Why Brazil’s CMU Energia is investing in remote and shared generation

On-site distributed solar generation (DG) is the preferred modality for Brazilian consumers in the DG segment, but the high cost of installing PV panels limits its expansion, according to Walter Fróes, president of the local trading company CMU Energia.

“That's why our investment has been bringing in cheaper energy to a section of the population that can benefit from remote and shared DG, without installing on-site panels,” Fróes told BNamericas. 

THE DETAILS

On-site DG is where solar panels are installed on the roof. There are currently around 2.32mn generating units (GU) and the same number of receiving units (RU) in the country, totaling around 23.5GW of potency. 

Remote self-consumption occurs when a power plant serves several units under the same ownership. Today, there are 486,375 GUs and 1,354,097 RUs, with 6.95GW.

Shared DG is when a power plant serves several consumers through a consortium or cooperative. In this segment there are 10,935 GUs and 361,905 RUs, with 1.19GW.

There is also DG with multiple consumer units, when participants are brought together in a central system of panels installed in a common area of the project. There are currently 359 UGs and 10,377 URs with installed capacity of 131MW.

THE OUTLOOK

It is unlikely that shared DG will surpass on-site DG in Brazil, according to Fróes.

“Shared generation has become a business, and the DG regulatory framework is making it less attractive to investors. In the case of on-site, it's a personal decision, associated with bill savings,” he said.  

Approved in 2022, the regulation includes a progressive charge for the use of the distribution grid on DG systems that are connected to the network, since January 2023. 

In addition to rising costs, DG comes up against problems such as reverse flow, which occurs when the amount of electricity produced by DG systems exceeds the demand of consumers connected to the same distribution network.

This has happened in the north and northeast of Minas Gerais state, in rural areas with low consumption loads where many DG power plants have been set up in recent years. As the state's consumption is mostly in the south, expansion would also require investment in the transmission grid. 

Fróes warns that restrictions imposed by national grid operator ONS on wind and solar generation, which already affect centralized generation, could extend to DG.

The curtailment consists of limiting all or part of a plant's output potential in order to maintain the stability of the grid due to the intermittency of renewable sources.

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

Fróes believes the curtailment will lead to a wave of lawsuits. 

“How can you obtain access authorization and then be told that you can't operate during a certain period of the day?”  

The associations representing the solar and wind sectors, Absolar and Abeeólica, have already filed lawsuits. 

RESTRUCTURING

Fróes says Brazil’s electric power system needs to undergo a general rearrangement, based on technical discussions, not politicized ones, as he believes is happening in the case of the electricity crisis in São Paulo with concession holder Enel.

“The main problem in São Paulo was the trees that fell. Were they well looked after by the city council? We can't say. We need to depoliticize the discussion and make heavy investments, not only Enel but also the government.”

Current options such as burying power cables to avoid supply interruptions due to storms would, however, lead to higher bills for consumers. 

“Brazil is a country of cheap energy, but expensive rates,” said Fróes, attributing the problem mainly to the energy development account (CDE). Managed by the government, the CDE is a fund with a large contribution from private consumers that finances a series of energy sector policies.

PLD

In the face of the severe drought affecting the country, the price of settling differences (PLD) – the main reference in the free energy market – has exceeded 500 reais (US$88.5) per MWh, after remaining at the floor for more than two years (around 60 reais/MWh).

“There are traders who thought it was good to sell energy for 100 reais/MWh [before the drought] and now they're buying it for 400 reais/MWh,” said Fróes.

For 2025, he projects a PLD in the range of 180-200 reais/MWh, still above the marginal investment cost and making it possible to take new generation projects off the drawing board.