Why a bill threatens the growth of distributed generation in Brazil

A bill in congress could affect the growth of distributed generation in Brazil, two local associations representing companies in the segment told BNamericas. 

Bill 4,831/2023 addresses the extension of electricity distribution concessions and includes an article that potentially limits the insertion of DG in the coverage areas of distribution concessionaires: 

"The limit for the insertion of distributed generation in the area of operation of a distribution concessionaire is 10%, after reaching this limit, the concessionaire is no longer obliged to provide a connection point for new accessors," the article reads 

As BNamericas previously reported, tensions are high in the market, as DG investors accuse distributors of hindering new prosumers (consumers who also generate energy) from accessing their networks.

The concessionaires, in turn, claim that there are technical limitations to make new connections in certain parts of the country, above all because of the risk of energy flow inversion. 

The president of solar power association Absolar, Rodrigo Sauaia, said that, if approved with the current text, the bill will jeopardize the attraction of investment and the creation of green jobs and delay the country's energy transition 

“I think the chances of it being approved are slim. I don’t believe that this proposal responds to Brazil's needs,” he told BNamericas.  

Another provision in the bill that concerns Absolar is the free market. It says that distribution concessionaires are guaranteed a minimum of 70% of the annual energy market. 

“This creates a market reserve for energy distributors. An artificial barrier, which limits the ability not only of the free market to grow, but even to exist,” Sauaia said. 

Carlos Evangelista, president of local DG association ABGD, said that by imposing strict limits on distributed generation, the bill jeopardizes the growth of a crucial sector for the energy transition and the sustainability of the electric power system. 

“Approval of this bill could result in a significant setback for Brazil, jeopardizing its position in the advancement of renewable energy and sustainability in the electricity sector,” he told BNamericas. 

Evangelista highlighted that DG projects, especially in remote areas, can bring significant economic benefits to local communities. 

“The limitations proposed by the bill could reduce these opportunities, negatively affecting the local economy and efforts to promote energy justice,” he added. 

National DG capacity currently stands at around 30GW, based mainly on solar energy, according to sector watchdog Aneel. There are 2.6mn installations across 5,548 municipalities across the country.

Federal energy research company EPE projects that DG will grow between 56% and 135% in the next decade, requiring investments of 70.4-162 billion reais (US$12.8-29.4bn).