The Free Electricity Power Market

Newcom helps you negotiate the best power contract in the unregulated power market, whether you want to buy or sell. We strive to offer our clients and suppliers the best deals.

NEWCOM - MERCADO DE ENERGIA - VERSÃO INGLÊS (1)

THE FREE MARKET FOR THE TRADER

The growing free power market brings greater liquidity for operations among traders, creating opportunities for different structures in power contracting, shifting risks among market players and enabling speculative positions.

The key types of power contracting in the free market are:

  • MercadoLivre-01-contratoscompravenda-anim

    Power Purchase Agreement  through which traders can set up reserves to comply with regulatory requirements, structure future directional positions in the physical energy market and lock positions with price and volume hedging

  • MercadoLivre-02-contratosadminriscos-anim

    Contracts for risk management to protect  portfolios and maximize margins, including  swaps, options and energy derivatives

  • MercadoLivre-03-produtosestruturados-anim

    Structured products based on specific demands of other market players

  • MercadoLivre-04-contratosderivativos-anim

    Power derivatives: financial instruments derived from power

Traders can buy and sell in the physical market or operate in the financial market of power derivatives to meet the needs of different market players, such as consumers, generators, distributors or other traders. 

THE FREE MARKET FOR THE GENERATOR

The combination of savings for consumers and improved margins for generators led to growing volumes traded in the free market , creating opportunities to develop contracting structures to maximize results and allocate risks among market agents. 

Generators can offer their product in the unregulated market to serve the so-called free or special consumers, and also in the regulated market to meet the demand of large distributors. The key types of energy contracting for generators in the free market include:

  • MercadoLivre-01-contratoscompravenda-anim

    Power Purchase Agreement for traders to set up energy reserves to comply with regulatory requirements, structure their future directional position in the physical market, and lock positions with price and volume hedging.

  • MercadoLivre-02-contratosadminriscos-anim (1)

    Risk management contracts to protect portfolios and maximize margins, such as  swaps, options and energy derivatives

  • MercadoLivre-03-produtosestruturados-anim (1)

    Structured products to meet specific needs of other market players

  • MercadoLivre-04-contratosderivativos-anim (1)

    Power derivatives as financial instruments

In the Brazilian energy market, generators using primary renewable sources (wind, solar, biomass and biogas, small hydropower plants) can also offer an added incentive to consumers: discounts of 50%-100% in charges for the use of distribution and transmission charges. 

THE FREE MARKET FOR THE CONSUMER

In the Free Electricity Power Market, consumers can negotiate their purchase directly with generators, traders or other consumers. Estimates point to accumulated consumer savings of R$200 billion since the unregulated market started operating in Brasil.  (Source: Abraceel)

Any corporation currently supplied by a regional distributor under a Demand Contract of more than 500 kW (five hundred kilowatt) is eligible to migrate to the free market and choose their supplier freely. Different consumer units belonging to the same corporation can combine their loads if necessary to reach this minimum volume. 

  • MercadoLivre-05-demandaAbaixo_v2-anim

    Consumers with a contract demand above  500kW and BELOW 2.000kW  are called special consumers. When migrating from the distributor in the captive or regulated market to the free market, such consumers must purchase their energy exclusively from renewable sources -- small HPPs, thermal plants fuelled by biomass or biogas,  solar or wind  

  • MercadoLivre-06-demandaAcima_v2-anim

    Consumers with a contract demand ABOVE  2.000kW are called free consumers, and they can choose to buy their energy from renewable or non-renewable sources -- including large hydropower plants and thermal plants burning fossil fuels

In order to migrate to the free market, consumers should first check the required Contract Demand requirements, as shown above. The next step is to choose the new supplier and sign a buy-and-sell agreement to ensure supply during the future desired period. The consumer must then give notice to the current supplier, notifying the distributor of the decision to migrate to the free market. The other final steps are to follow the procedures to join the Electrical Energy Trading Chamber  – CCEE and provide the appropriate System for Measurement and Billing - SMF.

The buy-and-sell agreement should consider consumption profiles, required energy volumes and compatible costs.