Brazil’s Experience with Availability-Based Demand Response Procurement under the Regulatory Sandbox Framework: Lessons Learned and Proposals for Future Regulatory Enhancements

Response (DR) programs, which may be based on dynamic pricing or incentive-based mechanisms. Among these, incentive-based DR programs enable electric power system operators to offer financial incentives to achieve specific system benefits, in accordance with identified operational needs.

In Brazil, the Structural incentive-based DR Program is regulated by the Brazilian Electricity

Regulatory Agency (ANEEL) under Normative Resolution No. 1,040/2022 and includes a short-term product designed to meet the system’s peak load. Within this program, demand reduction offers are submitted weekly (by Thursday at 12:00 p.m.) for the following operating week (Saturday to Friday) by consumer agents or load aggregators, who confirm their dayahead (D-1) availability.

ANEEL Normative Resolution No. 1,040/2022 also established the possibility of introducing additional DR products within a Regulatory Sandbox environment. Subsequently, through

ANEEL Authorizing Resolution No. 12,600/2022, the use of an availability-based product was approved for a testing period extending until December 31, 2026.

The Regulatory Sandbox is an environment in which sector entities are authorized by the

Regulator to test innovative projects for a limited period, under a specific set of provisions that enable such activities to be carried out in a controlled and well-defined manner. During the testing period, participating companies and institutions are subject to differentiated regulatory requirements, while the Regulator monitors both the implementation and the outcomes of the projects. Within this experimental environment, the National Power System Operator (ONS), the Electric Energy Commercialization Chamber (CCEE), and participants in the DR program may test market innovations, while complying with the guidelines established by ANEEL

Authorizing Resolution No. 12,600/2022.

The objective of this paper is to present ONS’s experience in operationalizing the first two

Competitive Procurement Mechanisms for the availability-based DR product, which were conducted in 2024 and 2025, respectively. The paper describes the main stages of the process, the definition of the methodology and products, the key outcomes, the lessons learned, and the opportunities for regulatory improvements within the Brazilian Electricity Sector.

Beyond the national context, this paper contributes to the international discussion on Demand

Response and regulatory sandboxes by providing empirical evidence, highlighting practical insights on the design, implementation, and performance of availability-based DR procurement mechanisms that may be relevant to system operators, regulators, and policymakers in other energy markets facing similar challenges related to system flexibility, peak demand management, and energy transition.

The experience accumulated under the Regulatory Sandbox may support the development of performance metrics to assess the potential incorporation of this product into the Structural DR

Program, including participation levels, verified availability, dispatch compliance, historical of penaltys, quality of measurement and verification, among others.