SÃO PAULO (Reuters) – Electricity prices on the free market in Brazil have been undergoing an upward correction in recent days, reacting to successive frustration with hydrology since January, the CEO of Auren (AURE3) said on Thursday Energy, Fábio Zanfelice.
In a conference call to comment on the company’s quarterly results, the executive commented that, in addition to the hydrology factor, the market began to realize that prices were “underestimated” and should not be so depressed, even given the scenario of energy oversupply in the country.
“Some of the effect we are having on the market is a return to normality… Some of this volatility comes, obviously, due to the hydrology recession, the last time we had such a dry January was in 2019,” said Zanfelice.
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“But I also think that there is now a recognition in the market that pricing was very depressed, they believed that we would have very good hydrological periods”, he added.
The “PLD”, the short-term market reference price, has remained at the regulatory floor of 61.07 reais per megawatt-hour (MWh) in recent years due to a combination of good hydrology, strong entry of new renewable capacity and low consumption growth in the country.
This strongly impacted energy trading activities in the free market, given the lack of volatility, and also longer energy contracts, with new “greenfield” projects having difficulty becoming viable.
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Prices, however, began to show more volatility at the end of last year, leaving the floor at certain times of the day, mainly due to the high temperatures that boosted consumption and led to record loads on the system.
This week, prices also started to react to longer terms, rising due to lower-than-expected hydrology.
According to data from the Dcide platform, the reference index for conventional energy, such as that provided by hydroelectric plants, reached 158.92 reais/MWh for 2025-2028, an increase of 7.68% in the week and 30.63% in the month.
Incentivized energy (solar and wind) reached 190.28 reais/MWh, an increase of 6.4% in the week and 24.33% in the month.
For Zanfelice, there is still room for prices to rise further until the end of the wet period in the country, generally in March.
The CEO of Auren pointed out, however, that the PLD has not yet definitively reached higher levels because the storage of hydroelectric plants – the main source of the Brazilian matrix – remains comfortable.
“Storage is still high, 60% is not negligible in an oversupply scenario”, he noted, noting that he did not see any risk to the country’s energy supply.
He also said that energy trading activity is intense in “wholesale”, for large consumers, but that this effect has not yet reached “retail”, for smaller consumers.