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Power prices/tariffs not viable in Brazil

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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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Power prices/tariffs not viable in Brazil

Predictability, legal certainty and respect for contracts are essential so that power providers and energy users can make long-term decisions.

The amortization of power generation plants, which is the main cost item of the Brazilian power matrix, can be estimated as follows.

* Investment in power plants is R$ 6 thousand/kW of nominal capacity
* For every 1 kW of market demand, the matrix offer is 2 kW
* The investment is therefore R$ 12 thousand/kW
* The financial calculation is for 20 years and an interest rate of 1% per month
* Amortization results in R$ 233/MWh (USD 44/MWh)

In addition to amortization, there is a list of costs to be considered:

* Fuel to run thermal plants
* Operation and maintenance
* Power theft, which in Brazil is important
* Subsidies
* Taxes

The current tariffs/prices are below the required economic-financial balance.

This although Brazil has the highest cost among the BRICS in USD/MWh.

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Thank Rafael for the Post!
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