Brazil's spot power market clearing price (PLD), calculated hourly by the electric energy trading chamber (CCEE), will remain at its regulatory minimum value for at least the next year, according to market participants.
The regulatory minimum, calculated at the end of every year by power regulator Aneel for the following year, is at R69.04/MWh ($14.11/MWh). Aneel is accepting public comments to evaluate the calculation method for the PLD's bottom limit, which will be taken to the agency's board by director Agnes da Costa. Congress is also working on a decree that would define the PLD's bottom level, thus politicizing a technical matter and reducing Aneel's authority.
A simulation by energy consultancy Ampere estimates the minimum PLD could be lowered to R62.63/MWh in 2024, taking into account changes in the dollar-real exchange rate and an expected drop in US inflation rates.
Three specialists consulted by Argus foresee the PLD at its regulatory bottom for at least 12 months, thanks to higher water levels in reservoirs feeding hydropower generators, excess power supply driven by distributed generation and renewable sources and depressed power demand growth.
Those factors could largely insulate Brazil's power sector from some of the El Nino weather pattern that is in effect, which tends to be much drier,power consultancy PSR's chief executive Luiz Augusto Barroso said.PSR also estimates the PLD will remain at its bottom for the next 12 months, even if Brazil experiences somewhat drier weather.
Carlos Faria, president of the national association for energy consumers (Anace), foresees Brazil's PLD at the bottom for the next two years because of more supply from new power generation projects. That is a positive outlook for consumers, as power supply agreements are usually influenced by the spot price, he said.
But the lower clearing price could also work against power consumers. Any excess power volumes on distributors' contracts will be cleared at the spot price, and the difference between that price and the power auction price passed on to the surcharges on its customers.
Tiago de Barros Correia, chief executive at RegE advisors, said it is difficult to estimate the exact price of the PLD more than 12 months in advance, but Brazil's next rainy season — which begins in November-December and will end in April — will happen with full reservoirs despite the expected El Nino weather pattern, which brings drier weather.
But Correia also points to a side effect of long periods with bottom PLD price: it can lead to new clients — who will join the liberalized market in 2024 — with no memories of navigating the free market during power crises and being caught under contract or relying on spot prices.
