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Utilities
As we take a deep dive into what caused the energy curtailment in Brazil and analyse what's ahead, who could be the most affected?
The curtailment effect
The Brazilian electric matrix has undergone significant transformation in recent decade, yet it persists with an outdated planning structure. The stark reality is that, due to the rapid expansion of solar energy, production capacity has exceeded energy demand, and a portion of the renewable sources are not being dispatched. Who bears the cost? The wind generator itself. This phenomenon is known as Curtailment. We take a deep dive into what caused the curtailment and what to expect moving forward, as well as the impact a long-term curtailment could have on companies.
Energy price volatility
The higher dispatch of thermal power plants has led to volatile energy prices. In turn, these spikes have led consumers to reduce spot price exposure. A combination of higher demand for Power Purchase Agreements and rainfall being lower than expected at reservoirs has led the medium-term energy price to increase (DCIDE: +37% YoY).
Overall emerging market growth is likely to be lower going into the new year, but we believe active management could continue to build a compelling emerging market case for global investors.
