Projected load, supply and advances for the electricity sector

Brazil adopted the first preventive measures against the new coronavirus in March. It has now been three months of sluggish economic activity, and the electricity sector has been hit hard. Some actions have been put in place to minimize these impacts.

We present some projections for the energy market within this scenario. First, let's recap what we have seen so far.

Panorama Comerc already showed the first effects experienced by energy agents, such as increased payment default and reduced consumption.

Read more about it: 4 effects of the covid-19 crisis on the electricity sector

We also addressed the relief measures adopted by the Ministry of Mines and Energy (MME) and the National Electric Energy Agency (Aneel) to support the sector.

The "covid-account", published on May 18, was designed to release funds for distributors. To discuss in more depth this loan that generated heated arguments in the sector, MegaWhat got together with Aneel General Director André Pepitone, the President of the Brazilian Association of Electricity Distributors (Abradee), Marcos Madureira, and attorney Gustavo de Marchi, Partner at Décio Freire Advogados specializing in the area of energy regulation and infrastructure, and also chairman of the Energy Commission of the Federal Council at the Brazilian Bar Association OAB. They all presented their views during the MegaWebinar “Conta-Covid, extraordinary tariff revisions and contracts”.

You can see it in full here.

Energy market projections

Every four months, the National System Operator (ONS), the Electric Energy Trading Chamber (CCEE) and the Energy Research Company (EPE) publish the Four-Month Load Review, with the projected growth of energy load for the next five years based on current data from the Brazilian economy.

In view of the economic slowdown caused by the pandemic and different scenarios of uncertainty, extraordinary revisions are being made.

One thing is clear in all revisions: the load was significantly reduced. The first revision was based on 0% Brazilian GDP growth; in the extraordinary revision, the figure was revised to -5%. As a result, the load shrank 4.9 GW compared to the initial projection.

See the details below:

 Source: MegaWhat

An important aspect is the greater participation of the free energy market in the country's total load. Back in 2015, the unregulated market accounted for 25% of the load; by 2019, it had grown to 30%.

It should be pointed out that the Brazilian economic crisis in 2014-2015 also affected the load, which only recovered in 2018. This underscores the direct link between energy consumption and the country's level of economic activity: energy demand grows when there is an increase in industrial production, services and overall consumption.

With this significant load reduction, there is still no plan in sight to resume power generation auctions, currently on hold due to the pandemic. EPE President Thiago Barral explains: “In an environment where distributors are over-contracted and there is surplus energy in the short and medium term, expanding investments in generation can create a greater problem and increase the cost to final consumers, who will ultimately have to pay for this investment”.

Read more about it here: EPE: No need to rush generation auctions this year, says Thiago Barral

On the other hand, there are optimistic projections regarding the natural gas market and the free energy market. We see regulatory advances in both cases, with many benefits for consumers, such as cost reduction and greater freedom to negotiate.

You can watch here the MegaWhat webinar with the full discussion.

MegaWhat 4-Month Study

MegaWhat, the content and intelligence company belonging to the Comerc group, conducts four-month studies with an in-depth analysis of the electricity sector.

The latest edition was released on May 26. For more details, check out this full report.