Recently, articles have been published in the media about the participation of MMGD (micro and mini distributed generation) in the generation cuts that centralized wind and solar power plants have been suffering due to restrictions on the flow of their generation, known as curtailment.
It is therefore stated that the total or partial blame for these cuts is due to the reduction in the load provided by MMGD.
To analyze this issue, let's go back to the past and understand why we got to this situation and then look for those responsible for the losses that reached more than one billion reais in 2024 to renewable generators, mainly in the Northeast Region.
The reform of the nineties
At the end of the 1990s, Brazil underwent a restructuring of the electricity sector, which sought to encourage competition through the adoption of a market economy that had already been implemented in several countries.
The basic idea to make the entire transformation viable was to separate generation and commercialization activities from transportation activities, which are intrinsically monopolistic.
The transport represented by the transmission and distribution of energy traded in the market became fully regulated by ANEEL (National Electric Energy Agency) and the planning for this segment was defined by the government through the MME (Ministry of Mines and Energy) via EPE (Energy Research Company).
Here we have the first important point: unlike the previous state model where the expansion of the network was done concomitantly with the expansion of generation, in the new model, generation is implemented through decisions made by market agents, while transmission continues to be defined by the government, materializing through transmission auctions.
In distribution, the responsibility for expansion continued to lie with distributors. While we were dependent on large-scale thermal and hydroelectric plants with long implementation times, the government was able to expand the electricity grid to meet the needs of the generation segment in a timely manner. This environment changed completely with the emergence of renewable plants.
A second point that differentiates Brazil from other countries that have undergone the same restructuring is that the agents are responsible for the connection works to the nearest substations belonging to the transmission network (basic network) or the distribution network, which we call “shallow connection”.
The identification and installation of the works necessary for the flow of new energy is the responsibility of the Brazilian government, which differs from other countries where the participation of agents goes beyond the substation, in other words, called “deep connection”.
In deep connection, there is a process of internalizing the dynamics of network expansion to the generation agents, who are therefore tly responsible for the definition and associated cost of the entire network necessary to meet the energy flow.
To get around this problem, these costs are now signaled in Brazil through the TUST (Transmission Usage Tariff) and the TUSD (Distribution Usage Tariff) with a locational signal inserted.
However, this signal has been very weak, failing to fulfill its purpose of signaling to the agents who use the network the most about the costs involved. Recently, the ANEEL through Normative Resolution 041/2022, this problem has been corrected, but even so not with the desired intensity given the continental dimensions of Brazil.
A third point is the way energy prices are set in Brazil. Unlike what happens in most countries, the price (PLD) is set by a computerized energy optimization program that created a condominium to minimize hydrological risk through the MRE (energy reallocation mechanism).
In this condominium, a physical guarantee is offered by the government in which each generation agent can negotiate its energy limited to this value.
We can say that, indirectly, we have a market separate from the physical world, where optimization is done and plant dispatches are determined by the ONS (National Electric System Operator), from the ing world where energy purchase and sale negotiations are made.
To complicate market liberalization, the government created the regulated market (ACR) in 2004 where consumers with power less than 3 MW are required to participate in a t energy purchase carried out by the government.
In short, there is a distancing of generation agents and especially consumption agents from the effects of the system's operation and planning that are dealt with by the government.
The risks end up being poorly distributed, resulting in a series of distortions that end up causing losses to agents with a growing process of judicialization.
Competition via the supply and demand market ended up not being realized. In other countries, the energy market, including the retail market, did not suffer the setback that occurred in 2004 in Brazil and has been improving since then.
Incentive for renewables
In this environment, at the end of the 2000s, incentives for renewable generation began to appear, starting with wind power. The problem with these plants is that they are not dispatchable and do not fit into the condominium model used until then.
While they were marginal and literally took the load off the main region where they were heavily installed, the Northeast Region, the system coexisted peacefully with the hydraulic and thermal plants, alleviating the intermittency.
In addition, incentives such as the payment of half of the TUST that continue to this day, the lack of a consistent locational signal in transmission and the reduction in the costs of implementing this generation ended up dramatically accelerating the supply of wind energy in the region, making this region a major energy exporter.
In the mid-2010s, solar power plants appeared as solar s and inverters became cheaper. These plants, which are also intermittent, have an important advantage when compared to other forms of energy conversion.
They are static and flexible and can have capacities ranging from 1 kW to 1 GW, which ends up giving small consumers the opportunity to have their own generation.
This small consumer ends up partially freeing himself from the constraints of the regulated market that imposes high prices on energy tariffs.
This revolution in the structure of how the electricity sector had been worked, that is, large generating plants connected to the load through transmission and distribution systems, ends up being contested.
In countries where the energy market was already well structured, these technological changes in energy generation have been absorbed more clearly and better signaled to sector agents.
In Brazil, where centralization and distancing of agents from the functioning of the sector ended up bringing about a series of distortions. In an attempt to resolve this, the government interferes in interactions between agents, creates subsidies, acts as a regulator, etc.
We can say that there is a structural problem in the Brazilian model that has worsened with the entry of new types of renewable energy.
Operation and planning challenges
In the physical world of grid operation, the ONS has been prioritizing the dispatch of wind and solar power plants because these plants, despite having a physical guarantee, are not part of the hydro and thermal condominium since they do not have control over their dispatch.
This had been working well as long as the amount of this intermittent generation was small and the electrical constraints on transferring power from the northeast to the southeast were not significant.
The outlook changes depending on the speed of growth of renewable plants and the event of August 15, 2023.
This growth ends up minimizing the capacity to cushion the effects of intermittency by hydraulic and thermal plants, and the blackout showed a reality where computer simulation models indicated energy transfer restrictions below what was necessary.
According to the ONS general director at the time, this disruption ended up being a “watershed” for the network’s operation, as the traditional way of operating was no longer suited to the new reality.
Due to this new dimension, the ONS has been cutting generation (curtailment) for reasons of network unavailability, reliability and energy as determined by the Normative Resolution 1030/2022 of the ANEEL.
In the first case, there is financial compensation for the generators, but in the last two cases, the generators bear the losses. In 2024, the reliability cut represented around 65% and the energy cut represented around 25%, with total losses reaching R$1 billion.
This situation is expected to continue despite the entry of new 500 kV lines near the Açu III SE, which currently represents a bottleneck in the Northeast Region, especially after the blackout on August 15.
To seek responsibility for the current curtailment, we can analyze the two types of cut that are not reimbursed by the system.
Reliability Cut
Network reliability is measured by criteria defined by the ONS network procedures approved by ANEEL. Many of these criteria come from previous decades, built by companies in the Eletrobrás group.
A basic criterion is that the grid must continue to operate when an element such as a transmission line, transformer or largest generating unit is lost (criterion N-1).
In short, the system must the dynamics of transitioning from one operating point to another without losing synchronization and with damped oscillations in frequency and voltage.
This dynamic is verified through programs that simulate power flow and electromechanical stability (ANAREDE, ANATEM and ORGANOM).
It is important to mention that they represent the transmission network and generators, and can reach a maximum of 138 kV networks.
With August 15th event, the ONS in its RAP (disturbance analysis report) concluded that the models reported by wind and solar plants were not representing the reality of response in these programs and that therefore the restrictions imposed on energy transfer flows mainly between the Northeast, North and Southeast were very relaxed.
As an example, the ONS ended up increasing the total export allowed for the NE region (ExpNE) from 13 GW to 8 GW the day after the event.
The concentration of centralized generation in a given region without the corresponding system to transport the generated energy ends up causing restrictions. This situation occurs due to the delay in the expansion of transmission as previously pointed out.
Furthermore, the lack of controllability of renewable generation, both due to the concentration of generation in certain periods of the year and times of the day, as well as the dynamic response of generation to disturbances in the grid, ends up increasing the generation cuts determined by the ONS.
It can be seen that the entire problem occurs in transmission due to the concentration of centralized wind and solar generation. We cannot blame MMGD, which is located in the distributor's medium and low voltage networks, for a problem in the dynamics of the transmission network.
When analyzing the occurrence of August 15 and the reason for the outage, it is clear that there was a need for reactive to avoid an abrupt voltage drop. The ONS is planning the installation of a synchronous compensator to provide reactive and short-circuit power to reduce the “curtailment”.
MMGD would not be able to provide reactive power to the transmission grid even with an adequate signal because its electrical distance is large since it is located on grids with much lower voltages. They are therefore not responsible for the conditions in the transmission system that led to the August 15 event.
Another important point is that the risks associated with transmission should be allocated to agents that are increasing the flow in the networks at certain times due to their low capacity factor.
Power Cut
Another reason for the cut is the energy balance, which at certain times, when there is excess generation, requires reducing the dispatch of power plants. The ONS has been correcting this imbalance by using hydraulic storage, that is, reducing the dispatch of hydroelectric plants to store energy.
Since hydroelectric plants are part of the MRE, it is understood that this block ends up operating together to compensate for the lack of dispatchability of renewables. With the increase in wind and solar generation, storage capacity has been decreasing, making it necessary to cut generation by energy.
As MMGD reduces the system load, the problem of generation cuts from new renewable plants ends up getting worse. Therefore, there is a reduction in the load, as the consumer chooses to build their own generation, taking advantage of the flexibility of solar generation, reducing their dependence on the grid and the high costs of the energy bill.
The consumer is, in principle, reducing his own load at the point of generation, as is the case with microgeneration, which currently represents more than 70% of cases.
For mini-generation, a large part ends up reducing the load of the region itself using the medium voltage (MV) grid, that is, in this case there is consumption in the region itself, minimizing the use of the grids by the mini-plant.
As it is not feasible to physically cut the generation of prosumers at this time, they are proposing to make an ing cut, that is, financially allocate part of the curtailment to MMGD.
This type of solution ends up being unfair because the consumer, when using his own generation, is in reality freeing himself from the captive condition where he is obliged to pay for the structural imbalances of the current model of the Brazilian electricity sector.
Today, small consumers do not have the possibility of operating in the free energy market (ACL) and transportation tariffs (TUSD) are completely outdated, not signaling the benefits of MMGD.
Conclusion
A series of difficulties experienced in the Brazilian electricity sector are the result of a poorly designed model where there is a distance between agents and the reality of operations and planning.
This has motivated the creation of a set of regulations by the government that often distances itself from efficiency and the fair allocation of the costs of agents' benefits.
As a consequence of the weakness of current regulation, the sector's tariffs and costs end up being allocated among agents through direct action by the legislative and executive branches or even the judiciary. This “by” of the regulator is not the most correct way to have a stable and reliable environment for investments.
In other countries, where the energy market is truly active, a solution is always sought with the participation of agents and it has been no different in the accommodation of renewable plants.
Incentives are given to decarbonization for both wind and solar, but always using financing, taxation or direct payment mechanisms such as the IRA in the USA.
Taking away consumers' freedom by penalizing them for investing in their own renewable energy production does not seem to be coherent or fair, since they are not to blame for the current imbalance in the sector. MMGD is not exempt from paying TUSD as long as there is correct signaling observing the locational advantages.
The opinions and information expressed are the sole responsibility of the author and do not necessarily represent the official position of the author. Canal Solar.
Answers of 6
In the text, I perceive the excess of the government and regulatory agencies punishing a large part of the consumer, with an impediment to having their own plant. The challenges for managers are not few, however. The lack of an effective policy to address or the continuity of other managers is the challenge.
As always, the state is ruining a sector that, despite the technical challenges, manages to continue advancing around the world. However, in this country, the need for “regulation” and the collection of exorbitant taxes overrides the basic need to consume or generate its own energy. There is a need to remodel the entire sector. Centralization may be tempting, but it always results in enormous inefficiencies in the long run. It is no wonder that we have one of the highest energy tariffs in the world, despite the cleanest energy matrix. As F. Bastiat said: “If a government istered the Sahara Desert, in 5 years there would be a shortage of sand.”
Congratulations to those involved.
Curtailment is a well-established practice in the context of centralized generation, but its application in distributed generation (DG) can provide a series of benefits for both consumers and the electrical system as a whole. In the case of DG, tax incentives and the possibility of generating energy autonomously make this alternative more accessible and financially attractive for consumers and investors. Unlike centralized generation, which faces higher costs due to large-scale infrastructure and less flexibility, DG allows consumers to control their own generation and, consequently, reduce energy costs.
By implementing curtailment in DG, the system can achieve a better balance between energy supply and demand, especially during periods of high generation and low demand. This would avoid overloading the grids and the need to activate backup plants, optimizing the use of the grids and reducing operating costs. In addition, the inclusion of technologies such as smart inverters and advanced meters, which would allow remote control of generation, would increase the flexibility of DG and contribute to a more integrated operation within the national system.
It is important to highlight that, although DG plays a fundamental role in the modernization of the electricity sector, its implementation without adequate regulation can undermine the stability of the system, especially if incentives and flow infrastructure are not adjusted to the growing supply of decentralized renewable energy. Therefore, by ensuring a balanced approach to curtailment, Brazil will be able to maximize the benefits of DG while preserving the competitiveness and sustainability of centralized generation.
The crux of the matter is that the planning of the Brazilian electrical sector is done by bureaucrats who understand little or nothing about the field. During the 33 years that I worked in the sector of operation, supervision, command and control of electrical systems, the majority and most important decisions that were taken originated in the offices of outsiders with adequate knowledge in decision-making.
Very pertinent and complete analysis! Congratulations!
With all the taxation that affects energy tariffs and the greed for revenue at the three levels: federal, state and municipal, it is difficult for market laws that regulate prices based on supply and demand to improve consumers' lives.
The current national model since the deregulation of the sector has never had central planning with long-term objectives and even after being away from the sector for more than 10 years, I wonder how these sector agents analyze the future in which consumers can become off-grid.