The introduction of the Hourly PLD in January 2021 has represented an important and necessary advance in the Brazilian electric energy  market, triggering a series of changes and opportunities but also some additional challenges for managing the risk of exposure to the Short-Term Market.

It is to help mitigate these risks of exposure and to support the expansion in renewable energy that ENGIE has developed the new Modulation Swap product for Generators. Says Energy Commercialization Officer at ENGIE, Gabriel Mann, the new product gives the security of a hedge against hourly price variations by swapping the generation profile curve for a constant or ‘flat’ curve. “A  constant curve represents a standardized product with greater liquidity for negotiations in the market. And in addition, it makes for the improved tracking of the consumption profile of industrial consumers, which today represent the larger part of consumption in the free energy market”, Gabriel explains.

The product works as follows: the generator defines its desired modulation curve (in MWh), distributed across the 24 hours of the day. As the case may be, a specific modulation curve can be established for each month of the year in line with the generation profile of the operation. In turn, ENGIE registers the same volume under the name of the generator at the CCEE – the energy clearing house, albeit distributed in a constant fashion spread over the 24 hours in the day.

Established on the basis of a  computational chain model, the PLD (Settlement Price for Differences) is the price used for settling the difference between resources and requirements of each entity in the Short-Term Market. The new pricing model was for long a traditional demand in the quest for more realistic prices in the market, with a pricing close to the realities of the operation, permitting greater efficiency in the planning and operations of the electric energy system and opening up new business opportunities. In short, this is a structural change deemed by the market as essential with the aim of modernizing the sector as a whole and developing new services.

However, for some generator companies, such as those where the energy source is wind power, the commercialization of energy in the free and regulated environments, as well as the settlement on an hourly basis, represent additional challenges for managing the risk of exposures to the Short-Term Market. “With the introduction of the new form of pricing energy, the generators are tending to experience a greater volatility in settling their positions in the Short-Term Market.

However, the greatest impact should be felt by the wind  power generators, since on many occasions, this segment of the business does not have a diversified portfolio which would  enable it to govern its generation profile during the course of the day”, comments Chief Strategy and Regulation Officer at ENGIE Brasil Energia, Marcos Keller. 

Expansion in the renewable energy sector

ENGIE’s solution was  developed to meet the demands of a market undergoing major expansion in Brazil. Renewable energy sources including hydraulic, wind, solar and bioenergy account for an 83% share of the Brazilian Energy matrix. The percentage for Brazil represents three times the world average according to Ministry of Mines and Energy data. With 695 windfarms, the country  has been climbing up the global ranking in wind power generation already occupying seventh place according to the Global World Energy Council (GWEC). A report published by the entity points to Brazil being in the forefront of growth of the sector in Latin America over the next few years, accounting for at least 37% of the forecasted expansion out to 2025.

ENGIE has more than 1,000 MW of installed capacity from wind source and is currently  embarking on the implementation of a new Wind Complex – Santo Agostinho (434 MW) ´- in the state of Rio Grande do Norte.