Most of Brazil's distributed generation (DG) projects fall into a category that does not pay for distribution tariffs or other surcharges, according to electricity regulator Aneel.
A full 96pc of the average installed capacity in approved distributed generation projects falls into the DG I category exempt from the tariff. This category encompasses a total of 61.8GW in projects that received approval before the legal framework for distributed generation was established. While it is important to note that not all approved projects may ultimately become operational, those that do fall into this category will enjoy exemptions from surcharges, transportation costs, and distribution tariffs until 2045.
Only 4pc of distribution projects fall into the DG II category, in which units pay for a percentage of transportation tariffs that gradually increases throughout the years. In 2023, projects in this category pay for 15pc of the distribution tariff, which will gradually increase 15 percentage points/yr until reaching up to 90pc of the tariff in 2028.
Some market participants refer to distributed generation as a "death spiral" in Brazil's electricity sector because of the considerable number of consumers who avoid paying surcharges and tariffs. These costs continue to accrue, however, and are subsequently redistributed among remaining consumers, distorting costs in power bills, participants argue.
Nearly half of the distributed generation capacity comes from nontraditional projects, where power is not necessarily generated where it is consumed. Almost 38pc of the installed distributed generation capacity is derived from remote self-consumption projects, where power is generated in one location and consumed in another owned by the same entity.
There are about 45,238 distributed generation units from high- and medium-voltage consumers already authorized in Brazil. These consumers will be eligible to sign bilateral contracts for electricity supply for the first time next year. But under current regulations those consumers will need to surrender their DG tariff and surcharge exemptions and reductions.
On that account, each operation will be evaluated on a case-by-case basis to establish if migrating will be an advantage. Those who opt to migrate would be able to keep their solar power panels and could find new opportunities in incentivized power sources, according to Douglas Geraldi, new business director in solar equipment supplier Solsticio Energia. Companies already migrating to the free market could also further their savings by considering the installation of solar panels, he added.
There are not yet many high- and medium- voltage consumers who have installed distributed generation systems migrating to the free market, Geraldi said, but he added that he expects that to become more common in the coming months, as the authorization for migrations approaches.
The bulk of consumers benefiting from distributed generation comes from the low-voltage sector. There are 4.8mn residential distributed generation consumers, about 412,300 rural consumers and nearly 646,400 low-voltage consumers in other categories in the sector — such as small businesses and commercial buildings. These consumers are unable to enter into bilateral agreements for power supply, and distributed generation represents their sole opportunity to reduce their power expenses.
