Vetoes on curtailment compensation would threaten investments and legal certainty, agents warn.

The possibility of President Lula vetoing parts of Provisional Measure 1304 regarding compensation for curtailment has caused a strong reaction from entities in the renewable energy generation sector, which foresee serious consequences if compensation for damages is ultimately denied.

Lula commented on this decision last week, focusing on a provision included at the last minute in the Provisional Measure that stipulates that consumers will bear the costs of compensation owed to solar and wind power plants through the ESS (System Service Charge).

The president's intention was strongly rejected by renewable energy sector associations. In their view, not approving the article would represent the greatest risk ever imposed on the clean energy industry in Brazil in two decades.

ABEEólica disputes cost

In response to the veto signal, ABEEólica (Brazilian Association of Wind Energy and New Technologies) mobilized and convened an online press conference last Friday, the 14th, followed by the publication of a manifesto.

The organization's CEO, Élbia Gannoum, strongly defended the idea that the full enactment of Article 1-A is indispensable. This provision is considered fundamental to ensuring that the Ministry of Mines and Energy (MME) defines what should be characterized as market risk, guaranteeing legal certainty and predictability in the system's operation.

ABEEólica estimates that R$2,8 billion will be needed to compensate for generation cuts that have already occurred since September 2023. The organization also questions and dismisses any impact on consumers.

The manifesto emphasizes that the amounts related to past cuts will not generate tariff increases and will not create subsidies. They can be fully offset in an accounting reconciliation at CCEE, using balances from regulated contracts, which would even result in a surplus of over R$1 billion for consumers, the association argues.

The organization also warns that, although future power outages are expected to be residual after the transmission expansion, failure to repair the damage will render existing projects unfeasible.

The manifesto continues, stating that the last few months have shown that power plants have suffered reductions of more than 50% in their monthly generation, hence the call for full sanctions to preserve affordable tariffs, protect investments, and ensure the expansion of clean energy, the association points out.

ABSOLAR warning about risk to Brazil's credibility.

A ABSOLAR The Brazilian Photovoltaic Solar Energy Association joined in the condemnation, warning that any vetoes could compromise investments and Brazilian confidence in new renewable projects.

For ABSOLARRemoving the possibility of compensation represents a serious economic risk and could "tarnish the country's credibility amidst COP 30".

The organization advocates for the full approval of articles 1-A and 1-B. The CEO, Rodrigo Sauaia, emphatically states that vetoing these articles would be "deadly for investments in large photovoltaic solar power plants" and would eliminate the possibility of expansion in the sector.

Sauaia points out that the agents are being doubly affected. In addition to being unable to generate energy and breaching contracts, they also have to bear the costs of the power cuts.

A ABSOLAR This reinforces the argument that the compensation established by the Provisional Measure will not have a tariff impact, as it will utilize resources already existing in the CCEE (Brazilian Chamber of Electric Energy Commercialization) and, by correcting the problem, will strengthen tariff moderation, returning more than R$ 1 billion to consumers.

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