Power outages in Brazil due to surplus renewable energy generation, known by the English term “curtailment,” have gained international attention behind the scenes of events taking place in parallel with the United Nations Climate Change Conference (COP30) in Belém, Pará.
According to people who follow the energy agenda, during his visit to the Leaders’ Summit last week, French President Emmanuel Macron asked President Luiz Inacio Lula da Silva not to object to Parliament’s Amendment (Temporary Measure) 1304, which deals with compensation for companies suffering financial losses due to these cuts.
Macron fears that French companies investing in renewable energy in Brazil may suffer losses if they are not compensated.
On Thursday afternoon (13), the Minister of Mines and Energy, Alexandre Silveira, flew from Belém to Brasilia for a meeting with Lula, which included discussing the veto in Parliament. The president does not want to raise the electricity bill, and Planalto has already warned senators that the section will be vetoed. He has until November 24 to make a decision.
The French government did not comment on the matter, and the Brazilian presidential advisor said that the Ministry of Minerals and Energy is responsible for the issue, which when contacted did not comment until this text was published.
according to Bound It was discovered that a few months earlier, a French diplomat had already complained about the downsizing of the Ministry of Municipality and Environment. The complaint is that the accumulation of losses due to the cutbacks harms the financial stability of companies and the image of Brazilian renewable energy generation in the world and jeopardizes future investments.
Although various energy sources are suffering from curtailments, among the companies most affected are wind and solar farms, many with foreign shareholders, who have made significant contributions to be here.
Five people familiar with the discussions said many countries with investments in renewable energy in Brazil were concerned about the financial impact of the cuts, but France was the country that was most vocal.
Macron’s government is particularly concerned about investments in renewable energy made by French companies in Brazil. Among them is TotalEnergies, which owns 34% of Casa dos Ventos, one of the main developers of wind energy projects in Brazil. The work is part of the French company’s decarbonisation portfolio.
When contacted by the report, the company responded that “as a private company, it does not comment on political topics or discussions between countries.” Founded in 1924, TotalEnergies is an energy giant that was born as a public company, but was privatized in the 1990s. Today, it maintains a complex relationship with the French state, as it has come under pressure from public opinion and sectors of government to accelerate the energy transition. Losses from downsizing in Brazil make this goal difficult.
Negotiations
The original report on the MP, prepared by Senator Eduardo Braga (MDB-AM), limited the reimbursement to specific cases, which were linked to technical issues, such as the lack of transmission lines, a problem that affected many investors.
The synthesis amendment introduced by Rep. Danilo Forte (União-CE) expanded the benefit to include other types of reductions. Ceará has wind energy projects, and the representative is known in Congress for his active work in defense of the state, especially Casa dos Vientos.
The company is working on multiple renewable energy fronts, including developing a large data center in Besim, which has recently benefited from government initiatives.
The form and amount of compensation also sparked controversy.
Most sector participants say that this mechanism will be financed by energy consumers through increased electricity bills. While the proposal was still being processed, estimates by Abrace, which represents major energy companies, estimated that losses from the curtailment, from 2023 until the end of this year, could reach about R$7 billion, enough to add about a 3% increase to the electricity bill, with implications for inflation in Brazil.
Abiolica, which represents the wind energy sector, said that the companies had already given up part of their losses and would accept R$3.8 billion. The association states that resources will come from the CCEE (Chamber of Commerce Electric Energy) mechanism that provides free market compensation. The entity says that the renewable energy sector may fail without compensation.
A technician from Aneel (National Electric Energy Agency), which was previously consulted Boundstates that the aforementioned resource belongs to consumers and can only be released with the approval of Congress.
MP 1304 reformed the energy sector. The text was frozen in Congress, but was later approved in record time. Interest groups exerted great pressure, introducing various devices, to the point that the Minister of Mines and Energy said it was a victory for the lobby.
While the veto is being debated, the sector is not solving the source of the problem: an oversupply of energy versus little demand, fueled by advances in rooftop power generation, known in the sector as MMGD (Micro Power Generation and Distributed Mining). An incentive that has a long period to expire keeps projects expanding. It was expected that the same resolution, MP 1304, would introduce some new restrictions on this feature, which did not happen.
BTG publishes reports on wind and solar curtailment and issued a consolidated report on the first earthquake outlining the scale of the problem. As of September, the cuts affected 20.4% of wind power generation. For solar parks, the reduction rose to 34.1%, much higher than the 23.8% in the previous quarter and the 16.5% recorded in the third quarter and last year.
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