra-day volatility of energy prices will increase, paving a way for solutions that rely on arbitrage to contribute to the provision of flexibility. However, current rules of price capping may hinder this deployment, at least in the context of an energy- only market incentive, which in turn may increase the use of out-of-market mechanisms to complement the revenue of flexibility solutions.