Brazilian power traders still have work ahead to convince high-voltage consumers that there are advantages in migrating to the free market.
A Brazilian national confederation of industry (CNI) study found that 37pc of high-voltage companies interviewed said that they did not know whether they would migrate to a bilateral contract. And 35pc of big companiesdid not know whether they would enter the free market by signing bilateral contracts.
Lack of technical knowledge necessary to make an informed decision might explain some of the uncertainty amid a dearth of broad and consistent communication on the subject, according to Paulo Gabardo, chief executive of power consultancy i4's economic regulation.
The growth in generation capacity for incentivized sources in the next few years will ensure a discount that would be hard to be matched by the regulated market. The subsidies for incentivized power have been boosting migrations since 2016, according to Gabardo. Companies that have invested in generating their own power would need to evaluate the most cost-efficient solution on a case-by-case basis.
Trading companies have started to invest in ways to communicate with these potential clients, through product development, social media, meetings and conversations with associations that can vouch for the free market's advantages. In October, when the CNI study interviewed participants, power prices were not as favorable as they are now for migration, according to Marcelo Avila, energy solutions vice-president at power trading company Comerc Energia.
Improving communication with potential clients also includes explaining the power sector's technicalities in simple and straightforward language and building trust in trading companies, as this is the first time many industries come in contact with them, according to Claudy Marcondes, power trading company 2W's chief operating officer.
Another component in high-voltage consumers' indecision might be that power costs are not their main expense. Companies tend to lack a department dedicated to looking at electricity supply, as they will be able to choose their providers for the first time in 2024. Power trading companies have been striving towards building different products for each client, working with self-generation, free market and distributed generation contracts.
Comerc expects a migration boom next year thanks to lower spot and medium-term power prices, and says that grid operator ONS, power clearinghouse CCEE and regional distributors must prepare for their role in this change.
