Energy Costs: from volatility management to strategic advantage

Brazil stands out globally for its majority clean and renewable diversified by energy matrix, positioning the country as a key player in the energy transition. Continued investment in renewable sources - particularly solar and wind - strengthens this advantage and supports the country's long-term energy resilience. Despite these strengths, the sector faces structural challenges that directly impact mid-market companies. In some industries, energy costs can account for up to 40% of operating expenses, making price volatility a significant concern. Higher energy prices affect not only production costs but also transportation and supply chains, ultimately influencing pricing across the economy.

At the same time, Brazil is undergoing a major market transformation. Following recent reforms, the country is progressing toward the full opening of the free energy market. Following the opening of the electricity market to medium and high voltage consumers in January 2024, a recent federal decree established the expansion of market access to low-voltage consumers as well with low-voltage commercial and industrial consumers gaining access in 2027 and residential consumers following in 2028. This structural shift, which is currently awaiting regulation by the Brazilian Electricity Regulatory Agency (ANEEL) is expected to increase competition, expand supplier options, and modernize tariff structures across the market.

According to Élica Martins, Partner and Energy Leader at Grant Thornton Brazil and Global Head of Energy Content, the diversity of Brazil’s energy matrix remains an important competitive advantage. However, the transition toward a more liberalized and competitive market requires companies to adopt a more strategic and data-driven approach to energy management.

“Energy security is back at the center of decision-making, making the transition more complex, and more gradual.”

Martins notes that businesses can no longer focus solely on securing energy supply. Instead, they must integrate risk analysis, renewable-energy sourcing, scenario monitoring, and efficiency initiatives into long-term planning. “Volatility has not disappeared; what has changed is the need to treat it as a structural component of corporate energy management in Brazil.” 

She also highlights a broader shift in the sector’s priorities: “The challenge is no longer just producing energy, but ensuring its efficient use, which increases the importance of solutions such as storage and smarter system management.”

According to Alexei Vivan, Partner and Head of the Energy Practice at CGM Advogados, President of ABCE, SindiEnergia/SP and FMASE, Energy Director at FIESP, and member of the São Paulo State Energy Policy Council (CEPE), every opportunity brings risks that, when properly understood and assessed, can become a significant competitive advantage.

In Brazil, the electricity spot price, which serves as a benchmark for medium and long-term transactions, is determined through a mathematical formula based on algorithms that are heavily influenced by the volume of water stored in the reservoirs of the country’s main hydroelectric plants. Therefore, in a market where electricity pricing is not driven solely by supply and demand dynamics, the accuracy of rainfall forecasts in the river basins feeding these reservoirs plays a critical role.

The new climate reality has altered rainfall patterns and made forecasting even more challenging, creating significant energy liquidity constraints and solvency issues for wholesale energy trading companies, which intermediates transactions in the free energy market for large consumers. On the other hand, access to this market by low-voltage consumers is only possible through a retail energy trader, which, unlike wholesale traders, assumes responsibility for the payment obligations of these consumers.

According to Alexei, “in addition to the usual price volatility and the difficulty of forecasting market movements, new participants in the free energy market should pay close attention to the financial strength and risk management policies of the retail energy traders with which they contract.”

Alexei also highlights that Brazil has an abundance of clean and renewable energy. However, the country’s electricity infrastructure faces bottlenecks that require companies to carefully plan and forecast their needs regarding operations in specific regions, production expansion, and increased energy consumption. Such planning is essential to ensure that, even with an energy supply agreement in place, neither physical access to electricity nor increased consumption becomes a constraint to business operations.

For Brazilian companies, the opportunity lies in turning these changes into a competitive advantage by combining energy diversification, operational efficiency, and proactive risk management within a more dynamic and increasingly open energy market.

Argentina experienced a more favorable energy environment in 2025, supported by increased domestic production and improved trade balance. As a result, concern over energy costs among mid-market businesses dropped to historically low levels, reflecting greater predictability and reduced supply risk.

However, structural vulnerabilities remain. Despite gains from projects such as Vaca Muerta, the system still faces seasonal risks and exposure to global price fluctuations.

Looking ahead, global developments in 2026 are expected to create both opportunities and challenges. Higher international energy prices may support export potential but could also increase domestic costs and inflationary pressures.

Germany continues to face a complex energy landscape, where decarbonisation objectives intersect with economic and infrastructural constraints.

While the transition toward renewable energy remains a priority, progress has slowed due to:

• high upfront capital requirements
• regulatory uncertainty
• delays in grid expansion

Although energy prices began to normalise toward the end of 2025, renewed geopolitical tensions have once again increased volatility. The ability to stabilise costs going forward will depend on infrastructure development and regulatory clarity, both of which remain evolving challenges, says Dr. Alexander Budzinski (Global Head of Energy and Natural Resources).

Barry Fraser, Advisory Director and Energy Lead at Grant Thornton UK says that in the UK, concerns over energy costs eased through early 2025 but rose again in the second half of the year, despite relatively stable oil prices. This reflects underlying structural issues, including limited domestic capacity, infrastructure constraints, and increasing reliance on imports.

With the UK importing a significant share of its energy supply, global disruptions in 2026 are expected to amplify cost pressures and uncertainty. For mid-market companies, energy security, not just price, is becoming a critical concern. 

Saudi Arabia occupies a unique dual position as both the world’s leading oil exporter and a country undergoing a large-scale energy transition. Its role as OPEC+’s primary “swing producer” positions it as a key stabilising force in global markets, particularly during periods of geopolitical uncertainty.

At the same time, domestic energy dynamics are shifting. Gradual subsidy reforms under Vision 2030, coupled with rising investment in renewable energy, are reshaping the cost base for businesses. While renewables currently represent a relatively small share of the energy mix, the pace of expansion is accelerating rapidly.

For mid-market businesses, this creates both opportunity and pressure. Imad Adileh, partner at Grant Thornton Kingdom Arab Emirates, notes: “Energy price volatility is no longer a surprise; it is a structural feature. The real challenge is how businesses turn that into a competitive advantage, rather than simply absorbing it as a cost.”

This transition is not only economic but strategic, requiring companies to adapt to a more competitive and less subsidised energy environment, says