New Electricity Price Formation in Brazil

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New Electricity Price Formation in Brazil

An Introduction to Hourly PLD & its Impacts on Renewable Energy

Product ID: P160004-02-20-1.0
Version: 1.0
Release: December 2020
Volume: 54 Pages

On January 1st, 2021, Brazil takes huge step in its evolution towards a cleaner, greener, and more investor-friendly energy market, when the long-anticipated shift to hourly spot pricing comes into effect. For a market that has been trading electricity on a weekly basis, the shift to hourly pricing will now track much shorter-term fluctuations in supply and demand, creating new opportunities and substantial benefits across the board.

As an Introduction to hourly PLD & its Impacts on renewable energy, this in-depth report reveals the new market mechanics and clarifies the underlying calculation model, while providing specific case studies for wind and solar power projects. The shift to hourly PLD will create an entirely new investment landscape, with new products, services, platforms designed to serve the new spot market, making this report an invaluable resource for anyone considering or developing projects in this new era for Brazilian energy.

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Table of Contents

  1. Introduction

  2. The Short-Term Market

    2.1 THE ENERGY BALANCING MECHANISM (MRE)
    2.2 ACCOUNTING OF ENERGY IN THE ACL
    2.3. SYSTEM’S SERVICES CHARGES (ESS)

  3. Formation of the Liquidation Price For Differences (PLD)

    3.1. FORMATION OF THE WEEKLY PLD
    3.2. THE ROLE OF THE PLD IN MARKET DESIGN
    3.2.1. The PLD’s economic drivers
    3.2.2. Guarantee of generation expansion in the Brazilian model
    3.3. THE HOURLY PLD
    3.4. THE PLD’S PRICE METHODOLOGY
    3.5. THE HOURLY PLD’S PRICE METHODOLOGY
    3.5.1. Example of hourly PLD calculation

  4. Impacts of The Hourly PLD

    4.1. IMPACTS IN ENERGY TRADING
    4.2. REDUCTION IN THE SYSTEM’S SERVICES CHARGES

  5. Case Studies

    5.1. NORTHEAST REGION WIND PARK
    5.2. BOM JESUS DA LAPA PHOTOVOLTAIC COMPLEX

  6. Hedging Instruments

    6.1. POWER STORAGE
    6.2. SYSTEM OPERATION TRANSPARENCY

  7. Bibliographic References

Figures:

  1. CMO value
  2. PLD value according to stored power
  3. Energy Balancing Mechanism (MRE): Total Generation equal to Guaranteed Power Output (GF)
  4. Energy Balancing Mechanism (MRE): Total Generation higher than Guaranteed Power Output (GF)
  5. Energy Balancing Mechanism (MRE): Total Generation lower than Guaranteed Power Output (GF)
  6. CCEE’s liquidation system
  7. Computational models’ processing
  8. Data processing flow to calculate the CMO
  9. Installed capacity, in MW, from 2001 to 2019
  10. Variation in installed capacity – Micro and Mini Distributed Generation (MW) 2018/2019
  11. Relationship between hours of the day and hourly CMO (Scenario A)
  12. Average Hourly Generation (GW – average in the respective period) = Average Hourly Generation – Wind Power
  13. Average price for the pilot PLD in 2019
  14. Power generation hourly averages for the Alegria wind farms
  15. Power generation hourly averages for the Calangos wind farms
  16. Average annual generation per hour
  17. Comparison of the average hourly and weekly PLD values for January 2019
  18. Comparison of the average hourly and weekly PLD values for October 2019
  19. Comparison of revenues with hourly and weekly PLD
  20. Accumulated differences
  21. Hourly and weekly PLD variations for January 2020
  22. BJL complex’ average hourly generation in MW (Jan/2020)
  23. PLD values and the difference between them (between 6 a.m. and 6 p.m.)
  24. BJL complex’s generation with PLD values
  25. Representation of how the RRH works

Tables:

  1. Total generation equal to the GF of plants participating in the MRE
  2. Total generation higher than the GF of plants participating in the MRE
  3. Total generation lower than the GF of plants participating in the MRE
  4. Historical and current parameters for PLD formation
  5. Data on the system modeled for 2016’s A-5 auction
  6. Annual averages of electricity prices and costs in R$/MWh
  7. Relationship between hours of the day and hourly CMO (Scenario A)
  8. Relationship between hours of the day and hourly CMO with updated values
  9. Relationship between hours of the day and hourly CMO (Scenario B)
  10. Relationship between hours of the day and hourly CMO with correction factor 0.835435
  11. Relationship between hours of the day and hourly CMO with correction factor 0.798775
  12. Main risks of the hourly PLD for the energy sector agents
  13. System’s Services Charges for the month of May (Subtotal 1) in R$ MM
  14. System’s Services Charges for the month of May (Subtotal 2) in R$ MM
  15. System’s Services Charges total price
  16. Consolidated results for the NE region in 2019