Brazil’s power outages caused by an overabundance of renewable energy generation, known in English as “cartailment,” attracted international attention at a behind-the-scenes event held in Belém, Pará, alongside COP30.
According to people interested in energy issues, during a summit visit last week, French President Emmanuel Macron asked President Luiz Inácio Lula da Silva not to veto Amendment No. 1,304 (Interim Measures), which deals with compensation for companies that have suffered economic losses due to these cuts.
Macron’s concern is that French companies investing in renewable energy in Brazil could suffer losses if they are not compensated.
This Thursday (13th) afternoon, Mines and Energy Minister Alexandre Silveira traveled from Belem to Brasilia for talks with Mr. Lula, which included a discussion on the parliamentary veto. The president doesn’t want to raise electricity rates, and Planalto has already warned senators that this part will be vetoed. He has until November 24th to make a decision.
The French government did not comment on the issue, and an advisory from the Brazilian Presidency stated that the MME (Ministry of Mines and Energy) was responsible for the issue, but when contacted, the MME (Ministry of Mines and Energy) had no comment until the publication of this document.
According to sheet It turns out that a few months ago, French diplomats had already complained about the MME cuts. The complaint states that the cumulative losses from the cuts undermine the company’s financial stability and the image of Brazil’s renewable energy in the world, jeopardizing future investments.
A variety of energy sources are affected by the cuts, but among the companies most affected are wind and solar farms, many of which have foreign shareholders, who have contributed significantly to get us here.
Several countries investing in renewable energy in Brazil are concerned about the fiscal impact of cuts, but France has been the most vocal, according to five people familiar with the discussions.
Macron’s government is particularly concerned about French companies investing in renewable energy in Brazil. These include TotalEnergies, which owns 34% of Casa dos Ventos, one of the main developers of wind energy projects in Brazil. The business is part of the French company’s decarbonization portfolio.
In response to a media inquiry, the company said, “As a private company, we do not comment on political topics or discussions between countries.” Founded in 1924, TotalEnergies is an energy giant that started life as a public company but was privatized in the 1990s. It is currently under pressure from public opinion and government departments to accelerate its energy transition, and maintains a complex relationship with the French state. Losses from cuts in Brazil make this goal difficult.
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The original report by Sen. Eduardo Braga (MDB-AM) on him limited reimbursements to specific cases related to technical issues, such as the lack of power lines, which affected multiple investors.
The stalled amendment introduced by Deputy Danilo Forte (União-CE) extended benefits to other types of cuts. There are wind power projects in the state of Ceará, and the congressman is known in Congress for his active defense of the state, especially Casa dos Ventos.
The company operates in several renewable energy sectors, including the development of a large data center in Pesem, which recently benefited from government initiatives.
The form and amount of compensation also caused controversy.
Most sector participants said the mechanism would be financed by energy consumers through electricity price increases. Although the proposal is still being processed, Abrace, which represents major energy companies, estimates that losses from power cuts could reach around 7 billion reais from 2023 to the end of this year, enough to impact Brazil’s inflation and increase electricity prices by around 3%.
Aveolica, which represents the wind power sector, said the companies had already waived part of their losses and would accept a total of 3.8 billion reais. The association says its resources will come from the CCEE (Chamber of Electricity Exchange) mechanism, which provides free market compensation. The group says the renewable energy sector could go bankrupt without compensation.
However, engineers at Aneel (National Electric Energy Agency) sheetstates that the aforementioned resources belong to the consumer and can only be released with Congressional approval.
MP 1304 reformed the energy sector. The document stalled in Congress but was later approved in record time. The Minister of Mines and Energy said this was a victory for the lobby, because interest groups put in so much pressure by inserting various devices.
While the veto is being discussed, the field has not resolved the root of the problem. That means an oversupply of energy for marginal demand, supported by advances in rooftop power generation, known in the sector as MMGD (distributed micro-mining generation). Incentives with long completion periods keep projects growing. It was expected that the same MP 1304 would impose some new restrictions on this benefit, but no such restrictions occurred.
BTG Bank has published a report on wind and solar curtailment, and has released an initial synthesis report that shows the scale of the problem. By September, the cuts affected 20.4% of wind power generation. The reduction rate for solar parks rose to 34.1%, significantly 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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