Energy Newsletter | No. 13 – August 2023

ANEEL approves bid notice of the second transmission lines auction

On August 01, 2023, the Brazilian National Electricity Regulatory Agency (“ANEEL”) approved the bid notice regarding the second auction of transmission lines. The auction will involve 3 lots of transmission facilities, totaling 4,471 km of transmission lines and 9,840 MW in transformation capacity of substations, located in the states of Goiás, Maranhão, Minas Gerais, São Paulo and Tocantins. These projects are expected to receive BRL 21.7 billion in investments, and to generate around 36,900 jobs. The auction will be held on December 15, 2023.

ONS news article in full.

ONS receives “Forgiveness Day” applications

Following the publication of ANEEL Normative Resolution No. 1,065/2023, which provides for requirements and procedures relating to the special mechanism for handling generation grants, as well as the CUSTs entered into by generation plants, the ONS published new information about the matter on August 01, 2023.

The ONS reportedly received 351 requests for adhesion to the normative resolution, which amounts to 14.7 GW, in total, of which 11 GW relate to amnesty applications (the possibility of terminating the CUST at a lower cost), and 3.7 GW for regularization (that allows the adjustment of the implementation schedule of the plant). Most of the orders concern solar energy projects, as outlined below:

Source – ONS

ONS news article in full.

See the full list of applicants.

MME approves service order to connect Roraima to the SIN

On August 04, 2023, the MME approved a service order that will enable the connection of the state of Roraima to the Brazilian National Interconnected System (SIN). According to the MME, “interconnection is expected to reduce the amount of thermal energy generated in the state, thus reducing energy supply costs. The studies regarding the planning of the operation will be updated as the works progress, seeking to balance supply and demand”.

MME news article in full.

Program “Light for All” reinstated

On August 07, 2023, Decree No. 11,628 was published, which provides for the Brazilian Program for Universalization of Access and Use of Electricity (“Light for All” – in Portuguese, “Luz para Todos”), with the aim of supplying electricity to the rural population residing in remote areas of the Legal Amazon and who does not have access to the energy distribution system.

Among the targets of the program, we highlight: (i) enable and expand access to and use of electricity to the population through the extension of energy distribution networks and isolated generation systems; (ii) reduce social inequality and energy poverty; and (iii) enable energy decarbonization of the Legal Amazon, using clean and renewable energy sources to generate electricity.

News article about Decree No. 11,628 in full.

Decree modifies CNPE structure and operation

On August 07, 2023, Decree No. 11,629 was published, which amended provisions regarding the structure and operation of the Brazilian National Council for Energy Policy (“CNPE”), an advisory body to the president of Brazil for the development of policies and guidelines aimed at the energy sector. Below, we highlight some of the changes, which provide for energy import:

• The CNPE has been assigned the role of defining and implementing national policies regarding the integration of energy systems and integration with other countries;
• The Electric Sector Monitoring Committee (CMSE) became responsible for deciding on electricity import guidelines and conditions; and
• Insertion of the term “Import Agent” to Decree No. 7,246/2023, as a definition for “agent of the energy sector that imports electricity, upon specific authorization, and is the holder of a concession, permission or authorization for generation or trade”.

News article about Decree No. 11,629 in full.

ANEEL publishes Measuring Regulatory Performance regarding the calculation of price difference and tariffs

On August 09, 2023, ANEEL published Technical Note No. 68 /2023-SGM/ANEEL, addressing the Measuring Regulatory Performance (or “Avaliação de Resultado Regulatório”, in portuguese) of the regulation relating to the maximum and minimum amounts of Differences Settlement Price (“PLD”) and the Optimization Energy Tariff (“TEO”), which are regulated by REN No. 1032/2022.

The main findings after the assessment under discussion were:

• Maximum structural PLD: formation and value ensured solvency for the energy market, while addressing the costs of the supply security service;
• Reconciliation between the maximum structural PLD and the maximum time PLD: system requires improvement, given that the current framework failed to ensure price variability on a daily basis;
• Minimum PLD: methodology is appropriate, ensuring uniform remuneration to market agents;
• TEO: its support database is outdated, which requires regulatory attention; and
• TEO Itaipu cost structure: in compliance with the established definitions of variable cost, and as such, the minimum PLD formation methodology remains eligible.

Technical Note No. 68 /2023-SGM/ANEEL in full.

“Amazon Energy” decree published

On August 17, 2023, Decree No. 11,648 was published, implementing the “Amazon Energy” program (in Portuguese, “Energias da Amazônia“). The program in question aims to: (i) reduce the use of fossil fuels to generate electricity and, consequently, greenhouse gas emissions; (ii) contribute to the quality and safety of the electricity supply; and (iii) reduce expenses pertaining to the fuel consumption account.

News article about Decree No. 11,648 in full.

Brazilian Association of Hydrogen and Sustainable Fuels created

On August 01, 2023, according to the article published by Brasil Energia, the Brazilian Association of Hydrogen and Sustainable Fuels (“ABHIC”) has been created. According to the publication, the entity seeks to promote the hydrogen and sustainable fuels market, and aims to implement and leverage the market’s conditions regarding the technological and regulatory aspects of such sector, whose investments for Brazil are estimated at BRL 200 billion in the next 20 years, according to McKinsey & Company’s projection.

The entity launched will represent sectoral interests before public authorities, including executive and legislative bodies, regulatory agencies, Brazilian and international companies, and academic institutions. In addition, the ABHIC aims at an intense action towards implementing the key practices of the global market into Brazil.

As reported, the ABHIC will gather companies from all over the country and the entire hydrogen production chain, especially in the energy, transport, oil, steel and chemical segments, among others.

Access the article published by Brasil Energia in full.

BNDES prepares a plan of at least BRL 50 billion to finance energy transition projects

According to the publication of August 01, 2023, the BNDES is preparing a plan to finance large energy transition projects through subsidies. As informed, the focus will be on green hydrogen projects, offshore wind farms, low-carbon fuels, sustainable aviation fuel, as well as the replacement of public transport fleets by electric buses.

In addition, the means to leverage the fund, linked to the Ministry of the Environment (“MMA”), with the BNDES as a financial agent, are currently under discussion by the BNDES along with the Ministry of Finance (“MF”).  One of the solutions can be the issuance of green bonds in the international market.

Access the BNDES article in full.

House of Representatives will focus on renewable energy in the second half of 2023

As reported by Valor Econômico on August 08, 2023, three topics are on the radar of the House of Representatives for discussion: the regulation of the carbon market and offshore wind farms, as well as a legal framework on green hydrogen.

After approval of the tax reform, the chairman of the House of Representatives, Arthur Lira (PP-AL), defined that the “green agenda” will be treated as a priority until the end of 2023. Green hydrogen already has a special commission in place since May 2023, in order to try and gather the numerous projects filed.

The regulatory framework for offshore wind farms was approved by the Brazilian Senate in 2022, and is currently in analysis by the House of Representatives. According to the reporting officer, Zé Vitor (PL-MG), a decision is still pending as to the focus of the project under discussion – whether it will be concentrated on offshore wind farms or on renewable energy as a whole.

Access the article published by Valor Econômico in full.

Ordinance on the use of biodiesel published

On August 09, 2023, Interministerial Ordinance MME/MDA No. 2/2023 was published, which provides for the mechanisms to meet the goals of promotion and acquisitions from the Social Biofuel Seal (“SBS”) for Brazil’s North, Northeast and Semi-arid regions.

The SBS, a nomenclature assigned by the Ministry of Agrarian Development and Family Agriculture (“MDA”), is granted for every biodiesel industrial facility that meets the criteria previously specified. The license is given to producers who are committed to the inclusion of family farmers framed in the National Program for Strengthening Family Farming (“PRONAF”).

As published, such measure was part of the work schedule developed by both the MME and the MDA teams, in partnership with the Ministry of Agriculture, Livestock and Food Supply (“MAPA”), in compliance with the provisions established by Resolution CNPE No. 3/2023, which defined the participation goals for the regions mentioned above, within the scope of the SBS, of at least 10% in 2024, 15% in 2025, and 20% as of 2026.

The ministries under discussion emphasize that the increase in the promotion and acquisitions of the SBS for these regions is only the first measure towards restructuring and strengthening this important public policy instrument as regards the National Program for Production and Use of Biodiesel (“PNPB”).

Access the MME article in full.

Wind power represents more than 80% of the installed capacity in July 2023

On August 10, 2023, according to news published by Brasil Energia, wind power led the advance in power generation in Brazil in July 2023, representing more than 80% of the expansion of the installed capacity, according to data from the Brazilian National Electricity Regulatory Agency (“ANEEL”). In July 2023, the sector recorded a significant increase of 525.5 MW in the installed capacity, of which 421.2 MW originated from 18 new wind power plants, 7 of which are located in the state of Rio Grande do Norte. In addition, Paraíba also has made progress through the installation of 104.5 MW in 3 wind facilities.

Additionally, 2 photovoltaic solar plants (93.6 MW), 2 thermoelectric plants (10.0 MW) and 2 small hydroelectric plants (0.7 MW) were incorporated. By the end of July 2023, the Brazilian energy matrix had already increased 5,673.9 MW.

The ANEEL also recorded the start of commercial operations of 176 power plants, of which 79 are wind farms (2,713.8 MW), 61 are solar photovoltaic plants (2,295.1 MW), 25 are thermoelectric plants (531.4 MW), 8 are small hydroelectric plants (122.2 MW) and 3 are hydroelectric generating plants (11.4 MW). Altogether, solar and wind power plants account for 88.3% of the installed capacity for the year.

Access the article published by Brasil Energia in full.