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Deregulated power prices and inflation

Rafael Herzberg's picture
Consultant energy affairs Self employed

Rafael Herzberg- is an independent energy consultant, self-employed (since 2018) based in São Paulo, Brazil* Focus on C level, VPs and upper managers associated to energy related info, analysis...

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  • May 18, 2022
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Deregulated power prices and inflation

While regulated electricity tariffs are rising, following the general trend in the Brazilian economy, deregulated prices are (still) remaining "super well behaved".

From one year to now, the prices of the deregulated power markets for future delivery, have dropped by around 4%!

And what to do with this information?

I recommend, as your energy advisor, exploring this issue as there is a potential opportunity to be captured!

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Julian Silk's picture
Julian Silk on May 18, 2022

Rafael, it would likely be the case that investors need more information on "which" prices are falling.  If they are hydroelectric prices, falling because of good rainfall, it might be a difficult investment.

Rafael Herzberg's picture
Rafael Herzberg on May 18, 2022

Hi Julian, you raise a very interesting question indeed! This is my view.

These days the supply side is very strong: water reservoirs that feed our hydro power plants (most important source in our power matrix) are way up, close to their nominal capacity. 

On the other hand the country's demand side is not so strong given the Brazilian weak economy.

In this scenario prices tend to be on the low side. And that's what's really happening!

This of course is happening in the deregulated power markets. It is a competitive environement. Regulated rates follow another path! They are always going way up! Sometimes when the party on power is willing to go for a re-election, there is a tendency to artificially "hold" pawer rates but in the following years this becomes a ratchet and rates go higher and higher. It is a well known ireresistible populist way to "handle" the situation.




 

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