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Economic Evaluation of Wind Power Projects in a Mix of Free and Regulated Market Environments in Brazil

Author

Listed:
  • Vanderson Aparecido Delapedra-Silva

    (Department of Management, Campus Darcy Ribeiro, University of Brasília, Brasília 70910-900, Federal District, Brazil)

  • Paula Ferreira

    (ALGORITMI Research Center, School of Engineering, University of Minho, 4800-058 Guimarães, Portugal)

  • Jorge Cunha

    (ALGORITMI Research Center, School of Engineering, University of Minho, 4800-058 Guimarães, Portugal)

  • Herbert Kimura

    (Department of Management, Campus Darcy Ribeiro, University of Brasília, Brasília 70910-900, Federal District, Brazil)

Abstract

The electricity market in Brazil is basically organized under two parts: the regulated market, where energy is traded through auctions, and the free market, where market participants freely negotiate the price and quantity of electricity. Although revenues obtained in the regulated market tend to be lower than in the free market, the auctions’ results show that investors still value the lesser degree of uncertainty associated with the regulated market. However, a growing interest in the free market by investors is recognized since the price of electricity tends to be higher. Therefore, this study investigates four free market price scenarios to assess the expected return for investors, using the traditional discounted cash flow approach complemented with Monte Carlo simulation to address market uncertainty. The study breaks new ground by capturing the weekly price fluctuations and including the price elasticity of demand of the free market. The results seem to indicate that the disclosure of the ceiling and floor price limits for the spot price can signal important information about the agents’ price expectation in the free market and can be used for investment project evaluation.

Suggested Citation

  • Vanderson Aparecido Delapedra-Silva & Paula Ferreira & Jorge Cunha & Herbert Kimura, 2021. "Economic Evaluation of Wind Power Projects in a Mix of Free and Regulated Market Environments in Brazil," Energies, MDPI, vol. 14(11), pages 1-18, June.
    • Handle: RePEc:gam:jeners:v:14:y:2021:i:11:p:3325-:d:569630
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    References listed on IDEAS

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