Energy Newsletter | No 14 -September 2023

On September 01, 2023, the Brazilian National Electric Energy Agency (“ANEEL”) published ANEEL Normative Resolution (“REN”) No. 1,069/2023, which revised Module 5 of the Transmission Services Regulations, and amended REN No. 875/2020 and No. 876/2020, thus changing the transmission access procedure to be followed by power plants.

Below, we highlight the key updates regarding the new regulation:

• Cancellation of access information:

Prior to this cancellation, the access information used to be issued by the Brazilian National Electric System Operator (“ONS”) as one of the steps for connecting to the transmission grid. In contrast, the ONS is now required to update the margin map every four months, which will be available to any interested party, containing detailed information on available and future connection margins. This requirement aims to give entrepreneurs access to reliable information that will enable them to make decisions about their projects’ access to the grid.

• Presentation of guarantee upon request for access:

The agent interested in connecting to the transmission system must provide a financial guarantee at the request for the access opinion, valued at three times the amount of the Transmission System Use Charges (“EUST”) that would be paid by the power plant. This guarantee can be returned after the issuance of the access opinion and will be returned after the presentation of the guarantees connected with the execution of the Contract for the Use of Transmission System (“CUST”).  In the event that the access opinion indicates restrictions preventing or limiting the connection of the generating station, the entrepreneur can choose to keep the guarantee in force, and take priority as to the margin release while the guarantee is in effect.

• CUST/CUSD Pre-Subscription:

The CUST must be executed prior to the request for generation grants within the scope of ANEEL. As of the CUST execution, in the case of hydroelectric power plants, a 60-month time frame is established for its enforcement, and a 36-month time frame for other power sources. These deadlines can be postponed once and for up to 12 months, upon payment of a monthly reservation charge of the transmission grid, which is staggered based on the number of complete months, counted as of the approval of the request for postponing the CUST implementation.

• Effectiveness period:

REN No. 1,069/2023 will enter into force entirely only on March 01, 2024. However, as of the publication of REN No. 1,069/2023, the ONS has already begun to require the submission of the financial guarantee to request access, using the guarantee instruments required for the execution of the CUST in a provisional manner, until the provisions of REN No. 1,069/2023 are incorporated into the grid procedures.

Access REN No. 1,069/2023 in full

ANEEL amends regulation on hydroelectric projects

On September 06, 2023, REN No. 1,070/2023 was published, which refined the requirements and procedures necessary to carry out studies of hydroelectric inventory of water basins, exploration and concession of hydroelectric projects through the amendment to REN No. 875/2020.

Below, we highlight the key updates regarding this regulation:

• Small Hydroelectric Power Plant (“PCH”):

In order to be classified as a PCH, the installed capacity of the power plant must be greater than 5,000 kW, equal to and not greater than 30,000 kW.

• Providing false information in hydroelectric inventory studies:

If false information is identified, or if there is evidence that the holder of the studies, directly or indirectly, is using them to discourage, inhibit or prevent the initiative of other interested parties, the following measures can be applied:

1. revocation of registration;
2. prohibition from obtaining new records within a period of 24 months; and
3. execution of the registration guarantee provided.

• Registration holder’s preemptive rights to hydroelectric inventory studies:

The main changes refer to:

1. the registration holder’s preemptive rights as regards the approved hydroelectric inventory studies, involving one hydroelectric development, whose minimum capacity was changed from “greater than 5,000 kW” to “greater than 30,000 kW”; and
2. possibility granted to another interested party to exercise preemptive rights, provided that it is attached to the registration holder’s declaration of the approved hydroelectric inventory studies.

• Intent registration request to authorization grants (“DRI-UHE”):

Hydroelectric power plants whose power is greater than 30,000 kW, and equal to or lower than 50,000kW, will be subject to the DRI-UHE. If the request is revoked, the interested party (or the economic group to which it is part) will have 90 days to request a new registration.

• Requests for change of ownership:

Possibility of requesting a change of the DRI ownership, as long as requested by both interested parties, and by submitting all of the documents listed in Annex III of REN No. 1,070/2023, so that the new holder will assume all rights and obligations originally constituted by their predecessor.

• Drafting of the basic project:

In the event of force majeure, act of God or those caused by the government, the deadline extension for submission of the basic project will be limited to seven months.

• Effectiveness of Registration Order for Executive Summary Suitability (“DRS”):

The DRS will be effective for eight years, and will remain valid after such period in the event that both the Declaration of Water Availability Reserve (“DRDH”) and the corresponding Environmental Licensing are obtained, provided that these are in force.

• Obtaining a grant:

Interested parties must submit the documents listed in Annex IV of REN No. 1,070/2023 during the effectiveness of the DRS.

• Suspension of the granting process:

The instruction on the authorization grant process will be suspended once if the interested party expresses their intention to participate in a subsequent energy auction.

• Change to project ownership:

ANEEL will only analyze claims of projects which have executed a contract for the use of the grid, except if they traded energy in auctions involving the regulated contracting environment (“ACR”) and/or result in changes of ownership that do not imply a change in the direct corporate control.

• Document submission:

Projects under an effective DRS or an approved basic project will have 8 years, as of the publication of their organizational documents, or until December 31, 2026, whichever occurs last, for submitting the documents provided for in article 30 of REN No. 1,070/2023.

• Transition period:

Projects that obtained authorization between September 14, 2016, and the publication of REN No. 1,070/2023, but whose plant construction works have not initiated can opt for the revocation of the authorizing resolution. Interested parties must submit a notice within 60 days as of publication of REN No. 1,070/2023.

• Performance bond:

Projects that obtained authorization prior to the effectiveness of REN No. 1,070/2023, whose energy was not traded within the ACR, can request the return of the performance bond, which was replaced by the guarantee of registration, according to Annex V of REN No. 1,070/2023.

Access REN No. 1,070/2023 in full

ANEEL publishes regulations on prudential monitoring of CCEE agents during shadow period

On September 06, 2023, REN No. 1,072/2023 was published, which provides for the prudential monitoring of agents within the scope of the Chamber of Electric Energy Commercialization (“CCEE”) during the testing period (“shadow period”), amending REN No. 957/2020.

This measure aims to mitigate individual exposures, as well as systemic and contagion risks in the energy market through the study of agents’ leverage factor by analyzing the following information:

(i) total consolidated purchase and sale contracts, in reais, and average MW, on a monthly basis, for the calculation month and the next six months, by type of contract (fixed price, variable price and derivatives), type of energy and submarket;

(ii) estimated generation and consumption in terms of average MW, on a monthly basis, for the calculation month and the next six months, by type of energy and submarket;

(iii) exposure of the five largest counterparties, individually, considering the market’s next three short-term accounting cycles;

(iv) revenue from regulated market contracting (CCEAR-D, CER, CCGF, CCEN and Itaipu), on a monthly basis, for the current month and the next six months; and

(v) equity, excluding low liquidity elements, as provided for in Annex I to REN No. 1,072/2023.

The implementation of the shadow period will be the responsibility of the CCEE, characterized by the time frame between the publication of REN No. 1,072/2023 and the approval of the new version of the “Calculation of Prudential Monitoring” module by ANEEL. This REN also lists the documents that must be submitted by the agents for carrying out the prudential monitoring. REN No. 1,072/2023 will enter into force on November 01, 2023.

REN No. 1,072/2023 in full

ANEEL changes regulations on authorization of generating plants

On September 08, 2023, REN No. 1,071/2023 was published, which improved the requirements and procedures necessary to obtain authorization for generating plants, repealing REN No. 876/2020.

In addition to providing for power plants with reduced installed capacity, the regulations apply to wind, photovoltaic, thermal, hybrid, and other alternative sources, as well as to the association of generating plants involving these generation technologies.

Below, we highlight the main updates to this regulation:

• DRO Validity:

The Authorization Order of Grant Request (“DRO”) will be valid for four non-extendable years, regardless of ANEEL’s decision, and cannot be subject to amendment request.

• DRO and Transfer of Ownership:

The agent must keep ANEEL informed of any transfer of ownership between the parties under the term of the DRO.

• Implementation works:

Interested parties can – at the agent’s criteria and risk – start the project implementation without the need of an authorization issued by ANEEL.

• Implementation deadline:

The authorizations will establish the deadline of 54 months for entry into commercial operation (“COD”) of all power plants, as of the date of publication of the authorization grant. In contrast, ANEEL can analyze exception requests to this term in the event that they exceed the deadline:

• the date provided for by the distribution concessionaire for the access; or
• the date provided for by the ONS to make the access to the grid available.

This deadline will apply to grants already issued that have a COD term of less than 54 months – except in the event that the project has traded energy within the regulated environment, or has already executed the contract for the use of transmission system.

• Individualization of adjacent plants:

Adjacent plants will not be able to share measurement, control, supervision and ancillary services systems.

• Performance bond waiver for wind power plants:

The performance bond is no longer required in the granting phase for wind power plants. Wind power plants authorized prior to the regulation, whose energy was not traded within the ACR, can request the return of the performance bond.

• CUST/CUSD access waiver and subscription information:

It is no longer necessary to submit access information in order to request the grant. Yet, this document will be accepted for authorization requests submitted by March 01, 2024. In contrast, either the CUST or the Contract for the Usage of Distribution System (“CUSD”) will be one of the documents required for authorization.

• Deadline extension for implementation and change of technical characteristics:

These requests will be reviewed only if:

1. the executed CUSD/CUST is submitted along with the corresponding access opinion, or an equivalent document; and
2. the start of the construction work is attested by ANEEL’s inspection department.

These conditions do not apply to requests to change technical characteristics for enabling hybrid or associated plants, or to requests from power plants that have sold energy in ACR auctions.

• Transfer of Ownership:

Requests will only be analyzed if the plant has executed a CUSD/CUST. However, this condition does not apply to power plants that have sold energy in ACR auctions, or with ownership changes that do not imply a change in direct corporate control (definition under REN No. 948/2021).

• Deadline extension for granting authorization:

Requests for deadline extension must be submitted at least six months prior to the end of the grant term.

• Transition period:

Agents that filed requests before ANEEL under the previous regulations, and whose instruction has not been completed, must comply with the following deadlines to either adapt their requests to the new requirements, or to withdraw their request, under penalty of the request being shelved:

• 90 days for requests to change technical characteristics; and
• 30 days for other requests.

Access REN No. 1,071/2023 in full

Normative resolution on constrained-off operation restrictions is amended

On September 18, 2023, REN No. 1,073/2023 was published, which established the procedures and criteria for calculating and paying for constrained-off operating restrictions of Photovoltaic Generating Plants (“UFV”), changing REN No. 1,030/2022.

Briefly, the key changes address the following topics:

• Constrained-off events:

These are events in which there has been a reduction in energy production by centrally-dispatched UFVs or groups of UFVs considered in the schedule, as a result of a command from the ONS, which originated outside the facilities of the respective UFVs.

• Event motivation:

For the purposes of constrained-off compensation, only the events resulting from external unavailability will be considered, classified as caused by unavailability in facilities outside the corresponding UFVs – in the Transmission Grid and Other Transmission Facilities (“DITs”), within the scope of the distribution grid.

• Payment of financial amounts:

Payment of the financial amounts relating to constrained-off events due to external unavailability will be calculated by the ONS based on the productivity of the photovoltaic generating plant, taking into account any restrictions included in the plant’s access report, and submitted by means of the System Service Charge (“ESS”), which is valued through the Difference Settlement Price (“PLD”).

• Compensation parameters:

Only events that result from external unavailability exceeding 30 hours and 30 minutes annually will be considered constrained-off events subject to compensation.

• Time milestones:
  • General:

As of April 01, 2024, compensation for constrained-off operating restrictions of photovoltaic power plants will be carried out upon approval of grid procedures and changes in CliqCCEE in order to mirror the provisions of REN No. 1,073/2023.

• ACR-related:

Constrained-off events of photovoltaic power plants that occurred before April 01, 2024, which traded energy within the ACR will be treated according to a specific methodology, under the terms of the trading regulation, to be approved by the Superintendence of Regulation of Generation Services and the Electric Energy Market (“SGM”). This approach will only be applied to constrained-off recognition requests filed with ANEEL with regard to events that occurred prior to July 2022. For events that occurred between July 2022, and April 01, 2024, the methodology will be applied regardless of the generation agent’s request for constrained-off recognition.

PEQuI 2024-2028 is approved by ANEEL

On September 19, 2023, through REN No. 1,074/2023, ANEEL approved the Five-Year Strategic Innovation Plan (“PEQuI”) 2024-2028, which aims to determine priorities in innovation production within the energy sector.

The main areas of the plan are:

• Modernization of tariff changes
• Electrification of the economy and energy efficiency
• Innovations for transmission and distribution, in addition to new supporting technologies (artificial intelligence, virtual and augmented reality and blockchain)
• Digitalization, technological standards, interoperability and cybersecurity
• Low-carbon electricity
• Energy storage
• Hydrogen

Access the article about PEQuI in full

 Access REN No. 1,074/2023 in full

Alexandre Silveira reinforces Federal Government’s policies to consolidate Brazil as a low-carbon hydrogen hub

On September 25, 2023, the Minister of Mines and Energy, Alexandre Silveira, participated in the execution of a memorandum between the Northeast Consortium and the World Bank, aimed at boosting measures for the development of low-carbon hydrogen and accelerating the energy transition.

According to the minister, this partnership is intended to strengthen the public policies already outlined by the Federal Government for the development of low-carbon hydrogen in Brazil. Therefore, the agreement is another opportunity for greater energy security in Brazil, generating new jobs and decarbonizing industry and transport.

Alexandre Silveira also stressed that the  Three-Year Work Plan 2023-2025 of the National Hydrogen Program (“PNH2”) offers positive prospects for the development of the hydrogen economy in Brazil, making Brazil the largest and most competitive producer of low-carbon hydrogen in Latin America by 2035. According to the MME, the agreement also seeks to build new value chains in the states, transforming the Northeast region into a green economy hub.

Click here to access the article in full.

‘Fuel for the Future’ Bill proposes legal framework for the production of synthetic fuels in Brazil

On September 14, 2023, the “Fuel for the Future” Bill (“Bill No. 4,516/23”), proposed and signed by the Brazilian Federal Government, was sent to Congress.

Among others, this Bill proposed the following topics:

• Synthetic fuels: This Bill proposes the creation of a regulatory framework for synthetic fuels (known as e-fuel), helping to reduce carbon dioxide emissions, which can be produced from renewable sources such as biomass and other low-carbon sources. As a result, the MME hopes to encourage domestic production and offer this fuel as an option for various types of engines, contributing to greater energy security in the future. According to the proposal, the ANP will be responsible for regulating and overseeing the production and distribution of synthetic fuels, as well as their quality and use.

• ProBioQAV: This Bill also establishes the National Program for Sustainable Aviation Fuel (“ProBioQAV”), which aims to encourage research, production and use of this fuel, as well as set goals for reducing greenhouse gas (“GHG”) emissions. Among other features, the program aims to encourage the production of sustainable aviation fuel (“SAF”), obtained from renewable raw materials such as vegetable and animal fats, sugar cane, ethanol, waste or other low-carbon sources, and to promote the use and manufacture of SAF, gradually reducing the amount of CO2 emitted by the aviation sector.

• Green Diesel: The Bill also proposes the creation of the National Green Diesel Program (“PNDV”), designed to encourage research, production, marketing and energy use of green diesel regulated by the ANP in the Brazilian energy matrix. The proposal establishes that the National Energy Policy Council (“CNPE”) indicate, every year until 2037, the minimum mandatory volumetric share of green diesel produced from raw materials derived exclusively from renewable biomass, in relation to diesel sold to the final consumer, in aggregate, within the Brazilian territory.

• Carbon Storage: The Bill provides for carbon dioxide capture and geological storage activities, which will be carried out with authorization from the ANP. In this case, the ANP will be in charge of establishing the regulations governing the qualification of interested parties to carry out the activities and the conditions for the authorization and eventual transfer of ownership of the authorization.

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Brazil launches Sovereign Sustainable Bond Framework

On September 05, 2023, the Sovereign Sustainable Bond Framework was released.

This is a reference document prepared by the Sovereign Sustainable Finance Committee (“CFSS”), which aims to issue sovereign sustainable bonds using funds backed by budget expenditures in order to contribute to the country’s sustainable development.

The main eligible expenses for the initiative are:

• Environmental preservation of native biomes (including deforestation control in the Amazon and the Brazilian Savanna);
• Fostering of the Brazilian Development Bank (“BNDES”) Climate Fund program;
• Renewable Energy Production;
• Energy Efficiency; and
• Sustainable management of natural resources.

Access the Sovereign Sustainable Bond Framework in full

Discussion table on renewable energy is created

On September 11, 2023, through Ordinance SG/PR No. 165 of 2023, the discussion table “Renewable Energy: rights and impacts” was created, with the aim of fostering communication between the Federal Government, civil society and the sectors directly involved in renewable energy projects.

The coordinating board of the discussion table will provide annual reports on the problems addressed, including suggestions, as well as quantitative and qualitative data analyses to be submitted to the state minister of the General Secretariat of the Brazilian Presidency.

Access SG/PR Ordinance No. 165 in full.

National Energy Transition Plan is launched during UN event

On September 17, 2023, Minister Alexandre Silveira, in charge of the MME, launched the National Plan for Fair and Inclusive Energy Transition during the United Nations’ (UN) Sustainable Development Goals Acceleration Day (“SDGs”).

Access the Energy Transition Plan in full