By Brazil Stock Guide – Brazil’s Ministry of Mines and Energy has established rules to compensate wind and solar generators for certain production cuts imposed between September 1, 2023, and November 25, 2025, offering potential financial relief to the sector while excluding restrictions caused by excess power supply.
Under Normative Ordinance No. 140, compensation will apply only to curtailment events classified by Brazil’s national grid operator, known as ONS, as resulting from external transmission outages or power-system reliability requirements.
Restrictions caused by outages at facilities used exclusively or jointly by generators, whether managed by the companies themselves or by third parties, will also be excluded.
The exclusion of oversupply significantly narrows the scope of the measure. Such curtailment occurs when the system is unable to absorb all available power even though generating assets and their connections are operational. It has become one of the main risks facing renewable-energy projects as Brazil’s wind and solar capacity expands faster than parts of the transmission system and electricity demand.
Retroactive compensation
Eligible volumes will initially be treated as electricity delivered under reserve-energy contracts and regulated-market contracts based on plant availability. This will reduce contractual reimbursements owed by generators for failing to deliver committed power.
Any eligible energy remaining after those obligations are covered will be valued at the spot power price, or PLD, for the region where the plant is located. Projects operating under Brazil’s Proinfa renewable-energy program will be compensated at the contractual price in effect when the curtailment occurred.
Compensation will be adjusted for inflation using Brazil’s benchmark IPCA consumer price index through the payment date. It will not be capped by a plant’s certified generation capacity, contracted volume, the frequency of the restrictions or their cumulative duration.
The financial impact on individual companies cannot yet be calculated. It will depend on ONS’s classification of each event and on the plant-level curtailment volumes subsequently calculated by Brazil’s power trading chamber, the CCEE.
Waiver of legal claims
Generators seeking compensation must register a preliminary expression of interest through the government’s CELEBRA platform by August 10. This does not amount to signing the final agreement. Companies will be formally invited to execute the commitment only after ONS completes its assessment and CCEE discloses the eligible volumes.
In exchange for compensation, generators must irrevocably waive the right to pursue administrative, arbitration or court claims related to generation restrictions through November 25, 2025. Companies involved in individual or class actions will also be required to formally withdraw the relevant claims.
Signing the agreement will allow CCEE to resume collecting contractual reimbursements currently suspended under court orders. If a generator fails to provide evidence that it has withdrawn its lawsuit within the required period, its compensation will remain suspended while its other obligations — including the resumption of the contractual charges — remain in effect.
Under the maximum timetable set out in the ordinance, ONS is expected to submit its final database to CCEE by late April 2027, with plant-level curtailment volumes potentially disclosed by the end of May. Once the commitment agreements are eventually signed, CCEE will have up to 180 days to complete the accounting adjustments and make the payments.
For investors, the new framework offers the prospect of recovering part of the revenue lost in previous years, but it does not remove the structural risk posed by renewable-energy curtailment. With no compensation estimate currently available and oversupply-related cuts excluded, a potentially significant portion of the sector’s losses will remain uncompensated.
Future rules remain unsettled
Separately, Brazil’s electricity regulator Aneel is still debating how the costs of future curtailment events should be allocated among different sources of generation.
The third phase of Public Consultation No. 45/2019 is expected to focus on which generators should participate in the cost-sharing mechanism and on the accounting and technical procedures required to implement it. A broader review of how future curtailment events are classified is likely to be addressed through a separate consultation involving changes to Aneel’s current regulatory framework.
The discussions also leave an unresolved period after November 25, 2025, which is outside the retroactive compensation window established by the government. Aneel director Fernando Mosna has indicated that he sees no need for the regulator or the ministry to create a separate solution for this interim period.
The distinction reinforces the limits of the new framework: it may settle part of the industry’s historical claims, but it does not determine how losses incurred after November 2025 will be treated or who will ultimately bear the cost of future oversupply-related curtailment.
Leave a Reply