Marginal Cost of Expansion (MCE) of the Brazilian Electricity Sector

Marginal Cost of Expansion (CME) of the Brazilian Electricity Sector

A crisis can be anticipated. The CME is an important metric as it indicates the cost of capital to expand the supply of the electricity sector considering the entire production chain, including generation (G), transmission (T) and distribution (D).

A plant that operates 100% of the time at nominal power (a theoretical reference only) would require an investment amortization of around USD 45/MWh to include G/T/D.

A hydroelectric plant and even a wind plant require USD 90/MWh. Solar USD 230/MWh.

The calculation I make is to consider the investment in the entire value chain for each source, the market interest rate plus the spread of the country (in this case Brazil) and the considered useful life of the project.

The crisis I’m referring to is the disparity between the CME and the prices currently charged in the free market for long-term (future) delivery. The math simply doesn’t add up!