Energy contracting in Brazil and electricity prices

Abstract

PurposeTo investigate the extent to which the contracting mechanisms instituted by the 2004 reform, in particular power auctions, have solved the investment hurdles created by the first reform.Design/methodology/approachThe paper analyses the characteristics of Brazilian contracting and the experience so far with power auctions, concerning investments in generation and electricity prices.FindingsAuctions have been moderately successful, in the sense that they have attracted a fair number of bidders and electric companies have increased their value in the stock exchange, while keeping prices moderate. However, a number of other hurdles to investment – in particular clear and feasible criteria for environmental licensing – have to be solved in order to achieve the reform goals.Research limitations/implicationsThe format of power auctions is still going through a learning process; also, the experience has been limited so far, which severely hinders the use of quantitative tools. This could be the object of future research, after more data are available. Of particular interest will be the follow‐up of free bilateral contracting, which has grown significantly.Practical implicationsThis could be a useful reference for scholars interested in the recent developments in the Brazilian Electricity Supply Industry.Originality/valueAs far as is known, this is the first paper to systematically analyse the performance of power auctions in the Brazilian market. Its value lies in that it allows an objective evaluation of one central point of the 2004 reform.

A GARCH Model to Understand the Volatility of the Electricity Spot Price in Brazil

“…The differences established are settled in the short-term market, or spot market, at the PLD (CCEE, 2019). The PLD is determined on a weekly basis for each load level, with a cap and a minimum price, and is used to value the energy that was not contracted by the agents of CCEE (surplus or difference) in the spot market (Araujo et al, 2008). The PLD reflects the marginal cost of new electricity in the system.…”

Bioelectricity’s Potential Availability from Last Brazilian Sugarcane Harvest

“…These customers can acquire electric energy from any incentive and/or conventional source [53]. According to Araujo et al [54], the special consumers are those whose contracted demand is greater than or equal to 500 kW, individually or by actual communion (same address) or law. In Brazil, the environment that allows producers and traders to freely sell electric energy is the short-term market [51].…”

“…The credits and debits resulting from this contracting are settled between the agents in a centralized way in the EETC. The sale or purchase price of the energy that exceeds or is lacking in the contracts is added to the system service charges (SSC) [54]. The settlement price of differences reflects the marginal cost of new electricity in the system.…”