Question 1

What are the energy market models in Brazil?

Accepted Answer

There are two types of energy systems in Brazil: the regulated (captive) energy system and the free energy system. Most consumers use regulated energy, where they are subject to energy tariffs regulated by ANEEL and paid to local distributors.
Today, only large energy consumers, with demand of at least 500 kW, can join the free energy system, where they can freely negotiate energy prices.

Question 2

What is distributed generation?

Accepted Answer

Distributed generation, or DG, is a solution for captive consumers to have a discount on their electricity bill, generating their own energy. In distributed generation, consumers provide grid-connected energy and receive electricity credits on their bill through the Energy Compensation System.
Free energy consumers can also generate their own energy, but do not participate in the energy compensation system, which is restricted to captive consumers.

Today, DG is regulated by Law 14300/2022 and ANEEL Resolution 482/2012.

Question 3

What are the accepted energy sources for DG?

Accepted Answer

Dispatchable sources include the following: (i) hydroelectric power plants, including run-of-river plants with variable control of power generation; (ii) qualified cogeneration; (iii) biomass; (iv) biogas; and (v) photovoltaic generation sources, limited to 3 MW installed power, with battery storage capacity of 20% of the monthly generation capacity.
Non-dispatchable and renewable sources are also accepted, such as photovoltaic solar power and wind power.

Question 4

What are the DG categories?

Accepted Answer

DG systems have two categories: distributed microgeneration and minigeneration (MMGD). Microgeneration is limited to 75 kW installed power, while minigeneration refers to facilities with systems above 75 kW and limited to 5 MW for dispatchable sources and 3 MW for non-dispatchable sources.
For projects with acquired rights granted before January 7, 2022 and for those with a request for access submitted to the distributor by January 7, 2023, the installed power limit for non-dispatchable sources is 5 MW until December 31, 2045.

Question 5

Energy tariff explanations

Accepted Answer

Energy tariff is the price consumers pay in BRL (Brazilian real currency) per unit of energy (in kWh). This price is made up of costs that represent the investments and operations of the entire electric energy production and supply chain, in addition to applicable taxes and charges. Then, roughly speaking, the tariff considers the purchase costs for energy generation, transportation (transmission and distribution), and taxes/charges.
The following taxes and charges are included in the tariff: PIS/COFINS (Social Integration Programs/Social Security Financing Contribution), ICMS (Tax on Goods and Services), and CIP (Public Lighting Contribution), which are charged by the Federal, State, and Municipal Governments, respectively.

Considering the tariff complexity, it can be divided into two main components: the Distribution System Tariff (TUSD) and the Energy Tariff (TE). The TUSD refers to transportation costs (transmission and distribution), losses and some charges, while the TE refers to consumed energy and other charges.

Therefore, the energy bill is basically the energy tariff multiplied by energy consumption.

Question 6

What is Energy Compensation System (SCEE - Sistema de Compensação de Energia Elétrica?)

Accepted Answer

The Energy Compensation System is an incentive for consumers to use DG. It is a mechanism for the compensation of electricity consumption, where the MMGD facility provides the active energy not consumed at the time of generation to the distribution grid.
The amount of energy provided that is higher than the consumed energy is called energy credit or surplus. For projects with acquired rights and those with a request for access submitted to the distributor by January 7, 2023, every 1 kWh of credit is equivalent to 1 kWh injected until December 31, 2045, and such credit can be used by the consumer for compensation in future cycles (within 60 months).

For other projects, this proportion between generation and credit will be gradually reduced over the years (see table below).

Question 7

Can all consumers use distributed generation?

Accepted Answer

No, only captive consumers. Consumers who already negotiate in free energy system are not allowed to participate in the SCEE.

In addition, generators that have already negotiated amounts of energy, whether in the free or regulated system, are also not allowed to participate in the SCEE.

Question 8

How has distributed generation become competitive?

Accepted Answer

Consumers who produce their own energy in DG, either directly or through participation in the SCEE, are able to generate energy at a lower price than that provided by the distributor, fully compensating for their consumption in proportion to their generation (1 kWh injected = 1 kWh consumed). In addition, incentives are provided in some states, such as ICMS tax exemption in the TUSD or TE, or in both tariffs.

Question 9

What are the types of facilities for DG?

Accepted Answer

Four basic types are commonly found:
Generation close to the load: Generation and consumption of energy occur in the same facility.

Facility with multiple consumer units (EMUC): Generation system in residential or commercial condominiums. The energy can be used to reduce the individual consumption of every user and the general consumption of the common areas of the condominium.

Shared generation: Consumer units joined together in a consortium, cooperative, voluntary civil condominium or building, or any other type of civil association established for this purpose. Each type has its particularities and rules. For example, cooperatives must have at least 20 members with a joint business plan and a statute to be respected. A consortium, in turn, must be the association of at least two legal entities. New Law 14300/22 created the “energy consortium,” allowing associations of individuals or legal entities.

Remote self-consumption: Consumer units of the same individual or legal entity that have, in the same concession area of the distributor, a generation facility to compensate for their high consumption. It is usually adopted by stores or factories.

Question 10

Is it possible to compensate energy without installing a system in your facility?

Accepted Answer

Yes, the categories of shared generation and remote self-consumption allow participation in the SCEE by installing the system in different and even distant units (for example, lands in other cities dedicated to this purpose in the same concession area of the distributor), which may or may not be shared.

Question 11

Is it allowed to own an MMGD system through a rental agreement?

Accepted Answer

Yes, when the customer does not have space for installation, it is possible, for example, to rent land with a generating unit already installed.
The energy generated by this generating unit may be used to offset the consumption of consumer units with the same title. That is, by renting land with a generation system, the consumer will be producing his energy on the rented land and compensating for the energy consumed in his house and/or establishment. In remote self-consumption, for example, land and a plant are rented entirely dedicated to the same individual or legal entity, offsetting their consumption with the energy produced.
In shared generation, a group of people rents land and a plant, compensating their consumption with the energy produced, in proportion to their participation in the consortium. These are some of GDSUN's business models.

Question 12

Are GDSUN’s plants owned by GDSUN or rented from third parties?

Accepted Answer

All plants are owned by GDSUN, this is a requirement in our business model.

Question 13

What is the Legal Framework for Distributed Generation?

Accepted Answer

It is Law 14300 of January 7, 2022, which consolidated new and existing rules for distributed generation. This law is important as it ensures market predictability.

Question 14

What are the main changes resulting from the Legal Framework for Distributed Generation?

Accepted Answer

Topics

Valuation of credits

REN 482/2012

Compensation of all tariff components

Law 14300/2022

Existing projects or projects submitted within 12 months of law issue: full compensation maintained until December 31, 2045.

Projects submitted between the 13th and 18th months after law issue: starting in 2031, only energy-related costs will be compensated.

New projects 18 months after law issue: from 2023 to 2028, some components will gradually no longer be compensated (wire B, in some cases wire A and R&D and TSFEE). New rule starting in 2029.

Topics

Demand from plants

REN 482/2012

Charged according to the consumption TUSD.

Law 14300/2022

Charged according to the generation TUSD, to be applied only after the tariff review process of every distributor.

Topics

Maximum power

REN 482/2012

Up to 5 MW.

Law 14300/2022

Up to 5 MW for dispatchable sources and 3 MW for non-dispatchable sources (maintaining 5 MW until 2045 for those projects with acquired rights).

Topics

Dispatchable photovoltaic solar generation

REN 482/2012

Not covered.

Law 14300/2022

Limited to 3 MW, with battery storage capacity of 20% of the monthly generation capacity.

Topics

Negotiation of energy credits

REN 482/2012

Not allowed.

Law 14300/2022

Negotiation of energy surplus with distributors by means of a public call to be regulated by ANEEL.

Question 15

Do compensation rules change for systems that are already in place?

Accepted Answer

No. A transition period was defined for existing facilities submitting a request for access until January 7, 2023, in which the provisions of REN 482/2012 remain in force until December 31, 2045.

Question 16

What happens to energy credits/surpluses?

Accepted Answer

According to Law 14300/2022, in the event of agreement termination, surpluses can be assigned to another consumer unit of the same owner in the same concession area of these credits.
Law 14,300/22 also allows these credits to be assigned to other units of the same owner or other units that are part of a project with multiple consumer units or shared generation, even if the consumer unit to which they have been assigned remains active.

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