Brazil's power load has been growing at a lower rate than its generating capacity, which might drive down future prices.
The government's PDE, a 10-year plan for the energy sector, foresaw in 2013 that Brazil's load would grow by 4.2pc/year to reach an average 91GW by 2022. But the actual 2022 power load averaged 67GW, up by just 1.1pc/year, according to the government research bureau EPE. Over 2022 Brazil's power load grew by just 0.3pc, according to grid operator ONS, citing an economic downturn and lower temperatures that decreased air conditioning and refrigeration use. Longer-term data shows that same trend continuing.
Brazil's generating capacity was 133GW in 2013 but it grew by 42pc to 189GW by 2022, according to EPE and electricity regulator Aneel data. The mines and energy ministry (MME) expects Brazil's installed power generation capacity to expand by a record margin in 2023.The PDE through 2032 expects the power load to average 93-105GW by 2032, not counting distributed generation. But power consultancy PSR's calculations expect the power load to reach just 90GW by 2032, also not including distributed generation.
The reasons for this mismatch between generation and power load rest on the expansion of distributed generation and a "gold rush" in which generators raced the clock to build new projects before the end of tariff exemptions, according to market sources. In this situation, power generation offer could surpass demand, affecting trade dynamics and driving consumers to migrate to the free market.
The captive market passes on power costs to consumers with a one-year delay, because it reviews tariffs once a year. But in the free power market consumers would benefit from lower prices sooner because prices adjust more frequently.
Trading companies that invest in generation projects would need to adjust their cost projections, as the lower prices would influence investment returns, according to a market participant. With more available power pressing down on prices, generators are likely to try to charge more for other services — such as capacity, grid reliability or renewable generation — that are currently not accounted for in pricing.
Even with more available power to offer than there is demand, market participants say that Brazil's power prices are largely dependent on weather. A drought year, such as 2021, would still heavily influence the mostly hydropowered country's power prices.
The disconnect between power demand and power supply could also support other areas of growth in the country.Surplus power could help Brazil fulfill long-term plans to invest in hydrogen production. Market participants believe the cheap, renewable power available in Brazil would position it to become a leading producer of hydrogen,
Siemens Energy Brazil's head of services and solutions, Armando Juliani, told Argus that Brazil could have the lowest-priced hydrogen in the world.
