By: Leonardo Neri

Provisional Measure 998/2020, converted into Law (Law 14,120/2021) in March, presented the proposal to eliminate subsidies for renewable electricity production in 2021, since the tax amounts (transmission and distribution tariff, TUST and TUSD, respectively), not charged to those who have distributed generation (GD) are borne by the Energy Development Account (CDE) and, subsequently, these amounts were passed on to other consumers through the electricity bill.

Distributed generation, unlike centralized generation, is electrical energy generated close to or at the place of consumption, such as solar energy, and those who invest in this type of energy receive credit on their electricity bill proportional to the energy generated.

Thus, when issued, the Provisional Measure, which was created to mitigate the impacts of the pandemic on energy tariffs – the rise in the dollar and the increase in defaults in the sector – ended government subsidies for the production of solar, wind and biomass energy. Now, as law, it establishes the gradual reduction of discounts on tariffs for the use of transmission and distribution systems for renewable source projects (solar, wind and biomass).

The end of this discount, granted to a few consumers – those who are able to implement renewable energy to benefit from it – will result in a reduction in tariffs for the majority of consumers. This benefit, however, will not be granted in the short term, given that the new law provides for the incentive to be extended for another 12 months and to those who begin operating all their generating units within 48 (forty-eight) months, counting from the date of granting.

Among other aspects, part of the research and development resources are taken from the CDE, which is responsible for several subsidies on electricity bills and which finances public policies in the electricity sector. Furthermore, resources that were already allocated to research and development in the sector, but were not used, will be deducted from the CDE and, between 2021 and 2025, 30% of the resources that energy concessionaires are required to apply in research and development and energy efficiency programs will be transferred to the CDE, in order to minimize possible tariff increases.

Furthermore, for retailers, the text guarantees that, in the event of consumer default, contracts may be suspended if there is default leading to the suspension of the supply of electricity to all of its consumer units modeled on the retailer.

It can be seen that the measures adopted with the entry into force of the new Law benefit small consumers, who will no longer have to bear the costs of the subsidy offered by the Government to consumers who have distributed generation. The subsidies were offered with the purpose of encouraging the growth of this method of obtaining electricity, since it is also beneficial to the environment as it is a clean and renewable source. Currently, the sector is expanding and, given the economic benefits that renewable energy brings, it will continue to grow exponentially, even without subsidies.