End of term generates race for discount on solar energy – 01/31/2023 – Market

The deadline for registration of solar energy projects entitled to full subsidy had a record number of requests. A total of 486,600 distributed generation (GD) projects were registered, as the smaller solar panel system is called, totaling 32,298 MW (megawatts) of installed power, from October last year to January 7th.

The last-minute surge surprised the sector, which had expected an increase, but not to that extent. “It’s an impressive volume from any aspect you look at”, says Marcos Madureira, president of Abradee (Brazilian Association of Electric Energy Distributors).

According to the entity, which consolidated the data, in these three months or so, the total power of the registered projects exceeds twice the volume of previously submitted requests. From October 1st to September 30th, according to the entity, orders accounted for 15,100 MW of installed capacity.

It is as if in just over three months almost two Itaipu hydroelectric plants were registered, which have 14,000 MW of installed capacity.

It could be excellent news, since solar energy is clean and projects are from private investors. However, the subsidy to which these projects are entitled will be paid by other consumers of the distributors, who will connect these new systems.

According to estimates by Abradee, the cost of this final wave for users will be BRL 270.7 billion by 2045, the period in which the complete exemption will last.

Projects prior to this final stretch, which are entitled to the benefits of this regulation, had already generated an additional cost for the consumer of around R$ 217 billion until 2045. With the additional cost at the end of last year and beginning of this year, the most which doubles, adding up to R$ 488.3 billion, according to the entity’s estimates.

The subsidy and the deadlines for accessing the discounts are provided for in Law 14,300, of January 6, 2022. The full subsidy would be valid for applications filed within one year of enactment. As there was a discussion about the deadline, the entity is considering January 7th.

According to Madureira, what most draws attention in the final wave of requests is the type of project registered.

In DG, solar energy can be generated in two ways. microgeneration, which corresponds to projects with power less than or equal to 75 kW (kilowatt), generally installed directly on roofs, and minigeneration, with installed power greater than 75 kW and less than or equal to 5 MW.

This second alternative was created to facilitate access for consumers interested in obtaining solar energy, but not those who did not have space on the roofs or lived in apartments and wanted to gather in cooperatives or associations to have access to DG.

However, this modality started to be explored as a business and most solar farms are created to sell energy to business groups, such as banks, supermarkets and retail chains.

From October to January 6, 460,110 microgeneration projects were registered, whose installed capacity adds up to 7,000 MW, adding a cost, via subsidy, of R$ 61.3 billion for other consumers until 2045.

In the case of mini-generation, a smaller number of projects was requested, 26,472. However, the total power is much higher, 25,231 MW, as well as the cost of subsidies for consumers, which amounts to R$ 209.4 billion.

On average, the annual bill transferred to consumers during this period will be R$ 12.2 billion.

Of this total, R$ 2.7 billion will refer to projects installed on roofs, and R$ 9.5 billion from so-called solar farms, which are normally businesses for selling energy to third parties.

Depending on the pace of approval of these new projects, the cost may rise as early as 2023 above that projected by Aneel (National Electric Energy Agency). In October, the agency had disclosed that projects registered by January 6 of this year should generate an additional cost of R$ 4 billion in subsidies in 2023.

Abradee understands that the data make it clear that the misuse of this generation alternative led to a commercially distorted and socially unfair market opening.

Units of large companies can have discounts, for selling the surplus to the distributor, or even disconnecting from it using the cheaper energy from these farms, but the low cost is supported by other consumers who do not have access to this alternative.

“Nothing against doing business with solar energy, but that was not the principle of the law, which provided for an alternative for energy sharing, not a commercialization disguised as sharing with subsidy paid by other consumers”, says the president of Abradee.

Madureira points out that, recently, commercialization began to be practiced even in microgeneration. Small units are installed in a single area, registered individually, but forming a single block to be sold remotely.

“In our understanding, this is a deviation from what the law effectively provides for”, he says.