Power prices volatility in Brazil
- Feb 25, 2018 6:31 pm GMT
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The capacity of the reservoirs that feed the hydroelectric plants - which represent about 70% of the annual Brazilian power production - is very small considering that the stored volume is about the nature!
This conclusion derives from the volatility observed in the CMO prices vis-à-vis water reservoirs, as shown in the charts, taken in the last 12 months:
- CMO - marginal cost of operation
it is the cost to produce an additional MWh with the available generation system
- H20 - stored volume
it is the energy reserved in water, for the dispatch of hydroelectric plants
The message is simple: anyone who has the mission to outline the power contracting strategy of a company or institution should necessarily analyze CMO and H2O to find out when to close good short-term deals.
For the longer term, the criterion should be the marginal cost of expansion, which is the cost of new plants to be built, considering the country's power matrix contracted for the future.