Article: “O custo marginal da operação: a base do PLD”, by Juliana Chade [The Marginal cost of Operation: the basis of the PLD]

To meet demand in the National Integrated System, the National System Operator (ONS) dispatches thermal and hydro plants based on Newave and Decomp optimization models. The ONS also subtracts small generators (biomass, wind and small hydros (PCHs)) from the load

The goal of the optimization models is to minimize the total cost of operation using the generating plants available in the system. Hydro plants are dispatched considering their value in [stored] water. Thermal plants are dispatched in what is known as merit order (from the cheapest to the most expensive to operate) to provide the load required. When there is less rainfall, the model tries to optimize by keeping more water in the reservoirs, making increased use of thermal plants, which drives up the price. In periods of more rainfall, the model decides to generate more power using hydro plants, and the price drops.

These models also provide the Marginal Cost to Operate (CMO), which is the cost of the next offer to provide an additional load unit. The following chart shows the thermal energy available in the Southeast in the third week of September, with the Variable Unit Cost of these plants.