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What is a balanced power price?

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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  • Sep 19, 2022
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What is a balanced power price?

Market price is about supply x demand! Sure! This is the concept of free business environments.

But... how to identify a systemic equilibrium price? Reasonable for buyers and sellers?

I really like using the marginal cost of expansion (MCE) criterion. It is derived from the construction of new power plants, considering a market compound interest rate (including country risk, inflation and a real interest rate) and a term consistent with projects of this type.

I make this calculation on month by month basis to be able to offer this reference to my clients. Today, this calculation ends up at R$ 180/MWh.

The market - this week - is offering "conventional energy" at R$156/MWh. So it's a "sexy" price in relation to the MCE.

1 USD = R$ 5.2

Rafael Herzberg's picture
Thank Rafael for the Post!
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