Regulatory changes initiated in 2008 have ushered in commercialization in the Brazilian electricity industry, resulting in impressive consumer, supplier, and services growth. In response, market participants are preparing for intense competition and jockeying for optimal positioning within the market.
As electricity can constitute up to 60 percent of the production costs of energy-intensive industries, commercialization companies will find numerous opportunities as third-party agents that manage the energy contracts of these industries.
New analysis from Frost & Sullivan (energy.frost.com), Brazilian Electricity Commercialization Market Assessment, provides an overview of the Brazilian commercialization market for electricity, with revenues and forecast for different agents, along with a complete analysis of key market drivers, restraints and trends that are impacting the market.
Currently, more than a quarter of the electricity market is freely negotiated between agents. Taking note of the impressive growth potential of the special consumer market, which has loads greater than or equal to 0.5MW, the government passed regulations and offered incentives to expand the market presence of special consumers and commercialization companies.
"In January 2008, a specific regulation created an agent for Special Consumer in Brazil, which led to a significant increase in this consumer group," says Frost & Sullivan Energy Industry Analyst Breno Wottrich. "After three years, 455 players are already able to contract their energy with Incentivized Generators (over 330 power units)."
Special consumers are expected to account for 5.2 percent of the total demand by 2014 - an increase of almost 70 percent from the 1.5 percent in 2010. Brazil's annual electricity consumption is also anticipated to increase by a similar percentage over the next ten years. This, in turn, could lead to more installations of wind turbines to meet the demand.
The cost per installed megawatt of wind technology has decreased to competitive standards with the establishment of two manufacturing companies and the expected induction of eleven more. In addition, investors are likely to give priority to free contracts with ‘Incentivized Consumers', as its prices will be lower than centralized auctions'. In three years, the wind technology supplied to the free market is expected to witness maturity.
Despite their advantages, free markets are laden with risk. For day-to-day operations, the risks can be shared by agents, which create numerous openings for commercialization companies.
"Commercialization companies optimize portfolios based on several strategies that mitigate clients' risks," notes Wottrich. "With their accrued expertise and the imminent entry of new competitive participants, commercialization companies can offer more advanced and complete services for both supply and demand."
From commercialization companies, seeking alternative means to profit with free consumers and generators, to independent and incentivized power supply agents offering competitive electricity prices, all types of companies are setting themselves up to take advantage of the new and promising market dynamics.
Overall, the market can expect a steady and sustainable rise in demand over the next four years, mainly due to supply (maturity of wind generation), commercialization services diversification, lowered transaction costs, and specific regulation to change load limits to less than 0.5 MW.
If you are interested in more information about this study, please send an e-mail to Tatiana Brull, Corporate Communications, at tatiana.brull[.]frost.com, with your contact details.
Brazilian Electricity Commercialization Market Assessment is a part of the Market Insights - Energy & Power subscription, which also includes research on Changing Dynamics of the North American Oil and Gas Industry, Utility Pain Points for Smart Grid Adoption, Smart Energy Market: Demand Response in Europe, Opportunities for Emerging Energy Storage Technologies Market in Western Europe, Impact of Japanese Earthquake on Global Energy Markets, Growth Opportunities in the CEE Biomass Energy Market, Oil and Gas Industry - Overview of Major Indicators (Quarter 2 2011), among others. These Market Insights are part of Frost & Sullivan Growth Partnership Service.
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