Distributed generation faces challenges in Brazil despite progress

Brazil’s distributed generation (DG) energy segment has made significant progress in recent years, such as obtaining greater legal certainty with the enactment of its regulatory framework in 2022 and, more recently, a new tax benefit. 

However, there are still obstacles to the development of this thriving market, according to businesspeople and lawyers interviewed by BNamericas. 

Luiz Serrano, CEO and managing partner of RZK Energia, says it is essential to improve procedures for connecting projects to distributors and postpone their connection deadlines.

According to Brazilian solar lobby group MSL, Minas Gerais state energy distribution concessionaire Cemig has been hindering the implementation of DG projects, an accusation the company denies. 

Serrano also considers it important to postpone the electric power watchdog Aneel's current public consultation on DG, so that its benefits and innovative business models can be demonstrated. 

"These models need to be consolidated without there being a change in the way consortium and association vehicles are used, as a mechanism for grouping loads in mini-power plants, because that will also give us a clearer perspective on the impact of the tax reform on the sector," he told BNamericas. 

The CEO of Helexia Brasil, Aurélien Maudonnet, also says there are problems with connecting projects.

"The trade associations – Absolar and ABGD – have been working on the institutional side with Aneel to remove these obstacles, with positive results, although the effects are taking time to appear," he told BNamericas. 

Maudonnet underscored that solar energy is still going through a process of consolidation and that the incorporation of storage solutions, such as batteries, can mitigate the effects of its intermittency, making it an interesting solution for hybrid generation in isolated systems.  

"Overall, we believe that solar energy still has huge growth potential," he added.  

Daniel Maia, managing partner of Athon Energia, believes the country has the potential to jump from 2.6mn to 10mn DG consumer units, mainly through shared DG. 

He said that this requires institutional maturation work with distributors and the government, combined with social programs aimed at the low-income population.

"The expansion of shared DG will allow those people who are unable to invest, either because of physical restrictions, because they live in apartment buildings, or because they have lower purchasing power, to gain access to clean generation," Maia told BNamericas.  

Mario Azambuja, director of solar power at Epcor Energia, noted that because of the regulatory framework, the residential DG market has slowed and consumers are still confused about the charging of 'Fio B', which forms the TUSD distribution system usage rate. 

"Another problem is that the distribution companies have made it difficult for DG projects to access their grids. Throughout Brazil, there are a lot of complaints about this," he told BNamericas. 

Mauricio Barros, CEO of MTR Solar, says that bureaucracy and the high costs of connecting to the grid are obstacles that prevent many consumers from adopting DG as a source of energy. 

"The lack of technical training and skilled labor is also a challenge to be overcome in order to expand this market," Barros told BNamericas. 

LEGAL UNCERTAINTY

Débora Yanasse, a partner at Tauil & Chequer Advogados in association with Mayer Brown, said there is still legal uncertainty regarding the sale of energy credits from DG projects, an issue that was the subject of a representation by the federal audit court (TCU). 

"It's important that Aneel defines, in a clear and objective manner, any new guidelines so that the commercialization of credits isn't made illegal, with a reasonable deadline for agents to adapt their practices, and any new rules shouldn't have retroactive effects," she told BNamericas.  

The lawyer also said the regulator needs to analyze possible conflicts of interest on the part of economic groups operating in distribution, commercialization and DG, establishing and overseeing corporate governance rules and restrictions on access to competitively sensitive information. 

Yanasse underscored that the high degree of atomization of the DG market is a challenge for Aneel and the distributors themselves. 

"It would be interesting for state regulatory agencies to take a greater role in establishing rules that reduce the asymmetry of consumer information, so that consumers themselves can monitor the market by making properly informed decisions," she said.