Reducing the PLD minimum price could stimulate consumption and benefit the electricity system by improving the energy price signal.
PLD Minimum Price Reduction: Energy Price Signal Could Boost Consumption and Benefit the Electricity System
A change in the calculation of the Settlement Price of Differences (PLD), with the possibility of reducing its minimum value to near zero at certain times, promises to revolutionize energy consumption in Brazil. The proposal, currently under public consultation by the Ministry of Mines and Energy (MME), aims to improve the energy “price signal,” encouraging consumption during periods of higher generation, which can bring benefits to both consumers and the electricity system as a whole.
Alexei Vivan, partner and head of the Energy division at CGM Advogados, views the measure as highly positive. He explains that the government’s intention is to adjust energy prices to more accurately reflect moments of higher or lower supply.
The government intends to improve the energy price signal to consumers, so that consumption is higher during times when generation is greater and, therefore, the energy price is lower. This favors so-called ‘demand response.’
This strategy aims to optimize generation utilization and ensure the sustainability of the electricity system.
Challenges of Renewable Generation and Demand Response
The expansion of solar and wind power sources has presented a peculiar challenge to Brazil’s electricity system: generation is concentrated at specific times, not always aligned with consumption peaks. Often, higher consumption occurs at the end of the day, a period when solar and wind generation decreases, requiring the activation of hydroelectric and thermoelectric plants, which can overload the system.
The proposal to reduce the PLD minimum seeks precisely to mitigate this mismatch. By offering lower energy prices during periods of high generation (such as during the day with sunlight, or with wind), consumption is encouraged to shift to these times. Although not all consumers have the necessary flexibility for this adaptation, Vivan emphasizes that it is a fundamental exercise for the benefit of the sector and consumers.
The Free Market and Consumer Flexibility
The discussion on the PLD revision also intertwines with plans to open the free energy market to low-voltage consumers, scheduled for 2027. In this new scenario, consumers with greater flexibility to manage their consumption hours will be able to significantly benefit from the ability to adjust their energy usage according to the most advantageous prices, driven by a more precise and responsive price signal to energy availability.
About CGM Advogados
With over a decade of operation and a team of partners with more than 25 years of combined experience, CGM Advogados is a renowned full-service law firm, serving major companies in Brazil and abroad in over 30 areas of Business Law. Currently, the firm has over 1,000 clients, 60% of whom are international, and represents names such as Valentino, Syngenta Seeds, Maersk, Idea Zarvos, CVC Corp, Citibank, Cielo, Banco Luso, Levi Strauss, Lindt Sprüngli, and Grupo Volkswagen. More information can be found at https://www.cgmlaw.com.br/.
