Energy Law: distributed generation, contracts and regulation in Brazil

Distributed generation, especially solar energy, allows consumers and developers to produce energy close to the point of consumption and offset it on the electricity bill. In Brazil, it is regulated by Law No. 14,300/2022 (in Portuguese), as later amended, and by ANEEL rules, which address modalities such as local self-consumption, remote self-consumption and shared generation, as well as the offsetting rules. In photovoltaic plant projects, the following usually require analysis:

• the modality and the regulatory classification;
• the purchase or lease of the land;
• the installation (EPC) and operation and maintenance contracts;
• the guarantees and the allocation of risks between the parties;
• environmental licensing and the registration or authorization of the plant, depending on its capacity.

The firm provides legal advice. Design, installation and operation of plants are engineering services, which are not part of our practice.

To connect a plant to the grid, access to the distribution utility's network follows procedures defined by regulation, such as the Distribution Procedures (Prodist), with stages of request, analysis, access opinion and contracts. Frequent difficulties:

• delay or refusal by the utility in analyzing the request;
• a requirement for works or grid reinforcement and how their costs are split;
• disagreements about documentation, deadlines and classification;
• generation restrictions determined by the system.

The analysis examines the procedure followed, the documents submitted, the applicable deadlines and the possible measures: a request for clarification, a complaint to ANEEL, negotiation or a court action, depending on the case.

ANEEL, the national electricity regulator, regulates and oversees generation, transmission, distribution and trading of energy, and issues resolutions that directly affect the return and the legal certainty of projects. The National Electric System Operator (ONS), the Electric Energy Trading Chamber (CCEE) and the Ministry of Mines and Energy also play relevant roles.

The analysis considers the rule in force at each decision and the risk of regulatory change during the contract, such as:

• offsetting rules and classification of plants;
• tariffs and charges;
• grid access conditions and generation restrictions.

The PPA contract (power purchase agreement, an energy purchase and sale contract) is the economic basis of many projects. Clauses that seem balanced can concentrate risk later. In the review, we look at:

• price and adjustment rules;
• term, contracted volume and flexibility;
• guarantees and default;
• termination scenarios;
• regulatory and market risks;
• the way disputes are resolved.

Other common contracts are those for use of and connection to the system and those for leasing or services associated with generation.

In the free energy market, the consumer negotiates the purchase of energy directly with generators or traders, instead of contracting through the utility's regulated environment. Access has been expanded by sector rules. The advice involves:

• requirements and costs of the migration;
• negotiation and review of the purchase contracts;
• obligations before the CCEE;
• price, volume and counterparty risks.

Migrating may or may not pay off: whether it is advisable depends on each company's consumption profile and on the regulation in force.

For the legal structuring of solar plants and other projects, we handle:

• special purpose entities and the agreement between partners;
• guarantees for financing;
• ownership and regularity of the land;
• licenses and authorizations;
• prior analysis of the assets (due diligence) and of contingencies;
• consistency among the project's contracts.

The aim is for the investor to know the regulatory, environmental, real estate, contractual and tax risks before taking on commitments.

Common situations:

• disagreement over price and adjustment;
• breach of a supply obligation;
• delay in construction or in connection to the grid;
• collection of tariffs and charges;
• application of a regulatory rule.

The path may be negotiation, administrative proceedings before the agency, arbitration or a court action, depending on the dispute resolution clause and the impact on the continuity of the project.