New Legal Framework for Distributed Generation in Brazil

On January 6, 2022, the Legal Framework for Distributed Generation in BRAZIL was published: Law No. 14.300/2022. It brings profound changes, but is more balanced and fair in establishing clear and coherent rules for this type of self-generation of solar energy, which has reached the historic mark of 8GW and is present in more than 97,3% of Brazilian municipalities, according to data from ANEEL (National Electric Energy Agency).

The concept of distributed energy generation in Brazil was initially introduced by Normative Resolution No. 482/2012 (revised by REN 687/2015 and REN 786/2017) of ANEEL.

The “own generation” of energy – which can be done by photovoltaic solar energy, wind energy, qualified cogeneration or energy from hydroelectric plants – has been the industry’s greatest strength in recent years, and has placed the solar source as an extremely powerful force. competitive and generating jobs and income throughout the country.

Now, with the approval of Law No. 14.300/2022, there is a new compensation rule with a limited period, which will be valid until 2045 for current consumer-generators and those who request access to the distribution network through the SCEE ( Electricity Compensation System) within 12 months of publication of the new Law (the so-called vacancy period).

However, important articles were vetoed by the President of the Republic and INEL (National Institute of Clean Energy) tried to analyze them. First, Article 11, §3, which deals with floating plants. Previously, they were not included in the division/subdivision of smaller generating plants, but they were vetoed after the publication of the law. Second excerpt from the article:

"The prohibition referred to in § 2 of this article does not apply to floating photovoltaic generation units installed on the water surface of water reservoirs, dams and lakes, natural and artificial, provided that each unit observes the maximum power limit installed microgeneration or distributed minigeneration, has inverter equipment, transformers and autonomous meters with specific georeferenced identification, and has requested access to the concessionaire or permission holder for the distribution of electricity in the same concession area or permission that will serve the consumer unit benefiting from the energy".

Second, the sole paragraph of Art.28 was vetoed, which classified minigeneration projects as benefiting from REIDI. It was not analyzed from the aspect of reasonableness and proportionality of legislation, which is why INEL will also start fighting to remove this important benefit from energy infrastructure projects:

"Single paragraph. For the purposes of this Law, distributed minigeneration projects will be considered electrical energy generation infrastructure projects, within the scope of § 1 of art. 1st of Law no. 11.478, of May 29, 2007, and in art. 2 of Law No. 11.488, of June 15, 2007, and in art. 2 of Law No. 12.431, of June 24, 2011, noting that, in the latter case, priority projects will be considered and that provide relevant environmental and social benefits".

Now, we cannot accept the withdrawal of the REIDI benefit for Distributed Generation, as in addition to being neither reasonable nor proportional (from the perspective of constitutional principles), it is completely incoherent and goes against the global bias of CLEAN ENERGY and RENEWABLE.

Even more so when the President of the Republic allocates billions of reais to coal-fired thermoelectric plants, which result in dirty and polluting energy. INEL is already in negotiations with the MME (Ministry of Mines and Energy) to overturn these 2 vetoes.

We now analyze the brief history until the publication of Law No. 14.300/2022:

1) 25/05/2018 to December 6, 2018: Public Consultation and Public Hearing of the ANEEL on changes to the rules of the energy compensation system, in which the first proposal was to charge for the use of the grid by self-generated energy generators in the range of 28%;

2) Various meetings conducted by INEL and other entities that fought for the sector and for the smooth and balanced transition of distributed generation rules;

3) 7/10/2019: A ANEEL informed the DG market that the charge for using the wire would be in the order of 62% of the total energy value, which caused panic and great concern in the market;

4) On December 3, 2020, at the CAE (Economic Affairs Committee), the President of INEL countered the argument of ANEEL that she had not considered the benefits of GD;

5) On December 9, 2020, the CNPE (National Energy Policy Council) published Resolution 15, which established the interest of the National Energy Policy that, in the formulation and implementation of public policies aimed at Microgeneration and Distributed Minigeneration in the Country, the following Guidelines are observed: I – non-discriminatory consumer access to distributor networks for the purpose of connecting Distributed Generation; II – legal and regulatory security, with deadlines for maintaining incentives for current consumers who have Distributed Generation; III – allocation of network usage costs and charges provided for in the Electricity Sector legislation, considering the benefits of Micro and Mini Distributed Generation – MMGD; IV – transparency and predictability in the processes of elaboration, implementation and monitoring of public policy, with definition of an agenda and deadlines for reviewing the rules for Distributed Generation; and V – gradual transition of rules, with the establishment of intermediate stages to improve the rules for Microgeneration and Distributed Minigeneration – MMGD.

6) Deputy Lafayette Andrada: sector warrior and protagonist of the action, he presents his new version of what would be the New Distributed Generation Law in Brazil through PL 5829/2019, which contained the main regulatory aspects for DG, such as maintenance of the SCEE, the acquired right and the balanced transition in the new rules.

7) On August 11, 2021, following the INEL initiative, the MME signed an agreement with the main associations in the sector so that there would be a smooth and balanced transition. This resulted in approval in the Chamber of Deputies on August 18, 2021, with 476 votes in favor and only 3 votes against.

8) On December 17, 2021, the Chamber of Deputies approved PL 5829/2019, authored by Deputy Lafayette Andrada. He presented his Final Report on the PL text and rejected 14 of the 15 Amendments that had been made the previous day (December 16), after a magical and quick approval in the Federal Senate.

There were several changes made to Distributed Generation in Brazil, INEL highlights the most important ones:

• Distributed MicroGeneration: up to 75 KW;
• Distributed Minigeneration: up to 3 MW for non-dispatchable sources;
• Minigeneration Dispatchable Sources: up to 5 MW.
• Acquired Right: rules maintained for existing projects or with “Access Request” filed within 12 months of publication of the Distributed Generation Law.

In other words: until December 31, 2045, existing micro and mini generators and those that register access with the distributor within 12 months of the publication of the Law, will pay all components of the tariff only on the difference, if positive, between the value consumed of the network and the value compensated via SCEE, as is currently the case.

However, to benefit from the Acquired Right, during the vacancy period (12 months), new entrants must inject energy into the network within the following deadlines, counted from the issuance of the distributor's access opinion: 120 (cent and twenty) days for microgenerators; 12 (twelve) months for solar source mini generators; 30 (thirty) months for mini-generators from other sources.

• Balance and valuation of benefits by CNPE and ANEEL: It will be up to the CNPE – after hearing society, associations and representative entities, companies and agents of the electric sector – to establish the guidelines for valuing the costs and benefits of microgeneration and distributed minigeneration. The following deadlines will be observed, counted from the date of publication of the Law: I- up to 6 months for the CNPE to establish the guidelines; and II- up to 18 months for the ANEEL establish calculations for the valuation of benefits.
• The CDE will cover the tariff components not associated with the cost of incident energy and not remunerated by the consumer-generator on the electrical energy compensated by consumer units participating in the SCEE in electrical energy distributors with a market of less than 700 GWh (seven hundred gigawatt-hours) per year , starting 12 (twelve) months after the publication of this Law.
• New Transition Rules: There will be new rules defined by the ANEEL within 18 months of the publication of the new law. They will be valid after the transition period, which will be nine years for those who file access between months 13 and 18 after the publication of the law, and seven years for the others.
• Faithful Compliance Guarantee: the entrepreneur must also pay a faithful compliance guarantee for projects above 500 kW in the following percentages: 2,5% of the investment value for power greater than 500 kW and less than 1 MW; and 5% of the investment value for power from 1 MW.
• Prohibition of commercialization of access opinions.
• Payment of the availability cost: 1) Existing projects – payment of the availability cost will be up to the limit of the injected energy; 2) New projects – there is no payment of the availability cost if consumption is greater than the availability cost, or if consumption is less than the availability cost.
• The B-Optante modality is only guaranteed for local generation with a transformer of up to 112,5 kVA. In other words, no longer for hotels, for example, or for remote generation.
• Concessionaires must promote public calls for the purchase of surplus energy from micro or mini distributed generation, which will be further defined by ANEEL. There will also be the hiring of ANCILLARY SERVICES through a public call.
• TUSDG: The cost of demand will decrease, since mini-generators will pay the value per kW corresponding to the TUSD for generation, which is much lower than that for consumption, even valid for old projects. In this case, only after the tariff review by the respective distributor – which occurs every four years, on average. Where there is consumption and injection, two demands will be charged. One on the amount actually consumed, the TUSD charge, and the other on the amount actually injected, TUSDG.
• The tariff flags will only apply to the energy consumed;
• The cost of the DG transition system will be covered by the CDE – energy development account;
• Any rule that modifies the rules for distributed micro/minigeneration must be published 90 days in advance;
• A ANEEL and Energy Distributors must adapt their regulations within 180 days after the publication of the new law.
• New business models were introduced in Shared Energy Generation with PL 5829, namely: Voluntary Condominium; Building Condominium and Association.

Therefore, for those interested in reducing their energy bill through their own generation, it doesn't matter whether the generation comes from the sun, wind, water or biomass. If a similar product is formatted with any of these fonts, the consumer's decision will ultimately be made towards the cheapest option.

The way energy will be measured and managed by companies, from now on, is the major innovation debated by the electricity sector. INEL is present to help all businesspeople in this new energy transition and the New DG Law in Brazil.