Curtailment, legal uncertainty, and regulatory obstacles raise alarms in the electricity sector

The Brazilian electricity sector is facing complex challenges and urgent demands. This was the focus of the 4th Lefosse Energy Day, held on August 7th in São Paulo. 

The meeting brought together executives, representatives of organizations, and experts to discuss the main regulatory and structural obstacles to the national energy matrix – with emphasis on the topics of curtailment, distributed generation, market opening, self-production, and energy storage.

Curtailment requires immediate solution, experts say

Curtailment was considered the main issue facing the sector, due to its direct impact on investments, contracts, and legal certainty. For Raphael Gomes, Energy partner at Lefosse Advogados, the curtailment issue is the "first knot to be untied":

“You want to know who is going to pay for it curtailment"The generator is already in financial trouble; this could lead to legal action. And with lawsuits running parallel, you hinder the regulatory agency's actions. We're halting investments, including in self-production. How can consumers trust the plant if they read in the media that it has a 70% curtailment rate?" he said.

The concern was shared by other participants, such as Pedro Dante, also a partner at Lefosse, who advocated pragmatism in solutions. "It's clear that we won't see structural reform in the sector. We need to simplify decisions to continue looking to the future. Market opening and storage must go hand in hand, as they are responses to the intermittency of renewable sources."

ANEEL: distributed generation does not fit into Public Consultation 45

Fernando Mosna, director of ANEEL, clarified that distributed generation should not be addressed in the third phase of Public Consultation 45, which deals with centralized generation and its interaction with the ONS (National Electric System Operator).

"CP 45 doesn't have the scope to address GD. Furthermore, GD has its own legal framework, Law 14.300, which guarantees the credit offsetting regime. To discuss credit reduction or curtailment in this context, a legislative change would be necessary," explained Mosna.

Self-production suffers from insecurity brought about by provisional measure

The wording of Provisional Measure 1300 was criticized by Mário Menel, president of Abiape (Brazilian Association of Investors in Energy Self-Production), who stated that the current text threatens contracts and creates legal uncertainty.

"The provisional measure was drafted through dialogue with our association, but the outcome is unsatisfactory. It violates contracts, contains contradictory instructions, and increases operational risk. We are working to submit amendments and engage in dialogue with the rapporteur to correct these inconsistencies," he stated.

Market opening and modernization are a priority, says Abracel

For Rodrigo Ferreira, CEO of Abracel (Brazilian Association of Energy Traders), four axes should guide the sector's agenda in the coming years: price formation, market security, openness and sustainability.

"The problem isn't a lack of topics, it's a lack of solutions. We need to deliver energy safely and at the lowest possible cost to society. And these are the goals we're working on every day," he emphasized.

Storage advances, but faces tax barriers

The development of energy storage was another prominent topic of discussion. According to Alexandre Oliveira, Executive Manager of New Business at Auren Energia, regulatory progress is already underway, but fiscal obstacles are compromising the competitiveness of these solutions.

"Regulatory guidance already exists, but the problem is tax. Reaching a tax burden of almost 80% makes a solution that, globally, produces 3 TWh unfeasible. We need to carefully consider how to address this in Brazil to ensure competitiveness and a diversity of solutions," he emphasized.

The future demands flexibility and digitalization

Oliveira also warned of the need to anticipate discussions on energy flexibility, not only at the infrastructure level, but also at the software and distribution level.

"The future of the market will be based on flexibility and capacity, both in high and low voltage. We need to think now about the digital superstructure that enables new electrical products in retail," he commented.

Consensus on urgency and pragmatism

Based on the panel discussions and provocations, a consensus was formed among experts: the sector needs concrete answers, fewer overlapping regulations, and more clarity for investors, consumers, and operators.

"We have a great opportunity. But to seize it, we need to stop piling up problems and start solving them based on our reality," concluded Pedro Dante.

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