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Power in Brazil: is it time to close prices?

image credit: Balance is the key!
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...

  • Member since 2003
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  • May 13, 2020
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Power in Brazil: is it time to close prices?

Power prices in Brazil depend primarily on two variables: 1st) level of hydroelectric reservoirs and 2nd) market demand.

Demand fell with the pandemic. The level of the reservoirs is signaling concern. Those reservoirs in the South, but also in the Southeast, where most of the country's stored water is located.

The result, composing these two variables, has been a gradual increase in the spot prices as published by the Clearinghouse CCEE.

In May, the spot rose from R$ 40/MWh to more than R$ 80/MWh. (1 USD = R$ 5,8)

This situation points to the interest and the convenience of closing now, prices for future delivery, taking advantage of the fact that the firm prices for future delivery are still well below the marginal cost of expansion. The MCE is a reference of a "technical" price that adequately remunerates the investment in new plants to be built.

If you would like to go evaluate this suggestion, I am at your disposal. This type of opportunity does not appear at all times. It is take it or leave it!

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