The Free Market is an environment of free contracting, where consumers can buy energy as an alternative to the regular captive market
What is the Free Energy Market?
The Free Energy Market is an environment where consumers have the option to buy energy by a direct contract with a power utility that manages generation power plant or transmission lines as an alternative to the regulated market, also known as the captive market or Regulated Contracting Environment. In the regulated market, energy is purchased by distributors through auctions, and rates are established by ANEEL (Brazil National Electric Energy Agency), without the possibility of negotiation. In the Free Energy Market, the consumer has the opportunity to directly negotiate the price of energy with generating, transmitting, and trading agents. Thus, the free customer has the freedom to choose their energy supplier. This model offers several advantages for consumers, such as the ability to choose the supplier, negotiate prices, and contract terms.
Who is the Free Market for?
The Free Energy Market is mainly targeted at industries or businesses with contracted demands above 1500 kW, both for free customers and special consumers. Special consumers have a minimum demand of 500 kW, a minimum voltage of 2.3 kV, and access to incentivized alternative sources. To participate, all generation, distribution, and trading companies must be associated with the Brazil Chamber of Electric Energy Commercialization.
The entry of companies into the market occurs after going through an adhesion process, which involves both commercial and technical procedures. Free or special consumers have consumption options such as incentivized sources from renewable resources (solar, wind, biomass), small hydroelectric plants with a generation capacity of up to 5,000 kW, or hydroelectric plants with a power generation below 30,000 kW.
These energy sources have subsidies in their costs, providing even more advantages to consumers. Additionally, for free customers with demands above 1500 kW, conventional energy sources from already consolidated sources in the market, such as large hydroelectric and thermoelectric power plants, are also available.
Changes in the Brazilian Energy Sector
The Brazilian energy sector has undergone significant changes over the years since its first consolidation in 1997, especially regarding the energy contracting bureaucracy. This change aims to reach a larger number of consumers, and this is already happening progressively, with minimum demand requirements being reduced year by year.
This transformation is expected to occur gradually, but there is a near-term prospect that it will even include residential consumers. “Approved in the form of a substitute, the law project, also known as the Electricity Bill Portability Law Project, expands the free energy market to all Brazilian consumers, including residential ones.” Source: Agência Câmara de Notícias.
The Impact of the Free Energy Market
It seems that the free market will be an irreversible reality, with more and more adherents in a market increasingly more open to investors, similar to the case of the telephone industry at the beginning of the century. However, the major barrier for consumers is based on two points: the lack of information and how to act in this area; due to the need to follow certain procedures, mainly in contractual matters, as in a free trade environment there are various contractual options.
“The free energy market could already have more than 70,000 customers. According to a study from Brazil Chamber of Electric Energy Commercialization, this is the number of consumers in the country who could migrate from captive supply.” Source: Valor Econômico.