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Small consumers could drive free power market to R$120bn by 2040

Nearly R$52bn may stem from low voltage migration, says strategy&; free supplier choice could capture 65% of the market

11/10/2024

The complete opening of Brazil’s electricity market to consumers on low voltage connections could generate an estimated R$120 billion by 2040. Of this total, R$52 billion would come from new consumers migrating to the free market, where they can choose their electricity supplier and contractual terms, according to projections by Strategy&, a PwC consultancy analysis arm.

If market liberalization occurs by 2030, Strategy& forecasts a significant increase in the volume of electricity traded in Brazil, potentially representing up to 65% of the total electricity market by 2040. Data from the Energy Research Company (EPE) reveals that the regulated market, managed by utility companies, currently includes over 90 million consumer units, half of which are residential.

There is anticipation within the energy sector that starting January 2026, the option to migrate will extend to industrial and commercial energy users on low voltage. Full liberalization, including residential and rural properties, is projected for January 2030, although this shift still requires studies and regulatory changes that have yet to be outlined.

Since the beginning of the year, the free market has allowed any energy consumer on high voltage networks over 2.3 kilovolts (kV) to migrate, typically involving customers with electricity bills exceeding R$10,000 monthly. For instance, a supermarket chain could have moved several stores to the free market. The latest data from the Electric Energy Commercialization Chamber (CCEE) indicates over 16,000 consumer units have transitioned to the free market.

The Brazilian Electric Energy Agency (ANEEL) reports that 31,400 energy consumers have notified their respective distribution companies about migrating to the free market this year and in 2025, averaging 2,500 migrations monthly.

Adriano Correia, a partner and leader of the energy and utilities sector at PwC Brazil, notes that it is crucial to see how market liberalization is structured within the Brazilian Congress. Technically, he believes it could be very beneficial for the energy market.

Mr. Correia sees potential for new investments to cater to a new consumer profile with a lower average ticket than currently observed. Future investments, he stated, are likely to involve initiatives like new types of energy consumption meters, specific marketing models, process automation, and establishing new commercial and communication channels with consumers.

He cites the example of a retail chain negotiating a migration to the free market, which required the installation of electric vehicle chargers in store parking lots as a condition for closing the deal. The commercializer agreed, he recalls.

“We can imagine, for instance, contracting energy efficiency services. Or, later on, combining the free market with distributed generation. There’s a vast field to explore for interesting solutions and, further down the line, to sophisticate the market,” Mr. Correia said.

One of the most anticipated regulatory measures is redesigning the role of power distribution companies. Currently, they purchase energy in auctions and manage distribution to regulated market clients through the transmission network. With the expected redesign, a regulated marketer will emerge, responsible for buying energy in auctions and negotiating it with distributors. These companies will then be compensated solely for delivering the energy to consumers.

Mr. Correia emphasizes that with this separation, distribution companies will be able to act more assertively to retain customers, maintaining scale and financial margins.

*By Fábio Couto — Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/
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Free power market can generate R$6.3bn in investments in 10 years

The Brazilian Government reduces energy load requirement for entry into the Free energy Market, starting in the second half of 2019 | Viridis

The free power market, a segment in which consumers with high demand negotiate directly with generation companies and traders, may generate R$6.3 billion in investments in 10 years to draw customers, a projection by consultancy Thymos Energia made at Valor’s request shows.

The cost for companies to draw consumers who want to migrate from the regulated market to the free power market is higher than R$1,000, the consultancy said. However, the value is expected to fall to only R$100 as a result of a digitalization drive.

The calculation is based on the number of potential consumers that can migrate from the regulated market to the free market. In Brazil, there are about 87 million consumers. However, Alexandre Viana, a partner and head of consulting at Thymos, believes that about 63 million will change to the free market.

“The cost of drawing customers multiplied by the number of consumers who can migrate to the free market is equal to R$6.3 billion in investments in 10 years, excluding other injections that may come from generation and services,” he said.

The consultancy’s survey outlines a conservative, a baseline and an aggressive scenarios for electricity consumption and projects that the free power market will account for almost 73% of the total load of the National Interconnected System (SIN) in 2035, compared with 35.4% now.

This scenario takes into account that as of 2024 the free market will open fully to all consumers of high voltage, as proposed by the Ministry of Mines and Energy (MME), and THAT in 2026 the opening follows for low-voltage consumers.

“In 2035, this curve will stop growing because low income, public services and rural [clients] will have more difficulty migrating and will remain in the regulated market,” Mr. Viana said.

Bills in Congress on the modernization of the electric sector and regulations can speed up the migration of consumers, the executive added.

As for businesses, some power trading companies no longer want to only buy and sell energy and are expanding their operations by offering services to consumers and generation companies.

This is the case of 2W. With an eye on the liberalization of the market, the company is increasing the supply of renewable power to sell on the free market with the construction of two wind power farms, and has set aside funds for the acquisition of new customers.

“We see a more liberal market in the second half of this decade. For this, it is key to have generation assets so that we are not in the middle of the chain having to buy power from a generation company to sell it to the customer…We have R$150 million for customer acquisition cost to be able to tap the market and sell electricity from these farms,” CEO Claudio Ribeiro said.

Tradener follows a similar path. The company sells about 800 average megawatts and serves between 20% and 30% of its customer portfolio with its own generation. CEO Walfrido Avila said that the investment relies on better market conditions.

“We have 400 MW of projects, but we will do this in tandem with the economy. The interest rates are very high right now. This is bad for financing and this hinders investments,” he said.

For Alexandre Lopes, vice-president of the Brazilian Association of Power Trading Companies (Abraceel), this is a trend since the sector has been driving competitiveness in companies for more than 20 years and the expansion of the electric system.

“The free market has become the flagship of the expansion of electric power generation in Brazil, responsible for more than 70% of the plants under construction, mainly of renewable origin, aligned with national public policy and the global energy transition.”

Source: Valor international

https://valorinternational.globo.com/

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