With the collaboration of Manuel Fernandes
In 2025, the effects of generation restrictions became more apparent in the balance sheets of companies in the electricity sector, showing that curtailment gained economic weight and began to occupy space in regulatory, legal, and accounting discussions as well.
As a result, the measure ceased to be merely a technical issue in electrical operations and began to directly impact the financial results of companies in the industry.
The term curtailment is used to describe situations in which power plants need to temporarily reduce or interrupt their generation as determined by the National Electric System Operator, even when there is available production capacity.
In practice, this phenomenon is usually associated with three main factors, as follows: energy security, to preserve the stability of the electrical system; transmission availability, in cases where the grid does not have sufficient capacity to carry all the energy generated; and energy demand in situations where the available supply exceeds consumption in certain periods or regions.
With the advancement of renewable energy generation in Brazil, especially in regions with strong wind and solar expansion, these restrictions have become more frequent. In the regulatory field, the discussion gained momentum with the approval of Law 15.269, which introduced provisions related to the treatment of generation restrictions and opened the way for compensation mechanisms in certain situations.
A significant part of this debate, however, remains open due to the government's veto of specific provisions of the law, a matter still awaiting deliberation by the National Congress. While this decision is pending, companies in the sector are exploring different approaches to address the issue economically.
Among the alternatives evaluated are adherence to regulatory renegotiation mechanisms, when available, and litigation, especially in cases where it is understood that the restrictions resulted from factors external to the projects.
Beyond the regulatory dimension, curtailment also brings significant challenges for accounting. The main question today is understanding when and to what extent any amounts related to compensation can be recognized in the financial statements.
The difficulty lies precisely in the following uncertainty: there is still no definitive clarity regarding the amounts, eligibility criteria, method of payment, and timeframe for any eventual reimbursement.
In this context, it's worth remembering that accounting is often defined as the language of business. It is through accounting that the market will monitor how companies are economically reflecting the effects of curtailment. - whether due to direct impacts on the outcome, or due to potential future rights, should there be greater regulatory certainty.
Therefore, many industry players believe that this year is likely to be decisive for the regulatory consolidation of this issue. The expectation is that there will be greater clarity regarding compensation, treatment criteria, and predictability for investors.
At the same time, structural solutions are beginning to gain traction in industry discussions, one of which is the advancement of battery energy storage, which could contribute to greater operational flexibility and better utilization of renewable generation in the future. If renewable expansion continues to be one of the pillars of the Brazilian electricity sector, how the country addresses curtailment will help define the investment environment in the coming years.
Manuel Fernandes He is the lead partner for the energy and natural resources sector at KPMG in Brazil and South America. He is also a member of the Brazilian Institute of Independent Auditors (IBRACON), the Brazilian Institute of Corporate Governance (IBGC), and the Brazilian Association of Publicly Held Companies (ABRASCA). He is a director of AmCham (American Chamber of Commerce), a director of the Portuguese Chamber of Commerce, and a board member of the Brazilian Institute of Finance Executives (IBEF).
The opinions and information expressed are the sole responsibility of the author and do not necessarily represent the official position of the author. Canal Solar.
