The energy sector is always an important point for monitoring the economy for all sectors, including purchasing departments, whether due to its direct or indirect impact on all segments. However, recently several positive and negative points for the sector are being discussed. This text is a summary to inform buyers of the main points in the field so they can plan for possible opportunities and risks for this year.
Starting with the positive aspects, according to the ONS and other bodies such as the National Energy Operator, the national hydroelectric systems in all regions of Brazil have historically high levels of water stored in reserves, above 85% in several regions, which supports ANEEL's forecast that the green flag on the accounts should remain throughout 2023 and possibly 2024.
However, in addition to this, it is worth noting that energy generation, especially self-generated energy, has been growing significantly in Brazil in recent months, reaching the 20GW mark in April according to Aneel, driven mainly by solar energy in small systems, such as rooftops and facades. This solar energy boom began in 2022 with the legal framework for distributed generation, which generated a “rush” for the system as it guaranteed free Tusd (tariff for use of the distributor network) until 2045 for those who installed the system until January/23. With this growth, in 2022 Brazil entered the ranking of the 10 largest solar energy producers for the first time, ranking 8th. However, it is worth noting that wind energy is also growing significantly, with factors such as the inauguration of the first renewable associated energy complex in the country, located in Paraíba and which generates energy from both sources. These investments generate more energy security for Brazil, reducing the risks of energy increases in cases of drought, in addition to presenting several new opportunities for companies to invest in ESG and reduce their carbon footprint, a very important point for buyers to monitor.
In addition, there are several other political movements towards a greener future, such as the recent start of work by the Special Commission for the Debate of Public Policies on Green Hydrogen in the Federal Senate, which should last 2 years and discuss measures to encourage the technology in the country. Green hydrogen is seen by many countries around the world as one of the best options for decarbonizing the economy and that it can possibly replace other energy storage systems such as batteries, with Brazil having a production advantage over many other countries due to our matrix.
In addition, it is also worth mentioning in the political field Bill 414/2021, which expands access to the free energy market for all consumers, including low-voltage (residential) consumers, and which has already been approved in the Senate and is in the Chamber of Deputies. Although industry and large companies already have access to the free market today, the change, if approved, has the potential to drastically change the national energy distribution scenario and directly impact companies.
However, the main point of uncertainty in 2023 is the Itaipu Power Plant. This year marks the end of payments on the plant's 50-year financing, and with that, the renegotiation of the so-called "Annex C" of the plant's treaty between Paraguay and Brazil is scheduled for this year. This treaty establishes the financial bases for the plant's energy commercialization, in addition to the investment focuses of the government company that manages it, with the Brazilian government seeking greater investment in social and environmental issues. It is worth noting that Itaipu produces 86% of Paraguay's energy, and each of the two countries has the right to half of the plant's production and, if it does not use all of it, according to the agreement it must sell the surplus to neighboring countries for a pre-determined price, which is what happens with Paraguay selling to Brazil. It is this value and sales models that are under discussion and guide an important aspect of the Paraguayan elections scheduled for this month, with 2 candidates with different views competing with chances of a second round.
In recent years, there have been several attempts to reach an agreement between the two countries, but no concessions were reached. This is the year in which it should be reached, with discussions on higher sales values, sales in the free energy market and even the possibility of Paraguay selling to countries other than Brazil, such as Argentina, for example. Due to Itaipu's importance in electricity generation, any agreements that are reached may have national repercussions that buyers should monitor, especially if there is progress towards greater Brazilian concessions to Paraguay.
