Curtailments in Brazil affecting solar, wind power investment plans

The curtailments of renewable power generation determined by Brazil’s national grid operator (ONS) are beginning to affect investment plans for new solar and wind projects. 

The mandatory generation cuts consist of limiting all or part of a plant's electricity production potential in order to maintain the stability of the power transmission grid.

These actions became more frequent after a blackout left six northeastern states without electricity in August 2023. 

Local wind and solar power generators reported cumulative losses of approximately 1.8bn reais (US$320mn) from January 2023 to September 2024 due to curtailments. 

“We don't have consolidated figures, but we’ve received information from companies that are putting the brakes on their plans to invest in renewable generation due to uncertainty about the volume of cuts,” Francisco Silva, technical regulatory director of wind power association Abeeólica, told BNamericas. 

Besides the curtailments, solar power investments have been harmed by the PV module import tax increase that has been in force since December 2023.  

“This will certainly influence business models, making the expansion more timid than we had projected,” Carlos Dornellas, solar association Absolar's technical regulatory director, told BNamericas. 

He underscored that greenfield projects have also been affected by the low energy prices that have prevailed in the last two years. 

“We’ve seen a slower pace for large plant [projects] throughout 2024.”

More recently, energy prices increased due to a severe drought that Brazil experienced for most of 2024. Last week, Eletrobras’ executives said that prices are also being pressured upwards due to curtailments and inflation in equipment prices. 

According to think tank Acende Brasil, price volatility and curtailments are among the consequences of the lack of operational flexibility in the electricity system amid the expansion of intermittent sources in the country. 

Operational flexibility is the availability of resources under the control of the ONS that are able to adjust production in a timely manner to balance the supply of electricity.

“The need to structure the energy market to ensure the adequacy of the provision of operational flexibility is becoming increasingly evident,” Acende Brasil said in a release. 

Transmission 

Another point of concern is the capacity of the national power transmission grid to absorb new generation plants. 

According to Dornellas, the so-called margin map of the ONS is rather congested, despite the reduction of the pipeline of undertakings to be connected to the grid after the “forgiveness day” carried out by sector regulator Aneel.

In 2023, the regulatory agency granted an amnesty for projects that had been authorized to connect but never started operating. As a result, these projects were able to have their authorization revoked without paying fines, which, in theory, would contribute to relieving the transmission system. 

“We’re working to investigate this margin map that makes it difficult for new connections to be made,” said Dornellas. 

He also said that Aneel needs to be more vigilant about delays in transmission lines and equipment, as well as modernizing planning and speeding up investments in transmission. 

Record expansion

Between January and October, Brazil added 9.3GW of renewable energy capacity, yet another record, according to Aneel. 

In October alone, the country registered an increase of 1.5GW, mainly driven by the start-up of 39 plants, mostly solar and wind.

Silva explained that the pace of installation of projects has not changed this year because the growth in curtailments occurred mainly after the 2023 blackout, while contracting of wind projects that came into operation in 2023 and this year took place in 2020, 2021 and 2022. 

“Our expectation is that this year we’ll have just over 2GW of new installed capacity,” he said. 

“New connections with established [grid] usage contracts aren't changed, since these contracts have already been signed,” Dornellas added.