The case for auctioning transmission margins: the design of a competitive mechanism for access to the National Interconnected System in Brazil

Lucas Santos e Silva

Maurício S. Bugarin

Recent transformations in the Brazilian Electricity Sector (BES) have ushered in a period marked by intense competition for transmission capacity within the National Interconnected System (NIS). This has brought attention to the inherent scarcity of transmission resources and revealed the inadequacy of the current queue criterion for allocating remaining margins in such a scenario. To address the country’s new reality, this paper proposes adopting a competitive mechanism for granting access to the transmission grid—an alternative that employs a simple and transparent procedure, enhances allocative efficiency, and improves access dynamics. Specifically, our paper introduces the design of a Transmission Margin Auction (TMA) for the BES, a mechanism based on an open ascending format, where all the available capacity outlined in the National System Operator’s (ONS) expansion plan is sequentially offered, and participants are granted the opportunity to compete at any preferred connection point of their choice.

Key Words: Mechanism design, Transmission margin auctions, Brazilian national interconnected system, Transmission network access, Grid access.

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