The return to energy growth and demand

Before I start, I apologize for starting the article by speaking in economic language. I promise to translate the first part of it later on into a less technical language.

Electricity is, of all the production factors, perhaps the one with the most elastic demand in relation to the income of people and companies. Since investments in power generation are long maturing, these assets need to be more elastic to the perspective of GDP growth. This is what we are living at the moment in the economic scenario of Brazil and, in particular, in the electricity market.

The return to economic growth is initially given by the occupation of idle capacity. The return to economic growth does not begin with a demand for new machines or capital goods but with fast growth in energy demand. The first thing that employers do is to activate that unit that was deactivated or increase a work shift, but for energy to be available when requested, an investment must be initiated approximately four years before. And that is the reason for the extreme dynamism felt in the segment of projects and the implementation of new power plants.

A dynamism that could not be verified in the last a-4 auction in June, but that makes itself felt in an alternative way in the free market. As if the market, even before the new regulation, already understood the signs of the new times and began to adapt, but that will be a matter for another article.

In nature, the species that begin to bloom with the first sign of the rain after a long dry period will be the first to generate the best fruits that will also be transformed into seeds that will spread throughout the region helping to perpetuate the species. So are the entrepreneurs who with the first signs of the return to economic growth are already positioning themselves to collect the strategic fruits of leaving before the competition.

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