Renewable energy: impasse with government reaches R$ 1.2 billion – 09/28/2024 – Market

The disorderly growth of renewable energy in the Northeast threatens to further burden Brazilians’ electricity bills, already inflated by subsidies granted to various segments of the economy, including renewable energy itself.

Companies in the sector and the government are discussing in court a bill that already reaches R$1.2 billion, caused by the mismatch between the implementation of energy generating plants and the expansion of the transmission system.

The companies want compensation for involuntary cuts in generation, intensified by restrictions imposed by the ONS (National Electric System Operator) on the transfer of energy to the rest of the country after the blackout in August 2023.

Without sufficient lines to transport electricity, these plants have been forced to stop for certain periods of the day, a process known as “curtailment”, common in the sector but which worsened after the blackout.

Renewables companies claim that, as they are not responsible for the cuts, they should be compensated for lost revenue. Aneel (National Electric Energy Agency) understands that the regulations do not provide for reimbursement in this case.

There are currently three types of involuntary generation cuts foreseen by the agency: when failures in third-party equipment affect the generator, when there are risks to the reliability of the system or when there is more energy than consumption.

The ONS says in a note that the current cuts meet precisely the two requirements for which Aneel does not foresee reimbursement: system reliability and excess generation.

Associations representing solar and wind generators say that the drop in revenue is already affecting the financial health of the most impacted projects, mainly in Ceará, the epicenter of the 2023 blackout, and in Rio Grande do Norte.

“The cuts harm the financial flow and, consequently, the ability of companies to honor contracts, loans and payment of suppliers”, says the president of Absolar (Brazilian Photovoltaic Solar Energy Association), Rodrigo Sauaia.

Abeeólica, which represents wind energy, says that, in the most affected regions, cuts can reach 70% of entrepreneurs’ revenue. The entity states that these losses can be compensated in new energy sales contracts, with increased costs for the Brazilian industry.

The sector went to court to ask for an injunction so that the amounts could be advanced — it won at first, but the decision was later overturned. The companies also argue that the debate creates legal uncertainty regarding investments.

The reimbursement provided for by law is paid with resources from the CDE (Energy Development Account), which covers subsidies paid for the electricity bill and is currently one of the main factors putting pressure on the cost of electricity in the country.

Abeeólica says that the impact on the electricity bill is small: paying the approximately R$700 million that the sector requests would cost the consumer an increase of just 0.04%, says the entity’s regulatory director, Francisco Silva.

“But when we are talking about how much the generators are adding to the energy bill [de seus clientes]the high is superior.”

The problem has been the target of warnings from EPE (Energy Planning Company) and the ONS itself for years — in 2021, the then president of EPE, Thiago Barral (currently at the Ministry of Mines and Energy), had already expressed concern about the issue in an interview with Sheet.

But the government itself has been driving disorderly growth with the recurring extension of subsidies for the installation of new wind and solar farms in the country. The incentive for distributed generation, also subsidized, helped create surpluses of renewable energy in the country.

This month, the ONS presented to the market a change in the methodology for defining cuts, which will result in a greater number of plants affected, but for less time each. The proposal divides the obligation to stop operations across a larger set of generators.

For Absolar, although it reduces the losses of those most affected, it does not solve the sector’s problem, as it does not address the issue of parameters to define compensation. The ONS says that the solution “aims to increase the reliability of the operation and has the indirect effect of reducing the concentration of cuts”.

Lawyer Elise Calixto, partner responsible for the Energy area at FAS Advogados, thinks that the solution could be a renegotiation of contracts, as occurred when hydroelectric plants experienced a similar problem.

In this case, companies that had legal actions to receive compensation for generation cuts waived their disputes in exchange for a longer concession period. The government, on the other hand, made the rules for cuts clearer.