Electricity consumption in Brazil could fall by up to 12% in 2020, says consultancy

Electricity consumption, an important indicator of economic activity, may drop by 5% to 12% in Brazil in 2020, amid the impacts of the coronavirus pandemic on demand, said the specialized consultancy RegE. The projection, if confirmed, would represent a much worse scenario than the latest estimates by the state-owned Energy Research Company (EPE) and other technical bodies in the sector, which at the beginning of May revised their prospects and signaled a 2.9% decline in energy use this year. By the end of March, forecasts for EPE, National Electric System Operator (ONS) and Electric Energy Trading Chamber (CCEE) were down only 0.9% in consumption. The consulting firm RegE pointed out that the reduction in consumption has been more significant in the free electricity market, in which large customers such as industries negotiate their supply directly with generators and traders, which will be accompanied by contract renegotiations and even a possible increase in delinquency in this sector. Energy traders expect a negative impact of R$ 5 billion this year due to these requests for flexibility and lower consumption by their customers as a result of coronavirus. Amid the sharp decline in demand and also an increase in defaults with the pandemic, the government has negotiated a support package for energy distributors that should involve more than R$ 10 billion in loans from a group of banks led by BNDES. Energy traders expect a negative impact of R$ 5 billion this year due to these requests for flexibility and lower consumption by their customers as a result of coronavirus. The consulting firm RegE, which has among the partners a former director of ANEEL, Tiago de Barros, evaluated that the slowdown in the economy will strongly impact the consumption of electricity, which could fall 4.7% in a scenario considered "optimistic". In a "moderate" view, the decline in demand could be 7.9%, while a "pessimistic" scenario could lead to a 12.3% drop in electricity use, according to RegE's own estimates. In a "normal" scenario without the pandemic, electricity consumption could have grown 4.5% in the country by 2020 -- a number in line with estimates of EPE, ONS and CCEE at the end of last year. The consultancy's projections take into account a 3.6% drop in Brazilian GDP in the optimistic scenario and 6.1% in the moderate scenario, while the pessimistic view would involve a 9.5% decline in the economy. The expectation of market analysts for the performance of the Brazilian economy this year is a drop of 5.89%, according to focus bulletin published by the Central Bank on Monday (25), against a drop of 5.12% in the previous week.