Energy Newsletter No. 4 – August 2021

HIGHLIGHTS          NEWS         PUBLIC CONSULTATIONS AND FORUMS         WHAT’S NEXT…

Check out our Energy Newsletter, which gathers information on the main administrative, normative and legal texts related to the regulation of the electricity sector in Brazil, for the month of August.

We are available to help you with any questions and hear your ideas and suggestions on how we can improve even more.
Enjoy reading!

Demarest Energy and Natural Resources Team


HIGHLIGHTS

MME presents proposal with guidelines for the National Hydrogen Program (“PNH2”)

On August 4, 2021, the Ministry of Mines and Energy (“MME”) presented to the members of the Brazilian National Council for Energy Policy (“CNPE”) a proposal with guidelines for the National Hydrogen Program (“PNH2”), in accordance with CNPE Resolution No. 6/2021.

The document presents the history of hydrogen in Brazil, the international framework, vision for the future in the context of Brazil, objectives, thematic axes and governance guidelines.

Hydrogen is one of the main topics of discussion nowadays. The development of this energy vector is being adopted in several other countries. Recently, the International Energy Agency published a report, which indicates that many Latin America countries are developing projects or strategies for the development of the use of low-carbon hydrogen.

This and other measures taken by Federal Government may help with the consolidation of this market in Brazil, the development of a low-carbon energy matrix and the promotion of diversity in the available energy sources in Brazil for its production.

Read in full (available only in Portuguese)

ANEEL adopts measures to solve GSF issue

The Brazilian National Electric Energy Agency (“ANEEL”) issued on August 12, 2021, Resolution No. 2.919/2021, which partially ratifies the extension period for each power plant from the energy relocation mechanism (MRE), a mechanism which determines the supply among hydro power plants. The ratification is related to 346 plants. ANEEL will still deliberate on the structural plants mentioned in Law No. 14.182/2021 (regarding the Privatization of Eletrobras).

In addition, ANEEL published, on August 18: Public Consultation 053/2021, which aims to obtain contributions on the draft of a resolution that modifies Normative Resolution No. 895/2020, which established the methodology for the calculation of compensation to owners of hydro power plants participating in MRE; and Public Consultation No. 054/2021, which aims to obtain contributions for the improvement of Trading Rules of the Power Commercialization Chamber (“CCEE”), contained in the GSF Impacts Assessment module – Law No. 14.052/2021, in compliance with article 18 of Law No. 14.182/2021 (regarding the Privatization of Eletrobras).

Check our client alert for more information on the subject here.

MME establishes guidelines for the 2021Reserve Capacity Auction

On August 18, 2021, the Ministry of Mines and Energy issued Ordinance No. 20/GM/MME/2021, which establishes guidelines for the auction to contract electric power and associated energy, known as the Reserve Capacity Auction, aiming to contract projects for thermoelectric generation sources.

The auction aims to ensure the continuity of power supply, to meet the electric power demands as required by the National Interconnected System (SIN), with power supply capacity commencing from July, 2026, and energy supply from January, 2027.

According to the MME, the auction represents another step in the Modernization of the Brazilian Power Section, which will aims to enable efficiency of cost allocation for the expansion of the electrical system so that all consumers can be served at any time, safely and reliably, even in critical periods.

The auction will take place on December 21, 2021.

Read in full (available only in Portuguese)

House of Representatives approves draft Bill that modifies rules for Distributed Generation

On August 18, 2021, the Brazilian House of Representatives approved Draft Bill No. 5.829/2019, which establishes the Legal Framework for Distributed Generation, consisting of 476 votes in favor and 3 against.

The Draft derives from an agreement made between the Ministry of Mines and Energy, ANEEL and sector entities Absolar (Association of Photovoltaic Solar Energy), ABGD (Brazilian Association of Distributed Generation), Abradee (Brazilian Association of Power Distributors) and Inel (National Institute of Clean Energy).

Some highlights of the Draft include:

  • Title transfer. The transfer of title of the project owner or its corporate control of the DG unit as indicated in the Access Opinion is prohibited, until the request for inspection by the distribution company is carried out;
  • The Energy Development Account (CDE) will temporarily fund the tariff components that are not associated with the energy cost and that are not paid by the consumer-generator, levied on the energy compensated by the consumer units participating in the SCEE system;
  • Transitional period. Until December 31, 2045.
  • Deadline for energy injection. Projects that file a request for access to the distribution company within 12 months from the publication date of the Law, must inject energy:
    • Within 120 days, for micro distributed generators;
    • Within 12 months for mini distributed generators from solar sources;
    • Within 30 months for mini distributed generators from other sources.

Read in full (available only in Portuguese)

MME publishes guidelines for Voluntary Reduction of Energy Demand

On August 23, 2021, the Ministry of Mines and Energy (“MME”) issued Ordinance No. 22/2021, which establishes guidelines for the Offer of Voluntary Reduction of Energy Demand (“RVD”) to serve the National Interconnected System (“SIN”).

This is one of the alternatives that has been adopted to guarantee safety and continuity of power supply throughout this year, due to the current water shortage faced by the country.

We highlight below the following measures of the Ordinance:

Use of the Offer. The RVD Offer constitutes a measure to be adopted by the consumer interested in participate in the RVD program and will be used by the National System Operator (“ONS”) as an additional resource to serve the National Interconnected System (“SIN”), provided that it is accepted by the Power Sector Monitoring Committee (“CMSE”);

PLD. The RVD Offer will not be considered in the determination of the Settlement Price of Differences (“PLD”);

Participants. The following agents are allowed to participate in the Offer, provided that they are in compliance with their obligations to the CCEE: (i) free consumers; (ii) aggregators (agents who aggregate and centralize the loads of free consumers); and (iii) partially free consumers, up to the limit equivalent to the free portion of their consumption;

RVD Offers. The RVD Offers may be valid from 1 to 6 months (there may be exceptions for offers lasting less than 1 month, subject to ONS assessment). The offers will be in multiple products with (i) hourly duration (from 4 to 7 hours; (ii) in batches with a minimum volume of 5 MW for each hour of the offer, discretized into the 1 MW standard; (iii) priced in BRL per megawatt hour; (iv) weekday; and (iv) identification of the offer by submarket;

Submission to ONS. The RVD Offers must be submitted to the ONS and, if accepted, must follow the needs of the System;

MCP. The amount verified in the RVD Offers will be accounted for on the Short-Term Market (“MCP”) by the Electric Power Trading Chamber (“CCEE”) and the financial result from the accounting will be paid to the Offerors. However, the RVD Offers will not be subject to the MCP’s loss sharing.

It is important to emphasize that, in the first attempt to introduce the RVD mechanism, one of the criticisms was the risk of the consumer being subject to the MCP’s loss sharing.

Rules on the subject. ONS and CCEE must issue temporary operating practices, procedures and trading rules required to comply with the Ordinance.

Duration. The ordinance will be in effect until April 30, 2022.

Read in full (available only in Portuguese)


ANEEL publishes notice for the New Energy Auction “A-5”, of 2021

On August 26, 2021, ANEEL published Auction Notice No. 8/2021-ANEEL, known as the New Energy Auction “A-5” of 2021. The auction aims to contract power generation projects from new hydroelectric, wind, solar photovoltaic and thermoelectric (biomass, natural gas, coal, and urban solid waste) sources, according to the guidelines established in the Ordinances No. 514/2011, No. 444/2016, No.435/2020 and No. 10/2021 of the Ministry of Mines and Energy (MME).

Find below the information about the projects, provided by ANEEL:

SourceContract ModalitySupply Period (years)Start of Supply
Hydroelectric Power Plant (CGH, PCH and UHE) ≤ 50 MWQuantity25January 1, 2026.
Wind Power PlantQuantity15
Solar Photovoltaic Power PlantQuantity15
Thermoelectric Power Plant (biomass, coal and natural gas)Availability20
Thermoelectric Power Plant (urban solid waste)Availability20

The Energy Research Company (EPE) registered 1,694 projects for the A-5 Auction of 2021, with a total installed capacity of 93,859 MW, as detailed below:


Source: ANEEL

The auction will take place on September 30, 2021.

Read in full – Auction Notice

Read in full – Folder

Waste-to-energy projects to be developed in Brazil

Power generation projects based on urban solid waste as a source are highlights at the A-5 Auction of 2021. 12 projects were registered by the Energy Research Company (EPE), totaling 315 MW, located in the States of Paraná, Rio de Janeiro and São Paulo.

Also, for the first time, the EPE included urban solid waste as source in the 2030 Ten-Year Energy Expansion Plan (PDE 2030). See below a summary of the expansion mentioned in the Plan for this source:

SourceInstalled power (MW)Investment by 2030 (in BRL millions)
20262027202820292030Total
Urban solid waste1212121212601176

 

Recently, the Brazilian financial newspaper Valor Econômico published an article entitled “ “Energy from garbage enters the sights of investors – Country gains its first “waste-to-energy” projects” [free translation], according to which, in addition to the projects registered in the auction, companies are developing waste-to-energy projects, which use energy recovery — a method that makes it possible to recover a part of the energy contained in the solid waste.

Read in full – PDE 2030

Read in full – Valor Econômico article [in Portuguese]


OTHER NEWS

CELGPAR publishes privatization notice for CELG T

On July 30, 2021, Companhia Celg De Participação (CELGPAR), a company controlled by the State of Goias, published Notice No. 02/2021, which aims for the disposal of 100% of the shares issued by the generation and transmission company Celg Geração e Transmissão (Celg-GT), as a result of the spin-off of assets of Celg-GT.

The proposed minimum starting price is BRL 1,097,713,000.00.

Bidders must submit their proposals and documents for qualification by October 10, 2021. The public bidding session will take place on October 14, 2021. However, the public session will only occur with prior consent by ANEEL to the operation (condition precedent of the partial spin-off of the company), which may result in changes to the auction schedule.

Read in full (available only in Portuguese)

ANEEL approves notice for Transmission Auction No. 02/2021

On August 6, 2021, ANEEL approved the draft notice for the Transmission Auction No. 02/2021, which aims at the construction and maintenance of 902 km of transmission lines, with 750 MVA in processing capacity of substations. The auction will take place on December 17, 2021.

The draft will now be analyzed by the Brazilian Federal Audit Court (TCU), for subsequent definitive approval by ANEEL.

The auction has the following features:

  • The auction expects investments of BRL 2.7 billion;
  • The lots are located in the states of Bahia, Minas Gerais, São Paulo, Paraná and Amapá;
  • Concession contracts valid for 30 years;
  • Work on the transmission lines is expected to be completed in 36 to 60 months.

Read in full (available only in Portuguese)

MME approves Program for Sustainable Use of Mineral Coal

On August 9, 2021, the Ministry of Mines and Energy (“MME”) issued Normative Ordinance No. 540/2021, which approves the Program for Sustainable Use of Mineral Coal.

The program aims for the continuity of the activity of coal mining in the Southern region of Brazil, contributing to the development of the region and the energy security of the country. Moreover, it aims to promote environmental recovery and the adoption of new and modern coal plants in the region.

Read in full (available only in Portuguese)

ANEEL modifies rules on verification of unavailability

On August 20, 2021, ANEEL issued Normative Resolution No. 944/2021, which modifies the Annex I of Normative Resolution No. 614/2014, which consolidates rules regarding the verification of unavailability of a generating unit or energy import project connected to the National Interconnected System (SIN).

The modifications derive from Public Consultation No. 44/2019, established for receiving contributions to improve the Energy Reallocation Mechanism (MRE) regarding Unavailability Purges.

Read in full

ONS publishes Technical Note with new criteria to ensure greater transfer of power among subsystems

On August 20, 2021, the National Power System Operator (“ONS”) issued Technical Note NT-ONS DPL 0090/2021, with new operating criteria to ensure the maximum capacity of power transfer between the subsystems, which will allow a better use of the energy resources available in the National Interconnected System (SIN).

This is one of the measures that has been adopted to ensure safety and continuity of power supply throughout this year, due to the current water shortage faced by the country.

Read in full (available only in Portuguese)

Federal Government publishes decree with measures to reduce energy consumption

On August 25, 2021, the Federal Government issued Decree No. 10.779/2021, which established measures to reduce energy consumption within the scope of the federal public administration. 

This is one of the measures that has been adopted to ensure safety and continuity of power supply throughout this year, due to the current water shortage faced by the country.

Public bodies must aim to reduce energy consumption between the months of September 2021 and April 2022, by 10% to 20% of the average energy consumption for the same months in the years 2018 and 2019.

Read in full (available only in Portuguese)

PUBLIC CONSULTATIONS AND FORUMS

 

CALLS FOR CONTRIBUTIONS (ANEEL)MATTER PERIOD FOR CONTRIBUTIONS
No 11/2021Proposals for regulatory models to insert Distributed Energy Resources (“DER”) in the Brazilian Power Sector.Until September 24, 2021

  

PUBLIC FORUMS (ANEEL)MATTERPERIOD FOR CONTRIBUTIONS
No 23/2021Obtain contributions on the draft Regulation and on the proposal of a Governance Project for implementation of tariff pilot projects (tariff sandboxes).August 25, 2021

  

PUBLIC CONSULTATIONS (ANEEL)MATTERPERIOD FOR CONTRIBUTIONS
No. 61/20202nd phase of the public consultation – Regulatory Impact Analysis (RIA) Report about the regulatory treatment for the establishment of hybrid power plants.Until September 16, 2021
No. 18/20212nd phase – Proposals for Normative Resolutions regarding the consolidation of normative acts related to “Rights and duties of users of  electricity distribution public services”, “Transfer of Public Lighting Assets” and the Regulatory Impact Analysis Report.Until October 3, 2021.
No 39/2021Improvement of RIA report about regulation related to tariffs for the use of the electric transmission system (“TUST”) and tariffs for the use of the electric distribution system for generation plants connected in 88 kV and 138 kV (“TUSDg”)Until September 29, 2021
No 45/2021Draft of Bidding Notice and Annexes related to Existing Energy Auction A-1 and A-2, 2021Until September 6, 2021
No. 46/2021Improvement of rules on the Surplus Sale Mechanism (MVE) for distribution companies, with the requirement of financial guarantees to participate of MVE.Until September 10, 2021
No. 49/2021Governance project proposal to apply pilot projects of tariffs (Tariff Sandboxes). This public consultation is related to the Public Forum No. 23/2021.Until September 13, 2021
No. 50/2021Modification of ANEEL’s Normative Resolution No. 804/2018, regarding rules for institutional registration at ANEEL, and electronic notification.Until October 1, 2021
No. 51/2021Criteria for the entry, maintenance and exit of agents in the trading market.Until September 17, 2021
No. 52/2021Proposal to consolidate rules regarding Distribution Procedures (PRODIST)Until October 3, 2021
No. 55/2021Proposal to complement the Power Trading Rules, to be operationalized from December, 2021Until October 8, 2021
No. 56/2021Regulatory Impact Analysis (RIA) Report about improvement of rules for obtaining authorization, provided for in ANEEL’s Normative Resolution No. 876/2020, to commercialize power plants with wind, solar, thermal and other sources.Until September 24, 2021

 

 

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O QUE VEM POR AÍ

 

30.09.2021 – Leilão ‘A-5’ de 2021
Empreendimentos eólicos, fotovoltaicos, hidrelétricos, termelétricos a biomassa e recuperação energética de resíduos sólidos urbanos.
Edital: ANEEL
Mais informações aqui
14.10.2021 – Privatização da CELG T
Alienação de 100% das ações de emissão da CELG Transmissão (CELG T), resultado da cisão de ativos da Celg Geração e Transmissão (Celg-GT).
Edital: CELGPAR
Mais informações aqui
03.12.2021 – Leilões de Energia Existente A-1 e A-2 de 2021
Empreendimentos de fonte termelétrica a biomassa, a carvão mineral nacional, a gás de processo, gás natural e outros
Edital: ANEEL (a publicar)
Mais informações aqui
17.12.2021 – Leilão de Transmissão n° 02/2021
Construção e manutenção de 902 km de linhas de transmissão e de 750 MVA em capacidade de transformação de subestações.
Edital: ANEEL (a publicar)
Mais informações aqui
21.12.2021 – Leilão de Reserva de Capacidade
Contratação de Potência Elétrica e de Energia Associada, denominado “Leilão de Reserva de Capacidade
Edital: ANEEL  (a publicar)
Mais informações aqui

 

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Este material tem caráter informativo, e não deve ser utilizado para a tomada de decisões. Aconselhamento legal específico poderá ser prestado por um de nossos advogados.