Provisional measure on renewable energies and tariff reduction

Provisional Measure No. 1,212, dated 04/09/2024, introduced incentives for renewable electricity generation (solar, wind, and biomass) and short-term measures to mitigate consumer tariffs.

MORE INVESTMENTS AND JOBS IN WIND, SOLAR, AND BIOMASS ENERGY

The renewable energy sector gained significant momentum with MP 1,212/2024, which is expected to enable projects capable of generating up to R$ 96 billion in private investments in wind, solar, and biomass plants, creating approximately 300,000 jobs.

The measure allowed project deadlines in this segment to be aligned with the implementation schedule for transmission lines auctioned by the current government. This adjustment favors investment by generation companies that had planned their projects based on the expected expansion of transmission capacity. It corrects the previous “mismatch” caused by delays in transmission auctions and supports the advancement of genuinely viable renewable power projects, excluding “paper projects.”

As a result, conditions were created for these energy sources to supply the emerging green industry, advancing both the energy transition and economic development. The deadline for commercial operation with benefits is set for 03/02/2029.

The benefits have been extended for plants that begin commercial operation by 03/02/2029 — that is, 36 months after 03/02/2026 for most of them.

The MP reduces the stock of 88 GW in unviable projects to 25.5 GW of effectively viable projects, including wind (11.4 GW), solar (14.1 GW), and biomass (140 MW). It establishes conditions for selecting viable projects, requiring a guarantee contribution of 5% of the investment value and the start of construction within 18 months.

Other features of Provisional Measure 1,212/2024 include:

Contributing to Brazil’s energy security

Ensuring the attractiveness of private investment in clean and renewable electricity

Providing a favorable business environment for the sector

Creating conditions for renewable generation to supply the new green industry in Brazil

Contributing to the fulfillment of international commitments on greenhouse gas emissions reductions in the energy matrix

Strengthening Brazil’s proactive participation in the global energy transition agenda

Following the MP, on 08/06/2024, the National Electric Energy Agency (ANEEL) published an order extending the deadline for renewable energy projects to begin commercial operation of all their generating units and qualify for Transmission or Distribution System Use Tariff (TUST/TUSD) discounts by 36 months.

In total, ANEEL received 2,035 applications, of which 601 were approved. The states with the highest number of approved plants are:

Bahia – 232 projects (152 wind and 80 solar)

Rio Grande do Norte – 69 projects (38 wind and 31 solar)

Minas Gerais – 65 projects (8 wind and 54 solar)

MITIGATION OF ELECTRICITY TARIFFS FOR CONSUMERS

Provisional Measure No. 1,212/2024 also introduced initiatives to help reduce costs for consumers. These mechanisms aim to correct distortions created by previous governments and curb excessive tariff increases, using sectoral resources to moderate electricity bills.

One of the measures refers to the repayment of the Covid Account and the Water Shortage Account, based on the advance receipt of funds from the privatization process of Eletrobras. Both accounts were contracted with high interest rates, meaning that the poorest Brazilians and the middle class would bear the cost. With the MP, by 2026, once the loans are repaid, electricity bills are expected to fall by an average of 3.5% per year for consumers nationwide.

The Covid Account was created in 2021 by the National Bank for Economic and Social Development (BNDES) as emergency financing for the electricity sector to mitigate the economic impacts of the coronavirus pandemic.

Another measure addressed by the MP concerns a 44% tariff increase announced in 09/2023 for families in Amapá. The Ministry of Mines and Energy (MME) allocated R$ 224 million to electricity consumers to prevent this increase, ensuring tariffs remained in line with the regional average (9%) of other states in the North Region.

NUMBERS

R$ 96 billion in private investments in wind, solar, and biomass plants, with an estimated 300,000 jobs

601 renewable energy projects approved by ANEEL, including:

Bahia - 232 projects (152 wind and 80 solar)

Rio Grande do Norte - 69 projects (38 wind and 31 solar)

Minas Gerais - 65 projects (8 wind and 54 solar)

25,521 MW planned

R$ 224 million allocated by the Ministry of Mines and Energy (MME) to Amapá to prevent a 44% increase in electricity bills

DATES

04/09/2024 – Provisional Measure 1,212
08/06/2024 – Aneel balance sheet released with approved requests