Brazil extends deadline for renewable generation projects

Brazil’s electric power watchdog Aneel has published an order extending by 36 months the deadline for renewable energy projects to start commercial operations of all their generating units and be entitled to discounts on the transmission and distribution rates TUST and TUSD, as established by a federal provisional measure. 

Elbia Gannoum, executive-president of local wind power association Abeeólica, told BNamericas that the regulator’s order will help the industry overcome a "structural crisis." 

Carlos Dornellas, technical and regulatory director of Brazil’s solar power association Absolar, said there will be enough demand to justify the new projects.

A total of 601 plants with installed capacity of 25,521MW were contemplated with the benefit. 

The state with the highest number of approved plants was Bahia, with 232 plants totaling 9,250MW, followed by Rio Grande do Norte, with 69 and 3,163MW, and Minas Gerais with 65 and 2,724MW. 

The other states in the list are: Ceará, 25 plants and 1,191MW; Goiás, 23 and 1,160MW; Mato Grosso do Sul, 33 and 2,035MW; Paraíba, 59 and 2,328MW; Pernambuco, 27 and 1,011MW; Piauí, 62 and 2,628MW; and Rio Grande do Sul, five and 122MW. 

The measure requires interested parties to sign a term of adhesion and provide a guarantee of 5% of the project’s estimated value and that works begin within 18 months of the measure's publication on April 10. 

The guarantees of faithful compliance and their validation were provided by Brazil’s stock exchange B3. More than 4.5 billion reais (US$795 million) in guarantees were provided.

Gannoum stressed that the extension of the deadline does not mean an extension of subsidies. 

"The subsidies ended in 2022. The initial deadline of 48 months for the projects to start operating was extended by another 36 months," she told BNamericas.

There are frequent complaints in the energy sector about the large volume of government incentives granted to renewable sources, which end up increasing power rates for consumers. 

According to Gannoum, the postponement is justified by the difficulty for new plants to connect to the transmission grid while new lines are not ready and by the effects of the Covid-19 pandemic. 

"The year 2022 was a post-pandemic period, when the global industry was very hot and there was a shortage of equipment, making orders difficult and generating delays," she argued. 

According to the representative of the wind sector, the extension of the deadline was also important due to the scenario of energy surplus as a result of favorable hydrological conditions and the relatively low growth in consumption. 

As a result, the price of settling differences (PLD), which is the main reference in the free market, has remained practically at the floor, affecting the economic viability of new generation projects. 

"As the PLD recovers its price – and there are already signs of water scarcity – contracting will begin to reappear, especially now at the end of 2024 and beginning of 2025," said Gannoum.  

"So this extension allows the projects time to negotiate new contracts to help solve this structural crisis that the sector is experiencing." 

Dornellas also highlighted the mismatch between the expansion of the transmission grid and renewable generation projects. 

"Solar plants become available very quickly. So we've recently experienced an exhaustion of the transmission system from the northeast region, where the main solar plants are located, to the southeast and south," he told BNamericas. 

"We’re a country that grows every year in energy at rates higher than GDP. It’s to be expected that we will see a growth in electrification, especially in regions where there are more renewables, whether through electric vehicles, datacenters or green hydrogen."