Improvements to the short-term price formation model in the Brazilian electricity sector are necessary and should be made cautiously, gradually, and transparently, with a clear roadmap so that authorities, agents, and other institutions can follow and interact for its proper implementation. This is the essence of the “Meta II – Formação de Preço” project, a 30-month project whose final workshop was held in early November in São Paulo in partnership between the Chamber of Electric Energy Commercialization (CCEE) and PSR.
The project involved everything from analyzing international experiences to developing open-source software that allows anyone to run simulations to study and evaluate concepts explored throughout the work. Among the topics analyzed and discussed in depth within the project are cost-based, supply-based, and hybrid price formation, double accounting for short-term prices, the establishment of virtual reservoirs, and the creation of mechanisms to mitigate market power and risks to security of supply, among others.
In its final stage, the project proposed a roadmap for the transparent implementation of improvements to the short-term pricing model in the Brazilian electricity sector, with a series of activities to be carried out by the institutions in 2026 and ideally aiming for the start of a shadow period for the new market before the end of 2027. According to PSR CEO Luiz Barroso, the presented schedule is not imposed. “It is a project proposal for institutions and the market to evaluate,” he explained.
The Deputy Executive Secretary of the Ministry of Mines and Energy, Fernando Colli, highlighted the quality of the project’s content and its collaborative nature. “Congratulations on the technical rigor and the sharing of findings with the entire sector and the entire market. In my view, the interlocutors have grown along with the development of the project,” he stated.
All materials related to the work are available on the initiative’s official page: https://www.meta2formacaodepreco.com.br
The “Meta II – Formação de Preço” project was initiated in June 2023, with resources from the World Bank, under the management and supervision of CCEE and with PSR as the main executor. The central objective of the work was to study improvements to the short-term price formation mechanism of the Brazilian electricity sector, seeking greater efficiency in the use of resources and in economic signaling for agents.
