Mariana Saragoça and Frederico Accon, comment on the new dynamics of the electricity sector

Mariana Saragoça and Frederico Accon, comment on the new dynamics of the electricity sector

Since federal presidential and parliamentary elections have ended, the industry is examining the new government’s opportunities and concerns.

Considering the change in the federal executive, the industry is waiting for the new titles for the Ministry of Mines and Energy – MME and likely implications on other institutions linked to it to comprehend the direction of their actions. Due to the nomination of multiple Aneel directors with specified terms in 2022, the agency should not be directly impacted b.

The guidelines of the newly elected federal executive’s government plan do not provide more details of their actions for the energy sector, indicating, in a broader way I the commitment to social, environmental, and economic sustainability and the confrontation of climate change through changing the production and consumption pattern of energy in the country to combat the climate crisis; and (ii) the dwindling fossil fuel reserves.

From the analysis of these provisions combined with discussions about modernizing the electricity sector and opening the free market, the new government’s first major challenge stands out: to establish policies to increase the expansion of the generation park based on intermittent renewable sources and to ensure the security of supply and capacity of the electricity system without impacting tariff modicity and reliability.

New energy contracting structures should be evaluated to facilitate generation park expansion following the new dynamics of the Free Contracting Environment, which may require new capacity and power auctions and the separation of ballast and energy.

The new regulations and recommendations should also address the electric sector’s new bottleneck, the transmission system’s ability to flow energy potential and assure its availability.

Standards and rules are planned for hybrid plants, offshore power, green hydrogen, and the carbon market.

The electric business expects definitions by the end of 2022, but that could be pushed to the first months of the incoming government.

The industry is eagerly awaiting the vote on Bill 414/2021, the so-called modernisation of the electric sector, before the end of the year and the change of administration.

Public Consultation number 137/2022, which deals with establishing the free market for low-voltage consumers by 2028, expires at the beginning of November, so its publication might be by the end of the year.

Extension of distribution, generating, and transmission concessions that expire in the next several years – MME Public Consultation No. 136/2022 – should be clearer by year’s end.

Mariana Saragoça

Even though these are important themes long discussed by the electric sector and can be addressed by the end of the year, it remains to be seen if the few weeks until the parliamentary recess and the confirmed changes in the federal executive and national congress will allow for the necessary political alignment to make their conclusion viable or if their definition will be a challenge for the new government.

Changing power sector dynamics will test the incoming administration and Congress, needing a more scientific analysis to assure sustained growth.

Given its importance for the country’s economic and social development and its undisputed relevance on the ESG agenda, the new rulers are expected to prioritize the sector, bringing more transparency to decision-making debates, increasing regulatory predictability and stability, and ensuring legal certainty for future investments.

Mariana Saragoça works in Administrative Law, Infrastructure, and Regulation at Stocche Forbes. Frederico Accon Soares specializes on the Electric Sector at Stocche Forbes.

Link to the law firm’s website for further information

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Picture (c): www.stoccheforbes.com.br

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