MP 1.212/2024: implications for the renewable energy electricity sector

As provided for in Law No. 9.427, on December 26, 1996, with introductions brought by Law No. 14.120, from March 01, 2021, projects based on solar, wind, biomass sources and, according to the regulations of the ANEEL (National Electric Energy Agency), qualified cogeneration, that the power injected into the transmission or distribution systems is greater than 30.000 kW and less than or equal to 300.000 kW, has the right to a reduction percentage of not less than 50% to be applied to tariffs for the use of electrical transmission (TUST) and distribution (TUSD) systems, provided that certain conditions are met:

• Result of an energy purchase auction held from January 1, 2016 until February 28, 2022;
• They will be authorized from January 1, 2016 until February 28, 2022;
• That grant requests be made within 12 months from March 1, 2021, and that all generating units begin operation within a period of up to 48 (forty-eight) months, counted from the date of grant;
• To the amount added to installed capacity, if the request to change the grant that results in an increase in the installed capacity of the enterprise is carried out within a period of up to 12 (twelve) months, counting from March 1, 2021, and the operation of all generating units associated with the request are initiated within a period of up to 48 (forty-eight) months, counting from the date of publication of the act authorizing the change in the grant.

An exception is made in relation to hydroelectric projects, whose power, to enjoy the benefit of at least 50% over TUST and/or TUSD, must be greater than 5.000 kW and less than 30.000 kW.

It is worth mentioning that the discount benefit on TUST and TUSD does not apply to distributed micro or mini generation projects, but only to those that allocate the energy generated for energy purchase auctions from the Regulated Market (ACR) and for the Free Energy Market (ACL).

Considering that in recent years there have been few auctions for purchasing energy from the regulated market, and the relatively low price for buying and selling energy in the ACL to make renewable energy projects viable, added to the fact that there is a shortage of transmission and distribution lines to flow the energy generated by the hundreds of projects that requested grants within a period of 12 months from March 1, 2021, which the market called the “gold rush”, the Federal Government, saw fit, to expand the deadline for the entry into operation of these projects, through the publication of the Provisional Measure (MP) 1.212, April 09, 2024.

Thus, with the new MP 1.212, enterprises that requested a grant or requested a change in grant to increase power between March 01, 2021 and February 28, 2022, will have the period extended, by 36 (thirty-six) months, added to the previous 48 (forty-eight) months, to complete the projects, which will take place on February 28, 2029.

To this end, entrepreneurs must provide a guarantee of faithful compliance within ninety days and begin work on the project within eighteen months from the publication of MP 1.212.

The value of the guarantee will be 5% (five percent) of the estimated value of the project, to be established in an act of the Ministry of Mines and Energy, in the following modalities:

• Collateral in cash or public debt securities issued in book-entry form, upon registration in a centralized settlement and custody system authorized by the Central Bank of Brazil, and valued at their economic values, as established by the Ministry of Finance;
• Bank guarantee issued by a bank or financial institution authorized by the Central Bank of Brazil to operate in the country;
• Insurance – guarantee.

Furthermore, MP 1.212 introduced issues aimed at reasonable tariffs, such as:

• Reversion of resources allocated to Aneel's Research and Development and Energy Efficiency programs, as provided for in Law No. 9.991, of July 24, 2000, which were rejected, or not completed, at tariffs or allocated to the CDE;
• Through a decision by the Ministry of Mines and Energy, resources destined for the Legal Amazon may be deducted to reduce tariffs;
• The Electric Energy Trading Chamber (CCEE) is authorized to negotiate the advance of CDE receivables, primarily to pay off the Covid Account and Water Shortage Account.

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.