Brazil wind, solar generators lose US$320mn to curtailments

Brazil wind and solar power generators have accumulated losses of approximately 1.8bn reais (US$320mn) from January 2023 to September 2024 due to generation cuts imposed by the national grid operator ONS, local associations Abeeólica and Absolar told BNamericas.

Wind generators reported a negative impact of 1.4bn reais, while solar energy producers registered a 392mn-real loss in the period. 

Technically called curtailment, the 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.

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

A request filed by Absolar and Abeeólica seeking the resumption of financial compensation for the curtailments is expected to be ruled upon by the court system on Wednesday.     

In July, electric power watchdog Aneel obtained a favorable ruling to overthrow an injunction from December 2023 that guaranteed compensation for generators forced to halt operations during certain periods of the day. 

Aneel claims it is not appropriate for consumers to pay a charge to generators when, due to engineering limitations or systemic security, it is not possible to physically transmit the energy, nor should consumers pay for energy they do not need. 

The regulator argues that including compensation for generators in the fees paid by users in their electricity bills would pass along the costs to the industrial, commercial and residential consumers.

One possible solution would be to create a compensation mechanism for generators affected by mandatory cuts, beyond the authorization for the generation plants to access the power grid. “This could balance the need to protect consumers with preserving the interests of generators,” Paula Padilha, a partner at Vieira Rezende Advogados, told BNamericas. 

In the lawyer's opinion, the regulations need to be reviewed and improved in order to set clear rights and duties of each party and avoid future conflicts.

“Mediation or a dialogue with the participation of all interested parties can also be a viable way to find a more balanced solution, in which no party is totally harmed. In other words, a negotiation in which both parties recognize their concerns and seek a middle ground that protects consumers, but without compromising generators, is essential,” Padilha said.