Brazil’s Grid Limits Threaten Renewable Investments

Brazil's grid operator is capping the amount of electricity wind and solar producers can supply to the national grid, seriously threatening future renewable energy investments in the country. Industry executives and representatives have lamented that renewable energy investments are less viable under the National Electric System Operator's (ONS) current "curtailments" policy that temporarily caps how much power the operator accepts from wind and solar plants. The problem has been most acute in northeast Brazil, one of Brazil's top producers of renewable energy.

"Renewable energy for the country is going to waste," Eduardo Sattamini, chief executive officer of Engie Brasil Energia, has told Reuters.

ONS has been using curtailments on renewable energy since August 2023, when a power outage in the northeast spread over most of the country. The operator claims the curtailments are not excessive, and only 3% of electricity generated was lost to curtailments in July. However, figures released by wind and solar producers suggest that ONS could be greatly underestimating the losses suffered by these companies when generated power is rejected.

"This is not an environment for decision-making about new projects," Equatorial Energia's renewables unit Echoenergia said in a statement. Equatorial is amongst the wind companies hardest hit, with 58% of power generated between January and early August rejected by the grid. 

Chinese generator SPIC's Banabuiu complex lost 50% of the electricity generated between January and early August. Voltalia, a major producer of renewable energy with nearly two-thirds of its capacity in Brazil, expects curtailments to shave 40 million euros ($44.48 million) from its EBITDA earnings, while CPFL Energia, a power company controlled by China's State Grid, expects to post losses of 21 million reais during the second quarter.

According to the Brazilian Wind Energy Association, last year, the sector lost 700 million reais ($128 million) in rejected power due to curtailments, while the Brazilian Solar Association, Absolar, estimates that the solar sector lost 50 million reais in the four months through July.

Relief might, however, be on the way, with Christiano Vieira, director of operations at ONS, saying that a new transmission line will start operating in September and might help lower the curtailments.

By Alex Kimani for Oilprice.com

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