POTENTIAL IMPLEMENTATION RISKS IN THE PILOT ENERGY EFFICIENCY AUCTION IN RORAIMA

This report by the Climate Policy Initiative (CPI) analyzes the design and implementation risks of a pilot energy efficiency (EE) auction proposed by the Brazilian Electricity Regulatory Agency (ANEEL) for the city of Boa Vista, Roraima. The analysis identifies risks related to the auction format, the measurement and verification (M&V) methodology, and the misalignment of incentives for electricity distributors.

• The pilot energy efficiency auction in Boa Vista is designed to hire entities to reduce electricity consumption through eight lots: one for public lighting and seven 'broad competition lots' covering residential and commercial units. Bidders submit sealed bids for the amount they wish to receive per megawatt-hour of avoided energy, with the lowest bidder winning if their price is at least 5% lower than others.
• The use of a 'sealed envelope' auction format may lead to the 'winner's curse,' where the winning bid is higher in value than the good being auctioned or reflects an inability to predict costs and risks. This can result in losses for bidders and make it infeasible for winners to execute the expected energy efficiency actions.
• The chosen Measurement and Verification (M&V) methodology uses Randomized Control Trials (RCT) and a difference-in-differences approach. This creates a risk of 'contamination' if control group members implement their own EE measures and restricts the overall potential for energy savings because actions are limited only to the treatment group.
• There is a fundamental misalignment of interests between electricity distributors (the buyers of avoided energy) and the central planner. Because distribution tariffs are based on total consumption, distributors lack incentives to encourage rational energy use, as doing so lowers their own profits.
• The pilot in Roraima may lack external validity for the rest of Brazil because the state's current energy situation is atypical. Roraima is the only Brazilian state not part of the National Interconnected System (SIN) and relies on expensive, polluting diesel-fueled thermoelectric plants following the discontinuation of electricity imports from Venezuela.
• The auction's focus exclusively on the amount of energy avoided means that projects designed to shift consumption to off-peak hours, rather than reducing total consumption, are not encouraged and will not be remunerated.

APA

Schutze, A., Holz, R., & Assunção, J. (2020). POTENTIAL IMPLEMENTATION RISKS IN THE PILOT ENERGY EFFICIENCY AUCTION IN RORAIMA. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2020/08/Insight-Potential-implementation-risks-in-the-pilot-energy-efficiency-auction-in-Roraima.pdf

Chicago

Schutze, Amanda, Rhayana Holz, and Juliano Assunção. POTENTIAL IMPLEMENTATION RISKS IN THE PILOT ENERGY EFFICIENCY AUCTION IN RORAIMA. Climate Policy Initiative, 2020. https://www.climatepolicyinitiative.org/wp-content/uploads/2020/08/Insight-Potential-implementation-risks-in-the-pilot-energy-efficiency-auction-in-Roraima.pdf.

Wikipedia

{{cite report |last1=Schutze |first1=Amanda |last2=Holz |first2=Rhayana |last3=Assunção |first3=Juliano |title=POTENTIAL IMPLEMENTATION RISKS IN THE PILOT ENERGY EFFICIENCY AUCTION IN RORAIMA |publisher=Climate Policy Initiative |date=August 2020 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2020/08/Insight-Potential-implementation-risks-in-the-pilot-energy-efficiency-auction-in-Roraima.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{schutze2020potential, author = {Schutze, Amanda and Holz, Rhayana and Assunção, Juliano}, title = {{POTENTIAL IMPLEMENTATION RISKS IN THE PILOT ENERGY EFFICIENCY AUCTION IN RORAIMA}}, institution = {Climate Policy Initiative}, year = {2020}, month = aug, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2020/08/Insight-Potential-implementation-risks-in-the-pilot-energy-efficiency-auction-in-Roraima.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }